<PAGE>
Filed pursuant to Rule 424(b)(5)
Registration No. 33-29879-01
Prospectus Supplement
(To Prospectus dated September 24, 1997)
[LOGO]
First Industrial, L.P.
$300,000,000
MEDIUM-TERM NOTES
DUE NINE MONTHS OR MORE FROM DATE OF ISSUE
First Industrial, L.P. (the "Operating Partnership") may offer from time to time
up to $300,000,000 aggregate initial offering price, or the equivalent thereof
in one or more foreign or composite currencies, of its Medium-Term Notes Due
Nine Months or more from the Date of Issue (the "Notes"). Such aggregate initial
offering price is subject to reduction as a result of the sale by the Operating
Partnership of other Debt Securities described in the accompanying Prospectus.
Each Note will mature on any day nine months or more from the date of issue, as
specified in the applicable pricing supplement hereto (each, a "Pricing
Supplement"), and may be subject to redemption at the option of the Operating
Partnership or repayment at the option of the holder thereof, in each case, in
whole or in part, prior to its Stated Maturity Date, as specified in the
applicable Pricing Supplement. In addition, each Note may be denominated and/or
payable in United States dollars or a foreign or composite currency ("Foreign
Currency Notes"), as specified in the applicable Pricing Supplement. The Notes,
other than Foreign Currency Notes, will be issued in minimum denominations of
$1,000 and integral multiples thereof, unless otherwise specified in the
applicable Pricing Supplement, while Foreign Currency Notes will be issued in
the minimum denominations specified in the applicable Pricing Supplement.
Unless otherwise specified in the applicable Pricing Supplement, Notes will bear
interest at fixed rates ("Fixed Rate Notes") or at floating rates ("Floating
Rate Notes"). The applicable Pricing Supplement will specify whether a Floating
Rate Note is a Regular Floating Rate Note, a Floating Rate/Fixed Rate Note or an
Inverse Floating Rate Note and whether the rate of interest thereon is
determined by reference to one or more of the CD Rate, the CMT Rate, the
Commercial Paper Rate, the Eleventh District Cost of Funds Rate, the Federal
Funds Rate, LIBOR, the Prime Rate or the Treasury Rate (each, an "Interest Rate
Basis"), or any other interest rate basis or formula, as adjusted by any Spread
and/or Spread Multiplier. Interest on each Floating Rate Note will accrue from
its date of issue and, unless otherwise specified in the applicable Pricing
Supplement, will be payable monthly, quarterly, semiannually or annually in
arrears, as specified in the applicable Pricing Supplement, and on the Maturity
Date. Unless otherwise specified in the applicable Pricing Supplement, the rate
of interest on each Floating Rate Note will be reset daily, weekly, monthly,
quarterly, semiannually or annually, as specified in the applicable Pricing
Supplement. Interest on each Fixed Rate Note will accrue from its date of issue
and will be payable in arrears as specified in the applicable Pricing Supplement
and on the Maturity Date. Notes may also be issued that do not bear any interest
currently or that bear interest at a below market rate. See "Description of
Notes."
The interest rate, or formula for the determination of the interest rate,
applicable to each Note and the other variable terms thereof will be established
by the Operating Partnership on the date of issue of such Note and will be
specified in the applicable Pricing Supplement. Interest rates or formulas and
other terms of Notes are subject to change by the Operating Partnership, but no
change will affect any Note already issued or as to which an offer to purchase
has been accepted by the Operating Partnership.
Each Note will be issued in fully registered book-entry form (a "Book-Entry
Note") or in certificated form (a "Certificated Note"), as specified in the
applicable Pricing Supplement. Each Book-Entry Note will be represented by one
or more fully-registered global securities (the "Global Securities") deposited
with or on behalf of The Depository Trust Company ("DTC") and registered in the
name of DTC or DTC's nominee. Interests in the Global Securities will be shown
on, and transfers thereof will be effected only through, records maintained by
DTC (with respect to its participants) and DTC's participants (with respect to
beneficial owners).
See "Risk Factors" on page S-3 for a discussion of certain risks that should be
considered in connection with an investment in the Notes offered hereby.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS SUPPLEMENT, THE PROSPECTUS OR ANY
PRICING SUPPLEMENT HERETO. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
<TABLE>
<CAPTION>
Agents' discounts
Price to and Proceeds to Operating
public(1) commissions(1)(2) Partnership(1)(3)
<S> <C> <C> <C>
Per Note 100% .125%-.750% 99.875%-99.250%
Total(4) $300,000,000 $375,000-$2,250,000 $299,625,000-$297,750,000
</TABLE>
(1) J.P. Morgan Securities Inc., Donaldson, Lufkin & Jenrette Securities
Corporation, Merrill Lynch & Co., Merrill Lynch, Pierce, Fenner & Smith
Incorporated, First Chicago Capital Markets, Inc. and UBS Securities LLC
(the "Agents"), individually or in a syndicate, may purchase the Notes, as
principal, from the Operating Partnership, for resale to investors and other
purchasers at varying prices relating to prevailing market prices at the
time of resale as determined by the applicable Agent, or, if so specified in
the applicable Pricing Supplement, for resale at a fixed offering price.
Unless otherwise specified in the applicable Pricing Supplement, any Note
sold to an Agent as principal will be purchased by such Agent at a price
equal to 100% of the principal amount thereof less a percentage of the
principal amount equal to the commission applicable to an agency sale (as
described below) of a Note of identical maturity. If agreed to by the
Operating Partnership and an Agent, such Agent may utilize its reasonable
efforts on an agency basis to solicit offers to purchase the Notes at 100%
of the principal amount thereof, unless otherwise specified in the
applicable Pricing Supplement. If the Operating Partnership issues any Note
at a discount from or at a premium over its principal amount, the Price to
Public of any Note issued at a discount or premium will be set forth in the
applicable Pricing Supplement. The Operating Partnership will pay a
commission to the applicable Agent, ranging from .125% to .750% of the
principal amount of any Note, depending upon its stated maturity, sold
through such Agent. Commissions with respect to Notes with stated maturities
in excess of 30 years that are sold through such Agent will be negotiated
between the Operating Partnership and such Agent at the time of such sale.
See "Supplemental Plan of Distribution."
(2) The Operating Partnership has agreed to indemnify the Agents against, and to
provide contribution with respect to, certain liabilities, including
liabilities under the Securities Act of 1933, as amended. See "Supplemental
Plan of Distribution."
(3) Before deducting expenses payable by the Operating Partnership estimated at
$1,150,000.
(4) Or the equivalent thereof in one or more foreign or composite currencies.
The Notes are being offered on a continuous basis by the Operating Partnership
to or through the Agents. Unless otherwise specified in the applicable Pricing
Supplement, the Notes will not be listed on any securities exchange and there
can be no assurance that the Notes offered hereby will be sold or that there
will be a secondary market for the Notes or that there will be liquidity in such
market if one develops. The Operating Partnership reserves the right to cancel
or modify the offer made hereby without notice. The Operating Partnership or an
Agent, if it solicits the offer on an agency basis, may reject any offer to
purchase Notes in whole or in part. See "Supplemental Plan of Distribution."
J.P. Morgan & Co.
Donaldson, Lufkin & Jenrette
Securities Corporation
Merrill Lynch & Co.
First Chicago Capital Markets, Inc. UBS Securities
October 28, 1997
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CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE NOTES.
SPECIFICALLY, THE AGENTS MAY OVER-ALLOT IN CONNECTION WITH THE OFFERING AND MAY
BID FOR, AND PURCHASE, THE NOTES IN THE OPEN MARKET. FOR A DESCRIPTION OF THESE
ACTIVITIES, SEE "SUPPLEMENTAL PLAN OF DISTRIBUTION."
NO DEALER, SALESPERSON, OR ANY OTHER INDIVIDUAL HAS BEEN AUTHORIZED TO GIVE
ANY INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN OR
INCORPORATED BY REFERENCE IN THIS PROSPECTUS SUPPLEMENT, THE APPLICABLE PRICING
SUPPLEMENT OR THE PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR
REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE
OPERATING PARTNERSHIP OR THE AGENTS. THIS PROSPECTUS SUPPLEMENT, THE APPLICABLE
PRICING SUPPLEMENT AND THE PROSPECTUS DO NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY ANY SECURITIES OTHER THAN THE NOTES OFFERED
HEREBY AND THEREBY OR AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY SUCH
NOTES IN ANY JURISDICTION BY ANY PERSONS NOT AUTHORIZED OR QUALIFIED TO MAKE
SUCH OFFER OR SOLICITATION OR TO ANY PERSONS TO WHOM IT IS UNLAWFUL TO MAKE SUCH
OFFER OR SOLICITATION. NEITHER THE DELIVERY OF THIS PROSPECTUS SUPPLEMENT, THE
APPLICABLE PRICING SUPPLEMENT OR THE PROSPECTUS, NOR ANY SALE MADE HEREUNDER OR
THEREUNDER, SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE
HAS BEEN NO CHANGE IN THE AFFAIRS OF THE OPERATING PARTNERSHIP SINCE THE DATE
HEREOF OR THEREOF OR THAT THE INFORMATION HEREIN OR THEREIN IS CORRECT AS OF ANY
TIME SUBSEQUENT TO THE DATE OF SUCH INFORMATION.
TABLE OF CONTENTS
PROSPECTUS SUPPLEMENT
<TABLE>
<CAPTION>
PAGE
---------
<S> <C>
Forward-Looking Information................................................................................ S-3
Risk Factors............................................................................................... S-3
Description of Notes....................................................................................... S-6
Special Provisions Relating to Foreign Currency Notes...................................................... S-25
Certain United States Federal Income Tax Considerations.................................................... S-27
Supplemental Plan of Distribution.......................................................................... S-35
Legal Matters.............................................................................................. S-36
PROSPECTUS
Available Information...................................................................................... 2
Incorporation of Certain Documents by Reference............................................................ 2
The Company and the Operating Partnership.................................................................. 4
Risk Factors............................................................................................... 4
Use of Proceeds............................................................................................ 9
Ratio of Earnings to Fixed Charges......................................................................... 9
Description of Debt Securities............................................................................. 10
Description of Preferred Stock............................................................................. 21
Description of Depositary Shares........................................................................... 27
Description of Common Stock................................................................................ 31
Certain Provisions of Maryland Law and the Company's Articles of Incorporation and Bylaws.................. 32
Restrictions on Transfers of Capital Stock................................................................. 35
Policies with Respect to Certain Activities of the Operating Partnership................................... 35
Properties of the Operating Partnership and the Other Real Estate Partnerships............................. 38
Federal Income Tax Considerations.......................................................................... 40
Plan of Distribution....................................................................................... 43
Legal Matters.............................................................................................. 44
Experts.................................................................................................... 44
First Industrial, L.P. and Contributing Businesses and Other Real Estate Partnerships -- Index to Financial
Statements and Other Information......................................................................... F-1
</TABLE>
S-2
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FORWARD-LOOKING INFORMATION
This Prospectus Supplement and the accompanying Prospectus contain certain
forward-looking statements within the meaning of Section 27A of the Securities
Act and Section 21E of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"). The Operating Partnership intends such forward-looking
statements to be covered by the safe harbor provisions for forward-looking
statements contained in the Private Securities Litigation Reform Act of 1995,
and is including this statement for purposes of complying with these safe harbor
provisions. Forward-looking statements, which are based on certain assumptions
and describe future plans, strategies and expectations of the Company (as
hereinafter defined)), the Operating Partnership and the Other Real Estate
Partnerships (as hereinafter defined) are generally identifiable by use of the
words "believe," "expect," "intend," "anticipate," "estimate," "project" or
similar expressions. The Operating Partnership's ability to predict results or
the actual effect of future plans or strategies is inherently uncertain. Factors
which could have a material adverse affect on the operations and future
prospects of the Operating Partnership include, but are not limited to, changes
in: economic conditions generally and the real estate market specifically,
legislative/regulatory changes (including changes to laws governing the taxation
of REITs (as hereinafter defined), availability of capital, interest rates,
competition, supply and demand for industrial properties in the Operating
Partnership's and the Other Real Estate Partnerships' current and proposed
market areas and general accounting principles, policies and guidelines
applicable to REITs. These risks and uncertainties, together with those stated
under the caption "Risk Factors" in the accompanying Prospectus, should be
considered in evaluating forward-looking statements and undue reliance should
not be placed on such statements.
RISK FACTORS
THIS PROSPECTUS SUPPLEMENT DOES NOT DESCRIBE ALL OF THE RISKS OF AN
INVESTMENT IN NOTES THAT RESULT FROM SUCH NOTES BEING DENOMINATED OR PAYABLE IN
OR DETERMINED BY REFERENCE TO A CURRENCY OR COMPOSITE CURRENCY OTHER THAN UNITED
STATES DOLLARS OR TO ONE OR MORE INTEREST RATE, CURRENCY OR OTHER INDICES OR
FORMULAE. THE OPERATING PARTNERSHIP AND THE AGENTS DISCLAIM ANY RESPONSIBILITY
TO ADVISE PROSPECTIVE INVESTORS OF SUCH RISKS AS THEY EXIST AT THE DATE OF THIS
PROSPECTUS SUPPLEMENT OR AS THEY CHANGE FROM TIME TO TIME. EACH PROSPECTIVE
INVESTOR SHOULD CONSULT HIS OWN FINANCIAL AND LEGAL ADVISORS AS TO THE RISKS
ENTAILED BY AN INVESTMENT IN NOTES DENOMINATED OR PAYABLE IN OR DETERMINED BY
REFERENCE TO A CURRENCY OR COMPOSITE CURRENCY OTHER THAN UNITED STATES DOLLARS
OR TO ONE OR MORE INTEREST RATE, CURRENCY OR OTHER INDICES OR FORMULAE. SUCH
NOTES ARE NOT AN APPROPRIATE INVESTMENT FOR INVESTORS WHO ARE UNSOPHISTICATED
WITH RESPECT TO FOREIGN CURRENCY TRANSACTIONS OR TRANSACTIONS INVOLVING THE
APPLICABLE INTEREST RATE INDEX OR CURRENCY INDEX OR OTHER INDICES OR FORMULAE.
STRUCTURE RISKS
An investment in Notes indexed, as to principal, premium, if any, and/or
interest, to one or more currencies or composite currencies (including exchange
rates and swap indices between currencies or composite currencies), commodities,
interest rates or other indices or formulae, either directly or inversely,
entails significant risks that are not associated with similar investments in a
conventional fixed rate or floating rate debt security. Such risks include,
without limitation, the possibility that any such index or formula may be
subject to significant changes, that the resulting interest rate will be less
than that payable on a conventional fixed rate or floating rate debt security
issued by the Operating Partnership at the same time, that the repayment of
principal and/or premium, if any, can occur at times other than that expected by
the investor, and that the investor could lose all or a substantial portion of
principal and/or premium, if any, payable on the Maturity Date (as defined
below). Such risks depend on a number of interrelated factors, including
economic, financial and political events, over which the Operating Partnership
has no control. Additionally, if the formula used to determine the amount of
principal, premium, if any, and/or interest payable with respect to such Notes
contains a multiplier or leverage factor, the effect of any change in the
applicable index or indices
S-3
<PAGE>
or formula or formulae will be magnified. In recent years, values of certain
indices and formulae have been highly volatile and such volatility may continue
or increase in the future. Fluctuations in the value of any particular index or
formula that have occurred in the past are not necessarily indicative, however,
of fluctuations that may occur in the future.
The secondary market for Notes will be affected by a number of factors
independent of the creditworthiness of the Operating Partnership and the value
of the applicable index or indices or formula or formulae, including the
complexity and volatility of each such index or formula, the method of
calculating the principal, premium, if any, and/or interest in respect of such
Notes, the time remaining to the maturity of such Notes, the outstanding amount
of such Notes, any redemption features of such Notes, the amount of other debt
securities linked to such index or formula and the level, direction and
volatility of market interest rates generally. Such factors also will affect the
market value of such Notes. In addition, certain Notes may be designed for
specific investment objectives or strategies and, therefore, may have a more
limited secondary market and experience more price volatility than conventional
debt securities. Investors may not be able to sell such Notes readily or at
prices that will enable investors to realize their anticipated yield.
Any optional redemption feature of Notes might affect the market value of
such Notes. Since the Operating Partnership may be expected to redeem such Notes
when prevailing interest rates are relatively low, an investor might not be able
to reinvest the redemption proceeds at an effective interest rate as high as the
interest rate on such Notes.
The Notes will not have an established trading market when issued, and there
can be no assurance of a secondary market for the Notes or the liquidity of such
market if one develops. See "Supplemental Plan of Distribution."
No investor should purchase Notes unless such investor understands and is
able to bear the risk that such Notes may not be readily saleable, that the
value of Notes will fluctuate over time and that such fluctuations may be
significant.
CREDIT RATINGS
The credit ratings assigned to the Operating Partnership's medium-term note
program may not reflect the potential impact of all risks related to structure
and other factors on the value of the Notes. Accordingly, prospective investors
should consult their own financial and legal advisors as to the risks entailed
by an investment in the Notes and the suitability of such Notes in light of
their particular circumstances.
EXCHANGE RATES AND EXCHANGE CONTROLS
An investment in Foreign Currency Notes (as defined below) entails
significant risks that are not associated with a similar investment in a debt
security denominated and payable in United States dollars. Such risks include,
without limitation, the possibility of significant changes in the rate of
exchange between the United States dollar and the applicable foreign currency or
composite currency and the possibility of the imposition or modification of
exchange controls by the applicable governments or monetary authorities. Such
risks generally depend on factors over which the Operating Partnership has no
control, such as economic, financial and political events and the supply and
demand for the applicable currencies or composite currencies. In addition, if
the formula used to determine the amount of principal, premium, if any, and/or
interest payable with respect to Foreign Currency Notes contains a multiplier or
leverage factor, the effect of any change in the applicable currencies or
composite currencies will be magnified. In recent years, rates of exchange
between the United States dollar and foreign currencies or composite currencies
have been highly volatile and such volatility may continue or increase in the
future. Fluctuations in any particular exchange rate that have occurred in the
past are not necessarily indicative, however, of fluctuations that may occur in
the future. Depreciation of the foreign currency or composite currency in which
a Foreign Currency Note is payable against the United States dollar would result
in a decrease in the United States dollar-equivalent yield of such Foreign
Currency Note, in the United States dollar-equivalent value of the principal and
premium, if any, payable on the Maturity Date of such Foreign Currency Note,
and, generally, in the United States dollar-equivalent market value of such
Foreign Currency Note.
S-4
<PAGE>
Governments or monetary authorities have imposed from time to time, and may
in the future impose or revise, exchange controls at or prior to the date on
which any payment of principal of, or premium, if any, or interest on, a Foreign
Currency Note is due, which could affect exchange rates, as well as the
availability of the foreign currency or composite currency in which such payment
is to be made on such date. Even if there are no exchange controls, it is
possible that the foreign currency or composite currency in which a payment in
respect of any particular Foreign Currency Note is to be made would not be
available on the applicable payment date due to other circumstances beyond the
reasonable control of the Operating Partnership. In such cases, the Operating
Partnership will be entitled to satisfy its obligations in respect of such
Foreign Currency Note in United States dollars. See "Special Provisions Relating
to Foreign Currency Notes--Payment Currency."
S-5
<PAGE>
DESCRIPTION OF NOTES
The Notes will be issued as a series of Debt Securities (as defined in the
accompanying Prospectus) under an Indenture, dated as of May 13, 1997, as
amended, supplemented or modified from time to time (the "Indenture"), between
the Operating Partnership and First Trust National Association, as trustee (the
"Trustee"). The Indenture is subject to, and governed by, the Trust Indenture
Act of 1939, as amended. The following summary of certain provisions of the
Notes and the Indenture does not purport to be complete and is qualified in its
entirety by reference to the actual provisions of the Notes and the Indenture.
Capitalized terms used but not defined herein shall have the meanings given to
them in the accompanying Prospectus, the Notes or the Indenture, as the case may
be. The term "Indenture Debt Securities" as used in this Prospectus Supplement,
refers to all Debt Securities, including the Notes, issued and issuable from
time to time under the Indenture. The following description of the particular
terms of the Notes offered hereby supplements, and to the extent inconsistent
therewith replaces, the description of the general terms and provisions of the
Debt Securities set forth in the Prospectus, to which description reference is
hereby made.
The following description of Notes will apply to each Note offered hereby
unless otherwise specified in the applicable Pricing Supplement.
GENERAL
The Notes will be direct, senior unsecured obligations of the Operating
Partnership and will rank PARI PASSU with all other unsecured and unsubordinated
indebtedness of the Operating Partnership from time to time outstanding. The
Notes will not be obligations of the Company (as defined in the accompanying
Prospectus) or any of the Other Real Estate Partnerships (as defined in the
accompanying Prospectus). The Notes will be effectively subordinated to
mortgages and other secured indebtedness of the Operating Partnership and to
indebtedness and other liabilities the Other Real Estate Partnerships and any
subsidiaries the Operating Partnership may have from time to time. Accordingly,
such prior indebtedness will have to be satisfied in full before Holders of the
Notes (the "Holders") will be able to realize any value from encumbered or
indirectly held properties.
As of June 30, 1997, the Operating Partnership had $453.8 million of
indebtedness (of which $49.7 million is secured by 23 of the Operating
Partnership's properties), and, in addition to a defeased mortgage loan, the
Other Real Estate Partnerships had an aggregate of $46.4 million of mortgage
indebtedness outstanding.
The Indenture does not limit the aggregate initial offering price of
Indenture Debt Securities that may be issued thereunder and Indenture Debt
Securities may be issued thereunder from time to time in one or more series up
to the aggregate initial offering price from time to time authorized by the
Operating Partnership for each series. The Operating Partnership may, from time
to time, without the consent of the Holders of the Notes, provide for the
issuance of Notes or other Indenture Debt Securities under the Indenture in
addition to the $300 million aggregate initial offering price of Notes offered
hereby.
The Notes are currently limited to up to $300.0 million aggregate initial
offering price, or the equivalent thereof in one or more foreign or composite
currencies. The Notes will be offered on a continuous basis and will mature on
any day nine months or more from their dates of issue (each, a "Stated Maturity
Date"), as specified in the applicable Pricing Supplement. Unless otherwise
specified in the applicable Pricing Supplement, interest-bearing Notes will
either be Fixed Rate Notes or Floating Rate Notes, as specified in the
applicable Pricing Supplement. Notes may also be issued that do not bear any
interest currently or that bear interest at a below market rate.
Unless otherwise specified in the applicable Pricing Supplement, the Notes
will be denominated in, and payments of principal, premium, if any, and/or
interest will be made in, United States dollars. The Notes also may be
denominated in, and payments of principal, premium, if any, and/or interest may
be made in, one or more foreign currencies or composite currencies ("Foreign
Currency Notes"). See "Special Provisions Relating to Foreign Currency Notes--
Payment of Principal, Premium, if any, and Interest." The currency or composite
currency in which a Note is denominated, whether United States dollars or
otherwise, is herein referred to as the "Specified Currency." References herein
to "United States dollars," "U.S. dollars" and "U.S. $" are to the lawful
currency of the United States of America (the "United States").
S-6
<PAGE>
Unless otherwise specified in the applicable Pricing Supplement, purchasers
are required to pay for the Notes in the applicable Specified Currencies. At the
present time, there are limited facilities in the United States for the
conversion of United States dollars into foreign currencies or composite
currencies and vice versa, and commercial banks do not generally offer
non-United States dollar checking or savings account facilities in the United
States. Each applicable Agent is prepared to arrange for the conversion of
United States dollars into the applicable Specified Currency to enable the
purchaser to pay for the related Foreign Currency Note, provided that a request
is made to such Agent on or prior to the fifth Business Day (as defined below)
preceding the date of delivery of such Foreign Currency Note, or by such other
day as determined by such Agent. Each such conversion will be made by an Agent
on such terms and subject to such conditions, limitations and charges as such
Agent may from time to time establish in accordance with its regular foreign
exchange practices. All costs of exchange will be borne by the purchaser of each
such Foreign Currency Note. See "Special Provisions Relating to Foreign Currency
Notes."
Interest rates offered by the Operating Partnership with respect to the
Notes may differ depending upon, among other things, the aggregate principal
amount of Notes purchased in any single transaction. Interest rates or formulas
and other terms of Notes are subject to change by the Operating Partnership from
time to time, but no such change will affect any Note already issued or as to
which an offer to purchase has been accepted by the Operating Partnership.
Each Note will be issued in fully registered form as a Book-Entry Note or a
Certificated Note. The authorized denominations of each Note other than a
Foreign Currency Note will be $1,000 and integral multiples thereof, unless
otherwise specified in the applicable Pricing Supplement, while the authorized
denominations of each Foreign Currency Note will be specified in the applicable
Pricing Supplement.
Payments of principal of, premium, if any, and interest on, Book-Entry Notes
will be made by the Operating Partnership through the Trustee to DTC. See
"--Book-Entry Notes." In the case of Certificated Notes, payment of principal
and premium, if any, due on the Stated Maturity Date or any prior date on which
the principal, or an installment of principal, of each Certificated Note becomes
due and payable, whether by the declaration of acceleration, notice of
redemption at the option of the Operating Partnership, notice of the Holder's
option to elect repayment or otherwise (the Stated Maturity Date or such prior
date, as the case may be, is herein referred to as the "Maturity Date" with
respect to the principal of the applicable Note repayable on such date) will be
made in immediately available funds upon presentation and surrender thereof (or,
in the case of any repayment on an Optional Repayment Date (as defined below),
upon presentation and surrender thereof and a duly completed election form in
accordance with the provisions described below) at the office or agency
maintained by the Operating Partnership for such purpose in the Borough of
Manhattan in New York City. Such office or agency is maintained currently by the
Trustee at 100 Wall Street, Suite 2000, New York, New York 10005. Payment of
interest due on the Maturity Date of each Certificated Note will be made to the
person to whom payment of the principal and premium, if any, shall be made.
Payment of interest due on each Certificated Note on any Interest Payment Date
(as defined below) other than the Maturity Date will be made at the office or
agency referred to above maintained by the Operating Partnership for such
purpose or, at the option of the Operating Partnership, may be made by check
mailed to the address of the Holder entitled thereto as such address shall
appear in the Security Register of the Operating Partnership. Notwithstanding
the foregoing, a Holder of $10,000,000 (or, if the applicable Specified Currency
is other than United States dollars, the equivalent thereof in such Specified
Currency) or more in aggregate principal amount of Notes (whether having
identical or different terms and provisions) will be entitled to receive
interest payments on any Interest Payment Date other than the Maturity Date by
wire transfer of immediately available funds if appropriate wire transfer
instructions have been received in writing by the Trustee not less than fifteen
days prior to such Interest Payment Date. Any such wire transfer instructions
received by the Trustee shall remain in effect until revoked by such Holder. For
special payment terms applicable to Foreign Currency Notes, see "Special
Provisions Relating to Foreign Currency Notes--Payment of Principal, Premium, if
any, and Interest."
As used herein, "Business Day" means any day, other than a Saturday or
Sunday, that is neither a legal holiday nor a day on which banking institutions
in New York City or in Chicago are authorized or required by law, resolution or
executive order to close; PROVIDED, HOWEVER, that with respect to Foreign
Currency Notes, such day is also not a day on which banking institutions are
authorized or required by law, regulation or executive order to close in the
Principal Financial Center (as defined below) of the country issuing the
Specified Currency (or if the Specified Currency is European Currency Units
("ECU"), such day is not a day that appears as an ECU non-settlement day on the
display
S-7
<PAGE>
designated as "ISDE" on the Reuter Monitor Money Rates Service (or a day so
designated by the ECU Banking Association), or, if ECU non-settlement days do
not appear on that page (and are not so designated), is not a day on which
payments in ECU cannot be settled in the international interbank market);
PROVIDED, FURTHER, that, with respect to Notes as to which LIBOR is an
applicable Interest Rate Basis, such day is also a London Business Day (as
defined below). "London Business Day" means any day (i) if the Index Currency
(as defined below) is other than ECU, on which dealings in such Index Currency
are transacted in the London interbank market or (ii) if the Index Currency is
ECU, that does not appear as an ECU non-settlement day on the display designated
as "ISDE" on the Reuter Monitor Money Rates Service (or a day so designated by
the ECU Banking Association, or, if ECU non-settlement days do not appear on
that page (and are not so designated), is not a day on which payments in ECU
cannot be settled in the international interbank market).
"Principal Financial Center" means the capital city of the country issuing
the Specified Currency or, solely with respect to the calculation of LIBOR, the
Index Currency, except that with respect to United States dollars, Australian
dollars, Deutsche marks, Dutch guilders, Italian lire, Swiss francs and ECU, the
Principal Financial Center shall be New York City, Sydney, Frankfurt, Amsterdam,
Milan, Zurich and Luxembourg, respectively.
Book-Entry Notes may be transferred or exchanged only through DTC. See
"--Book-Entry Notes." Registration of transfer or exchange of Certificated Notes
will be made at the office or agency maintained by the Operating Partnership for
such purpose in the Borough of Manhattan in New York City. No service charge
will be made by the Operating Partnership or the Trustee for any such
registration of transfer or exchange of Notes, but the Operating Partnership may
require payment of a sum sufficient to cover any tax or other governmental
charge that may be imposed in connection therewith (other than exchanges
pursuant to the Indenture not involving any transfer).
Notwithstanding any provisions described in this Prospectus Supplement to
the contrary, if a Note specifies that an Addendum is attached thereto or that
"Other/Additional Provisions" apply, such Note will be subject to the terms
specified in such Addendum or "Other/Additional Provisions," as the case may be,
and will be described in the applicable Pricing Supplement.
REDEMPTION AT THE OPTION OF THE OPERATING PARTNERSHIP
Unless otherwise specified in the applicable Pricing Supplement, the Notes
will not be subject to any sinking fund. The applicable Pricing Supplement will
indicate if the Notes will be redeemable prior to the Stated Maturity Date and
the terms on which such Notes will be redeemable at the option of the Operating
Partnership. If so specified, the Notes will be subject to redemption at the
option of the Operating Partnership on any date on and after the applicable
Initial Redemption Date in whole or from time to time in part in increments of
$1,000 or such other minimum denomination specified in such Pricing Supplement
(provided that any remaining principal amount thereof shall be at least $1,000
or such minimum denomination), at the applicable Redemption Price (as defined
below), together with unpaid interest accrued to the date of redemption, on
notice given not more than 60 nor less than 30 calendar days prior to the date
of redemption and in accordance with the provisions of the Indenture. Unless
otherwise specified in the applicable Pricing Supplement, "Redemption Price,"
with respect to a Note, means an amount equal to the Initial Redemption
Percentage specified in the applicable Pricing Supplement (as adjusted by the
Annual Redemption Percentage Reduction, if applicable) multiplied by the unpaid
principal amount to be redeemed. The Initial Redemption Percentage, if any,
applicable to a Note shall decline at each anniversary of the Initial Redemption
Date by an amount equal to the applicable Annual Redemption Percentage
Reduction, if any, until the Redemption Price is equal to 100% of the unpaid
principal amount to be redeemed. See also "--Original Issue Discount Notes."
REPAYMENT AT THE NOTEHOLDERS' OPTION; REPURCHASES BY THE OPERATING PARTNERSHIP
The applicable Pricing Supplement will indicate if the Notes will be
repayable at the option of the Holders thereof on a date specified prior to the
applicable Maturity Date and, unless otherwise specified in the Pricing
Supplement, such Notes shall be repayable at a price equal to 100% of the
principal amount thereof, together with unpaid interest accrued to the date of
repayment.
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In order for such a Note to be repaid, the Trustee must receive at least 30
days but not more than 60 days prior to the repayment date (i) such Note with
the form entitled "Option to Elect Repayment" on the reverse of such Note duly
completed or (ii) a telegram, telex, facsimile transmission, or a letter from a
member of a national securities exchange or the National Association of
Securities Dealers, Inc. or a commercial bank or trust company in the United
States setting forth the name of the Holder of such Note, the principal amount
of such Note, the principal amount of such Note to be repaid, the certificate
number or a description of the tenor and terms of such Note, a statement that
the option to elect repayment is being exercised thereby, and a guarantee that
such Note to be repaid, together with the duly completed form entitled "Option
to Elect Repayment" on the reverse of such Note, will be received by the Trustee
not later than the fifth Business Day after the date of such telegram, telex,
facsimile transmission or letter; however, such telegram, telex, facsimile
transmission, or letter shall only be effective if such Note and duly completed
form are received by the Trustee by such fifth Business Day. Unless otherwise
specified in the applicable Pricing Supplement, exercise of the repayment option
by the Holder of a Note will be irrevocable. The repayment option may be
exercised by the Holder of a Note for less than the entire principal amount of
the Note, but in that event, the principal amount of the Note remaining
outstanding after repayment must be in an authorized denomination.
If a Note is represented by a Global Security, DTC's nominee will be the
Holder of such Note and therefore will be the only entity that can exercise a
right to repayment. In order to ensure that DTC's nominee will timely exercise a
right to repayment with respect to a particular Note, the Beneficial Owner of
such Note must instruct the broker or other Direct Participant (as defined
below) or Indirect Participant (as defined below) through which it holds an
interest in such Note to notify DTC of its desire to exercise a right to
repayment. Different firms have different deadlines for accepting instructions
from their customers. Accordingly, each Beneficial Owner should consult the
broker or other Direct Participant or Indirect Participant through which it
holds an interest in a Note in order to ascertain the deadline by which such an
instruction must be given in order for timely notice to be delivered to DTC.
If applicable, the Operating Partnership will comply with the requirements
of Rule 14e-1 under the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), and any other securities laws or regulations in connection with
any such repayment.
The Operating Partnership may at any time purchase Notes at any price or
prices in the open market or otherwise. Notes so purchased by the Operating
Partnership may, at the discretion of the Operating Partnership, be held, resold
or surrendered to the Trustee for cancellation.
INTEREST
GENERAL
Unless otherwise specified in the applicable Pricing Supplement, each
interest-bearing Note will bear interest from its date of issue at the rate per
annum, in the case of a Fixed Rate Note, or pursuant to the interest rate
formula, in the case of a Floating Rate Note, in each case, as specified in the
applicable Pricing Supplement, until the principal thereof is paid or duly made
available for payment. Unless otherwise specified in the applicable Pricing
Supplement, interest payments in respect of Fixed Rate Notes and Floating Rate
Notes will equal the amount of interest accrued from and including the
immediately preceding Interest Payment Date in respect of which interest has
been paid or duly made available for payment (or from and including the date of
issue, if no interest has been paid or duly made available for payment with
respect to the applicable Note) to but excluding the applicable Interest Payment
Date or the Maturity Date, as the case may be (each, an "Interest Period").
Interest on Fixed Rate Notes and Floating Rate Notes will be payable in
arrears on each Interest Payment Date and on the Maturity Date. Unless otherwise
specified in the applicable Pricing Supplement, the first payment of interest on
any such Note originally issued between a Record Date (as defined below) and the
related Interest Payment Date will be made on the Interest Payment Date
immediately following the next succeeding Record Date to the Holder on such next
succeeding Record Date. Unless otherwise specified in the applicable Pricing
Supplement, a "Record Date" shall be the fifteenth calendar day (whether or not
a Business Day) immediately preceding the related Interest Payment Date.
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FIXED RATE NOTES
Interest on Fixed Rate Notes will be payable in arrears as specified in the
applicable Pricing Supplement (each, an "Interest Payment Date") and on the
Maturity Date. Unless otherwise specified in the applicable Pricing Supplement,
interest on Fixed Rate Notes will be computed on the basis of a 360-day year of
twelve 30-day months.
If any Interest Payment Date or the Maturity Date of a Fixed Rate Note falls
on a day that is not a Business Day, the required payment of principal, premium,
if any, and/or interest will be made on the next succeeding Business Day with
the same force and effect as if made on the date such payment was due, and no
interest will accrue on such payment for the period from and after such Interest
Payment Date or the Maturity Date, as the case may be, to the date of such
payment on the next succeeding Business Day.
FLOATING RATE NOTES
Unless otherwise specified in the applicable Pricing Supplement, Floating
Rate Notes will be issued as described below. The applicable Pricing Supplement
will specify certain terms with respect to which each Floating Rate Note is
being delivered, including: whether such Floating Rate Note is a "Regular
Floating Rate Note," a "Floating Rate/Fixed Rate Note" or an "Inverse Floating
Rate Note," the Fixed Rate Commencement Date, if applicable, Fixed Interest
Rate, if applicable, Interest Rate Basis or Bases, Initial Interest Rate, if
any, Initial Interest Reset Date, Interest Reset Period and Dates, Interest
Payment Period and Dates, Index Maturity, Maximum Interest Rate and/or Minimum
Interest Rate, if any, and Spread and/or Spread Multiplier, if any, as such
terms are defined below. If one or more of the applicable Interest Rate Bases is
LIBOR or the CMT Rate, the applicable Pricing Supplement will specify the Index
Currency, if any, and Designated LIBOR Page or the Designated CMT Maturity Index
and Designated CMT Telerate Page, respectively, as such terms are defined below.
The interest rate borne by the Floating Rate Notes will be determined as
follows:
(i) Unless such Floating Rate Note is designated as a "Floating
Rate/Fixed Rate Note," or an "Inverse Floating Rate Note" or as having an
Addendum attached or having "Other/Additional Provisions" apply relating to
a different interest rate formula, such Floating Rate Note will be
designated as a "Regular Floating Rate Note" and, except as described below
or in the applicable Pricing Supplement, will bear interest at the rate
determined by reference to the applicable Interest Rate Basis or Bases (a)
plus or minus the applicable Spread, if any, and/or (b) multiplied by the
applicable Spread Multiplier, if any. Commencing on the Initial Interest
Reset Date, the rate at which interest on such Regular Floating Rate Note
shall be payable shall be reset as of each Interest Reset Date; PROVIDED,
HOWEVER, that the interest rate in effect for the period, if any, from the
date of issue to the Initial Interest Reset Date will be the Initial
Interest Rate.
(ii) If such Floating Rate Note is designated as a "Floating Rate/Fixed
Rate Note," then, except as described below or in the applicable Pricing
Supplement, such Floating Rate Note will bear interest at the rate
determined by reference to the applicable Interest Rate Basis or Bases (a)
plus or minus the applicable Spread, if any, and/or (b) multiplied by the
applicable Spread Multiplier, if any. Commencing on the Initial Interest
Reset Date, the rate at which interest on such Floating Rate/Fixed Rate Note
shall be payable shall be reset as of each Interest Reset Date; PROVIDED,
HOWEVER, that (y) the interest rate in effect for the period, if any, from
the date of issue to the Initial Interest Reset Date will be the Initial
Interest Rate and (z) the interest rate in effect for the period commencing
on the Fixed Rate Commencement Date to the Maturity Date shall be the Fixed
Interest Rate, if such rate is specified in the applicable Pricing
Supplement or, if no such Fixed Interest Rate is specified, the interest
rate in effect thereon on the day immediately preceding the Fixed Rate
Commencement Date.
(iii) If such Floating Rate Note is designated as an "Inverse Floating
Rate Note," then, except as described below or in the applicable Pricing
Supplement, such Floating Rate Note will bear interest at the Fixed Interest
Rate minus the rate determined by reference to the applicable Interest Rate
Basis or Bases (a) plus or minus the applicable Spread, if any, and/or (b)
multiplied by the applicable Spread Multiplier, if any; PROVIDED, HOWEVER,
that, unless otherwise specified in the applicable Pricing Supplement, the
interest rate thereon will not be less than zero. Commencing on the Initial
Interest Reset Date, the rate at which interest on such Inverse Floating
Rate Note
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shall be payable shall be reset as of each Interest Reset Date; PROVIDED,
HOWEVER, that the interest rate in effect for the period, if any, from the
date of issue to the Initial Interest Reset Date will be the Initial
Interest Rate.
The "Spread" is the number of basis points to be added to or subtracted from
the related Interest Rate Basis or Bases applicable to such Floating Rate Note.
The "Spread Multiplier" is the percentage of the related Interest Rate Basis or
Bases applicable to such Floating Rate Note by which such Interest Rate Basis or
Bases will be multiplied to determine the applicable interest rate on such
Floating Rate Note. The "Index Maturity" is the period to maturity of the
instrument or obligation with respect to which the related Interest Rate Basis
or Bases will be calculated.
Unless otherwise specified in the applicable Pricing Supplement, the
interest rate with respect to each Interest Rate Basis will be determined in
accordance with the applicable provisions below. Except as set forth above or in
the applicable Pricing Supplement, the interest rate in effect on each day shall
be (i) if such day is an Interest Reset Date, the interest rate determined as of
the Interest Determination Date (as defined below) immediately preceding such
Interest Reset Date or (ii) if such day is not an Interest Reset Date, the
interest rate determined as of the Interest Determination Date immediately
preceding the most recent Interest Reset Date.
Interest on Floating Rate Notes will be determined by reference to the
applicable Interest Rate Basis or Interest Rate Bases, which may, as described
below, include (i) the CD Rate, (ii) the CMT Rate, (iii) the Commercial Paper
Rate, (iv) the Eleventh District Cost of Funds Rate, (v) the Federal Funds Rate,
(vi) LIBOR, (vii) the Prime Rate, (viii) the Treasury Rate, or (ix) such other
Interest Rate Basis or interest rate formula as may be specified in the
applicable Pricing Supplement; PROVIDED, HOWEVER, that the interest rate in
effect on a Floating Rate Note for the period, if any, from the date of issue to
the Initial Interest Reset Date will be the Initial Interest Rate; PROVIDED,
FURTHER, that with respect to a Floating Rate/Fixed Rate Note the interest rate
in effect for the period commencing on the Fixed Rate Commencement Date to the
Maturity Date shall be the Fixed Interest Rate, if such rate is specified in the
applicable Pricing Supplement or, if no such Fixed Interest Rate is specified,
the interest rate in effect thereon on the day immediately preceding the Fixed
Rate Commencement Date.
The applicable Pricing Supplement will specify whether the rate of interest
on the related Floating Rate Note will be reset daily, weekly, monthly,
quarterly, semiannually or annually or on such other specified basis (each, an
"Interest Reset Period") and the dates on which such rate of interest will be
reset (each, an "Interest Reset Date"). Unless otherwise specified in the
applicable Pricing Supplement, the Interest Reset Dates will be, in the case of
Floating Rate Notes which reset: (i) daily, each Business Day; (ii) weekly, the
Wednesday of each week (with the exception of weekly reset Floating Rate Notes
as to which the Treasury Rate is an applicable Interest Rate Basis, which will
reset the Tuesday of each week, except as described below); (iii) monthly, the
third Wednesday of each month (with the exception of monthly reset Floating Rate
Notes as to which the Eleventh District Cost of Funds Rate is an applicable
Interest Rate Basis, which will reset on the first calendar day of the month);
(iv) quarterly, the third Wednesday of March, June, September and December of
each year; (v) semiannually, the third Wednesday of the two months specified in
the applicable Pricing Supplement; and (vi) annually, the third Wednesday of the
month specified in the applicable Pricing Supplement; PROVIDED, HOWEVER, that,
with respect to Floating Rate/Fixed Rate Notes, the rate of interest thereon
will not reset after the applicable Fixed Rate Commencement Date. If any
Interest Reset Date for any Floating Rate Note would otherwise be a day that is
not a Business Day, such Interest Reset Date will be postponed to the next
succeeding Business Day, except that in the case of a Floating Rate Note as to
which LIBOR is an applicable Interest Rate Basis and such Business Day falls in
the next succeeding calendar month, such Interest Reset Date will be the
immediately preceding Business Day. In addition, in the case of a Floating Rate
Note as to which the Treasury Rate is an applicable Interest Rate Basis and the
Interest Determination Date would otherwise fall on an Interest Reset Date, then
such Interest Reset Date will be postponed to the next succeeding Business Day.
The interest rate applicable to each Interest Reset Period commencing on the
related Interest Reset Date will be the rate determined as of the applicable
Interest Determination Date and calculated on or prior to the Calculation Date
(as defined below), except with respect to LIBOR and the Eleventh District Cost
of Funds Rate, which will be calculated as of such Interest Determination Date.
The "Interest Determination Date" with respect to the CD Rate, the CMT Rate, the
Commercial Paper Rate, the Federal Funds Rate and the Prime Rate will be the
second Business Day immediately preceding the applicable Interest Reset Date;
the "Interest Determination Date" with respect to the Eleventh District
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Cost of Funds Rate will be the last business day of the month immediately
preceding the applicable Interest Reset Date on which the Federal Home Loan Bank
of San Francisco (the "FHLB of San Francisco") publishes the Index (as defined
below); and the "Interest Determination Date" with respect to LIBOR will be the
second London Business Day immediately preceding the applicable Interest Reset
Date, unless the Index Currency is British pounds sterling, in which case the
"Interest Determination Date" will be the applicable Interest Reset Date. With
respect to the Treasury Rate, the "Interest Determination Date" will be the day
in the week in which the applicable Interest Reset Date falls on which day
Treasury Bills (as defined below) are normally auctioned (Treasury Bills are
normally sold at an auction held on Monday of each week, unless that day is a
legal holiday, in which case the auction is normally held on the following
Tuesday, except that such auction may be held on the preceding Friday);
PROVIDED, HOWEVER, that if an auction is held on the Friday of the week
preceding the applicable Interest Reset Date, the Interest Determination Date
will be such preceding Friday. The "Interest Determination Date" pertaining to a
Floating Rate Note the interest rate of which is determined by reference to two
or more Interest Rate Bases will be the most recent Business Day which is at
least two Business Days prior to the applicable Interest Reset Date for such
Floating Rate Note on which each Interest Rate Basis is determinable. Each
Interest Rate Basis will be determined as of such date, and the applicable
interest rate will take effect on the applicable Interest Reset Date.
A Floating Rate Note may also have either or both of the following: (i) a
Maximum Interest Rate, or ceiling, that may accrue during any Interest Period
and (ii) a Minimum Interest Rate, or floor, that may accrue during any Interest
Period. In addition to any Maximum Interest Rate that may apply to any Floating
Rate Note, the interest rate on Floating Rate Notes will in no event be higher
than the maximum rate permitted by New York law, as the same may be modified by
United States law of general application.
Except as provided below or in the applicable Pricing Supplement, interest
will be payable, in the case of Floating Rate Notes which reset: (i) daily,
weekly or monthly, on the third Wednesday of each month or the third Wednesday
of March, June, September and December of each year, as specified in the
applicable Pricing Supplement; (ii) quarterly, on the third Wednesday of March,
June, September and December of each year; (iii) semiannually, on the third
Wednesday of the two months of each year specified in the applicable Pricing
Supplement; and (iv) annually, on the third Wednesday of the month of each year
specified in the applicable Pricing Supplement (each, an "Interest Payment
Date") and, in each case, on the Maturity Date. If any Interest Payment Date
other than the Maturity Date for any Floating Rate Note would otherwise be a day
that is not a Business Day, such Interest Payment Date will be postponed to the
next succeeding Business Day, except that in the case of a Floating Rate Note as
to which LIBOR is an applicable Interest Rate Basis and such Business Day falls
in the next succeeding calendar month, such Interest Payment Date will be the
immediately preceding Business Day. If the Maturity Date of a Floating Rate Note
falls on a day that is not a Business Day, the required payment of principal,
premium, if any, and interest will be made on the next succeeding Business Day
with the same force and effect as if made on the date such payment was due, and
no interest will accrue on such payment for the period from and after the
Maturity Date to the date of such payment on the next succeeding Business Day.
All percentages resulting from any calculation on Floating Rate Notes will
be rounded to the nearest one hundred-thousandth of a percentage point, with
five-one millionths of a percentage point rounded upwards (e.g., 5.876545% (or
.05876545) would be rounded to 5.87655% (or .0587655)), and all amounts used in
or resulting from such calculation on Floating Rate Notes will be rounded, in
the case of United States dollars, to the nearest cent or, in the case of a
foreign currency or composite currency, to the nearest unit (with one-half cent
or unit being rounded upwards).
With respect to each Floating Rate Note, accrued interest is calculated by
multiplying its principal amount by an accrued interest factor. Such accrued
interest factor is computed by adding the interest factor calculated for each
day in the applicable Interest Period. Unless otherwise specified in the
applicable Pricing Supplement, the interest factor for each such day will be
computed by dividing the interest rate applicable to such day by 360, in the
case of Floating Rate Notes for which an applicable Interest Rate Basis is the
CD Rate, the Commercial Paper Rate, the Eleventh District Cost of Funds Rate,
the Federal Funds Rate, LIBOR or the Prime Rate, or by the actual number of days
in the year in the case of Floating Rate Notes for which an applicable Interest
Rate Basis is the CMT Rate or the Treasury Rate. Unless otherwise specified in
the applicable Pricing Supplement, the interest factor for Floating Rate Notes
for which the
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interest rate is calculated with reference to two or more Interest Rate Bases
will be calculated in each period in the same manner as if only one of the
applicable Interest Rate Bases applied as specified in the applicable Pricing
Supplement.
Unless otherwise specified in the applicable Pricing Supplement, First Trust
National Association will be the "Calculation Agent" with respect to any
Floating Rate Note. Upon request of the Holder of any Floating Rate Note, the
Calculation Agent will disclose the interest rate then in effect and, if
determined, the interest rate that will become effective as a result of a
determination made for the next succeeding Interest Reset Date with respect to
such Floating Rate Note. Unless otherwise specified in the applicable Pricing
Supplement, the "Calculation Date," if applicable, pertaining to any Interest
Determination Date will be the earlier of (i) the tenth calendar day after such
Interest Determination Date, or, if such day is not a Business Day, the next
succeeding Business Day or (ii) the Business Day immediately preceding the
applicable Interest Payment Date or the Maturity Date, as the case may be.
Unless otherwise specified in the applicable Pricing Supplement, the
Calculation Agent shall determine each Interest Rate Basis in accordance with
the following provisions.
CD RATE. Unless otherwise specified in the applicable Pricing Supplement,
"CD Rate" means, with respect to any Interest Determination Date relating to a
Floating Rate Note for which the interest rate is determined with reference to
the CD Rate (a "CD Rate Interest Determination Date"), the rate on such date for
negotiable United States dollar certificates of deposit having the Index
Maturity specified in the applicable Pricing Supplement as published by the
Board of Governors of the Federal Reserve System in "Statistical Release
H.15(519), Selected Interest Rates" or any successor publication ("H.15(519)")
under the heading "CDs (Secondary Market)," or, if not published by 3:00 P.M.,
New York City time, on the related Calculation Date, the rate on such CD Rate
Interest Determination Date for negotiable United States dollar certificates of
deposit of the Index Maturity specified in the applicable Pricing Supplement as
published by the Federal Reserve Bank of New York in its daily statistical
release "Composite 3:30 P.M. Quotations for U.S. Government Securities" or any
successor publication ("Composite Quotations") under the heading "Certificates
of Deposit." If such rate is not yet published in either H.15(519) or Composite
Quotations by 3:00 P.M., New York City time, on the related Calculation Date,
then the CD Rate on such CD Rate Interest Determination Date will be calculated
by the Calculation Agent and will be the arithmetic mean of the secondary market
offered rates as of 10:00 A.M., New York City time, on such CD Rate Interest
Determination Date, of three leading nonbank dealers in negotiable United States
dollar certificates of deposit in New York City (which may include any of the
Agents or their affiliates) selected by the Calculation Agent for negotiable
United States dollar certificates of deposit of major United States money center
banks in the market for negotiable United States dollar certificates of deposit
with a remaining maturity closest to the Index Maturity specified in the
applicable Pricing Supplement in an amount that is representative for a single
transaction in that market at that time; PROVIDED, HOWEVER, that if the dealers
so selected by the Calculation Agent are not quoting as mentioned in this
sentence, the CD Rate determined as of such CD Rate Interest Determination Date
will be the CD Rate in effect on such CD Rate Interest Determination Date.
CMT RATE. Unless otherwise specified in the applicable Pricing Supplement,
"CMT Rate" means, with respect to any Interest Determination Date relating to a
Floating Rate Note for which the interest rate is determined with reference to
the CMT Rate (a "CMT Rate Interest Determination Date"), the rate displayed on
the Designated CMT Telerate Page under the caption ". . . Treasury Constant
Maturities . . . Federal Reserve Board Release H.15 . . . Mondays Approximately
3:45 P.M.," under the column for the Designated CMT Maturity Index for (i) if
the Designated CMT Telerate Page is 7055, the rate on such CMT Rate Interest
Determination Date and (ii) if the Designated CMT Telerate Page is 7052, the
weekly or monthly average, as specified in the applicable Pricing Supplement,
for the week or the month, as applicable, ended immediately preceding the week
or month, as applicable, in which the related CMT Rate Interest Determination
Date occurs. If such rate is no longer displayed on the relevant page or is not
displayed by 3:00 P.M., New York City time, on the related Calculation Date,
then the CMT Rate for such CMT Rate Interest Determination Date will be such
treasury constant maturity rate for the Designated CMT Maturity Index as
published in the relevant H.15(519). If such rate is no longer published or is
not published by 3:00 P.M., New York City time, on the related Calculation Date,
then the CMT Rate on such CMT Rate Interest Determination Date will be such
treasury constant maturity rate for the Designated CMT Maturity Index (or other
United States Treasury rate for the Designated CMT Maturity Index) for the CMT
Rate Interest Determination Date with respect to such Interest Reset Date as may
then be published by either the Board of Governors of the Federal Reserve System
or the United States Department of
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the Treasury that the Calculation Agent determines to be comparable to the rate
formerly displayed on the Designated CMT Telerate Page and published in the
relevant H.15(519). If such information is not provided by 3:00 P.M., New York
City time, on the related Calculation Date, then the CMT Rate on the CMT Rate
Interest Determination Date will be calculated by the Calculation Agent and will
be a yield to maturity, based on the arithmetic mean of the secondary market
closing offer side prices as of approximately 3:30 P.M., New York City time, on
such CMT Rate Interest Determination Date reported, according to their written
records, by three leading primary United States government securities dealers
(each, a "Reference Dealer") in New York City (which may include any of the
Agents or their affiliates) selected by the Calculation Agent (from five such
Reference Dealers selected by the Calculation Agent and eliminating the highest
quotation (or, in the event of equality, one of the highest) and the lowest
quotation (or, in the event of equality, one of the lowest)), for the most
recently issued direct noncallable fixed rate obligations of the United States
("Treasury Notes") with an original maturity of approximately the Designated CMT
Maturity Index and a remaining term to maturity of not less than such Designated
CMT Maturity Index minus one year. If the Calculation Agent is unable to obtain
three such Treasury Note quotations, the CMT Rate on such CMT Rate Interest
Determination Date will be calculated by the Calculation Agent and will be a
yield to maturity based on the arithmetic mean of the secondary market offer
side prices as of approximately 3:30 P.M., New York City time, on such CMT Rate
Interest Determination Date of three Reference Dealers in New York City (from
five such Reference Dealers selected by the Calculation Agent and eliminating
the highest quotation (or, in the event of equality, one of the highest) and the
lowest quotation (or, in the event of equality, one of the lowest)), for
Treasury Notes with an original maturity of the number of years that is the next
highest to the Designated CMT Maturity Index and a remaining term to maturity
closest to the Designated CMT Maturity Index and in an amount of at least
$100,000,000. If three or four (and not five) of such Reference Dealers are
quoting as described above, then the CMT Rate will be based on the arithmetic
mean of the offer prices obtained and neither the highest nor the lowest of such
quotes will be eliminated; PROVIDED, HOWEVER, that if fewer than three Reference
Dealers so selected by the Calculation Agent are quoting as mentioned herein,
the CMT Rate determined as of such CMT Rate Interest Determination Date will be
the CMT Rate in effect on such CMT Rate Interest Determination Date. If two
Treasury Notes with an original maturity as described in the second preceding
sentence have remaining terms to maturity equally close to the Designated CMT
Maturity Index, the Calculation Agent will obtain quotations for the Treasury
Note with the shorter remaining term to maturity and will use such quotations to
calculate the CMT Rate as set forth above.
"Designated CMT Telerate Page" means the display on the Dow Jones Telerate
Service (or any successor service) on the page specified in the applicable
Pricing Supplement (or any other page as may replace such page on that service
(or any successor service) for the purpose of displaying Treasury Constant
Maturities as reported in H.15(519)) for the purpose of displaying Treasury
Constant Maturities as reported in H.15(519). If no such page is specified in
the applicable Pricing Supplement, the Designated CMT Telerate Page shall be
7052, for the most recent week.
"Designated CMT Maturity Index" means the original period to maturity of the
U.S. Treasury securities (either one, two, three, five, seven, 10, 20 or 30
years) specified in the applicable Pricing Supplement with respect to which the
CMT Rate will be calculated. If no such maturity is specified in the applicable
Pricing Supplement, the Designated CMT Maturity Index shall be two years.
COMMERCIAL PAPER RATE. Unless otherwise specified in the applicable Pricing
Supplement, "Commercial Paper Rate" means, with respect to any Interest
Determination Date relating to a Floating Rate Note for which the interest rate
is determined with reference to the Commercial Paper Rate (a "Commercial Paper
Rate Interest Determination Date"), the Money Market Yield (as defined below) on
such date of the rate for commercial paper having the Index Maturity specified
in the applicable Pricing Supplement as published in H.15(519) under the heading
"Commercial Paper-- Nonfinancial." In the event that such rate is not published
by 3:00 PM., New York City time, on the related Calculation Date, then the
Commercial Paper Rate on such Commercial Paper Rate Interest Determination Date
will be the Money Market Yield of the rate for commercial paper having the Index
Maturity specified in the applicable Pricing Supplement as published in
Composite Quotations under the heading "Commercial Paper" (with an Index
Maturity of one month or three months being deemed to be equivalent to an Index
Maturity of 30 days or 90 days, respectively). If such rate is not yet published
in either H.15(519) or Composite Quotation by 3:00 P.M., New York City time, on
the related Calculation Date, then the Commercial Paper Rate on such Commercial
Paper Rate Interest Determination Date will be calculated
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by the Calculation Agent and will be the Money Market Yield of the arithmetic
mean of the offered rates at approximately 11.00 A.M., New York City time, on
such Commercial Paper Rate Interest Determination Date of three leading dealers
of commercial paper in New York City (which may include any of the Agents or
their affiliates) selected by the Calculation Agent for commercial paper having
the Index Maturity specified in the applicable Pricing Supplement placed for an
industrial issuer whose bond rating is "AA," or the equivalent, from a
nationally recognized statistical rating organization; PROVIDED, HOWEVER, that
if the dealers so selected by the Calculation Agent are not quoting as mentioned
in this sentence, the Commercial Paper Rate determined as of such Commercial
Paper Rate Interest Determination Date will be the Commercial Paper Rate in
effect on such Commercial Paper Interest Determination Date.
"Money Market Yield" means a yield (expressed as a percentage) calculated in
accordance with the following formula:
Money Market Yield = __D X 360__ X 100
360-(D X M)
where "D" refers to the applicable per annum rate for commercial paper quoted on
a bank discount basis and expressed as a decimal, and "M" refers to the actual
number of days in the Interest Period for which interest is being calculated.
ELEVENTH DISTRICT COST OF FUNDS RATE. Unless otherwise specified in the
applicable Pricing Supplement, "Eleventh District Cost of Funds Rate" means,
with respect to any Interest Determination Date relating to a Floating Rate Note
for which the interest rate is determined with reference to the Eleventh
District Cost of Funds Rate (an "Eleventh District Cost of Funds Rate Interest
Determination Date"), the rate equal to the monthly weighted average cost of
funds for the calendar month immediately preceding the month in which such
Eleventh District Cost of Funds Rate Interest Determination Date falls, as set
forth under the caption "11th District" on Telerate Page 7058 as of 11:00 A.M.,
San Francisco time, on such Eleventh District Cost of Funds Rate Interest
Determination Date. If such rate does not appear on Telerate Page 7058 on such
Eleventh District Cost of Funds Rate Interest Determination Date then the
Eleventh District Cost of Funds Rate on such Eleventh District Cost of Funds
Rate Interest Determination Date shall be the monthly weighted average cost of
funds paid by member institutions of the Eleventh Federal Home Loan Bank
District that was most recently announced (the "Index") by the FHLB of San
Francisco, as such cost of funds for the calendar month immediately preceding
such Eleventh District Cost of Funds Rate Interest Determination Date. If the
FHLB of San Francisco fails to announce the Index on or prior to such Eleventh
District Cost of Funds Rate Interest Determination Date for the calendar month
immediately preceding such Eleventh District Cost of Funds Rate Interest
Determination Date, the Eleventh District Cost of Funds Rate determined as of
such Eleventh District Cost of Funds Rate Interest Determination Date will be
the Eleventh District Cost of Funds Rate in effect on such Eleventh District
Cost of Funds Rate Interest Determination Date.
FEDERAL FUNDS RATE. Unless otherwise specified in the applicable Pricing
Supplement, "Federal Funds Rate" means, with respect to any Interest
Determination Date relating to a Floating Rate Note for which the interest rate
is determined with reference to the Federal Funds Rate (a "Federal Funds Rate
Interest Determination Date"), the rate on such date for United States dollar
federal funds as published in H.15(519) under the heading "Federal Funds
(Effective)" or, if not published by 3:00 P.M., New York City time, on the
related Calculation Date, the rate on such Federal Funds Rate Interest
Determination Date as published in Composite Quotations under the heading
"Federal Funds/Effective Rate." If such rate is not published in either
H.15(519) or Composite Quotations by 3:00 P.M., New York City time, on the
related Calculation Date, then the Federal Funds Rate on such Federal Funds Rate
Interest Determination Date will be calculated by the Calculation Agent and will
be the arithmetic mean of the rates for the last transaction in overnight United
States dollar federal funds arranged by three leading brokers of federal funds
transactions in New York City (which may include any of the Agents or their
affiliates) selected by the Calculation Agent prior to 9:00 A.M., New York City
time, on such Federal Funds Rate Interest Determination Date; PROVIDED, HOWEVER,
that if the brokers so selected by the Calculation Agent are not quoting as
mentioned in this sentence, the Federal Funds Rate determined as of such Federal
Funds Rate Interest Determination Date will be the Federal Funds Rate in effect
on such Federal Funds Rate Interest Determination Date.
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LIBOR. Unless otherwise specified in the applicable Pricing Supplement,
"LIBOR" means the rate determined in accordance with the following provisions:
(i) With respect to any Interest Determination Date relating to a
Floating Rate Note for which the interest rate is determined with reference
to LIBOR (a "LIBOR Interest Determination Date"), LIBOR will be either: (a)
if "LIBOR Reuters" is specified in the applicable Pricing Supplement, the
arithmetic mean of the offered rates (unless the Designated LIBOR Page by
its terms provides only for a single rate, in which case such single rate
shall be used) for deposits in the Index Currency having the index Maturity
specified in such Pricing Supplement, commencing on the applicable Interest
Reset Date, that appear (or, if only a single rate is required as aforesaid,
appears) on the Designated LIBOR Page as of 11:00 A.M., London time, on such
LIBOR Interest Determination Date, or (b) if "LIBOR Telerate" is specified
in the applicable Pricing Supplement or if neither "LIBOR Reuters" nor
"LIBOR Telerate" is specified in the applicable Pricing Supplement as the
method for calculating LIBOR, the rate for deposits in the Index Currency
having the Index Maturity specified in such Pricing Supplement, commencing
on such Interest Reset Date, that appears on the Designated LIBOR Page as of
11:00 A.M., London time, on such LIBOR Interest Determination Date. If fewer
than two such offered rates appear, or if no such rate appears, as
applicable, LIBOR on such LIBOR Interest Determination Date will be
determined in accordance with the provisions described in clause (ii) below.
(ii) With respect to a LIBOR Interest Determination Date on which fewer
than two offered rates appear, or no rate appears, as the case may be, on
the Designated LIBOR Page as specified in clause (i) above, the Calculation
Agent will request the principal London offices of each of four major
reference banks in the London interbank market, as selected by the
Calculation Agent, to provide the Calculation Agent with its offered
quotation for deposits in the Index Currency for the period of the Index
Maturity specified in the applicable Pricing Supplement, commencing on the
applicable Interest Reset Date, to prime banks in the London interbank
market at approximately 11:00 A.M., London time, on such LIBOR Interest
Determination Date and in a principal amount that is representative for a
single transaction in such Index Currency in such market at such time. If at
least two such quotations are so provided, then LIBOR on such LIBOR Interest
Determination Date will be the arithmetic mean of such quotations. If fewer
than two such quotations are so provided, then LIBOR on such LIBOR Interest
Determination Date will be the arithmetic mean of the rates quoted at
approximately 11:00 A.M., in the applicable Principal Financial Center, on
such LIBOR Interest Determination Date by three major banks in such
Principal Financial Center selected by the Calculation Agent for loans in
the Index Currency to leading European banks, having the Index Maturity
specified in the applicable Pricing Supplement and in a principal amount
that is representative for a single transaction in such Index Currency in
such market at such time; PROVIDED, HOWEVER, that if the banks so selected
by the Calculation Agent are not quoting as mentioned in this sentence,
LIBOR determined as of such LIBOR Interest Determination Date will be LIBOR
in effect on such LIBOR Interest Determination Date.
"Index Currency" means the currency or composite currency specified in the
applicable Pricing Supplement as to which LIBOR shall be calculated. If no such
currency or composite currency is specified in the applicable Pricing
Supplement, the Index Currency shall be United States dollars.
"Designated LIBOR Page" means (a) if "LIBOR Reuters" is specified in the
applicable Pricing Supplement, the display on the Reuter Monitor Money Rates
Service (or any successor service) on the page specified in such Pricing
Supplement (or any other page as may replace such page or such service (or any
successor service)) for the purpose of displaying the London interbank rates of
major banks for the applicable Index Currency, or (b) if "LIBOR Telerate" is
specified in the applicable Pricing Supplement or neither "LIBOR Reuters" nor
"LIBOR Telerate" is specified in the applicable Pricing Supplement as the method
for calculating LIBOR, the display on the Dow Jones Telerate Service (or any
successor service) on the page specified in such Pricing Supplement (or any
other page as may replace such page or such service (or any successor service))
for the purpose of displaying the London interbank rates of major banks for the
applicable Index Currency.
PRIME RATE. Unless otherwise specified in the applicable Pricing
Supplement, "Prime Rate" means, with respect to any Interest Determination Date
relating to a Floating Rate Note for which the interest rate is determined with
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reference to the Prime Rate (a "Prime Rate Interest Determination Date"), the
rate on such date as is published in H.15(519) under the heading "Bank Prime
Loan." If such rate is not published prior to 3:00 P.M., New York City time, on
the related Calculation Date, then the Prime Rate shall be the arithmetic mean
of the rates of interest publicly announced by each bank that appears on the
Reuters Screen USPRIME1 Page (as defined below) as such bank's prime rate or
base lending rate as in effect for such Prime Rate Interest Determination Date.
If fewer than four such rates appear on the Reuters Screen USPRIME1 Page for
such Prime Rate Interest Determination Date, then the Prime Rate shall be the
arithmetic mean of the prime rates quoted on the basis of the actual number of
days in the year divided by a 360-day year as of the close of business on such
Prime Rate Interest Determination Date by four major money center banks in New
York City selected by the Calculation Agent. If fewer than four such quotations
are so provided, then the Prime Rate shall be the arithmetic mean of four prime
rates quoted on the basis of the actual number of days in the year divided by a
360-day year as of the close of business on such Prime Rate Interest
Determination Date as furnished in New York City by the major money center
banks, if any, that have provided such quotations and by a reasonable number of
substitute banks or trust companies to obtain four such prime rate quotations,
provided such substitute banks or trust companies are organized and doing
business under the laws of the United States, or any State thereof, each having
total equity capital of at least $500,000,000 and being subject to supervision
or examination by Federal or State authority, selected by the Calculation Agent
to provide such rate or rates; PROVIDED, HOWEVER, that if the banks or trust
companies so selected by the Calculation Agent are not quoting as mentioned in
this sentence, the Prime Rate determined as of such Prime Rate Interest
Determination Date will be the Prime Rate in effect on such Prime Rate Interest
Determination Date.
"Reuters Screen USPRIME1 Page" means the display designated as page
"USPRIME1" on the Reuter Monitor Money Rates Service (or any successor service)
or such other page as may replace the USPRIME1 Page on the Reuter Monitor Money
Rates Service (or any successor service) for the purpose of displaying prime
rates or base lending rates of major United States banks.
TREASURY RATE. Unless otherwise specified in the applicable Pricing
Supplement, "Treasury Rate" means, with respect to any Interest Determination
Date relating to a Floating Rate Note for which the interest rate is determined
by reference to the Treasury Rate (a "Treasury Rate Interest Determination
Date"), the rate from the auction held on such Treasury Rate Interest
Determination Date (the "Auction") of direct obligations of the United States
("Treasury Bills") having the Index Maturity specified in the applicable Pricing
Supplement, as such rate is published in H.15(519) under the heading "Treasury
bills-auction average (investment)" or, if not published by 3:00 P.M., New York
City time, on the related Calculation Date, the auction average rate of such
Treasury Bills (expressed as a bond equivalent on the basis of a year of 365 or
366 days, as applicable, and applied on a daily basis) as otherwise announced by
the United States Department of the Treasury. In the event that the results of
the Auction of Treasury Bills having the Index Maturity specified in the
applicable Pricing Supplement are not reported as provided by 3:00 P.M., New
York City time, on the related Calculation Date, or if no such Auction is held,
then the Treasury Rate will be calculated by the Calculation Agent and will be a
yield to maturity (expressed as a bond equivalent on the basis of a year of 365
or 366 days, as applicable, and applied on a daily basis) of the arithmetic mean
of the secondary market bid rates, as of approximately 3:30 P.M., New York City
time, on such Treasury Rate Interest Determination Date, of three leading
primary United States government securities dealers (which may include any of
the Agents or their affiliates) selected by the Calculation Agent, for the issue
of Treasury Bills with a remaining maturity closest to the Index Maturity
specified in the applicable Pricing Supplement; PROVIDED, HOWEVER, that if the
dealers so selected by the Calculation Agent are not quoting as mentioned in
this sentence, the Treasury Rate determined as of such Treasury Rate Interest
Determination Date will be the Treasury Rate in effect on such Treasury Rate
Interest Determination Date.
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AMORTIZING NOTES
The Operating Partnership may from time to time offer amortizing notes
("Amortizing Notes"). Unless otherwise specified in the applicable Pricing
Supplement, interest on each Amortizing Note will be computed on the basis of a
360-day year of twelve 30-day months. Payments with respect to Amortizing Notes
will be applied first to interest due and payable thereon and then to the
reduction of the unpaid principal amount thereof. Further information concerning
additional terms and provisions of Amortizing Notes will be specified in the
applicable Pricing Supplement, including a table setting forth repayment
information for such Amortizing Notes.
ORIGINAL ISSUE DISCOUNT NOTES
The Operating Partnership may offer Notes ("Discount Notes") from time to
time that have an Issue Price (as specified in the applicable Pricing
Supplement) that is less than 100% of the principal amount thereof (i.e., par).
Discount Notes may not bear any interest currently or may bear interest at a
rate that is below market rates at the time of issuance. The difference between
the Issue Price of a Discount Note and par is referred to herein as the
"Discount." In the event of redemption, repayment or acceleration of maturity of
a Discount Note, the amount payable to the Holder of such Discount Note will be
equal to the sum of: (i) the Issue Price (increased by any accruals of Discount)
and, in the event of any redemption of such Discount Note (if applicable),
multiplied by the Initial Redemption Percentage specified in the applicable
Pricing Supplement (as adjusted by the Annual Redemption Percentage Reduction,
if applicable); and (ii) any unpaid interest on such Discount Note accrued from
the date of issue to the date of such redemption, repayment or acceleration of
maturity.
Unless otherwise specified in the applicable Pricing Supplement, for
purposes of determining the amount of Discount that has accrued as of any date
on which a redemption, repayment or acceleration of maturity occurs for a
Discount Note, such Discount will be accrued using a constant yield method. The
constant yield will be calculated using a 30-day month, 360-day year convention,
a compounding period that, except for the Initial Period (as defined below),
corresponds to the shortest period between Interest Payment Dates for the
applicable Discount Note (with ratable accruals within a compounding period), a
coupon rate equal to the initial coupon rate applicable to such Discount Note
and an assumption that the maturity of such Discount Note will not be
accelerated. If the period from the date of issue to the initial Interest
Payment Date for a Discount Note (the "Initial Period") is shorter than the
compounding period for such Discount Note, a proportionate amount of the yield
for an entire compounding period will be accrued. If the Initial Period is
longer than the compounding period, then such period will be divided into a
regular compounding period and a short period with the short period being
treated as provided in the preceding sentence. The accrual of the applicable
Discount may differ from the accrual of original issue discount for purposes of
the Internal Revenue Code of 1986, as amended (the "Code"), certain Discount
Notes may not be treated as having original issue discount within the meaning of
the Code, and Notes other than Discount Notes may be treated as issued with
original issue discount for federal income tax purposes. See "Certain United
States Federal Income Tax Considerations" herein.
INDEXED NOTES
Notes may be issued with the amount of principal, premium and/or interest
payable in respect thereof to be determined with reference to the price or
prices of specified commodities or stocks, to the exchange rate of one or more
designated currencies (including a composite currency such as the ECU) relative
to an indexed currency or to such other price(s) or exchange rate(s) ("Indexed
Notes"), as specified in the applicable Pricing Supplement. In certain cases,
Holders of Indexed Notes may receive a principal payment on the Maturity Date
that is greater than or less than the principal amount of such Indexed Notes
depending upon the relative value on the Maturity Date of the specified indexed
item. Information as to the method for determining the amount of principal,
premium, if any, and/or interest payable in respect of Indexed Notes, certain
historical information with respect to the specified indexed item and certain
tax considerations associated with an investment in Indexed Notes will be
specified in the applicable Pricing Supplement. See also "Risk Factors."
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CERTAIN COVENANTS
LIMITATIONS ON INCURRENCE OF INDEBTEDNESS. The Operating Partnership will
not, and will not permit any of its Subsidiaries (as defined below) to, incur
any Indebtedness (as defined below), other than intercompany Indebtedness
(representing Indebtedness to which the only parties are the Operating
Partnership and any of its Subsidiaries (but only so long as such Indebtedness
is held solely by any of the Operating Partnership and any of its
Subsidiaries)), if, immediately after giving effect to the incurrence of such
additional Indebtedness and the application of the proceeds thereof, the
aggregate principal amount of all outstanding Indebtedness of the Operating
Partnership and its Subsidiaries on a consolidated basis determined in
accordance with GAAP (except that for the purposes hereof, each Subsidiary of
the Operating Partnership shall be treated as if such Subsidiary were a
subsidiary under GAAP) is greater than 60% of the sum of (without duplication)
(i) the Total Assets (as defined below) as of the end of the calendar quarter
covered in the Operating Partnership's Annual Report on Form 10-K or Quarterly
Report on Form 10-Q, as the case may be, most recently filed with the Securities
and Exchange Commission (the "Commission") (or, if such filing is not permitted
under the Exchange Act, with the Trustee) prior to the incurrence of such
additional Indebtedness and (ii) the purchase price of any real estate assets or
mortgages receivable acquired, and the amount of any securities offering
proceeds received (to the extent that such proceeds were not used to acquire
real estate assets or mortgages receivable or used to reduce Indebtedness), by
the Operating Partnership or any of its Subsidiaries since the end of such
calendar quarter, including those proceeds obtained in connection with the
incurrence of such additional Indebtedness.
In addition to the foregoing limitation on the incurrence of Indebtedness,
the Operating Partnership will not, and will not permit any of its Subsidiaries
to, incur Indebtedness secured by any Encumbrance (as defined below) upon any of
the property of the Operating Partnership or any of its Subsidiaries if,
immediately after giving effect to the incurrence of such additional
Indebtedness and the application of the proceeds thereof, the aggregate
principal amount of all outstanding Indebtedness of the Operating Partnership
and its Subsidiaries on a consolidated basis determined in accordance with GAAP
(except that for the purposes hereof, each Subsidiary of the Operating
Partnership shall be treated as if such Subsidiary were a subsidiary under GAAP)
which is secured by any Encumbrance on property of the Operating Partnership or
any of its Subsidiaries is greater than 40% of the sum of (without duplication)
(i) the Total Assets as of the end of the calendar quarter covered in the
Operating Partnership's Annual Report on Form 10-K or Quarterly Report on Form
10-Q, as the case may be, most recently filed with the Commission (or, if such
filing is not permitted under the Exchange Act, with the Trustee) prior to the
incurrence of such additional Indebtedness and (ii) the purchase price of any
real estate assets or mortgages receivable acquired, and the amount of any
securities offering proceeds received (to the extent that such proceeds were not
used to acquire real estate assets or mortgages receivable or used to reduce
Indebtedness), by the Operating Partnership or any of its Subsidiaries since the
end of such calendar quarter, including those proceeds obtained in connection
with the incurrence of such additional Indebtedness.
The Operating Partnership and its Subsidiaries may not at any time own Total
Unencumbered Assets (as defined below) equal to less than 150% of the aggregate
outstanding principal amount of the Unsecured Indebtedness (as defined below) of
the Operating Partnership and its Subsidiaries on a consolidated basis
determined in accordance with GAAP (except that for the purposes hereof, each
Subsidiary of the Operating Partnership shall be treated as if such Subsidiary
were a subsidiary under GAAP).
In addition to the foregoing limitations on the incurrence of Indebtedness,
the Operating Partnership will not, and will not permit any of its Subsidiaries
to, incur any Indebtedness if the ratio of Consolidated Income Available for
Debt Service (as defined below) to the Annual Service Charge (as defined below)
for the four consecutive fiscal quarters most recently ended prior to the date
on which such additional Indebtedness is to be incurred shall have been less
than 1.5:1 on a pro forma basis after giving effect thereto and to the
application of the proceeds therefrom, and calculated on the assumption that (i)
such Indebtedness and any other Indebtedness incurred by the Operating
Partnership and its Subsidiaries since the first day of such four-quarter period
and the application of the proceeds therefrom, including to refinance other
Indebtedness, had occurred at the beginning of such period; (ii) the repayment
or retirement of any other Indebtedness by the Operating Partnership and its
Subsidiaries since the first day of such four-quarter period had been repaid or
retired at the beginning of such period (except that, in making such
computation, the amount of Indebtedness under any revolving credit facility
shall be computed based upon the average daily balance of such Indebtedness
during such period); (iii) in the case of Acquired Indebtedness (as defined
below) or Indebtedness
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incurred in connection with any acquisition since the first day of such
four-quarter period, the related acquisition had occurred as of the first day of
such period with the appropriate adjustments with respect to such acquisition
being included in such pro forma calculation; and (iv) in the case of any
acquisition or disposition by the Operating Partnership or its Subsidiaries of
any asset or group of assets since the first day of such four-quarter period,
whether by merger, stock purchase or sale, or asset purchase or sale, such
acquisition or disposition or any related repayment of Indebtedness had occurred
as of the first day of such period with the appropriate adjustments with respect
to such acquisition or disposition being included in such pro forma calculation.
In accordance with GAAP, the financial statements of the Operating
Partnership present its limited partnership interests in each of the Other Real
Estate Partnerships under the equity method of accounting. However, the
Indenture treats the Other Real Estate Partnerships as consolidated subsidiaries
for purposes of the financial covenants of the Indenture. For the purposes of
such covenants, as of June 30, 1997, the Company had a percentage of
Indebtedness to Total Assets of 38.5%, a percentage of Indebtedness subject to
Encumbrances to Total Assets of 9.8% and a percentage of Total Unencumbered
Assets to Unsecured Indebtedness of 268.7% and, for the four consecutive fiscal
quarters ended June 30, 1997, the Operating Partnership had a ratio of
Consolidated Income Available for Debt Service to the Annual Service Charge of
3.42.
PROVISION OF FINANCIAL INFORMATION. Whether or not the Operating
Partnership is subject to Section 13 or 15(d) of the Exchange Act, the Operating
Partnership will, to the extent permitted under the Exchange Act, file with the
Commission the annual reports, quarterly reports and other documents which the
Operating Partnership would have been required to file with the Commission
pursuant to such Section 13 and 15(d) of the Exchange Act if the Operating
Partnership were so subject, such documents to be filed with the Commission on
or prior to the respective dates (the "Required Filing Dates") by which the
Operating Partnership would have been required so to file such documents if the
Operating Partnership were so subject. The Operating Partnership will also in
any event (x) within 15 days of each Required Filing Date if the Operating
Partnership is not then subject to such Section 13 or 15(d) of the Exchange Act,
(i) transmit by mail to all Holders of Notes, as their names and addresses
appear in the Security Register, without cost to such Holders, copies of the
annual reports and quarterly reports that the Operating Partnership would have
been required to file with the Commission pursuant to Section 13 or 15(d) of the
Exchange Act if the Operating Partnership were subject to such Sections and (ii)
file with the Trustee copies of the annual reports, quarterly reports and other
documents that the Operating Partnership would have been required to file with
the Commission pursuant to Section 13 or 15(d) of the Exchange Act if the
Operating Partnership were subject to such Sections and (y) if filing such
documents by the Operating Partnership with the Commission is not permitted
under the Exchange Act, promptly upon written request and payment of the
reasonable cost of duplication and delivery, supply copies of such documents to
any prospective Holder.
WAIVER OF CERTAIN COVENANTS. The Operating Partnership may omit to comply
with any term, provision or condition of the foregoing covenants, and with any
other term, provision or condition with respect to the Notes (except any such
term, provision or condition which could not be amended without the consent of
all Holders of Notes), if before or after the time for such compliance the
Holders of at least a majority in principal amount of all the outstanding Notes
by Act of such Holders, either waive such compliance in such instance or
generally waive compliance with such covenant or condition. Except to the extent
so expressly waived, and until such waiver shall become effective, the
obligations of the Operating Partnership and the duties of the Trustee in
respect of any such term, provision or condition shall remain in full force and
effect.
As used herein, and in the Indenture:
"ACQUIRED INDEBTEDNESS" means Indebtedness of a Person (i) existing at the
time such Person becomes a Subsidiary or (ii) assumed in connection with the
acquisition of assets from such Person, in each case, other than Indebtedness
incurred in connection with, or in contemplation of, such Person becoming a
Subsidiary or such acquisition. Acquired Indebtedness shall be deemed to be
incurred on the date of the related acquisition of assets from any Person or the
date the acquired Person becomes a Subsidiary.
"ANNUAL SERVICE CHARGE" for any period means (i) the aggregate interest
expense for such period in respect of, and the amortization during such period
of any original issue discount of, Indebtedness of the Operating Partnership and
its
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Subsidiaries and the amount of dividends which are payable during such period in
respect of any Disqualified Stock and (ii) so long as First Securities, L.P.
("Securities, L.P.") is a Subsidiary of the Operating Partnership, distributions
which are payable during such period in respect of any preference equity
interests of Securities, L.P.
"CAPITAL STOCK" means, with respect to any Person, any capital stock
(including preferred stock), shares, interests, participations or other
ownership interests (however designated) of such Person and any rights (other
than debt securities convertible into or exchangeable for corporate stock),
warrants or options to purchase any thereof.
"CONSOLIDATED INCOME AVAILABLE FOR DEBT SERVICE" for any period means
Earnings from Operations (as defined below) of the Operating Partnership and its
Subsidiaries plus amounts which have been deducted, and minus amounts which have
been added, for the following (without duplication): (i) interest on
Indebtedness of the Operating Partnership and its Subsidiaries, (ii) provision
for taxes of the Operating Partnership and its Subsidiaries based on income,
(iii) amortization of debt discount, (iv) provisions for gains and losses on
properties and property depreciation and amortization, (v) the effect of any
noncash charge resulting from a change in accounting principles in determining
Earnings from Operations for such period, (vi) amortization of deferred charges
and (vii) interest income related to investments irrevocably deposited with an
agent of the Operating Partnership or any of its Subsidiaries, as the case may
be, for the purpose of defeasing any indebtedness or any other obligation
(whether through a covenant defeasance or otherwise) pursuant to the terms of
such indebtedness or other obligation or the terms of any instrument creating or
evidencing it.
"DISQUALIFIED STOCK" means, with respect to any Person, any Capital Stock of
such Person which by the terms of such Capital Stock (or by the terms of any
security into which it is convertible or for which it is exchangeable or
exercisable), upon the happening of any event or otherwise, (i) matures or is
mandatorily redeemable, pursuant to a sinking fund obligation or otherwise
(other than Capital Stock which is redeemable solely in exchange for Capital
Stock which is not Disqualified Stock or the maturity price or redemption price
of which may, at the option of such Person, be paid in Capital Stock which is
not Disqualified Stock), (ii) is convertible into or exchangeable or exercisable
for Indebtedness or Disqualified Stock or (iii) is redeemable at the option of
the holder thereof, in whole or in part (other than Capital Stock which is
redeemable solely in exchange for Capital Stock which is not Disqualified Stock
or the redemption price of which may, at the option of such Person, be paid in
Capital Stock which is not Disqualified Stock), in each case on or prior to the
Stated Maturity of the Notes.
"EARNINGS FROM OPERATIONS" for any period means net income excluding gains
and losses on sales of investments, extraordinary items and property valuation
losses, net as reflected in the financial statements of the Operating
Partnership and its Subsidiaries for such period determined on a consolidated
basis in accordance with GAAP (except that for the purposes hereof, each
Subsidiary of the Operating Partnership shall be treated as if such Subsidiary
were a subsidiary under GAAP).
"ENCUMBRANCE" means any mortgage, lien, charge, pledge, encumbrance or
security interest of any kind; provided, however, that the term "Encumbrance"
shall not include any mortgage, lien, charge, pledge or security interest
securing any indebtedness or any other obligation which has been defeased
(whether through a covenant defeasance or otherwise) pursuant to the terms of
such indebtedness or other obligation or the terms of any instrument creating or
evidencing it.
"INDEBTEDNESS" of the Operating Partnership or any of its Subsidiaries means
(i) any indebtedness of the Operating Partnership or any of its Subsidiaries,
whether or not contingent, in respect of (a) borrowed money or evidenced by
bonds, notes, debentures or similar instruments whether or not such indebtedness
is secured by any Encumbrance existing on property owned by the Operating
Partnership or any of its Subsidiaries, (b) indebtedness for borrowed money of a
Person other than the Operating Partnership or a Subsidiary of the Operating
Partnership which is secured by any Encumbrance existing on property owned by
the Operating Partnership or any of its Subsidiaries, to the extent of the
lesser of (x) the amount of indebtedness so secured and (y) the fair market
value of the property subject to such Encumbrance, (c) the reimbursement
obligations, contingent or otherwise, in connection with any letters of credit
actually issued or amounts representing the balance deferred and unpaid of the
purchase price of any property or services, except any such balance that
constitutes an accrued expense or trade payable, and all conditional sale
obligations or obligations under any title retention agreement, (d) the
principal amount of all obligations of the
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Operating Partnership or any of its Subsidiaries with respect to redemption,
repayment or other repurchase of any Disqualified Stock, (e) any lease of
property by the Operating Partnership or any of its Subsidiaries as lessee which
is reflected on the Operating Partnership's consolidated balance sheet
determined in accordance with GAAP (except that for the purposes hereof, each
Subsidiary of the Operating Partnership shall be treated as if such Subsidiary
were a subsidiary under GAAP) as a capitalized lease, or (f) interest rate
swaps, caps or similar agreements and foreign exchange contracts, currency swaps
or similar agreements and (ii) the liquidation preference on any issued and
outstanding preferred equity interests of Securities, L.P., to the extent, in
the case of items of indebtedness under (i)(a) through (c) above, that any such
items (other than letters of credit) would appear as a liability on the
Operating Partnership's consolidated balance sheet determined in accordance with
GAAP (except that for the purposes hereof, each Subsidiary of the Operating
Partnership shall be treated as if such Subsidiary were a subsidiary under
GAAP), and also includes, to the extent not otherwise included, any obligation
by the Operating Partnership or any of its Subsidiaries to be liable for, or to
pay, as obligor, guarantor or otherwise (other than for purposes of collection
in the ordinary course of business), Indebtedness of another Person (other than
the Operating Partnership or any of its Subsidiaries) (it being understood that
Indebtedness shall be deemed to be incurred by the Operating Partnership or any
of its Subsidiaries whenever the Operating Partnership or such Subsidiary shall
create, assume, guarantee or otherwise become liable in respect thereof);
provided, however, that the term "Indebtedness" shall not include any
indebtedness or any other obligation which has been defeased (whether through a
covenant defeasance or otherwise) pursuant to the terms of such indebtedness or
other obligation or the terms of any instrument creating or evidencing it.
"SUBSIDIARY" means, (i) with respect to any Person, any corporation,
partnership or other entity of which a majority of (a) the voting power of the
voting equity securities or (b) the outstanding equity interests of which are
owned, directly or indirectly, by such Person and (ii) with respect to the
Operating Partnership, Securities, L.P., so long as the Operating Partnership
owns, directly or indirectly, a majority of the outstanding non-preference
equity interests thereof. For the purposes of this definition, "voting equity
securities" means equity securities having voting power for the election of
directors, whether at all times or only so long as no senior class of security
has such voting power by reason of any contingency.
"TOTAL ASSETS" as of any date means the sum of (i) the Undepreciated Real
Estate Assets (as defined below) and (ii) all other assets of the Operating
Partnership and its Subsidiaries determined in accordance with GAAP (except that
for the purposes hereof, each Subsidiary of the Operating Partnership shall be
treated as if such Subsidiary were a subsidiary under GAAP), but excluding
accounts receivable and intangibles; provided, however, that the term "Total
Assets" shall not include any assets which have been deposited in trust to
defease any indebtedness or any other obligation (whether through a covenant
defeasance or otherwise) pursuant to the terms of such indebtedness or other
obligation or the terms of any instrument creating or evidencing it.
"TOTAL UNENCUMBERED ASSETS" means the sum of (i) those Undepreciated Real
Estate Assets not subject to an Encumbrance for borrowed money and (ii) all
other assets of the Operating Partnership and its Subsidiaries not subject to an
Encumbrance for borrowed money, determined in accordance with GAAP (except that
for the purposes hereof, each Subsidiary of the Operating Partnership shall be
treated as if such Subsidiary were a subsidiary under GAAP), but excluding
accounts receivable and intangibles; provided, however, that the term "Total
Unencumbered Assets" shall not include any assets which have been deposited in
trust to defease any indebtedness or any other obligation (whether through a
covenant defeasance or otherwise) pursuant to the terms of such indebtedness or
other obligation or the terms of any instrument creating or evidencing it.
"UNDEPRECIATED REAL ESTATE ASSETS" as of any date means the cost (original
cost plus capital improvements) of real estate assets of the Operating
Partnership and its Subsidiaries on such date, before depreciation and
amortization, determined on a consolidated basis in accordance with GAAP (except
that for the purposes hereof, each Subsidiary of the Operating Partnership shall
be treated as if such Subsidiary were a subsidiary under GAAP).
"UNSECURED INDEBTEDNESS" means Indebtedness which is not secured by any
Encumbrance upon any of the properties of the Operating Partnership or any of
its Subsidiaries.
See "Description of Debt Securities -- Certain Covenants" in the
accompanying Prospectus for a description of additional covenants applicable to
the Operating Partnership.
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BOOK-ENTRY NOTES
The Operating Partnership has established a depositary arrangement with DTC
with respect to the Book-Entry Notes, the terms of which are summarized below.
Any additional or differing terms of the depositary arrangement with respect to
the Book-Entry Notes will be described in the applicable Pricing Supplement.
Upon issuance, all Book-Entry Notes up to $200,000,000 aggregate principal
amount bearing interest at the same rate or pursuant to the same formula and
having the same date of issue, Specified Currency, Interest Payment Dates,
Stated Maturity Date, redemption provisions (if any), repayment provisions (if
any) and other terms will be represented by a single Global Security. Each
Global Security representing Book-Entry Notes will be deposited with, or on
behalf of, DTC and will be registered in the name of DTC or a nominee of DTC. No
Global Security may be transferred except as a whole by a nominee of DTC to DTC
or to another nominee of DTC, or by DTC or such nominee to a successor of DTC or
a nominee of such successor.
So long as DTC or its nominee is the registered owner of a Global Security,
DTC or its nominee, as the case may be, will be the sole Holder of the
Book-Entry Notes represented thereby for all purposes under the Indenture.
Except as otherwise provided in this section, the Beneficial Owners of the
Global Security or Securities representing Book-Entry Notes will not be entitled
to receive physical delivery of Certificated Notes and will not be considered
the Holders thereof for any purpose under the Indenture, and no Global Security
representing Book-Entry Notes shall be exchangeable or transferable.
Accordingly, each Beneficial Owner must rely on the procedures of DTC and, if
such Beneficial Owner is not a Participant (as defined below), on the procedures
of the Participant through which such Beneficial Owner owns its interest in
order to exercise any rights of a Holder under such Global Security or the
Indenture. The laws of some jurisdictions require that certain purchasers of
securities take physical delivery of such securities in certificated form. Such
limits and such laws may impair the ability to transfer beneficial interests in
a Global Security representing Book-Entry Notes.
Unless otherwise specified in the applicable Pricing Supplement, each Global
Security representing Book-Entry Notes will be exchangeable for Certificated
Notes of like tenor and terms and of differing authorized denominations
aggregating a like principal amount, only if (i) DTC notifies the Operating
Partnership that it is unwilling or unable to continue as depository for the
Global Securities or DTC ceases to be a clearing agency registered under the
Exchange Act (if so required by applicable law or regulation) and, in each case,
a successor depository is not appointed by the Operating Partnership within 90
days after the Operating Partnership receives such notice or becomes aware of
such unwillingness, inability or ineligibility, (ii) the Operating Partnership
in its sole discretion determines that the Global Securities shall be
exchangeable for Certificated Notes or (iii) there shall have occurred and be
continuing an Event of Default under the Indenture with respect to the Notes and
Beneficial Owners representing a majority in aggregate principal amount of the
Book-Entry Notes represented by Global Securities advise DTC to cease acting as
depository. Upon any such exchange, the Certificated Notes shall be registered
in the names of the Beneficial Owners of the Global Security or Securities
representing Book-Entry Notes, which names shall be provided by DTC's relevant
Participants (as identified by DTC) to the Trustee.
The information below concerning DTC and DTC's system has been furnished by
DTC, and the Operating Partnership takes no responsibility for the accuracy
thereof.
DTC will act as securities depository for the Book-Entry Notes. The
Book-Entry Notes will be issued as fully registered securities registered in the
name of Cede & Co. (DTC's partnership nominee). One fully registered Global
Security will be issued for each issue of Book-Entry Notes, each in the
aggregate principal amount of such issue, and will be deposited with DTC. If,
however, the aggregate principal amount of any issue exceeds $200,000,000, one
Global Security will be issued with respect to each $200,000,000 of principal
amount and an additional Global Security will be issued with respect to any
remaining principal amount of such issue.
DTC is a limited-purpose trust company organized under the New York Banking
Law, a "banking organization" within the meaning of the New York Banking Law, a
member of the Federal Reserve System, a "clearing corporation" within the
meaning of the New York Uniform Commercial Code, and a "clearing agency"
registered pursuant to the provisions of Section 17A of the Exchange Act. DTC
holds securities that its participants ("Participants") deposit with
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DTC. DTC also facilitates the settlement among Participants of securities
transactions, such as transfers and pledges, in deposited securities through
electronic computerized book-entry changes in Participants' accounts, thereby
eliminating the need for physical movement of securities certificates. Direct
Participants of DTC ("Direct Participants") include securities brokers and
dealers (including the Agents), banks, trust companies, clearing corporations
and certain other organizations. DTC is owned by a number of its Direct
Participants and by the New York Stock Exchange, Inc., the American Stock
Exchange, Inc. and the National Association of Securities Dealers, Inc. Access
to DTC's system is also available to others such as securities brokers and
dealers, banks and trust companies that clear through or maintain a custodial
relationship with a Direct Participant, either directly or indirectly ("Indirect
Participants"). The rules applicable to DTC and its Participants are on file
with the Securities and Exchange Commission.
Purchases of Book-Entry Notes under DTC's system must be made by or through
Direct Participants, which will receive a credit for such Book-Entry Notes on
DTC's records. The ownership interest of each actual purchaser of each
Book-Entry Note represented by a Global Security ("Beneficial Owner") is in turn
to be recorded on the Direct Participants' and Indirect Participants' records.
Beneficial Owners will not receive written confirmation from DTC of their
purchase, but Beneficial Owners are expected to receive written confirmations
providing details of the transaction, as well as periodic statements of their
holdings, from the Direct Participants or Indirect Participants through which
such Beneficial Owner entered into the transaction. Transfers of ownership
interests in a Global Security representing Book-Entry Notes are to be
accomplished by entries made on the books of Participants acting on behalf of
Beneficial Owners. Beneficial Owners of a Global Security representing
Book-Entry Notes will not receive Certificated Notes representing their
ownership interests therein, except in the event that use of the book-entry
system for such Book-Entry Notes is discontinued.
To facilitate subsequent transfers, all Global Securities representing
Book-Entry Notes which are deposited with, or on behalf of, DTC are registered
in the name of DTC's partnership nominee, Cede & Co. The deposit of Global
Securities with, or on behalf of, DTC and their registration in the name of Cede
& Co. effect no change in beneficial ownership. DTC has no knowledge of the
actual Beneficial Owners of the Global Securities representing the Book-Entry
Notes; DTC's records reflect only the identity of the Direct Participants to
whose accounts such Book-Entry Notes are credited, which may or may not be the
Beneficial Owners. The Participants will remain responsible for keeping account
of their holdings on behalf of their customers.
Conveyance of notices and other communications by DTC to Direct
Participants, by Direct Participants to Indirect Participants, and by Direct
Participants and Indirect Participants to Beneficial Owners will be governed by
arrangements among them, subject to any statutory or regulatory requirements as
may be in effect from time to time.
Neither DTC nor Cede & Co. will consent or vote with respect to the Global
Securities representing the Book-Entry Notes. Under its usual procedures, DTC
mails an Omnibus Proxy to the Operating Partnership as soon as possible after
the applicable record date. The Omnibus Proxy assigns Cede & Co.'s consenting or
voting rights to those Direct Participants to whose accounts the Book-Entry
Notes are credited on the applicable record date (identified in a listing
attached to the Omnibus Proxy).
Principal, premium, if any, and/or interest payments on Global Securities
representing the Book-Entry Notes will be made to DTC. DTC's practice is to
credit Direct Participants' accounts on the applicable payment date in
accordance with their respective holdings shown on DTC's records unless DTC has
reason to believe that it will not receive payment on such date. Payments by
Participants to Beneficial Owners will be governed by standing instructions and
customary practices, as is the case with securities held for the accounts of
customers in bearer form or registered in "street name," and will be the
responsibility of such Participant and not of DTC, the Trustee or the Operating
Partnership, subject to any statutory or regulatory requirements as may be in
effect from time to time. Payment of principal, premium, if any, and/or interest
to DTC is the responsibility of the Operating Partnership or the Trustee,
disbursement of such payments to Direct Participants shall be the responsibility
of DTC, and disbursement of such payments to the Beneficial Owners shall be the
responsibility of Direct Participants and Indirect Participants.
If applicable, redemption notices shall be sent to Cede & Co. If less than
all of the Book-Entry Notes within an issue are being redeemed, DTC's practice
is to determine by lot the amount of the interest of each Direct Participant in
such issue to be redeemed.
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A Beneficial Owner shall give notice of any option to elect to have its
Book-Entry Notes repaid by the Operating Partnership, through its Participant,
to the Trustee, and shall effect delivery of such Book-Entry Notes by causing
the Direct Participant to transfer the Participant's interest in the Global
Security or Securities representing such Book-Entry Notes, on DTC's records, to
the Trustee. The requirement for physical delivery of Book-Entry Notes in
connection with a demand for repayment will be deemed satisfied when the
ownership rights in the Global Security or Securities representing such
Book-Entry Notes are transferred by Direct Participants on DTC's records.
DTC may discontinue providing its services as securities depository with
respect to the Book-Entry Notes at any time by giving reasonable notice to the
Operating Partnership or the Trustee. Under such circumstances, in the event
that a successor securities depository is not obtained, Certificated Notes are
required to be printed and delivered.
The Operating Partnership may decide to discontinue use of the system of
book-entry transfers through DTC (or a successor securities depository). In that
event, Certificated Notes will be printed and delivered.
SPECIAL PROVISIONS RELATING TO FOREIGN CURRENCY NOTES
GENERAL
Unless otherwise specified in the applicable Pricing Supplement, Foreign
Currency Notes will not be sold in, or to residents of, the country issuing the
applicable currency. The information set forth in this Prospectus Supplement is
directed to prospective purchasers who are United States residents and, with
respect to Foreign Currency Notes, is by necessity incomplete. The Operating
Partnership disclaims any responsibility to advise prospective purchasers who
are residents of countries other than the United States with respect to any
matters that may affect the purchase, holding or receipt of payments of
principal of, and premium, if any, and interest on, the Foreign Currency Notes.
Such persons should consult their own financial and legal advisors with regard
to such matters. See "Risk Factors--Exchange Rates and Exchange Controls."
PAYMENT OF PRINCIPAL, PREMIUM, IF ANY, AND INTEREST
Unless otherwise specified in the applicable Pricing Supplement, the
Operating Partnership is obligated to make payments of principal of, and
premium, if any, and interest on, Foreign Currency Notes in the applicable
Specified Currency (or, if such Specified Currency is not at the time of such
payment legal tender for the payment of public and private debts, in such other
coin or currency of the country which issued such Specified Currency as at the
time of such payment is legal tender for the payment of such debts). Any such
amounts payable by the Operating Partnership in a foreign currency or composite
currency will, unless otherwise specified in the applicable Pricing Supplement,
be converted by the exchange rate agent named in the applicable Pricing
Supplement (the "Exchange Rate Agent") into United States dollars for payment to
Holders. However, the Holder of a Foreign Currency Note may elect to receive
such amounts in the applicable Foreign Currency or composite currency as
hereinafter described.
Any United States dollar amount to be received by a Holder of a Foreign
Currency Note will be based on the highest bid quotation in New York City
received by the Exchange Rate Agent at approximately 11:00 A.M., New York City
time, on the second Business Day preceding the applicable payment date from
three recognized foreign exchange dealers (one of whom may be the Exchange Rate
Agent) selected by the Exchange Rate Agent and approved by the Operating
Partnership for the purchase by the quoting dealer of the Specified Currency for
United States dollars for settlement on such payment date in the aggregate
amount of such Specified Currency payable to all Holders of Foreign Currency
Notes scheduled to receive United States dollar payments and at which the
applicable dealer commits to execute a contract. All currency exchange costs
will be borne by the Holders of such Foreign Currency Notes by deductions from
such payments. If three such bid quotations are not available, payments will be
made in the Specified Currency.
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A Holder of a Foreign Currency Note may elect to receive all or a specified
portion of any payment of the principal of, and premium, if any, and/or interest
on, such Foreign Currency Note in the Specified Currency by submitting a written
request for such payment to the Trustee at its corporate trust office in New
York City on or prior to the applicable Record Date or at least fifteen calendar
days prior to the Maturity Date, as the case may be. Such written request may be
mailed or hand delivered or sent by cable, telex or other form of facsimile
transmission. A Holder of a Foreign Currency Note may elect to receive all or a
specified portion of all future payments in the Specified Currency in respect of
such principal, premium, if any, and/or interest and need not file a separate
election for each payment. Such election will remain in effect until revoked by
written notice to the Trustee, but written notice of any such revocation must be
received by the Trustee on or prior to the applicable Record Date or at least
fifteen calendar days prior to the Maturity Date, as the case may be. Holders of
Foreign Currency Notes whose Notes are to be held in the name of a broker or
nominee should contact such broker or nominee to determine whether and how an
election to receive payments in the Specified Currency may be made.
Payments of the principal of, and premium, if any, and/or interest on,
Foreign Currency Notes which are to be made in United States dollars will be
made in the manner specified herein with respect to Notes denominated in United
States dollars. See "Description of Notes--General." Payments of interest on
Foreign Currency Notes which are to be made in the Specified Currency on an
Interest Payment Date other than the Maturity Date will be made by check mailed
to the address of the Holders of such Foreign Currency Notes as they appear in
the Security Register, subject to the right to receive such interest payments by
wire transfer of immediately available funds under certain circumstances
described under "Description of Notes--General." Payments of principal of, and
premium, if any, and/or interest on, Foreign Currency Notes which are to be made
in the Specified Currency on the Maturity Date will be made by wire transfer of
immediately available funds to an account with a bank designated at least
fifteen calendar days prior to the Maturity Date by each Holder thereof,
provided that such bank has appropriate facilities therefor and that the
applicable Foreign Currency Note is presented and surrendered at the principal
corporate trust office of the Trustee in time for the Trustee to make such
payments in such funds in accordance with its normal procedures.
Unless otherwise specified in the applicable Pricing Supplement, a
Beneficial Owner of a Global Security or Securities representing Book-Entry
Notes payable in a Specified Currency other than United States dollars that
elects to receive payments of principal, premium, if any, and/or interest in
such Specified Currency must notify the Participant through which it owns its
interest on or prior to the applicable Record Date or at least fifteen calendar
days prior to the Maturity Date, as the case may be, of such Beneficial Owner's
election. Such Participant must notify DTC of such election on or prior to the
third Business Day after such Record Date or at least twelve calendar days prior
to the Maturity Date, as the case may be, and DTC will notify the Trustee of
such election on or prior to the fifth Business Day after such Record Date or at
least ten calendar days prior to the Maturity Date, as the case may be. If
complete instructions are received by the Participant from the Beneficial Owner
and forwarded by the Participant to DTC, and by DTC to the Trustee, on or prior
to such dates, then such Beneficial Owner will receive payments in the
applicable Specified Currency.
PAYMENT CURRENCY
If the Specified Currency for a Foreign Currency Note is not available for
the required payment of principal, premium, if any, and/or interest due to the
imposition of exchange controls or other circumstances beyond the reasonable
control of the Operating Partnership, the Operating Partnership will be entitled
to satisfy its obligations to the Holder of such Foreign Currency Note by making
such payment in United States dollars on the basis of the Market Exchange Rate
(as defined below) on the second Business Day prior to such payment or, if such
Market Exchange Rate is not then available, on the basis of the most recently
available Market Exchange Rate or as otherwise specified in the applicable
Pricing Supplement.
If payment in respect of a Foreign Currency Note is required to be made in
any composite currency (e.g., ECU), and such composite currency is unavailable
due to the imposition of exchange controls or other circumstances beyond the
reasonable control of the Operating Partnership, the Operating Partnership will
be entitled to satisfy its obligations to the Holder of such Foreign Currency
Note by making such payment in United States dollars. The amount of each payment
in United States dollars shall be computed by the Exchange Rate Agent on the
basis of the equivalent of the
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composite currency in United States dollars. The component currencies of the
composite currency for this purpose (collectively, the "Component Currencies"
and each, a "Component Currency") shall be the currency amounts that were
components of the composite currency as of the last day on which the composite
currency was used. The equivalent of the composite currency in United States
dollars shall be calculated by aggregating the United States dollar equivalents
of the Component Currencies. The United States dollar equivalent of each of the
Component Currencies shall be determined by the Exchange Rate Agent on the basis
of the most recently available Market Exchange Rate for each such Component
Currency, or as otherwise specified in the applicable Pricing Supplement.
If the official unit of any Component Currency is altered by way of
combination or subdivision, the number of units of the currency as a Component
Currency shall be divided or multiplied in the same proportion. If two or more
Component Currencies are consolidated into a single currency, the amounts of
those currencies as Component Currencies shall be replaced by an amount in such
single currency equal to the sum of the amounts of the consolidated Component
Currencies expressed in such single currency. If any Component Currency is
divided into two or more currencies, the amount of the original Component
Currency shall be replaced by the amounts of such two or more currencies, the
sum of which shall be equal to the amount of the original Component Currency.
The "Market Exchange Rate" for a Specified Currency other than United States
dollars means the noon dollar buying rate in New York City for cable transfers
for such Specified Currency as certified for customs purposes by (or if not so
certified, as otherwise determined by) the Federal Reserve Bank of New York. Any
payment made in United States dollars under such circumstances where the
required payment is in a Specified Currency other than United States dollars
will not constitute an Event of Default under the Indenture with respect to the
Notes.
All determinations referred to above made by the Exchange Rate Agent shall
be at its sole discretion and shall, in the absence of manifest error, be
conclusive for all purposes and binding on the Holders of the Foreign Currency
Notes.
GOVERNING LAW; JUDGMENTS
The Notes will be governed by and construed in accordance with the laws of
the State of New York. Under current New York law, where a cause of action is
based upon an obligation denominated in a non-United States currency, a state
court in the State of New York rendering a judgment on such an obligation would
be required to render such judgment in the non-United States currency, and such
judgment would be converted into United States dollars at the exchange rate
prevailing on the date of entry of the judgment. The holders of such notes could
be subject to exchange rate fluctuations occurring after such judgment is
rendered. It is not certain, however, that a non-New York court would follow the
same rules with respect to conversion.
CERTAIN UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS
The following summary of certain United States Federal income tax
consequences of the purchase, ownership and disposition of the Notes is based
upon laws, regulations, rulings and decisions now in effect, all of which are
subject to change (including changes in effective dates) or possible differing
interpretations. It deals only with Notes held as capital assets and does not
purport to deal with persons in special tax situations, such as financial
institutions, insurance companies, tax-exempt organizations, regulated
investment companies, dealers in securities or currencies, persons holding Notes
as a hedge against currency risks or as a position in a "straddle" for tax
purposes, or persons whose functional currency is not the United States dollar.
It also does not deal with Holders other than original purchasers (except where
otherwise specifically noted). BECAUSE THE EXACT PRICING AND OTHER TERMS OF THE
NOTES WILL VARY, NO ASSURANCE CAN BE GIVEN THAT THE CONSIDERATIONS DESCRIBED
BELOW WILL APPLY TO A PARTICULAR ISSUANCE OF NOTES. CERTAIN MATERIAL UNITED
STATES FEDERAL INCOME TAX CONSEQUENCES RELATING TO THE OWNERSHIP OF PARTICULAR
NOTES (WHERE APPLICABLE) WILL BE SUMMARIZED IN THE PRICING SUPPLEMENT RELATING
TO SUCH NOTES. PERSONS CONSIDERING THE PURCHASE OF NOTES SHOULD CONSULT THEIR
OWN TAX ADVISORS CONCERNING THE APPLICATION OF UNITED STATES FEDERAL INCOME TAX
LAWS TO THEIR PARTICULAR SITUATION AS WELL AS ANY CONSEQUENCES OF THE PURCHASE,
OWNERSHIP AND
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DISPOSITION OF THE NOTES ARISING UNDER THE LAWS OF ANY STATE, LOCAL OR FOREIGN
TAXING JURISDICTION.
As used herein, the term "U.S. Holder" means a Beneficial Owner of a Note
that is for United States Federal income tax purposes (i) a citizen or resident
of the United States, (ii) a corporation, partnership or other entity created or
organized in or under the laws of the United States or of any political
subdivision thereof (including the District of Columbia), (iii) an estate or
trust the income of which is subject to United States Federal income taxation
regardless of its source or (iv) any other person whose income or gain in
respect of a Note is effectively connected with the conduct of a United States
trade or business. As used herein, the term "non-U.S. Holder" means a Beneficial
Owner of a Note that is not a U.S. Holder. In the case of a Holder that is a
partnership for United States tax purposes, each partner will take into account
its allocable share of income or loss from the Notes, and will take such income
or loss into account under the rules of taxation applicable to such partner,
taking into account the activities of the partnership and the partner.
U.S. HOLDERS
PAYMENTS OF INTEREST. Payments of interest on a Note generally will be
taxable to a U.S. Holder as ordinary interest income at the time such payments
are accrued or are received (in accordance with the U.S. Holder's regular method
of tax accounting).
ORIGINAL ISSUE DISCOUNT. The following summary is a general discussion of
the United States Federal income tax consequences to U.S. Holders of the
purchase, ownership and disposition of Notes issued with original issue
discount. The following summary is based upon final Treasury regulations (the
"OID Regulations") under the original issue discount provisions of the Code.
For United States Federal income tax purposes, original issue discount is
the excess of the stated redemption price at maturity of a Note over its issue
price, if such excess equals or exceeds a DE MINIMIS amount (generally 1/4 of 1%
of the Note's stated redemption price at maturity multiplied by the number of
complete years to its maturity from its issue date or, in the case of a Note
providing for the payment of any amount other than qualified stated interest (as
defined below) prior to maturity, multiplied by the weighted average maturity of
such Note). The issue price of each Note in an issue of Notes equals the first
price at which a substantial amount of such Notes has been sold (ignoring sales
to bond houses, brokers, or similar persons or organizations acting in the
capacity of underwriters, placement agents, or wholesalers). The stated
redemption price at maturity of a Note is the sum of all payments provided by
the Note other than "qualified stated interest" payments. The term "qualified
stated interest" generally means stated interest that is unconditionally payable
in cash or property (other than debt instruments of the issuer) at least
annually at a single fixed rate. In addition, under the OID Regulations, if a
Note bears interest for one or more accrual periods at a rate below the rate
applicable for the remaining term of such Note (e.g., Notes with teaser rates or
interest holidays), and if the greater of either the resulting foregone interest
on such Note or any "true" discount on such Note (i.e., the excess of the Note's
stated principal amount over its issue price) equals or exceeds a specified de
minimis amount, then a portion, or in some circumstances all, of the stated
interest on the Note would be treated as original issue discount rather than
qualified stated interest.
Payments of qualified stated interest on a Note are taxable to a U.S. Holder
as ordinary interest income at the time such payments are accrued or are
received (in accordance with the U.S. Holder's regular method of tax
accounting). A U.S. Holder of a Discount Note must include original issue
discount in income as ordinary interest for United States Federal income tax
purposes as it accrues under a constant yield method in advance of receipt of
the cash payments attributable to such income, regardless of such U.S. Holder's
regular method of tax accounting. In general, the amount of original issue
discount included in income by the initial U.S. Holder of a Discount Note is the
sum of the daily portions of original issue discount with respect to such
Discount Note for each day during the taxable year (or portion of the taxable
year) on which such U.S. Holder held such Discount Note. The "daily portion" of
original issue discount on any Discount Note is determined by allocating to each
day in any accrual period a ratable portion of the original issue discount
allocable to that accrual period. An "accrual period" may be of any length and
the accrual periods may vary in length over the term of the Discount Note,
provided that each accrual period is no longer than one year and each scheduled
payment of principal or interest occurs either on the final day of an accrual
period or on the first day of an
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accrual period. The amount of original issue discount allocable to each accrual
period is generally equal to the difference between (i) the product of the
Discount Note's adjusted issue price at the beginning of such accrual period and
its yield to maturity (determined on the basis of compounding at the close of
each accrual period and appropriately adjusted to take into account the length
of the particular accrual period) and (ii) the amount of any qualified stated
interest payments allocable to such accrual period. The "adjusted issue price"
of a Discount Note at the beginning of any accrual period is the sum of the
issue price of the Discount Note plus the amount of original issue discount
allocable to all prior accrual periods minus the amount of any prior payments on
the Discount Note that were not qualified stated interest payments. Under these
rules, U.S. Holders generally will have to include in income increasingly
greater amounts of original issue discount in successive accrual periods. These
same rules apply to any Note that is not otherwise a Discount Note, but
nonetheless has been issued with original issue discount.
A U.S. Holder who purchases a Discount Note for an amount that is greater
than its adjusted issue price as of the purchase date and less than or equal to
the sum of all amounts payable on the Discount Note after the purchase date
other than payments of qualified stated interest, will be considered to have
purchased the Discount Note at an "acquisition premium." Under the acquisition
premium rules, the amount of original issue discount which such U.S. Holder must
include in its gross income with respect to such Discount Note for any taxable
year (or portion thereof in which the U.S. Holder holds the Discount Note) will
be reduced (but not below zero) by the portion of the acquisition premium
properly allocable to the period. These same rules apply to any Note that is not
otherwise a Discount Note, but nonetheless has been issued with original issue
discount.
Alternatively, rather than making an allocation of the acquisition premium
to reduce the daily portion of accrued original issue discount, a U.S. Holder of
a Note may elect to compute original issue discount by treating the purchase as
a purchase at original issuance and applying the mechanics of the constant yield
method described above in "-- Original issue Discount." Prior to making this
election, U.S. Holders of Notes should consult their own tax advisors concerning
the potential United States Federal income tax consequences to their particular
situations.
Under the OID Regulations, Floating Rate Notes and Indexed Notes ("Variable
Notes") are subject to special rules whereby a Variable Note will qualify as a
"variable rate debt instrument" if (a) its issue price does not exceed the total
noncontingent principal payments due under the Variable Note by more than a
specified DE MINIMIS amount, (b) it provides for stated interest, paid or
compounded at least annually, at current values of (i) one or more qualified
floating rates, (ii) a single fixed rate and one or more qualified floating
rates, (iii) a single objective rate, or (iv) a single fixed rate and a single
objective rate that is a qualified inverse floating rate and (c) a qualified
floating rate or objective rate in effect at any time during the term of the
Note is set at a current value of that rate (I.E., the value of the rate on any
day that is no earlier than three months prior to the first rate day on which
the value is in effect and no later than one year following that first day).
A "qualified floating rate" is any variable rate where variations in the
value of such rate can reasonably be expected to measure contemporaneous
variations in the cost of newly borrowed funds in the currency in which the
Variable Note is denominated. Although a multiple of a qualified floating rate
will generally not itself constitute a qualified floating rate, a variable rate
equal to the product of a qualified floating rate and a fixed multiple that is
greater than .65 but not more than 1.35 will constitute a qualified floating
rate. A variable rate equal to the product of a qualified floating rate and a
fixed multiple that is greater than .65 but not more than 1.35, increased or
decreased by a fixed rate, will also constitute a qualified floating rate. In
addition, under the OID Regulations, two or more qualified floating rates that
can reasonably be expected to have approximately the same values throughout the
term of the Variable Note (e.g., two or more qualified floating rates with
values within 25 basis points of each other as determined on the Variable Note's
issue date) will be treated as a single qualified floating rate. Notwithstanding
the foregoing, a variable rate that would otherwise constitute a qualified
floating rate but which is subject to one or more restrictions such as a maximum
numerical limitation (i.e., a cap) or a minimum numerical limitation (i.e., a
floor) may, under certain circumstances, fail to be treated as a qualified
floating rate under the OID Regulations unless such cap or floor is fixed
throughout the term of the Note or are not reasonably expected to significantly
affect the yield on the Note. An "objective rate" is a rate that is not itself a
qualified floating rate but which is determined using a single fixed formula and
which is based upon objective financial or economic information, other than
information that is within the control of the issuer or a related party, or that
is unique to the circumstances of the issuer or a related party such as
dividends,
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profits or the value of such person's stock (but not the issuer's credit
quality). The OID Regulations also provide that other variable interest rates
may be treated as objective rates if so designated by the Internal Revenue
Service (the "IRS") in the future. Despite the foregoing, a variable rate of
interest on a Variable Note will not constitute an objective rate if it is
reasonably expected that the average value of such rate during the first half of
the Variable Note's term will be either significantly less than or significantly
greater than the average value of the rate during the final half of the Variable
Note's term. A "qualified inverse floating rate" is any objective rate where
such rate is equal to a fixed rate minus a qualified floating rate, as long as
variations in the rate can reasonably be expected to inversely reflect
contemporaneous variations in the qualified floating rate. OID Regulations also
provide that if a Variable Note provides for stated interest at a fixed rate for
an initial period of less than one year followed by a variable rate that is
either a qualified floating rate or an objective rate and if the variable rate
on the Variable Note's issue date is intended to approximate the fixed rate
(e.g., the value of the variable rate on the issue date does not differ from the
value of the fixed rate by more than 25 basis points), then the fixed rate and
the variable rate together will constitute either a single qualified floating
rate or objective rate, as the case may be.
If a Variable Note that provides for stated interest at either a single
qualified floating rate or a single objective rate throughout the term thereof
qualifies as a "variable rate debt instrument" under the OID Regulations, then
any stated interest on such Note which is unconditionally payable in cash or
property (other than debt instruments of the issuer) at least annually will
constitute qualified stated interest and will be taxed accordingly. Thus, a
Variable Note that provides for stated interest at either a single qualified
floating rate or a single objective rate throughout the term thereof and that
qualifies as a "variable rate debt instrument" under the OID Regulations will
generally not be treated as having been issued with original issue discount
unless the Variable Note is issued at a "true" discount (i.e., at a price below
the Note's stated principal amount) in excess of a specified DE MINIMIS amount.
Original issue discount on such a Variable Note arising from "true" discount and
qualified stated interest are allocated to an accrual period using the constant
yield method described above by assuming that the variable rate is a fixed rate
equal to (i) in the case of a qualified floating rate or qualified inverse
floating rate, the value as of the issue date, of the qualified floating rate or
qualified inverse floating rate, or (ii) in the case of an objective rate (other
than a qualified inverse floating rate), a fixed rate that reflects the yield
that is reasonably expected for the Variable Note. The amount of qualified
stated interest allocable to an accrual period is increased (or decreased) if
the interest actually paid during an accrual period exceeds (or is less than)
the interest assumed to be paid during the accrual period.
In general, any other Variable Note that qualifies as a "variable rate debt
instrument" will be converted into an "equivalent" fixed rate debt instrument
for purposes of determining the amount and accrual of original issue discount
and qualified stated interest on the Variable Note. The OID Regulations
generally require that such a Variable Note be converted into an "equivalent"
fixed rate debt instrument by substituting any qualified floating rate or
qualified inverse floating rate provided for under the terms of the Variable
Note with a fixed rate equal to the value of the qualified floating rate or
qualified inverse floating rate, as the case may be, as of the Variable Note's
issue date. Any objective rate (other than a qualified inverse floating rate)
provided for under the terms of the Variable Note is converted into a fixed rate
that reflects the yield that is reasonably expected for the Variable Note. In
the case of a Variable Note that qualifies as a "variable rate debt instrument"
and provides for stated interest at a fixed rate in addition to either one or
more qualified floating rates or a qualified inverse floating rate, the fixed
rate is initially converted into a qualified floating rate (or a qualified
inverse floating rate, if the Variable Note provides for a qualified inverse
floating rate). Under such circumstances, the qualified floating rate or
qualified inverse floating rate that replaces the fixed rate must be such that
the fair market value of the Variable Note as of the Variable Note's issue date
is approximately the same as the fair market value of an otherwise identical
debt instrument that provides for either the qualified floating rate or
qualified inverse floating rate rather than the fixed rate. Subsequent to
converting the fixed rate into either a qualified floating rate or a qualified
inverse floating rate, the Variable Note is then converted into an "equivalent"
fixed rate debt instrument in the manner described above.
Once the Variable Note is converted into an "equivalent" fixed rate debt
instrument pursuant to the foregoing rules, the amount of original issue
discount and qualified stated interest are determined for the "equivalent" fixed
rate debt instrument by applying the general original issue discount rules to
the "equivalent" fixed rate debt instrument and a U.S. Holder of the Variable
Note will account for such original issue discount and qualified stated interest
as if the U.S.
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Holder held the "equivalent" fixed rate debt instrument. Each accrual period
appropriate adjustments will be made to the amount of qualified stated interest
or original issue discount assumed to have been accrued or paid with respect to
the "equivalent" fixed rate debt instrument in the event that such amounts
differ from the actual amount of interest accrued or paid on the Variable Note
during the accrual period.
If a Variable Note does not qualify as a "variable rate debt instrument"
under the OID Regulations, then the Variable Note would be treated as a
contingent payment debt obligation. On June 11, 1996, the IRS released final
Treasury regulations dealing with the treatment of contingent payment
obligations (the "Contingent Debt Regulations").
Generally, if a Variable Note is treated as a contingent payment obligation,
interest payments thereon will be treated as "contingent interest" payments. Any
contingent interest payments on a Variable Note would be includible in income in
a taxable year whether or not the amount of any payment is fixed or determinable
in that year. The amount of interest included in income in any particular
accrual period would be determined by estimating a projected payment schedule
(as determined under the Contingent Debt Regulations) for the Variable Note
based on a comparable yield based on a hypothetical fixed rate instrument having
similar terms and conditions as the Variable Note and applying daily accrual
rules similar to those for accruing original issue discount on Notes issued with
original issue discount (as discussed above). If the actual amount of contingent
interest payments is not equal to the projected amount, an adjustment to income
at the time of the payment must be made to reflect the difference.
Certain of the Notes (i) may be redeemable at the option of the Operating
Partnership prior to their stated maturity (a "call option") and/or (ii) may be
repayable at the option of the Holder prior to their stated maturity (a "put
option"). Notes containing such features may be subject to rules that differ
from the general rules discussed above. Investors intending to purchase Notes
with such features should consult their own tax advisors, since the original
issue discount consequences will depend, in part, on the particular terms and
features of the purchased Notes.
U.S. Holders may generally, upon election, include in income all interest
(including stated interest, acquisition discount, original issue discount, de
minimis original issue discount, market discount, DE MINIMIS market discount,
and unstated interest, as adjusted by any amortizable bond premium or
acquisition premium) that accrues on a debt instrument by using the constant
yield method applicable to original issue discount, subject to certain
limitations and exceptions.
Short-Term Notes. Notes that have a fixed maturity of one year or less
("Short-Term Notes") will be treated as having been issued with original issue
discount. In general, a cash method U.S. Holder is not required to accrue such
original issue discount unless the U.S. Holder elects to do so. If such an
election is not made, any gain recognized by the U.S. Holder on the sale,
exchange or maturity of the Short-Term Note will be ordinary income to the
extent of the original issue discount accrued on a straight-line basis, or upon
election under the constant yield method (based on daily compounding), through
the date of sale or maturity, and a portion of the deductions otherwise
allowable to the U.S. Holder for interest on borrowings allocable to the
Short-Term Note will be deferred until a corresponding amount of income is
realized. U.S. Holders who report income for United States Federal income tax
purposes under the accrual method, and certain other Holders including banks and
dealers in securities, are required to accrue original issue discount on a
Short-Term Note on a straight-line basis unless an election is made to accrue
the original issue discount under a constant yield method (based on daily
compounding).
MARKET DISCOUNT. If a U.S. Holder purchases a Note, other than a Note
issued with original issue discount, for an amount that is less than its issue
price (or, in the case of a subsequent purchaser, its stated redemption price at
maturity) or, in the case of a Note issued with original issue discount, for an
amount that is less than its adjusted issue price as of the purchase date, such
U.S. Holder will be treated as having purchased such Note at a "market
discount," unless such market discount is less than a specified DE MINIMIS
amount.
Under the market discount rules, a U.S. Holder will be required to treat any
partial principal payment (or, in the case of a Note issued with original issue
discount, any payment that is part of its "revised issue price") on, or any gain
realized on the sale, exchange, retirement or other disposition of, a Note as
ordinary income to the extent of the lesser of (i) the amount of such payment or
realized gain or (ii) the market discount which has not previously been included
in income and is treated as having accrued on such Note at the time of such
payment or disposition. Market discount will
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be considered to accrue ratably during the period from the date of acquisition
to the Maturity Date of the Note, unless the U.S. Holder elects to accrue market
discount on the basis of a constant interest rate.
A U.S. Holder may be required to defer the deduction of all or a portion of
the interest paid or accrued on any indebtedness incurred or maintained to
purchase or carry a Note with market discount until the maturity of the Note or
certain earlier dispositions, because a current deduction is only allowed to the
extent the interest expense exceeds an allocable portion of market discount. A
U.S. Holder may elect to include market discount in income currently as it
accrues (on either a ratable or a constant interest rate basis), in which case
the rules described above regarding the treatment as ordinary income of gain
upon the disposition of the Note and upon the receipt of certain cash payments
and regarding the deferral of interest deductions will not apply. Generally,
such currently included market discount is treated as ordinary interest for
United States Federal income tax purposes. Such an election will apply to all
debt instruments acquired by the U.S. Holder on or after the first day of the
taxable year to which such election applies and may be revoked only with the
consent of the IRS.
PREMIUM. If a U.S. Holder purchases a Note for an amount that is greater
than the sum of all amounts payable on the Note after the purchase date other
than payments of qualified stated interest, such U.S. Holder will be considered
to have purchased the Note with "amortizable bond premium" equal in amount to
such excess. A U.S. Holder may elect to amortize such premium using a constant
yield method over the remaining term of the Note and may offset interest
otherwise required to be included in respect of the Note during any taxable year
by the amortized amount of such excess for the taxable year. However, if the
Note may be optionally redeemed after the U.S. Holder acquires it at a price in
excess of its stated redemption price at maturity, special rules would apply
which could result in it deferral of the amortization of some bond premium until
later in the term of the Note. Any election to amortize bond premium applies to
all taxable debt obligations then owned and thereafter acquired by the U.S.
Holder and may be revoked only with the consent of the IRS.
DISPOSITION OF A NOTE. Except as discussed above, upon the sale, exchange
or retirement of a Note, a U.S. Holder generally will recognize taxable gain or
loss equal to the difference between the amount realized on the sale, exchange
or retirement (other than amounts representing accrued and unpaid interest) and
such U.S. Holder's adjusted tax basis in the Note. A U.S. Holder's adjusted tax
basis in a Note generally will equal such U.S. Holder's initial investment in
the Note increased by any original issue discount included in income (and
accrued market discount, if any, if the U.S. Holder has included such market
discount in income) and decreased by the amount of any payments, other than
qualified stated interest payments, received and amortizable bond premium taken
with respect to such Note. Such gain or loss generally will be mid-term capital
gain or loss (taxable at a maximum rate of 28%) if the Note were held for more
than one year but not more than 18 months, and long-term capital gain or loss
(taxable at a maximum rate of 20%) if the Note were held for more than 18
months.
NOTES DENOMINATED, OR IN RESPECT OF WHICH INTEREST IS PAYABLE, IN A FOREIGN
CURRENCY
As used herein, "Foreign Currency" means a currency or currency unit other
than U.S. dollars.
CASH METHOD. A U.S. Holder who uses the cash method of accounting for
United States Federal income tax purposes and who receives a payment of interest
on a Note (other than original issue discount or market discount) will be
required to include in income the U.S. dollar value of the Foreign Currency
payment (determined on the date such payment is received) regardless of whether
the payment is in fact converted to U.S. dollars at that time, and such U.S.
dollar value will be the U.S. Holder's tax basis in such Foreign Currency.
ACCRUAL METHOD. A U.S. Holder who uses the accrual method of accounting for
United States Federal income tax purposes, or who otherwise is required to
accrue interest prior to receipt, will be required to include in income the U.S.
dollar value of the amount of interest income (including original issue discount
or market discount and reduced by amortizable bond premium to the extent
applicable) that has accrued and is otherwise required to be taken into account
with respect to a Note during an accrual period. The U.S. dollar value of such
accrued income will be determined by translating such income at the average rate
of exchange for the accrual period or, with respect to an accrual period that
spans two taxable years, at the average rate for the partial period within the
taxable year. A U.S. Holder may elect,
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however, to translate such accrued interest income using the rate of exchange on
the last day of the accrual period or, with respect to an accrual period that
spans two taxable years, using the rate of exchange on the last day of the
taxable year. If the last day of an accrual period is within five business days
of the date of receipt of the accrued interest, a U.S. Holder may translate such
interest using the rate of exchange on the date of receipt. The above election
will apply to other debt obligations held by the U.S. Holder and may not be
changed without the consent of the IRS. A U.S. Holder should consult a tax
advisor before making the above election. A U.S. Holder will recognize exchange
gain or loss (which will be treated as ordinary income or loss) with respect to
accrued interest income on the date such income is received. The amount of
ordinary income or loss recognized will equal the difference, if any, between
the U.S. dollar value of the Foreign Currency payment received (determined on
the date such payment is received) in respect of such accrual period and the
U.S. dollar value of interest income that has accrued during such accrual period
(as determined above).
PURCHASE, SALE AND RETIREMENT OF NOTES. A U.S. Holder who purchases a Note
with previously owned Foreign Currency will recognize ordinary income or loss in
an amount equal to the difference, if any, between such U.S. Holder's tax basis
in the Foreign Currency and the U.S. dollar fair market value of the Foreign
Currency used to purchase the Note, determined on the date of purchase.
Except as discussed above with respect to Short-Term Notes, upon the sale,
exchange or retirement of a Note, a U.S. Holder will recognize taxable gain or
loss equal to the difference between the amount realized on the sale, exchange
or retirement and such U.S. Holder's adjusted tax basis in the Note. Such gain
or loss generally will be capital gain or loss (except to the extent of any
accrued market discount not previously included in the U.S. Holder's income) and
will be long-term capital gain or loss if at the time of sale, exchange or
retirement the Note has been held by such U.S. Holder for more than one year. To
the extent the amount realized represents accrued but unpaid interest, however,
such amounts must be taken into account as interest income, with exchange gain
or loss computed as described in "Payments of Interest in a Foreign Currency"
above. If a U.S. Holder receives Foreign Currency on such a sale, exchange or
retirement, the amount realized will be based on the U.S. dollar value of the
Foreign Currency on the date the payment is received or the Note is disposed of
(or deemed disposed of in the case of a taxable exchange of the Note for a new
Note). In the case of a Note that is denominated in Foreign Currency and is
traded on an established securities market, a cash basis U.S. Holder (or, upon
election, an accrual basis U.S. Holder) will determine the U.S. dollar value of
the amount realized by translating the Foreign Currency payment at the spot rate
of exchange on the settlement date of the sale. A U.S. Holder's adjusted tax
basis in a Note will equal the cost of the Note to such Holder, increased by the
amounts of any market discount or original issue discount previously included in
income by the Holder with respect to such Note and reduced by any amortized
acquisition or other premium and any principal payments received by the Holder.
A U.S. Holder's tax basis in a Note, and the amount of any subsequent
adjustments to such Holder's tax basis, will be the U.S. dollar value of the
Foreign Currency amount paid for such Note, or of the Foreign Currency amount of
the adjustment, determined on the date of such purchase or adjustment.
Gain or loss realized upon the sale, exchange or retirement of a Note that
is attributable to fluctuations in currency exchange rates will be ordinary
income or loss which will not be treated as interest income or expense. Gain or
loss attributable to fluctuations in exchange rates will equal the difference
between the U.S. dollar value of the Foreign Currency principal amount of the
Note, determined on the date such payment is received or the Note is disposed
of, and the U.S. dollar value of the Foreign Currency principal amount of the
Note, determined on the date the U.S. Holder acquired the Note. Such Foreign
Currency gain or loss will be recognized only to the extent of the total gain or
loss realized by the U.S. Holder on the sale, exchange or retirement of the
Note.
ORIGINAL ISSUE DISCOUNT. In the case of a Note issued with original issue
discount, (i) original issue discount is determined in units of the Foreign
Currency, (ii) accrued original issue discount is translated into U.S. dollars
as described in "Payments of Interest in a Foreign Currency--Accrual Method"
above and (iii) the amount of Foreign Currency gain or loss on the accrued
original issue discount is determined by comparing the amount of income received
attributable to the discount (either upon payment, maturity or an earlier
disposition), as translated into U.S. dollars at the rate of exchange on the
date of such receipt, with the amount of original issue discount accrued, as
translated above.
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PREMIUM AND MARKET DISCOUNT. In the case of a Note with market discount,
(i) market discount is determined in units of the Foreign Currency, (ii) accrued
market discount taken into account upon the receipt of any partial principal
payment or upon the sale, exchange, retirement or other disposition of the Note
(other than accrued market discount required to be taken into account currently)
is translated into U.S. dollars at the exchange rate on such disposition date
(and no part of such accrued market discount is treated as exchange gain or
loss) and (iii) accrued market discount currently includible in income by a U.S.
Holder for any accrual period is translated into U.S. dollars on the basis of
the average exchange rate in effect during such accrual period, and the exchange
gain or loss is determined upon the receipt of any partial principal payment or
upon the sale, exchange, retirement or other disposition of the Note in the
manner described in "Payments of Interest in a Foreign Currency--Accrual Method"
above with respect to computation of exchange gain or loss on accrued interest.
With respect to a Note issued with amortizable bond premium, such premium is
determined in the relevant Foreign Currency and reduces interest income in units
of the Foreign Currency. Although not entirely clear, a U.S. Holder should
recognize exchange gain or loss equal to the difference between the U.S. dollar
value of the bond premium amortized with respect to a period, determined on the
date the interest attributable to such period is received, and the U.S. dollar
value of the bond premium determined on the date of the acquisition of the Note.
EXCHANGE OF FOREIGN CURRENCIES. A U.S. Holder will have a tax basis in any
Foreign Currency received as interest or on the sale, exchange or retirement of
a Note equal to the U.S. dollar value of such Foreign Currency, determined at
the time the interest is received or at the time of the sale, exchange or
retirement. Any gain or loss realized by a U.S. Holder on a sale or other
disposition of Foreign Currency (including its exchange for U.S. dollars or its
use to purchase Notes) will be ordinary income or loss.
NON-U.S. HOLDERS
A non-U.S. Holder will not be subject to United States Federal income taxes
on payments of principal, premium (if any) or interest (including original issue
discount, if any) on a Note, unless such non-U.S. Holder is a direct or indirect
10% or greater shareholder of the Operating Partnership, a controlled foreign
corporation related to the Operating Partnership or a bank receiving interest
described in Section 881(c)(3)(A) of the Code. To qualify for the exemption from
taxation, the last United States payor in the chain of payment prior to payment
to a non-U.S. Holder (the "Withholding Agent") must have received in the year in
which a payment of interest or principal occurs, or in either of the two
preceding calendar years, a statement that (i) is signed by the Beneficial Owner
of the Note under penalties of perjury, (ii) certifies that such owner is not a
U.S. Holder and (iii) provides the name and address of the Beneficial Owner. The
statement may be made on an IRS Form W-8 or a substantially similar form, and
the Beneficial Owner must inform the Withholding Agent of any change in the
information on the statement within 30 days of such change. If a Note is held
through a securities clearing organization or certain other financial
institutions, the organization or institution may provide a signed statement to
the Withholding Agent. However, in such case, the signed statement must be
accompanied by a copy of the IRS Form W-8 or the substitute form provided by the
Beneficial Owner to the organization or institution. The Treasury Department is
considering implementation of further certification requirements aimed at
determining whether the issuer of a debt obligation is related to Holders
thereof.
Generally, a non-U.S. Holder will not be subject to Federal income taxes on
any amount which constitutes capital gain upon retirement or disposition of a
Note, provided the gain is not effectively connected with the conduct of a trade
or business in the United States by the non-U.S. Holder. Certain other
exceptions may be applicable, and a non-U.S. Holder should consult its tax
advisor in this regard.
The Notes will not be includible in the estate of a non-U.S. Holder unless
the individual is a direct or indirect 10% or greater shareholder of the
Operating Partnership or, at the time of such individual's death, payments in
respect of the Notes would have been effectively connected with the conduct by
such individual of a trade or business in the United States.
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BACKUP WITHHOLDING
Backup withholding of United States Federal income tax at a rate of 31% may
apply to payments made in respect of the Notes to registered owners who are not
"exempt recipients" and who fail to provide certain identifying information
(such as the registered owner's taxpayer identification number) in the required
manner. Generally, individuals are not exempt recipients, whereas corporations
and certain other entities generally are exempt recipients. Payments made in
respect of the Notes to a U.S. Holder must be reported to the IRS, unless the
U.S. Holder is an exempt recipient or establishes an exemption. Compliance with
the identification procedures described in the preceding section would establish
an exemption from backup withholding for those non-U.S. Holders who are not
exempt recipients.
In addition, upon the sale of a Note to (or through) a broker, the broker
must withhold 31% of the entire purchase price, unless either (i) the broker
determines that the seller is a corporation or other exempt recipient or (ii)
the seller provides, in the required manner, certain identifying information
and, in the case of a non-U.S. Holder, certifies that such seller is a non-U.S.
Holder (and certain other conditions are met). Such a sale must also be reported
by the broker to the IRS, unless either (i) the broker determines that the
seller is an exempt recipient or (ii) the seller certifies its non-U.S. status
(and certain other conditions are met). Certification of the registered owner's
non-U.S. status would be made normally on an IRS Form W-8 under penalties of
perjury, although in certain cases it may be possible to submit other
documentary evidence. The United States Treasury has recently issued final
regulations (the "Final Regulations") which affect the procedures to be followed
by a non-U.S. Holder regarding the withholding and information reporting rules
discussed above. In general, the Final Regulations do not alter the substantive
withholding and information reporting requirements but unify current
certification procedures and forms and clarify and modify reliance standards.
The Final Regulations are generally effective for payments made on or after
January 1, 1999, subject to certain transition rules. Prospective investors
should consult their own tax advisors concerning the adoption of the Final
Regulations and the potential effect on their ownership of Notes.
Any amounts withheld under the backup withholding rule, from a payment to a
Beneficial Owner would be allowed as a refund or a credit against such
Beneficial Owner's United States Federal income tax provided the required
information is furnished to the IRS.
SUPPLEMENTAL PLAN OF DISTRIBUTION
The Notes are being offered on a continuous basis for sale by the Operating
Partnership to or through J.P. Morgan Securities Inc., Donaldson, Lufkin &
Jenrette Securities Corporation, Merrill Lynch & Co., Merrill Lynch, Pierce,
Fenner & Smith Incorporated, First Chicago Capital Markets, Inc. and UBS
Securities LLC. The Agents, individually or in a syndicate, may purchase Notes,
as principal, from the Operating Partnership from time to time for resale to
investors and other purchasers at varying prices relating to prevailing market
prices at the time of resale as determined by the applicable Agent(s), or, if so
specified in the applicable Pricing Supplement, for resale at a fixed offering
price. If agreed to by the Operating Partnership and an Agent, such Agent may
also utilize its reasonable efforts on an agency basis to solicit offers to
purchase the Notes at 100% of the principal amount thereof, unless otherwise
specified in the applicable Pricing Supplement. The Operating Partnership will
pay a commission to an Agent, ranging from .125% to .750% of the principal
amount of each Note, depending upon its stated maturity, sold through such
Agent. Commissions with respect to Notes with stated maturities in excess of 30
years that are sold through an Agent will be negotiated between the Operating
Partnership and such Agent at the time of such sale.
Unless otherwise specified in the applicable Pricing Supplement, any Note
sold to an Agent as principal will be purchased by such Agent at a price equal
to 100% of the principal amount thereof less a percentage of the principal
amount equal to the commission applicable to an agency sale of a Note of
identical maturity. An Agent may sell Notes it has purchased from the Operating
Partnership as principal to other dealers for resale to investors and other
purchasers, and may allow all or any portion of the discount received in
connection with such purchase from the Operating Partnership to such dealers.
After the initial offering of Notes, the offering price (in the case of Notes to
be resold on a fixed price basis), the concession and the discount may be
changed.
The Operating Partnership has reserved the right to sell the Notes directly
to investors, and may solicit and accept offers to purchase Notes directly from
investors from time to time on its own behalf. No commission will be paid on
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Notes sold directly by the Operating Partnership. In certain instances, the
Operating Partnership may offer Notes to or through additional agents named in
the applicable Pricing Supplement.
The Operating Partnership reserves the right to withdraw, cancel or modify
the offer made hereby without notice and may reject offers in whole or in part
(whether placed directly with the Operating Partnership or through the Agents).
Each Agent will have the right, in its discretion reasonably exercised, to
reject in whole or in part any offer to purchase Notes received by it on an
agency basis.
Unless otherwise specified in the applicable Pricing Supplement, payment of
the purchase price of the Notes will be required to be made in immediately
available funds in the Specified Currency in New York City on the date of
settlement. See "Description of Notes--General."
Upon issuance, the Notes will not have an established trading market. The
Notes will not be listed on any securities exchange, unless otherwise specified.
The Agents may from time to time purchase and sell Notes in the secondary
market, but the Agents are not obligated to do so, and there can be no assurance
that there will be a secondary market for the Notes or that there will be
liquidity in the secondary market if one develops. From time to time, the Agents
may make a market in the Notes, but the Agents are not obligated to do so and
may discontinue any market-making activity at any time.
The Agents may be deemed to be "underwriters" within the meaning of the
Securities Act of 1933, as amended (the "Securities Act"). The Operating
Partnership has agreed to indemnify the Agents against certain liabilities
(including liabilities under the Securities Act), or to contribute to payments
the Agents may be required to make in respect thereof. The Operating Partnership
has agreed to reimburse the Agents for certain other expenses.
In the ordinary course of their respective businesses, the Agents and their
affiliates have engaged in, and may in the future engage in, investment and
commercial banking transactions with the Operating Partnership and certain of
its affiliates.
In connection with this offering, the Agents may engage in transactions that
stabilize, maintain or otherwise affect the price of the Notes. Specifically,
the Agents may overallot in connection with such offering, creating a syndicate
short position. In addition, the Agents may bid for and purchase the Notes in
the open market to cover syndicate short positions or to stabilize the price of
the Notes. Finally, the syndicate may reclaim selling concessions allowed for
distributing Notes in the offering, if the syndicate repurchases previously
distributed Notes in the market to cover overallotments or to stabilize the
price of the Notes. Any of these activities may stabilize or maintain the market
price of the Notes above independent market levels. The Agents are not required
to engage in any of these activities, and may end any of them at any time.
Concurrently with the offering of Notes described herein, the Operating
Partnership may issue other Offered Securities described in the accompanying
Prospectus.
LEGAL MATTERS
Certain legal matters including the legality of the Notes and certain tax
matters, will be passed upon for the Company by Cahill Gordon & Reindel (a
partnership including a professional corporation), New York, New York and for
the Agents by Rogers & Wells, New York, New York. Cahill Gordon & Reindel and
Rogers & Wells will rely as to all matters of Maryland law on the opinion of
McGuire Woods Battle & Boothe LLP, Baltimore, Maryland. The opinions of Cahill
Gordon & Reindel and Rogers & Wells will be based upon, and subject to, certain
assumptions as to future actions required to be taken in connection with the
issuance and sale of the Notes and as to other events that may affect the
validity of the Notes but that cannot be ascertained on the date of such
opinions.
S-36
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PROSPECTUS
$669,525,320
FIRST INDUSTRIAL REALTY TRUST, INC.
Common Stock, Preferred Stock and Depositary Shares
FIRST INDUSTRIAL, L.P.
Debt Securities
First Industrial Realty Trust, Inc. (the "Company") may from time to time
offer in one or more series (i) shares of common stock, par value $.01 per share
("Common Stock"), (ii) shares of preferred stock, par value $.01 per share
("Preferred Stock"), and (iii) shares of Preferred Stock represented by
depositary shares ("Depositary Shares"), with an aggregate public offering price
of up to $669,525,320, in amounts, at prices and on terms to be determined at
the time of offering. First Industrial, L.P. (the "Operating Partnership") may
from time to time offer in one or more series unsecured non-convertible
investment grade debt securities ("Debt Securities"), with an aggregate public
offering price of up to $300,000,000, in amounts, at prices and on terms to be
determined at the time of offering. The Common Stock, Preferred Stock,
Depositary Shares and Debt Securities (collectively, the "Securities") may be
offered, separately or together, in separate series in amounts, at prices and on
terms to be set forth in one or more supplements to this Prospectus (each a
"Prospectus Supplement").
The specific terms of the Securities in respect of which this Prospectus is
being delivered will be set forth in the applicable Prospectus Supplement and
will include, where applicable: (i) in the case of Common Stock, any initial
public offering price; (ii) in the case of Preferred Stock, the specific title
and stated value, any dividend, liquidation, redemption, conversion, voting and
other rights, and any initial public offering price; (iii) in the case of
Depositary Shares, the fractional share of Preferred Stock represented by each
such Depositary Share; and (iv) in the case of Debt Securities, the specific
title, aggregate principal amount, currency, form (which may be registered or
bearer, or certificated or global), authorized denominations, maturity, rate (or
manner of calculation thereof) and time of payment of interest, terms for
redemption at the option of the Operating Partnership or repayment at the option
of the holder, terms for sinking fund payments, covenants and any initial public
offering price. In addition, such specific terms may include limitations on
direct or beneficial ownership and restrictions on transfer of the Securities,
in each case as may be consistent with the Company's Amended and Restated
Articles of Incorporation (the "Articles of Incorporation") or otherwise
appropriate to preserve the status of the Company as a real estate investment
trust ("REIT") for federal income tax purposes. See "Description of Preferred
Stock--Restrictions on Ownership" and "Restrictions on Transfers of Capital
Stock."
The applicable Prospectus Supplement will also contain information, where
applicable, about certain United States federal income tax considerations
relating to, and any listing on a securities exchange of, the Securities covered
by such Prospectus Supplement, not contained in this Prospectus.
The Securities may be offered directly to one or more purchasers, through
agents designated from time to time by the Company or the Operating Partnership
or to or through underwriters or dealers. If any agents or underwriters are
involved in the sale of any of the Securities, their names, and any applicable
purchase price, fee, commission or discount arrangement between or among them,
will be set forth, or will be calculable from the information set forth, in an
accompanying Prospectus Supplement. No Securities may be sold by the Company or
the Operating Partnership without delivery of a Prospectus Supplement describing
the method and terms of the offering of such series of Securities. See "Plan of
Distribution."
<PAGE>
FOR A DISCUSSION OF CERTAIN FACTORS THAT SHOULD BE CONSIDERED IN CONNECTION
WITH AN INVESTMENT IN THE SECURITIES, SEE "RISK FACTORS" COMMENCING ON PAGE 4.
---------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
------------------------
The date of this Prospectus is September 24, 1997
<PAGE>
AVAILABLE INFORMATION
The Company and the Operating Partnership are subject to the informational
requirements of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), and, in accordance therewith, the Company files reports, proxy statements
and other information with the Securities and Exchange Commission (the
"Commission") and the Operating Partnership files reports and other information
with the Commission. Such reports, proxy statements and other information can be
inspected and copied at prescribed rates at the public reference facilities
maintained by the Commission at Room 1024, 450 Fifth Street, N.W., Washington,
D.C. 20549 and at the regional offices of the Commission at 7 World Trade
Center, 13th Floor, New York, New York 10048 and at Northwestern Atrium Center,
500 West Madison Street, Suite 1400, Chicago, Illinois 60661-2511. Copies of
such material also can be obtained from the Public Reference Section of the
Commission at 450 Fifth Street, N.W., Washington, D.C 20549 at prescribed rates.
In addition, the Commission maintains a Web site that contains reports, proxy
and information statements and other information regarding registrants that file
electronically with the Commission at http://www.sec.gov. Securities of the
Company are listed on the New York Stock Exchange (the "NYSE"), and all such
material filed by the Company with the NYSE also can be inspected at the offices
of the NYSE, 20 Broad Street, New York, New York 10005.
The Company and the Operating Partnership have filed with the Commission a
registration statement on Form S-3 (together with all amendments and exhibits,
the "Registration Statement"), of which this Prospectus is a part, under the
Securities Act of 1933, as amended (the "Securities Act"), with respect to the
Securities. This Prospectus does not contain all of the information set forth in
the Registration Statement, certain parts of which are omitted in accordance
with the rules and regulations of the Commission. For further information
concerning the Company, the Operating Partnership and the Securities, reference
is made to the Registration Statement. Statements contained in this Prospectus
as to the contents of any contract or other document are not necessarily
complete, and in each instance, reference is made to the copy of such contract
or document filed as an exhibit to the Registration Statement, each such
statement being qualified in all respects by such reference.
------------------------
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents heretofore filed by the Company (File No. 1-13102)
and the Operating Partnership (File No. 333-21873) with the Commission are
incorporated herein by reference:
(a) the Company's Annual Report on Form 10-K for the year ended December
31, 1996;
(b) the Company's Quarterly Report on Form 10-Q for the quarter ended
March 31, 1997, as amended by Form 10-Q/A No. 1 filed May 30, 1997;
(c) the Company's Quarterly Report on Form 10-Q for the quarter ended
June 30, 1997, as amended by Form 10-Q/A No. 1 filed August 26, 1997;
(d) the Company's Current Report on Form 8-K filed February 12, 1997, as
amended by Form 8-K/A No. 1 filed April 10, 1997;
(e) the Company's Current Report on Form 8-K filed May 13, 1997;
(f) the Company's Current Report on Form 8-K filed June 6, 1997;
(g) the Company's Current Report on Form 8-K filed July 15, 1997, as
amended by Form 8-K/A No. 1 filed September 4, 1997;
(h) the Company's Current Report on Form 8-K filed September 11, 1997;
(i) the Company's Current Report on Form 8-K filed September 19, 1997;
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<PAGE>
(j) the description of the Common Stock included in the Company's
Registration Statement on Form 8-A dated June 23, 1994;
(k) the Operating Partnership's Quarterly Report on Form 10-Q for the
quarter ended March 31, 1997;
(l) the Operating Partnership's Quarterly Report on Form 10-Q for the
quarter ended June 30, 1997, as amended by Form 10-Q/A No. 1 filed August
26, 1997;
(m) the Operating Partnership's Current Report on Form 8-K filed May 13,
1997;
(n) the Operating Partnership's Current Report on Form 8-K filed May 15,
1997;
(o) the Operating Partnership's Current Report on Form 8-K filed June
13, 1997; and
(p) the Operating Partnership's Current Report on Form 8-K filed July
15, 1997, as amended by Form 8-K/A No. 1 filed September 4, 1997.
All documents filed by the Company or the Operating Partnership pursuant to
Section 13(a), 13(c), 14 or 15(d) of the Exchange Act subsequent to the date of
this Prospectus and prior to the termination of the offering of the Securities
offered hereby shall be deemed to be incorporated by reference in this
Prospectus and made a part hereof from the date of the filing of such documents.
Any statement contained in a document incorporated or deemed to be incorporated
by reference herein shall be deemed to be modified or superseded for purposes of
this Prospectus to the extent that a statement contained herein or in any other
document subsequently filed with the Commission which also is incorporated or
deemed to be incorporated by reference herein modifies or supersedes such
statement. Any such statement so modified or superseded shall not be deemed,
except as so modified or superseded, to constitute a part of this Prospectus.
The Company and the Operating Partnership will provide without charge to
each person, including any beneficial owner, to whom this Prospectus is
delivered, upon the written or oral request of such person, a copy of any or all
of the information incorporated by reference herein (not including the exhibits
to the information that is incorporated by reference herein, unless such
exhibits are specifically incorporated by reference into the information that is
incorporated by reference herein). Requests for such copies should be directed
to: First Industrial Realty Trust, Inc., Attn: Investor Relations, 311 S. Wacker
Drive, Suite 4000, Chicago, Illinois 60606, telephone (312) 344-4300.
Certain information, including, but not limited to, information relating to
the Operating Partnership's principal security holders, management, executive
compensation, certain relationships and related transactions and legal
proceedings that would be required to be disclosed in a prospectus included in a
registration statement on Form S-11 has been omitted from this Prospectus,
because such information is not materially different from the information
contained in the Company's periodic reports, proxy statements and other
information filed by the Company with the Commission.
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<PAGE>
THE COMPANY AND THE OPERATING PARTNERSHIP
UNLESS THE CONTEXT OTHERWISE REQUIRES, ALL REFERENCES IN THIS PROSPECTUS TO
THE "COMPANY" REFER TO FIRST INDUSTRIAL REALTY TRUST, INC. AND ITS SUBSIDIARIES,
INCLUDING FIRST INDUSTRIAL, L.P. (THE "OPERATING PARTNERSHIP"), AND ALL
REFERENCES IN THIS PROSPECTUS TO THE "OTHER REAL ESTATE PARTNERSHIPS" REFER TO
ALL PARTNERSHIP SUBSIDIARIES OF FIRST INDUSTRIAL REALTY TRUST, INC. OTHER THAN
THE OPERATING PARTNERSHIP. UNLESS OTHERWISE INDICATED, ALL INFORMATION REGARDING
PROPERTIES RELATES TO PROPERTIES OWNED AND IN SERVICE AS OF JUNE 30, 1997.
The Company is a REIT which owns, manages, acquires and develops bulk
warehouse and light industrial properties. Markets in which the Company operates
include the following metropolitan areas: Atlanta, Georgia; Chicago, Illinois;
Cincinnati, Ohio; Cleveland, Ohio; Columbus, Ohio; Dayton, Ohio; Des Moines,
Iowa; Detroit, Michigan; Grand Rapids, Michigan; Indianapolis, Indiana;
Milwaukee, Wisconsin; Minneapolis/St. Paul, Minnesota; Nashville, Tennessee; and
St. Louis, Missouri, as well as the regional areas of Central Pennsylvania, Long
Island, New York and New Jersey. As of June 30, 1997, the Company owned 453
in-service properties containing an aggregate of approximately 39.1 million
square feet of gross leasable area ("GLA") which was approximately 96% leased to
over 1,300 tenants. The Company is a self-administered and fully integrated
industrial real estate company.
The Company is the sole general partner of, and, as of June 30, 1997, held
approximately 88.0% of the outstanding units of partnership interest ("Units")
in, the Operating Partnership. As of such date, approximately 12.0% of the
outstanding Units were held by outside investors, including certain members of
the Company's management. Each Unit, other than those held by the Company, may
be exchanged by the holder thereof for one share (subject to certain
adjustments) of Common Stock. With each such exchange, the number of Units owned
by the Company, and, therefore, the Company's percentage interest in the
Operating Partnership, will increase.
Substantially all of the Company's assets are held through the Operating
Partnership and the Other Real Estate Partnerships. The Operating Partnership
owns a 99% limited partnership interest, and wholly owned subsidiaries of First
Industrial Realty Trust, Inc. own a 1% general partnership interest, in each of
the Other Real Estate Partnerships, except that in the case of one Other Real
Estate Partnership, First Industrial Securities L.P. ("Securities L.P."), the
general partner thereof also owns a preferred limited partnership interest the
terms of which mirror the terms of the Company's outstanding 9 1/2% Series A
Preferred Stock, par value $.01 per share ("Series A Preferred Stock"). See
"Description of Preferred Stock--Outstanding Preferred Stock."
The Company was incorporated in Maryland in August 1993. The Operating
Partnership was formed in Delaware in November 1993. The Company's and the
Operating Partnership's executive offices are located at 311 S. Wacker Drive,
Suite 4000, Chicago, Illinois 60606, and their telephone number is (312)
344-4300.
RISK FACTORS
In evaluating an investment in the Securities, investors should consider the
following factors, in addition to other matters set forth or incorporated in
this Prospectus and in any applicable Prospectus Supplement.
REAL ESTATE INVESTMENT CONSIDERATIONS
GENERAL
Income from real property investments, and the Company's resulting ability
to make expected distributions to stockholders, may be adversely affected by the
general economic climate, local conditions such as oversupply or a reduction in
demand in the area, the attractiveness of the properties to tenants, tenant
defaults, zoning or other regulatory restrictions, competition from other
available real estate, the ability of the Company to provide adequate
maintenance and insurance and increased operating costs (including insurance
premiums and real estate taxes). The Company's income would also be adversely
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<PAGE>
affected if tenants were unable to pay rent or the Company were unable to rent
properties on favorable terms. In addition, certain expenditures associated with
real estate investment (such as real estate taxes and maintenance costs)
generally are not reduced when circumstances cause a reduction in income from
the investment. Furthermore, real estate investments are relatively illiquid
and, therefore, will tend to limit the ability of the Company to vary its
portfolio promptly in response to changes in economic or other conditions.
RENEWAL OF LEASES AND RELETTING OF SPACE
The Company will be subject to the risks that, upon expiration of leases,
the leases may not be renewed, the space subject to such leases may not be relet
or the terms of renewal or reletting (including the cost of required
renovations) may be less favorable than expiring lease terms. If the Company
were unable promptly to renew a significant number of expiring leases or
promptly to relet the space covered by such leases, or if the rental rates upon
such renewal or reletting were significantly lower than the then current rates,
the Company's funds from operations and ability to make expected distributions
to stockholders might be adversely affected. Leases with respect to
approximately 3.4 million, 6.6 million and 7.0 million square feet of GLA expire
in 1997, 1998 and 1999, respectively.
POTENTIAL ENVIRONMENTAL LIABILITY
Under various federal, state and local laws, ordinances and regulations, an
owner or operator of real estate may be liable for the costs of clean-up of
certain conditions relating to the presence of hazardous or toxic materials on,
in or emanating from the property, and any related damages to natural resources.
Such laws often impose liability without regard to whether the owner or operator
knew of, or was responsible for, the presence of hazardous or toxic materials.
The presence of such materials, or the failure to address such conditions
properly, may adversely affect the ability to rent or sell the property or to
borrow using the property as collateral. Persons who dispose of or arrange for
the disposal or treatment of hazardous or toxic materials may also be liable for
the costs of clean-up of such materials, or for related natural resource
damages, at or from an off-site disposal or treatment facility, whether or not
such facility is owned or operated by such persons. No assurance can be given
that existing environmental assessments with respect to any of the Company's
properties reveal all environmental liabilities, that any prior owner or
operator of any of the properties did not create any material environmental
condition not known to the Company or that a material environmental condition
does not otherwise exist as to any one or more properties.
LIMITED GEOGRAPHIC CONCENTRATION
Approximately 68% of the Properties owned by the Company as of June 30, 1997
are located in the midwest region of the United States. A fundamental element of
the Company's growth strategy is to acquire additional properties in its current
markets. Consequently, the Company may be dependent upon the demand for
industrial space in those markets. The Company's revenues and the value of its
properties may be affected by a number of factors in its current markets,
including the local economic climate (which may be adversely impacted by
business layoffs or downsizing, industry slowdowns, changing demographics and
other factors) and local real estate conditions (such as oversupply of, or
reduced demand for, properties). Therefore, the Company's performance and its
ability to make distributions to stockholders will likely be dependent, to a
significant extent, on the economic conditions in its current markets.
TAX RISKS
CONSEQUENCES OF FAILURE TO QUALIFY AS A REIT
The Company intends to operate so as to qualify as a REIT under the Internal
Revenue Code of 1986, as amended (the "Code"). Although the Company believes
that it is organized and will operate in a manner so as to qualify as a REIT,
qualification as a REIT involves the satisfaction of numerous requirements (some
of which must be met on a recurring basis) established under highly technical
and
5
<PAGE>
complex Code provisions of which there are only limited judicial or
administrative interpretations, and involves the determination of various
factual matters and circumstances not entirely within the Company's control. If
the Company were to fail to qualify as a REIT in any taxable year, the Company
would be subject to federal income tax (including any applicable alternative
minimum tax) on its taxable income at corporate rates and, unless entitled to
relief under certain statutory provisions, the Company also would be
disqualified from treatment as a REIT for the four taxable years that follow.
See "Federal Income Tax Considerations."
EFFECT OF DISTRIBUTION REQUIREMENTS
The Company could, in certain instances, have taxable income without
sufficient cash to enable the Company to meet the distribution requirements of
the REIT provisions of the Code. Accordingly, the Company could be required to
borrow funds or sell properties on adverse terms in order to meet such
distribution requirements. In addition, because the Company must distribute to
its stockholders at least 95% of its REIT taxable income each year, the
Company's ability to accumulate capital may be limited. Thus, it may be more
dependent on outside sources of financing, such as debt financing or issuances
of additional capital stock, in connection with future acquisitions. See
"Federal Income Tax Considerations."
RESTRICTIONS ON TRANSFER OF SHARES
As noted below under "Description of Preferred Stock--Restrictions on
Ownership" and "Restrictions on Transfers of Capital Stock," in order to
maintain its qualification as a REIT under the Code, no more than 50% in value
of the outstanding capital stock of the Company may be owned, directly or
indirectly, by five or fewer individuals (as defined in the Code to include
certain entities) during the last half of a taxable year. Accordingly, the
Company's Articles of Incorporation contain, and the Designating Amendment for
each series of Preferred Stock may contain, provisions restricting the ownership
and transfer of the Company's capital stock.
RISKS ASSOCIATED WITH DEBT FINANCING AND LEVERAGE; COLLATERALIZATION AND CROSS-
COLLATERALIZATION
GENERAL
Where possible, the Company intends to continue to use leverage to increase
the rate of return on its investments and to allow the Company to make more
investments than it otherwise could. Such use of leverage presents an additional
element of risk in the event that the cash flow from the Company's properties is
insufficient to meet both debt payment obligations and the distribution
requirements of the REIT provisions of the Code. To the extent the Operating
Partnership determines to obtain additional debt financing in the future, it may
do so through mortgages on some or all of its properties. These mortgages may be
on recourse, non-recourse or crossed-collateralized bases. Holders of
indebtedness which is so secured will have a claim against these properties
which is senior to the claim of holders of Debt Securities. In addition, to the
extent indebtedness is crossed-collateralized, lenders may seek to foreclose
upon properties which are not the primary collateral for their loan, which may,
in turn, result in acceleration of other indebtedness secured by properties.
Foreclosure of properties would result in a loss of income and asset value to
the Operating Partnership and the Company.
BALLOON PAYMENTS
The Operating Partnership is required to make lump-sum or "balloon" payments
pursuant to the terms of certain of its indebtedness, including the Operating
Partnership's $100,000,000 aggregate principal amount 7.15% Notes due 2027 (the
"2027 Notes"), the Operating Partnership's $100,000,000 aggregate principal
amount 7 3/8% Notes due 2011 (the "Trust Notes"), the Operating Partnership's
$150,000,000 aggregate principal amount 7.60% Notes due 2007 (the "2007 Notes")
and a $200,000,000 unsecured revolving credit facility (the "Acquisition
Facility") under which the Company, through the Operating
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Partnership, may borrow to finance the acquisition of additional properties and
for other corporate purposes, including working capital. The holders of the 2027
Notes have the right to require the Operating Partnership to redeem their 2027
Notes, in whole or in part, on May 15, 2002. The trust to which the Trust Notes
were issued must exercise its right to require the Operating Partnership to
redeem the Trust Notes on May 15, 2004 if the holder of a call option with
respect to the Trust Notes fails to give written notice on or before May 1, 2004
that it intends to exercise such option. The Acquisition Facility provides for
the repayment of principal in a lump-sum or "balloon" payment at maturity in
2000 (subject to successive one-year extensions at the Operating Partnership's
option, subject to certain conditions). The Company's ability to make required
payments of principal on outstanding indebtedness, whether at maturity or
otherwise, may depend on its ability either to refinance the applicable
indebtedness or to sell properties. The Company has no commitments to refinance
the 2027 Notes, the Trust Notes, the 2007 Notes or the Acquisition Facility.
Certain other existing debt obligations of the Company are secured by its
properties, and therefore such obligations will permit the lender to foreclose
on those properties in the event of a default.
NO LIMITATION ON DEBT IN ORGANIZATIONAL DOCUMENTS
The Operating Partnership has no separate policy regarding the amount of
debt it may incur, but rather is encompassed by the Company's policy in this
regard. The Company currently has a policy of maintaining a ratio of debt to
total market capitalization (I.E., total consolidated debt of the Company
(excluding the Company's $300 million mortgage loan (the "1994 Defeased Mortgage
Loan") which was defeased in April 1997) as a percentage of the aggregate market
value of all outstanding shares of Common Stock, assuming the exchange of all
Units for Common Stock, plus the aggregate stated value of all outstanding
shares of preferred stock, plus total consolidated debt (excluding 1994 Defeased
Mortgage Loan)) which generally will not exceed 50% and a coverage ratio
(computed as total revenues (excluding interest income on U.S. government
securities collateralizing the 1994 Defeased Mortgage Loan) minus property
expenses and general and administrative expenses divided by interest expense
(excluding interest on the 1994 Defeased Mortgage Loan accruing after the date
of defeasance) plus dividends on preferred stock) of at least 2.0:1. As of June
30, 1997, the Company's ratio of debt to total market capitalization was 29.6%,
and for the twelve months ended June 30, 1997, the Company's coverage ratio was
3.12. However, the organizational documents of the Company do not contain any
limitation on the amount or percentage of indebtedness the Company may incur and
the Company's Board of Directors has the power to alter the current policy.
Accordingly, the Company could become more highly leveraged, resulting in an
increase in debt service that could adversely affect the Company's ability to
make expected distributions to stockholders and in an increased risk of default
on its obligations. In addition, except as may be set forth in any Prospectus
Supplement, the Debt Securities will not contain any provision that would afford
holders of Debt Securities protection in the event of a highly leveraged
transaction or change in control of the Operating Partnership or the Company.
RISING INTEREST RATES
The Acquisition Facility bears interest at a floating rate. Increases in the
interest rate payable on balances outstanding under the Acquisition Facility
would have an adverse effect on the Company's cash available for distribution.
LIMITS ON CHANGES IN CONTROL
GENERAL
Certain provisions of the Articles of Incorporation may have the effect of
delaying, deferring or preventing a third party from making an acquisition
proposal for the Company and thus inhibit a change in control of the Company and
limit the opportunity for stockholders to receive a premium for their Common
Stock over then-prevailing market prices. See "Certain Provisions of Maryland
Law and the Company's Articles of Incorporation and Bylaws." These provisions
include the following:
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RISKS ASSOCIATED WITH PREFERRED STOCK
Under its Articles of Incorporation, the Company has authority to issue up
to 10,000,000 shares of Preferred Stock, par value $.01 per share (of which
1,650,000 shares of Series A Preferred Stock, 40,000 shares of the Company's
8 3/4% Series B Preferred Stock (the "Series B Preferred Stock") and 20,000
shares of the Company's 8 5/8% Series C Preferred Stock ( the "Series C
Preferred Stock") were outstanding on September 19, 1997), on such terms as may
be authorized by the Board of Directors of the Company. The Board of Directors
has also reserved 1,000,000 shares of Junior Participating Preferred Stock, par
value $.01 per share (the "Junior Participating Preferred Stock"), of the
Company for issuance pursuant to a shareholder rights plan adopted by the Board
of Directors. The shareholder rights plan may discourage a third party from
making an acquisition proposal and thus inhibit a change in control of the
Company. See "Description of Common Stock--Shareholder Rights Plan."
MARYLAND BUSINESS COMBINATION LAW
Under the Maryland General Corporation Law, as amended ("MGCL"), certain
"business combinations" (including certain issuances of equity securities)
between a Maryland corporation, such as the Company, and any person who
beneficially owns 10% or more of the voting power of the corporation's shares
(an "Interested Stockholder") or, in certain circumstances, an associate or an
affiliate thereof (as defined in the MGCL) are prohibited for five years after
the most recent date on which the Interested Stockholder becomes an Interested
Stockholder. Thereafter, any such business combination must be recommended by
the board of directors and approved by two super-majority stockholder votes
unless, among other conditions, the corporation's common stockholders receive a
minimum price (as defined in the MGCL) for their shares, in cash or in the same
form as previously paid by the Interested Stockholder for its shares. The
provisions of the MGCL do not apply to business combinations that are approved
or exempted by the Board of Directors prior to the time that the Interested
Stockholder becomes an Interested Stockholder. In addition, the Company's
Articles of Incorporation exempt from these provisions of the MGCL any business
combination in which there is no Interested Stockholder other than Jay H.
Shidler, the Chairman of the Board of Directors of the Company, or any entity
controlled by Mr. Shidler, unless Mr. Shidler is an Interested Stockholder
without taking into account Mr. Shidler's ownership of shares of Common Stock of
the Company and the right to acquire shares in an aggregate amount which does
not exceed the number of shares which Mr. Shidler owned and had the right to
acquire (including through the exchange of Units) at the time of the
consummation of the Company's initial public offering.
MARYLAND CONTROL SHARE ACQUISITION STATUTE
The MGCL provides that "control shares" of a Maryland corporation acquired
in a "control share acquisition" have no voting rights, except to the extent
approved by a vote of two-thirds of the votes entitled to be cast on the matter,
excluding shares owned by the acquiror, by officers of the corporation and by
directors who are also employees of the corporation. If voting rights with
respect to control shares have not been approved at a meeting of stockholders,
then, subject to certain conditions and limitations, the issuer may redeem any
or all of such control shares for fair value. If voting rights for control
shares are approved at a stockholders meeting and the acquiror becomes entitled
to vote a majority of the shares entitled to vote, all other stockholders may
exercise appraisal rights. The Company's Bylaws contain a provision exempting
any and all acquisitions of the Company's shares of capital stock from the
control shares provisions of the MGCL. There can be no assurance that this
provision will not be amended or eliminated in the future.
CLASSIFIED BOARD OF DIRECTORS
The Company's directors are divided into three classes by its Articles of
Incorporation, with terms expiring over a three year period. The classified
board provision could make it more difficult and time
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consuming to remove the incumbent directors, thus discouraging a third party
from attempting to take control of the Company.
RISKS ASSOCIATED WITH DILUTION
To the extent the Company issues Common Stock, the ownership interest of
existing stockholders would be diluted.
RISKS ASSOCIATED WITH POSSIBLE CONFLICTS OF INTEREST
COMPETITION FROM OTHER BUSINESS INTERESTS OF CERTAIN OFFICERS AND DIRECTORS
Entities affiliated with or controlled by certain officers and directors of
the Company hold equity interests in industrial properties not owned by the
Company. Some of these properties may compete with properties owned by the
Company. There can be no assurance that decisions by officers and directors of
the Company will fully represent the interests of stockholders of the Company
rather than such individuals and their affiliates.
TAX CONSEQUENCES TO CERTAIN OFFICERS AND DIRECTORS
Certain officers and directors of the Company own Units which may be
exchanged for Common Stock. Prior to the exchange of Units for Common Stock,
officers and directors of the Company who own Units may suffer different and
more adverse tax consequences than holders of Common Stock upon the sale of
certain of the Company's properties, the refinancing of debt associated with
those properties or in connection with a proposed tender offer or merger
involving the Company and, therefore, such individuals and the Company, as
partners in the Operating Partnership, may have different objectives regarding
the appropriate terms of any such transaction.
USE OF PROCEEDS
Unless otherwise described in the applicable Prospectus Supplement, the
Company and the Operating Partnership intend to use the net proceeds from the
sale of Securities offered by this Prospectus and the applicable Prospectus
Supplement for general corporate purposes, which may include the acquisition of
additional properties, the repayment of outstanding debt or the improvement of
certain properties already in the Company's portfolio. Any proceeds from the
sale of Common Stock, Preferred Stock or Depositary Shares by the Company will
be invested in the Operating Partnership, which will use such proceeds for the
above-described purposes.
RATIOS OF EARNINGS TO FIXED CHARGES
The Company's ratios of earnings to fixed charges plus preferred dividend
requirements for the years ended December 31, 1996, 1995 and 1994 and the six
months ended June 30, 1997 and 1996 were 1.88, 1.56 and 1.33 and 2.11 and 1.77,
respectively. The Operating Partnership's ratios of earnings to fixed charges
for the years ended December 31, 1996, 1995 and 1994 and the six months ended
June 30, 1997 and 1996 were 6.96, 2.68 and 1.65 and 2.55 and 7.82, respectively.
For purposes of computing the ratios of earnings to fixed charges, earnings
have been calculated by adding fixed charges (excluding capitalized interest) to
income (loss) (excluding interest income on securities collateralizing the
defeasance of the 1994 Mortgage Loan) before disposition of interest rate
protection agreement, gain on sales of properties, minority interest and
extraordinary items. Fixed charges consist of interest costs (excluding interest
on the defeased 1994 Mortgage Loan accruing after the date of defeasance),
whether expensed or capitalized, and amortization of interest rate protection
agreements and deferred financing costs.
With respect to the Company and the Operating Partnership, earnings were
inadequate to cover fixed charges by approximately $3.4 million and $4.3 million
for the years ended December 31, 1993 and 1992,
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respectively, which periods were prior to the Company's initial public offering.
No preferred stock of the Company was outstanding during such years.
DESCRIPTION OF DEBT SECURITIES
The Debt Securities will be issued under an indenture (the "Indenture"),
dated as of May 13, 1997, between the Operating Partnership and First Trust
National Association, as trustee (the "Trustee"), which has been incorporated by
reference as an exhibit to the Registration Statement of which this Prospectus
is a part, subject to such amendments or supplements as may be adopted from time
to time. The Indenture is subject to and governed by the Trust Indenture Act of
1939, as amended (the "TIA"). The statements made under this heading relating to
the Debt Securities and the Indenture are summaries of certain provisions
thereof, do not purport to be complete and are qualified in their entirety by
reference to the Indenture and such Debt Securities. All material terms of the
Debt Securities and the Indenture, other than those disclosed in the applicable
Prospectus Supplement, are described in this Prospectus.
Capitalized terms used herein and not defined shall have the meanings
assigned to them in the Indenture.
The Debt Securities to be offered hereby and in any applicable Prospectus
Supplement will be "investment grade" securities, meaning at the time of the
offering of such Debt Securities, at least one nationally recognized statistical
rating organization (as defined in the Exchange Act) will have rated such Debt
Securities in one of its generic rating categories which signifies investment
grade (typically the four highest rating categories, within which there may be
sub-categories or gradations indicating relative standing, signify investment
grades). An investment grade rating is not a recommendation to buy, sell or hold
securities, is subject to revision or withdrawal at any time by the assigning
entity and should be evaluated independently of any other rating.
TERMS
GENERAL. The Debt Securities will be direct unsecured obligations of the
Operating Partnership. The indebtedness represented by the Debt Securities will
rank equally with all other unsecured and unsubordinated indebtedness of the
Operating Partnership. No partner (whether limited or general, including the
Company) of the Operating Partnership has any obligation for the payment of
principal of (or premium, if any) or interest, if any, on, or any other amount
with respect to, the Debt Securities. The particular terms of the Debt
Securities offered by a Prospectus Supplement will be described in the
applicable Prospectus Supplement, along with any applicable modifications of or
additions to the general terms of the Debt Securities as described herein and in
the Indenture and any applicable federal income tax considerations. Accordingly,
for a description of the terms of any series of Debt Securities, reference must
be made to both the Prospectus Supplement relating thereto and the description
of the Debt Securities set forth in this Prospectus.
Except as set forth in any Prospectus Supplement, the Debt Securities may be
issued without limit as to aggregate principal amount, in one or more series, in
each case as established from time to time by the Operating Partnership or as
set forth in the Indenture or in one or more indentures supplemental to the
Indenture. All Debt Securities of one series need not be issued at the same time
and, unless otherwise provided, a series may be reopened, without the consent of
the holders of the Debt Securities of such series, for issuance of additional
Debt Securities of such series.
The Indenture provides that the Operating Partnership may, but need not,
designate more than one Trustee thereunder, each with respect to one or more
series of Debt Securities. Any Trustee under the Indenture may resign or be
removed with respect to one or more series of Debt Securities, and a successor
Trustee may be appointed to act with respect to such series. In the event that
two or more persons are acting as Trustee with respect to different series of
Debt Securities, each such Trustee shall be a Trustee of a trust under the
Indenture separate and apart from the trust administered by any other Trustee,
and, except as otherwise indicated herein, any action described herein to be
taken by each Trustee may be taken
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by each such Trustee with respect to, and only with respect to, the one or more
series of Debt Securities for which it is Trustee under the Indenture.
The following summaries set forth certain general terms and provisions of
the Indenture and the Debt Securities. The Prospectus Supplement relating to the
series of Debt Securities being offered will contain further terms of such Debt
Securities, including the following specific terms:
(1) The title of such Debt Securities;
(2) The aggregate principal amount of such Debt Securities and any limit on
such aggregate principal amount;
(3) The price (expressed as a percentage of the principal amount thereof)
at which such Debt Securities will be issued and, if other than the
principal amount thereof, the portion of the principal amount thereof
payable upon declaration of acceleration of the maturity thereof;
(4) The date or dates, or the method for determining such date or dates, on
which the principal of such Debt Securities will be payable;
(5) The rate or rates (which may be fixed or variable), or the method by
which such rate or rates shall be determined, at which such Debt
Securities will bear interest, if any;
(6) The date or dates, or the method for determining such date or dates,
from which any such interest will accrue, the dates on which any such
interest will be payable, the record dates for such interest payment
dates, or the method by which such dates shall be determined, the
persons to whom such interest shall be payable, and the basis upon
which interest shall be calculated if other than that of a 360-day year
of twelve 30-day months;
(7) The place or places where the principal of (and premium or Make-Whole
Amount, if any) and interest, if any, on such Debt Securities will be
payable, where such Debt Securities may be surrendered for registration
of transfer or exchange and where notices or demands to or upon the
Operating Partnership in respect of such Debt Securities and the
Indenture may be served;
(8) The period or periods, if any, within which, the price or prices at
which and the other terms and conditions upon which such Debt
Securities may, pursuant to any optional or mandatory redemption
provisions, be redeemed, as a whole or in part, at the option of the
Operating Partnership;
(9) The obligation, if any, of the Operating Partnership to redeem, repay
or purchase such Debt Securities pursuant to any sinking fund or
analogous provision or at the option of a holder thereof, and the
period or periods within which, the price or prices at which and the
other terms and conditions upon which such Debt Securities will be
redeemed, repaid or purchased, as a whole or in part, pursuant to such
obligation;
(10) If other than U.S. dollars, the currency or currencies in which such
Debt Securities are denominated and payable, which may be a foreign
currency or units of two or more foreign currencies or a composite
currency or currencies, and the terms and conditions relating thereto;
(11) Whether the amount of payments of principal of (and premium or
Make-Whole Amount, if any, including any amount due upon redemption, if
any) or interest, if any, on such Debt Securities may be determined
with reference to an index, formula or other method (which index,
formula or method may, but need not be, based on the yield on or
trading price of other securities, including United States Treasury
securities, or on a currency, currencies, currency unit or units, or
composite currency or currencies) and the manner in which such amounts
shall be determined;
(12) Whether the principal of (and premium or Make-Whole Amount, if any) or
interest on the Debt Securities of the series are to be payable, at the
election of the Operating Partnership or a holder thereof, in a
currency or currencies, currency unit or units or composite currency or
currencies other than that in which such Debt Securities are
denominated or stated to be payable, the
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period or periods within which, and the terms and conditions upon
which, such election may be made, and the time and manner of, and
identity of the exchange rate agent with responsibility for,
determining the exchange rate between the currency or currencies,
currency unit or units or composite currency or currencies in which
such Debt Securities are denominated or stated to be payable and the
currency or currencies, currency unit or units or composite currency or
currencies in which such Debt Securities are to be so payable;
(13) Provisions, if any, granting special rights to the holders of Debt
Securities of the series upon the occurrence of such events as may be
specified;
(14) Any deletions from, modifications of or additions to the Events of
Default or covenants of the Operating Partnership with respect to Debt
Securities of the series, whether or not such Events of Default or
covenants are consistent with the Events of Default or covenants
described herein;
(15) Whether and under what circumstances the Operating Partnership will pay
any additional amounts on such Debt Securities in respect of any tax,
assessment or governmental charge and, if so, whether the Operating
Partnership will have the option to redeem such Debt Securities in lieu
of making such payment;
(16) Whether Debt Securities of the series are to be issuable as Registered
Securities, Bearer Securities (with or without coupons) or both, any
restrictions applicable to the offer, sale or delivery of Bearer
Securities and the terms upon which Bearer Securities of the series may
be exchanged for Registered Securities of the series and vice versa (if
permitted by applicable laws and regulations), whether any Debt
Securities of the series are to be issuable initially in temporary
global form and whether any Debt Securities of the series are to be
issuable in permanent global form with or without coupons and, if so,
whether beneficial owners of interests in any such permanent global
Security may exchange such interests for Debt Securities of such series
and of like tenor of any authorized form and denomination and the
circumstances under which any such exchanges may occur, if other than
in the manner provided in the Indenture, and, if Registered Securities
of the series are to be issuable as a Global Security, the identity of
the depository for such series;
(17) The date as of which any Bearer Securities of the series and any
temporary Global Security representing outstanding Debt Securities of
the series shall be dated if other than the date of original issuance
of the first Security of the series to be issued;
(18) The Person to whom any interest on any Registered Security of the
series shall be payable, if other than the Person in whose name that
Security (or one or more Predecessor Securities) is registered at the
close of business on the Regular Record Date for such interest, the
manner in which, or the Person to whom, any interest on any Bearer
Security of the series shall be payable, if otherwise than upon
presentation and surrender of the coupons appertaining thereto as they
severally mature, and the extent to which, or the manner in which, any
interest payable on a temporary Global Security on an Interest Payment
Date will be paid if other than in the manner provided in the
Indenture;
(19) Whether such Debt Securities will be issued in certificated or book
entry form;
(20) The applicability, if any, of the defeasance and covenant defeasance
provisions of the Indenture to the Debt Securities of the series;
(21) If the Debt Securities of such series are to be issuable in definitive
form (whether upon original issue or upon exchange of a temporary
Security of such series) only upon receipt of certain certificates or
other documents or satisfaction of other conditions, then the form
and/or terms of such certificates, documents or conditions; and
(22) Any other terms of the series (which terms shall not be inconsistent
with the provisions of the Indenture).
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If so provided in the applicable Prospectus Supplement, the Debt Securities
may be issued at a discount below their principal amount and provide for less
than the entire principal amount thereof to be payable upon declaration of
acceleration of the maturity thereof ("Original Issue Discount Securities"). In
such cases, all material U.S. federal income tax, accounting and other
considerations applicable to Original Issue Discount Securities will be
described in the applicable Prospectus Supplement.
Except as may be set forth in any Prospectus Supplement, the Indenture does
not contain any provisions that would limit the ability of the Operating
Partnership to incur indebtedness or that would afford holders of Debt
Securities protection in the event of a highly leveraged or similar transaction
involving the Operating Partnership or in the event of a change of control.
Restrictions on ownership and transfers of the Common Stock and Preferred Stock
are designed to preserve the Company's status as a REIT and, therefore, may act
to prevent or hinder a change of control. See "Restrictions on Transfers of
Capital Stock." Reference is made to the applicable Prospectus Supplement for
information with respect to any deletions from, modifications of, or additions
to, the Events of Default or covenants of the Operating Partnership that are
described below, including any addition of a covenant or other provision
providing event risk or similar protection.
DENOMINATION, INTEREST, REGISTRATION AND TRANSFER
Unless otherwise described in the applicable Prospectus Supplement, the Debt
Securities of any series will be issuable in denominations of $1,000 and
integral multiples thereof. Where Debt Securities of any series are issued in
bearer form, the special restrictions and considerations, including special
offering restrictions and special federal income tax considerations, applicable
to any such Debt Securities and to payment on and transfer and exchange of such
Debt Securities will be described in the applicable Prospectus Supplement.
Bearer Debt Securities will be transferable by delivery.
Unless otherwise specified in the applicable Prospectus Supplement, the
principal of (and applicable premium or Make-Whole Amount, if any) and interest
on any series of Debt Securities will be payable at the corporate trust office
of the applicable Trustee, the address of which will be stated in the applicable
Prospectus Supplement; provided that, at the option of the Operating
Partnership, payment of interest may be made by check mailed to the address of
the person entitled thereto as it appears in the applicable register for such
Debt Securities or by wire transfer of funds to such person at an account
maintained within the United States.
Unless otherwise specified in the applicable Prospectus Supplement, any
interest not punctually paid or duly provided for on any Interest Payment Date
with respect to a Debt Security in registered form ("Defaulted Interest") will
forthwith cease to be payable to the holder on the applicable Regular Record
Date and may either be paid to the Person in whose name such Debt Security is
registered at the close of business on a special record date (the "Special
Record Date") for the payment of such Defaulted Interest to be fixed by the
Trustee, in which case notice thereof shall be given to the holder of such Debt
Security not less than 10 days prior to such Special Record Date, or may be paid
at any time in any other lawful manner, all as more completely described in the
Indenture.
Subject to certain limitations imposed upon Debt Securities issued in
book-entry form, the Debt Securities of any series will be exchangeable for any
authorized denomination of other Debt Securities of the same series and of a
like aggregate principal amount and tenor upon surrender of such Debt Securities
at the corporate trust office of the applicable Trustee or at the office of any
transfer agent designated by the Operating Partnership for such purpose. In
addition, subject to certain limitations imposed upon Debt Securities issued in
book-entry form, the Debt Securities of any series may be surrendered for
registration of transfer or exchange thereof at the corporate trust office of
the applicable Trustee or at the office of any transfer agent designated by the
Operating Partnership for such purpose. Every Debt Security in registered form
surrendered for registration of transfer or exchange must be duly endorsed or
accompanied by a written instrument of transfer, and the person requesting such
action must provide evidence of title and identity satisfactory to the
applicable Trustee or transfer agent. No service charge will be made for any
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registration of transfer or exchange of any Debt Securities, but the Operating
Partnership may require payment of a sum sufficient to cover any tax or other
governmental charge payable in connection therewith. If the applicable
Prospectus Supplement refers to any transfer agent (in addition to the
applicable Trustee) initially designated by the Operating Partnership with
respect to any series of Debt Securities, the Operating Partnership may at any
time rescind the designation of any such transfer agent or approve a change in
the location through which any such transfer agent acts, except that the
Operating Partnership will be required to maintain a transfer agent in each
place of payment for such series. The Operating Partnership may at any time
designate additional transfer agents with respect to any series of Debt
Securities.
Neither the Operating Partnership nor any Trustee shall be required to (a)
issue, register the transfer of or exchange Debt Securities of any series during
a period beginning at the opening of business 15 days before the selection of
any Debt Securities for redemption and ending at the close of business on (i) if
such Debt Securities are issuable only as Registered Securities, the day of the
mailing of the relevant notice of redemption and (ii) if such Debt Securities
are issuable as Bearer Securities, the day of the first publication of the
relevant notice of redemption or, if such Debt Securities are also issuable as
Registered Securities and there is no publication, the mailing of the relevant
notice of redemption; (b) register the transfer of or exchange any Debt
Security, or portion thereof, so selected for redemption, in whole or in part,
except the unredeemed portion of any Debt Security being redeemed in part; (c)
exchange any Bearer Security so selected for redemption except that, to the
extent provided with respect to such Bearer Security, such Bearer Security may
be exchanged for a Registered Security of that series and of like tenor,
PROVIDED that such Registered Security shall be simultaneously surrendered for
redemption; or (d) issue, register the transfer of or exchange any Debt Security
that has been surrendered for repayment at the option of the holder, except the
portion, if any, of such Debt Security not to be so repaid.
Payment in respect of Debt Securities in bearer form will be made in the
currency and in the manner designated in the applicable Prospectus Supplement,
subject to any applicable laws and regulations, at such paying agencies outside
the United States as the Operating Partnership may appoint from time to time.
The paying agents outside the United States, if any, initially appointed by the
Operating Partnership for a series of Debt Securities will be named in the
applicable Prospectus Supplement. Unless otherwise provided in the applicable
Prospectus Supplement, the Operating Partnership may at any time designate
additional paying agents or rescind the designation of any paying agents, except
that, if Debt Securities of a series are issuable in registered form, the
Operating Partnership will be required to maintain at least one paying agent in
each place of payment for such series and if Debt Securities of a series are
issuable in bearer form, the Operating Partnership will be required to maintain
at least one paying agent in a place of payment outside the United States where
Debt Securities of such series and any coupons appertaining thereto may be
presented and surrendered for payment.
MERGER, CONSOLIDATION OR SALE OF ASSETS
The Indenture provides that the Operating Partnership may, without the
consent of the holders of any outstanding Debt Securities, consolidate with, or
sell, lease or convey all or substantially all of its assets to, or merge with
or into, any other entity provided that (a) either the Operating Partnership
shall be the continuing entity, or the successor entity (if other than the
Operating Partnership) formed by or resulting from any such consolidation or
merger or which shall have received the transfer of such assets is organized
under the laws of any domestic jurisdiction and expressly assumes the Operating
Partnership's obligations to pay principal of (and premium or Make-Whole Amount,
if any) and interest on all of the Debt Securities and the due and punctual
performance and observance of all of the covenants and conditions contained in
the Indenture; (b) immediately after giving effect to such transaction and
treating any indebtedness that becomes an obligation of the Operating
Partnership or any subsidiary as a result thereof as having been incurred by the
Operating Partnership or such subsidiary at the time of such transaction, no
Event of Default under the Indenture, and no event which, after notice or the
lapse of time, or both, would become such an Event of Default, shall have
occurred and be continuing; and (c) an officers' certificate and legal opinion
covering such conditions shall be delivered to each Trustee.
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CERTAIN COVENANTS
The applicable Prospectus Supplement will describe any material covenants in
respect of a series of Debt Securities that are not described in this
Prospectus. Unless otherwise indicated in the applicable Prospectus Supplement,
the Debt Securities will include the following covenants of the Operating
Partnership:
EXISTENCE. Except as permitted under "--Merger, Consolidation or Sale of
Assets," the Indenture requires the Operating Partnership to do or cause to be
done all things necessary to preserve and keep in full force and effect its
existence, rights and franchises; PROVIDED, HOWEVER, that the Operating
Partnership shall not be required to preserve any right or franchise if it
determines that the preservation thereof is no longer desirable in the conduct
of its business.
MAINTENANCE OF PROPERTIES. The Indenture requires the Operating Partnership
to cause all of its material properties used or useful in the conduct of its
business or the business of any subsidiary to be maintained and kept in good
condition, repair and working order and supplied with all necessary equipment
and will cause to be made all necessary repairs, renewals, replacements,
betterments and improvements thereof, all as in the judgment of the Operating
Partnership may be necessary so that the business carried on in connection
therewith may be properly and advantageously conducted at all times; PROVIDED,
HOWEVER, that the Operating Partnership and its subsidiaries shall not be
prevented from selling or otherwise disposing of their properties for value in
the ordinary course of business.
INSURANCE. The Indenture requires the Operating Partnership to cause each
of its and its subsidiaries' insurable properties to be insured against loss or
damage at least equal to their then full insurable value with insurers of
recognized responsibility and, if described in the applicable Prospectus
Supplement, having a specified rating from a recognized insurance rating
service.
PAYMENT OF TAXES AND OTHER CLAIMS. The Indenture requires the Operating
Partnership to pay or discharge or cause to be paid or discharged, before the
same shall become delinquent, (i) all taxes, assessments and governmental
charges levied or imposed upon it or any subsidiary or upon the income, profits
or property of the Operating Partnership or any subsidiary and (ii) all lawful
claims for labor, materials and supplies which, if unpaid, might by law become a
lien upon the property of the Operating Partnership or any subsidiary; PROVIDED,
HOWEVER, that the Operating Partnership shall not be required to pay or
discharge or cause to be paid or discharged any such tax, assessment, charge or
claim whose amount, applicability or validity is being contested in good faith.
EVENTS OF DEFAULT, NOTICE AND WAIVER
Unless otherwise provided in the applicable Prospectus Supplement, the
Indenture provides that the following events are "Events of Default" with
respect to any series of Debt Securities issued thereunder: (a) default in the
payment of any interest on any Debt Security of such series when such interest
becomes due and payable that continues for a period of 30 days; (b) default in
the payment of the principal of (or premium or Make-Whole Amount, if any, on)
any Debt Security of such series when due and payable; (c) default in making any
sinking fund payment as required for any Debt Security of such series; (d)
default in the performance, or breach, of any other covenant or warranty of the
Operating Partnership in the Indenture with respect to the Debt Securities of
such series and continuance of such default or breach for a period of 60 days
after written notice as provided in the Indenture; (e) default under any bond,
debenture, note, mortgage, indenture or instrument under which there may be
issued or by which there may be secured or evidenced any indebtedness for money
borrowed by the Operating Partnership (or by any subsidiary the repayment of
which the Operating Partnership has guaranteed or for which the Operating
Partnership is directly responsible or liable as obligor or guarantor) having an
aggregate principal amount outstanding of at least $10,000,000, whether such
indebtedness now exists or shall hereafter be created, which default shall have
resulted in such indebtedness becoming or being declared due and payable prior
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to the date on which it would otherwise have become due and payable, without
such indebtedness having been discharged, or such acceleration having been
rescinded or annulled, within a period of 10 days after written notice to the
Operating Partnership as provided in the Indenture; (f) certain events of
bankruptcy, insolvency or reorganization, or court appointment of a receiver,
liquidator or trustee of the Operating Partnership or any Significant
Subsidiary; and (g) any other event of default provided with respect to a
particular series of Debt Securities. The term "Significant Subsidiary" has the
meaning ascribed to such term in Regulation S-X promulgated under the Securities
Act.
If an Event of Default under the Indenture with respect to Debt Securities
of any series at the time outstanding occurs and is continuing, then in every
such case the applicable Trustee or the holders of not less than 25% in
principal amount of the Debt Securities of that series will have the right to
declare the principal amount (or, if the Debt Securities of that series are
Original Issue Discount Securities or indexed securities, such portion of the
principal amount as may be specified in the terms thereof) of, and premium or
Make-Whole Amount, if any, on, all the Debt Securities of that series to be due
and payable immediately by written notice thereof to the Operating Partnership
(and to the applicable Trustee if given by the holders); PROVIDED, that in the
case of an Event of Default described under clause (f) of the preceding
paragraph, acceleration is automatic. However, at any time after such a
declaration of acceleration with respect to Debt Securities of such series has
been made, but before a judgment or decree for payment of the money due has been
obtained by the applicable Trustee, the holders of not less than a majority in
principal amount of outstanding Debt Securities of such series may rescind and
annul such declaration and its consequences if (a) the Operating Partnership
shall have deposited with the applicable Trustee all required payments of the
principal of (and premium or Make-Whole Amount, if any) and interest on the Debt
Securities of such series, plus certain fees, expenses, disbursements and
advances of the applicable Trustee, and (b) all Events of Default, other than
the non-payment of accelerated principal (or specified portion thereof and the
premium or Make-Whole Amount, if any), with respect to Debt Securities of such
series have been cured or waived as provided in the Indenture. The Indenture
will also provide that the holders of not less than a majority in principal
amount of the outstanding Debt Securities of any series may waive any past
default with respect to such series and its consequences, except a default (i)
in the payment of the principal of (or premium or Make-Whole Amount, if any) or
interest on any Debt Security of such series or (ii) in respect of a covenant or
provision contained in the Indenture that cannot be modified or amended without
the consent of the holder of each outstanding Debt Security affected thereby.
The Indenture requires each Trustee to give notice to the holders of Debt
Securities within 90 days of a default under the Indenture unless such default
shall have been cured or waived; PROVIDED, HOWEVER, that such Trustee may
withhold notice to the holders of any series of Debt Securities of any default
with respect to such series (except a default in the payment of the principal of
(or premium or Make-Whole Amount, if any) or interest on any Debt Security of
such series or in the payment of any sinking fund installment in respect of any
Debt Security of such series) if specified responsible officers of such Trustee
consider such withholding to be in the interest of such holders.
The Indenture provides that no holders of Debt Securities of any series may
institute any proceedings, judicial or otherwise, with respect to the Indenture
or for any remedy thereunder, except in the case of failure of the applicable
Trustee, for 60 days, to act after it has received a written request to
institute proceedings in respect of an Event of Default from the holders of not
less than 25% in principal amount of the outstanding Debt Securities of such
series, as well as an offer of indemnity reasonably satisfactory to it. This
provision will not prevent, however, any holder of Debt Securities from
instituting suit for the enforcement of payment of the principal of (and premium
or Make-Whole Amount, if any) and interest on such Debt Securities at the
respective due dates or redemption dates thereof.
The Indenture provides that, subject to provisions in the Indenture relating
to its duties in case of default, a Trustee will be under no obligation to
exercise any of its rights or powers under the Indenture at the request or
direction of any holders of any series of Debt Securities then outstanding under
the
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Indenture, unless such holders shall have offered to the Trustee thereunder
reasonable security or indemnity. The holders of not less than a majority in
principal amount of the outstanding Debt Securities of any series (or of all
Debt Securities then outstanding under the Indenture, as the case may be) shall
have the right to direct the time, method and place of conducting any proceeding
for any remedy available to the applicable Trustee, or of exercising any trust
or power conferred upon such Trustee. However, a Trustee may refuse to follow
any direction which is in conflict with any law or the Indenture, which may
involve such Trustee in personal liability or which may be unduly prejudicial to
the holders of Debt Securities of such series not joining therein.
Within 120 days after the close of each fiscal year, the Operating
Partnership will be required to deliver to each Trustee a certificate, signed by
one of several specified officers of the Company, stating whether or not such
officer has knowledge of any default under the Indenture and, if so, specifying
each such default and the nature and status thereof.
MODIFICATION OF THE INDENTURE
Modifications and amendments of the Indenture are permitted to be made only
with the consent of the holders of not less than a majority in principal amount
of all outstanding Debt Securities issued under the Indenture affected by such
modification or amendment; PROVIDED, HOWEVER, that no such modification or
amendment may, without the consent of the holder of each such Debt Security
affected thereby, (a) change the stated maturity of the principal of, or any
installment of interest (or premium or Make-Whole Amount, if any) on, any such
Debt Security; (b) reduce the principal amount of, or the rate or amount of
interest on, or any premium or Make-Whole Amount payable on redemption of, any
such Debt Security, or reduce the amount of principal of an Original Issue
Discount Security that would be due and payable upon declaration of acceleration
of the maturity thereof or would be provable in bankruptcy, or adversely affect
any right of repayment of the holder of any such Debt Security; (c) change the
place of payment, or the coin or currency, for payment of principal of (or
premium or Make-Whole Amount, if any) or interest on any such Debt Security; (d)
impair the right to institute suit for the enforcement of any payment on or with
respect to any such Debt Security; (e) reduce the above-stated percentage of
outstanding Debt Securities of any series necessary to modify or amend the
Indenture, to waive compliance with certain provisions thereof or certain
defaults and consequences thereunder or to reduce the quorum or voting
requirements set forth in the Indenture; or (f) modify any of the foregoing
provisions or any of the provisions relating to the waiver of certain past
defaults or certain covenants, except to increase the required percentage to
effect such action or to provide that certain other provisions may not be
modified or waived without the consent of the holder of such Debt Security.
The holders of a majority in aggregate principal amount of the outstanding
Debt Securities of each series may, on behalf of all holders of Debt Securities
of that series, waive, insofar as that series is concerned, compliance by the
Operating Partnership with certain restrictive covenants of the Indenture.
Modifications and amendments of the Indenture are permitted to be made by
the Operating Partnership and the respective Trustee thereunder without the
consent of any holder of Debt Securities for any of the following purposes: (a)
to evidence the succession of another person to the Operating Partnership as
obligor under the Indenture; (b) to add to the covenants of the Operating
Partnership for the benefit of the holders of all or any series of Debt
Securities or to surrender any right or power conferred upon the Operating
Partnership in the Indenture; (c) to add events of default for the benefit of
the holders of all or any series of Debt Securities; (d) to add or change any
provisions of the Indenture to facilitate the issuance of, or to liberalize
certain terms of, Debt Securities in bearer form, or to permit or facilitate the
issuance of Debt Securities in uncertificated form, PROVIDED that such action
shall not adversely affect the interests of the holders of the Debt Securities
of any series in any material respect; (e) to change or eliminate any provisions
of the Indenture, PROVIDED that any such change or elimination shall become
effective only when there are no Debt Securities outstanding of any series
created prior thereto which are entitled to the benefit of such provision; (f)
to secure the Debt Securities; (g) to establish
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the form or terms of Debt Securities of any series; (h) to provide for the
acceptance of appointment by a successor Trustee or facilitate the
administration of the trusts under the Indenture by more than one Trustee; (i)
to cure any ambiguity, defect or inconsistency in the Indenture, provided that
such action shall not adversely affect the interests of holders of Debt
Securities of any series issued under the Indenture in any material respect; or
(j) to supplement any of the provisions of the Indenture to the extent necessary
to permit or facilitate defeasance and discharge of any series of such Debt
Securities, PROVIDED that such action shall not adversely affect the interests
of the holders of the outstanding Debt Securities of any series in any material
respect.
The Indenture provides that in determining whether the holders of the
requisite principal amount of outstanding Debt Securities of a series have given
any request, demand, authorization, direction, notice, consent or waiver
thereunder or whether a quorum is present at a meeting of holders of Debt
Securities, (a) the principal amount of an Original Issue Discount Security that
shall be deemed to be Outstanding shall be the amount of the principal thereof
that would be due and payable as of the date of such determination upon
declaration of acceleration of the maturity thereof, (b) the principal amount of
any Debt Security denominated in a foreign currency that shall be deemed
Outstanding shall be the U.S. dollar equivalent, determined on the issue date
for such Debt Security, of the principal amount of such Debt Security (or, in
the case of an Original Issue Discount Security, the U.S. dollar equivalent on
the issue date of such Debt Security of the amount determined as provided in (a)
above), (c) the principal amount of an indexed security that shall be deemed
Outstanding shall be the principal face amount of such indexed security at
original issuance, unless otherwise provided with respect to such indexed
security pursuant to the Indenture, and (d) Debt Securities owned by the
Operating Partnership or any other obligor upon the Debt Securities or any
affiliate of the Operating Partnership or of such other obligor shall be
disregarded.
The Indenture contains provisions for convening meetings of the holders of
Debt Securities of a series. A meeting will be permitted to be called at any
time by the applicable Trustee, and also, upon request, by the Operating
Partnership or the holders of at least 25% in principal amount of the
outstanding Debt Securities of such series, in any such case upon notice given
as provided in the Indenture. Except for any consent that must be given by the
holder of each Debt Security affected by certain modifications and amendments of
the Indenture, any resolution presented at a meeting or adjourned meeting duly
reconvened at which a quorum is present may be adopted by the affirmative vote
of the holders of a majority in principal amount of the outstanding Debt
Securities of that series; PROVIDED, HOWEVER, that, except as referred to above,
any resolution with respect to any request, demand, authorization, direction,
notice, consent, waiver or other action that may be made, given or taken by the
holders of a specified percentage, which is less than a majority, in principal
amount of the outstanding Debt Securities of a series may be adopted at a
meeting or adjourned meeting or adjourned meeting duly reconvened at which a
quorum is present by the affirmative vote of the holders of such specified
percentage in principal amount of the outstanding Debt Securities of that
series. Any resolution passed or decision taken at any meeting of holders of
Debt Securities of any series duly held in accordance with the Indenture will be
binding on all holders of Debt Securities of that series. The quorum at any
meeting called to adopt a resolution, and at any reconvened meeting, will be
persons holding or representing a majority in principal amount of the
outstanding Debt Securities of a series; PROVIDED, HOWEVER, that if any action
is to be taken at such meeting with respect to a consent or waiver which may be
given by the holders of not less than a specified percentage in principal amount
of the outstanding Debt Securities of a series, the persons holding or
representing such specified percentage in principal amount of the outstanding
Debt Securities of such series will constitute a quorum.
Notwithstanding the foregoing provisions, the Indenture provides that if any
action is to be taken at a meeting of holders of Debt Securities of any series
with respect to any request, demand, authorization, direction, notice, consent,
waiver and other action that the Indenture expressly provides may be made, given
or taken by the holders of a specified percentage in principal amount of all
outstanding Debt Securities affected thereby, or of the holders of such series
and one or more additional series: (a) there
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shall be no minimum quorum requirement for such meeting, and (b) the principal
amount of the outstanding Debt Securities of such series that vote in favor of
such request, demand, authorization, direction, notice, consent, waiver or other
action shall be taken into account in determining whether such request, demand,
authorization, direction, notice, consent, waiver or other action has been made,
given or taken under the Indenture.
DISCHARGE, DEFEASANCE AND COVENANT DEFEASANCE
Unless otherwise indicated in the applicable Prospectus Supplement, the
Operating Partnership will be permitted, at its option, to discharge certain
obligations to holders of any series of Debt Securities issued under the
Indenture that have not already been delivered to the applicable Trustee for
cancellation and that either have become due and payable or will become due and
payable within one year (or scheduled for redemption within one year) by
irrevocably depositing with the applicable Trustee, in trust, funds in such
currency or currencies, currency unit or units or composite currency or
currencies in which such Debt Securities are payable in an amount sufficient to
pay the entire indebtedness on such Debt Securities in respect of principal (and
premium or Make-Whole Amount, if any) and interest to the date of such deposit
(if such Debt Securities have become due and payable) or to the stated maturity
or redemption date, as the case may be.
The Indenture provides that, unless otherwise indicated in the applicable
Prospectus Supplement, the Operating Partnership may elect either (a) to defease
and be discharged from any and all obligations with respect to such Debt
Securities (except for the obligation to pay additional amounts, if any, upon
the occurrence of certain events of tax, assessment or governmental charge with
respect to payments on such Debt Securities and the obligations to register the
transfer or exchange of such Debt Securities, to replace temporary or mutilated,
destroyed, lost or stolen Debt Securities, to maintain an office or agency in
respect of such Debt Securities, and to hold moneys for payment in trust)
("defeasance") or (b) to be released from certain obligations with respect to
such Debt Securities under the Indenture (including the restrictions described
under "--Certain Covenants") or, if provided in the applicable Prospectus
Supplement, its obligations with respect to any other covenant, and any omission
to comply with such obligations shall not constitute an Event of Default with
respect to such Debt Securities ("covenant defeasance"), in either case upon the
irrevocable deposit by the Operating Partnership with the applicable Trustee, in
trust, of an amount, in such currency or currencies, currency unit or units or
composite currency or currencies in which such Debt Securities are payable at
stated maturity, or Government Obligations (as defined below), or both,
applicable to such Debt Securities, which through the scheduled payment of
principal and interest in accordance with their terms will provide money in an
amount sufficient to pay the principal of (and premium or Make-Whole Amount, if
any) and interest on such Debt Securities, and any mandatory sinking fund or
analogous payments thereon, on the scheduled due dates therefor.
Such a trust will only be permitted to be established if, among other
things, the Operating Partnership has delivered to the applicable Trustee an
opinion of counsel (as specified in the Indenture) to the effect that the
holders of such Debt Securities will not recognize income, gain or loss for U.S.
federal income tax purposes as a result of such defeasance or covenant
defeasance and will be subject to U.S. federal income tax on the same amounts,
in the same manner and at the same times as would have been the case if such
defeasance or covenant defeasance had not occurred, and such opinion of counsel,
in the case of defeasance, will be required to refer to and be based upon a
ruling received from the Internal Revenue Service or a change in applicable
United States federal income tax law occurring after the date of the Indenture.
In the event of such defeasance, the holders of such Debt Securities would
thereafter be able to look only to such trust fund for payment of principal (and
premium or Make-Whole Amount, if any) and interest.
"Government Obligations" means securities that are (a) direct obligations of
the United States of America or the government which issued the foreign currency
in which the Debt Securities of a particular series are payable, for the payment
of which its full faith and credit is pledged or (b) obligations of a person
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controlled or supervised by and acting as an agency or instrumentality of the
United States of America or such government which issued the foreign currency in
which the Debt Securities of such series are payable, the payment of which is
unconditionally guaranteed as a full faith and credit obligation by the United
States of America or such other government, which, in either case, are not
callable or redeemable at the option of the issuer thereof, and shall also
include a depository receipt issued by a bank or trust company as custodian with
respect to any such Government Obligation or a specific payment of interest on
or principal of any such Government Obligation held by such custodian for the
account of the holder of a depository receipt, provided that (except as required
by law) such custodian is not authorized to make any deduction from the amount
payable to the holder of such depository receipt from any amount received by the
custodian in respect of the Government Obligation or the specific payment of
interest on or principal of the Government Obligation evidenced by such
depository receipt.
Unless otherwise provided in the applicable Prospectus Supplement, if after
the Operating Partnership has deposited funds and/or Government Obligations to
effect defeasance or covenant defeasance with respect to Debt Securities of any
series, (a) the holder of a Debt Security of such series is entitled to, and
does, elect pursuant to the Indenture or the terms of such Debt Security to
receive payment in a currency, currency unit or composite currency other than
that in which such deposit has been made in respect of such Debt Security, or
(b) a Conversion Event (as defined below) occurs in respect of the currency,
currency unit or composite currency in which such deposit has been made, the
indebtedness represented by such Debt Security will be deemed to have been, and
will be, fully discharged and satisfied through the payment of the principal of
(and premium or Make-Whole Amount, if any) and interest on such Debt Security as
they become due out of the proceeds yielded by converting the amount so
deposited in respect of such Debt Security into the currency, currency unit or
composite currency in which such Debt Security becomes payable as a result of
such election or such cessation of usage based on the applicable market exchange
rate. "Conversion Event" means the cessation of use of (i) a currency, currency
unit or composite currency both by the government of the country which issued
such currency and for the settlement of transactions by a central bank or other
public institutions of or within the international banking community, (ii) the
ECU both within the European Monetary System and for the settlement of
transactions by public institutions of or within the European Communities or
(iii) any currency unit or composite currency other than the ECU for the
purposes for which it was established. Unless otherwise provided in the
applicable Prospectus Supplement, all payments of principal of (and premium or
Make-Whole Amount, if any) and interest on any Debt Security that is payable in
a foreign currency that ceases to be used by its government of issuance shall be
made in U.S. dollars.
In the event the Operating Partnership effects covenant defeasance with
respect to any Debt Securities and such Debt Securities are declared due and
payable because of the occurrence of any Event of Default other than the Event
of Default described in clause (d) under "--Events of Default, Notice and
Waiver" with respect to specified sections of the Indenture (which sections
would no longer be applicable to such Debt Securities) or described in clause
(g) under "--Events of Default, Notice and Waiver" with respect to any other
covenant as to which there has been covenant defeasance, the amount in such
currency, currency unit or composite currency in which such Debt Securities are
payable, and Government Obligations on deposit with the applicable Trustee, will
be sufficient to pay amounts due on such Debt Securities at the time of their
stated maturity but may not be sufficient to pay amounts due on such Debt
Securities at the time of the acceleration resulting from such Event of Default.
However, the Operating Partnership would remain liable to make payment of such
amounts due at the time of acceleration.
The applicable Prospectus Supplement may further describe the provisions, if
any, permitting such defeasance or covenant defeasance, including any
modifications to the provisions described above, with respect to the Debt
Securities of or within a particular series.
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NO CONVERSION RIGHTS
The Debt Securities will not be convertible into or exchangeable for any
capital stock of the Company or equity interest in the Operating Partnership.
GLOBAL SECURITIES
The Debt Securities of a series may be issued in whole or in part in
book-entry form consisting of one or more global securities (the "Global
Securities") that will be deposited with, or on behalf of, a depositary (the
"Depositary") identified in the applicable Prospectus Supplement relating to
such series. Global Securities may be issued in either registered or bearer form
and in either temporary or permanent form. The specific terms of the depositary
arrangement with respect to a series of Debt Securities will be described in the
applicable Prospectus Supplement relating to such series.
PAYMENT AND PAYING AGENTS
Unless otherwise specified in the applicable Prospectus Supplement, the
principal of (and applicable premium or Make-Whole Amount, if any) and interest
on any series of Debt Securities will be payable at the corporate trust office
of the Trustee, the address of which will be stated in the applicable Prospectus
Supplement; provided that, at the option of the Operating Partnership, payment
of interest may be made by check mailed to the address of the person entitled
thereto as it appears in the applicable register for such Debt Securities or by
wire transfer of funds to such person at an account maintained within the United
States.
All moneys paid by the Operating Partnership to a paying agent or a Trustee
for the payment of the principal of or any premium, Make-Whole Amount or
interest on any Debt Security which remain unclaimed at the end of two years
after such principal, premium, Make-Whole Amount or interest has become due and
payable will be repaid to the Operating Partnership, and the holder of such Debt
Security thereafter may look only to the Operating Partnership for payment
thereof.
DESCRIPTION OF PREFERRED STOCK
The description of the Preferred Stock set forth below does not purport to
be complete and is qualified in its entirety by reference to the Company's
Amended and Restated Articles of Incorporation, as amended (the "Articles of
Incorporation"), and Amended and Restated Bylaws (the "Bylaws"). All material
terms of the Preferred Shares, except those disclosed in the applicable
Prospectus Supplement, are described in this Prospectus.
GENERAL
Under the Articles of Incorporation, the Company has authority to issue 10
million shares of Preferred Stock, par value $.01 per share. The Preferred Stock
may be issued from time to time, in one or more series, as authorized by the
Board of Directors of the Company. Prior to issuance of shares of each series,
the Board of Directors is required by the Maryland General Corporation Law
("MGCL") and the Articles of Incorporation to fix for each series, subject to
the provisions of the Articles of Incorporation regarding excess stock, par
value $.01 per share ("Excess Stock"), the terms, preferences, conversion or
other rights, voting powers, restrictions, limitations as to dividends or other
distributions, qualifications and terms or conditions of redemption of such
shares as may be permitted by Maryland law. Such rights, powers, restrictions
and limitations could include the right to receive specified dividend payments
and payments on liquidation prior to any such payments to holders of Common
Stock or other capital stock of the Company ranking junior to the Preferred
Stock. The outstanding shares of Preferred Stock are, and additional shares of
Preferred Stock will be, when issued, fully paid and nonassessable and will have
no preemptive rights. The Board of Directors could authorize the issuance of
shares of Preferred Stock with terms and conditions that could have the effect
of discouraging a takeover or other transaction that holders
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of Common Stock might believe to be in their best interests or in which holders
of some, or a majority, of the shares of Common Stock might receive a premium
for their shares over the then market price of such shares of Common Stock.
OUTSTANDING PREFERRED STOCK
At September 19, 1997, the Company had outstanding 1,650,000 shares of
Series A Preferred Stock, 40,000 shares of Series B Preferred Stock and 20,000
shares of Series C Preferred Stock, constituting all of the Company's then
outstanding Preferred Stock. The terms of the Series A Preferred Stock, Series B
Preferred Stock and Series C Preferred Stock provide for a preference as to the
payment of dividends over shares of Common Stock and any other capital stock
ranking junior to the Series A Preferred Stock, Series B Preferred Stock and
Series C Preferred Stock, and for cumulative quarterly dividends at the rate of
$2.375, $218.75 and $215.625, respectively, per share per year. On and after
November 17, 2000, May 14, 2002 and June 6, 2007, the Series A Preferred Stock,
Series B Preferred Stock and Series C Preferred Stock, respectively, are subject
to redemption, in each case in whole or in part, at the option of the Company,
at a cash redemption price of $25.00 per share, $2,500.00 per share and
$2,500.00 per share, respectively, plus accrued and unpaid dividends. The Series
A Preferred Stock, Series B Preferred Stock and Series C Preferred Stock rank on
a parity as to payment of dividends and amounts upon liquidation, however, the
Series A Preferred Stock has the benefit of the Guarantee Agreement, as
described below.
In the event of any voluntary or involuntary liquidation, dissolution or
winding up of the Company, the holders of the Series A Preferred Stock, Series B
Preferred Stock and Series C Preferred Stock will be entitled to receive out of
the Company's assets available for distribution to stockholders, before any
distribution of assets is made to holders of Common Stock or any other shares of
capital stock ranking as to such distributions junior to the Series A Preferred
Stock, Series B Preferred Stock and Series C Preferred Stock, liquidating
distributions in the amount of $25.00 per share, $2,500.00 per share and
$2,500.00 per share, respectively, plus all accrued and unpaid dividends.
The Series A Preferred Stock is entitled to the benefits of a Guarantee and
Payment Agreement between Securities L.P. and its general partner, First
Industrial Securities Corporation (each a subsidiary of the Company), for the
benefit of American National Bank and Trust Company of Chicago as Guarantee
Agent thereunder (the "Guarantee Agreement") pursuant to which Securities L.P.
has guaranteed, subject to the terms of the Guarantee Agreement, dividends on,
and redemption and liquidation payments with respect to, the Series A Preferred
Stock. No other Preferred Stock of the Company is or will be entitled to the
benefits of the Guarantee Agreement and the Series B Preferred Stock and Series
C Preferred Stock do not have the benefit of any such guarantee.
Except as expressly required by law and in certain other limited
circumstances, the holders of the Preferred Stock are not entitled to vote. The
consent of holders of at least 66% of the outstanding Preferred Stock and any
other series of Preferred Stock ranking on a parity therewith (collectively,
"Parity Preferred Stock"), voting as a single class, is required to authorize
another class of shares senior to such Parity Preferred Stock. The affirmative
vote or consent of the holders of at least 66% of the outstanding shares of each
series of Preferred Stock is required to amend or repeal any provision of, or
add any provision to, the Articles of Incorporation, including the Articles
Supplementary relating to such series of Preferred Stock, if such action would
materially and adversely alter or change the rights, preferences or privileges
of such series of Preferred Stock.
FUTURE SERIES OF PREFERRED STOCK
The following description of the Preferred Stock sets forth certain general
terms and provisions of the Preferred Stock to which any Prospectus Supplement
may relate. The statements below describing the Preferred Stock are in all
respects subject to and qualified in their entirety by reference to the
applicable
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provisions of the Articles of Incorporation and Bylaws and any applicable
amendment to the Articles of Incorporation designating terms of a series of
Preferred Stock (a "Designating Amendment").
Reference is made to the Prospectus Supplement relating to the Preferred
Stock offered thereby for specific terms, including:
(1) The title and stated value of such Preferred Stock;
(2) The number of shares of such Preferred Stock offered, the liquidation
preference per share and the offering price of such Preferred Stock;
(3) The dividend rate(s), period(s) and/or payment date(s) or method(s) of
calculation thereof applicable to such Preferred Stock;
(4) The date from which dividends on such Preferred Stock shall accumulate,
if applicable;
(5) The procedures for any auction and remarketing, if any, for such
Preferred Stock;
(6) The provision for a sinking fund, if any, for such Preferred Stock;
(7) The provision for redemption, if applicable, of such Preferred Stock;
(8) Any listing of such Preferred Stock on any securities exchange;
(9) The terms and conditions, if applicable, upon which such Preferred Stock
will be convertible into Common Stock, including the conversion price
(or manner of calculation thereof);
(10) Any other specific terms, preferences, rights, limitations or
restrictions of such Preferred Stock;
(11) A discussion of federal income tax considerations applicable to such
Preferred Stock;
(12) The relative ranking and preference of such Preferred Stock as to
dividend rights and rights upon liquidation, dissolution or winding up
of the affairs of the Company;
(13) Any limitations on issuance of any series of Preferred Stock ranking
senior to or on a parity with such series of Preferred Stock as to
dividend rights and rights upon liquidation, dissolution or winding up
of the affairs of the Company; and
(14) Any limitations on direct or beneficial ownership and restrictions on
transfer, in each case as may be appropriate to preserve the status of
the Company as a REIT.
RANK
Unless otherwise specified in the Prospectus Supplement, the Preferred Stock
will, with respect to dividend rights and rights upon liquidation, dissolution
or winding up of the Company, rank (i) senior to all classes or series of Common
Stock, and to all equity securities ranking junior to such Preferred Stock with
respect to dividend rights or rights upon liquidation, dissolution or winding up
of the Company; (ii) on a parity with all equity securities issued by the
Company the terms of which specifically provide that such equity securities rank
on a parity with the Preferred Stock with respect to dividend rights or rights
upon liquidation, dissolution or winding up of the Company; and (iii) junior to
all equity securities issued by the Company the terms of which specifically
provide that such equity securities rank senior to the Preferred Stock with
respect to dividend rights or rights upon liquidation, dissolution or winding up
of the Company. The term "equity securities" does not include convertible debt
securities.
DIVIDENDS
Holders of the Preferred Stock of each series will be entitled to receive,
when, as and if declared by the Board of Directors of the Company, out of assets
of the Company legally available for payment, cash dividends at such rates and
on such dates as will be set forth in the applicable Prospectus Supplement.
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Each such dividend shall be payable to holders of record as they appear on the
share transfer books of the Company on such record dates as shall be fixed by
the Board of Directors of the Company.
Dividends on any series of the Preferred Stock may be cumulative or
non-cumulative, as provided in the applicable Prospectus Supplement. Dividends,
if cumulative, will be cumulative from and after the date set forth in the
applicable Prospectus Supplement. If the Board of Directors of the Company fails
to declare a dividend payable on a dividend payment date on any series of the
Preferred Stock for which dividends are non-cumulative, then the holders of such
series of the Preferred Stock will have no right to receive a dividend in
respect of the dividend period ending on such dividend payment date, and the
Company will have no obligation to pay the dividend accrued for such period,
whether or not dividends on such series are declared payable on any future
dividend payment date.
If Preferred Stock of any series is outstanding, no dividends will be
declared or paid or set apart for payment on any capital stock of the Company of
any other series ranking, as to dividends, on a parity with or junior to the
Preferred Stock of such series for any period unless (i) if such series of
Preferred Stock has a cumulative dividend, full cumulative dividends have been
or contemporaneously are declared and paid or declared and a sum sufficient for
the payment thereof is set apart for such payment on the Preferred Stock of such
series for all past dividend periods and the then current dividend period or
(ii) if such series of Preferred Stock does not have a cumulative dividend, full
dividends for the then current dividend period have been or contemporaneously
are declared and paid or declared and a sum sufficient for the payment thereof
is set apart for such payment on the Preferred Stock of such series. When
dividends are not paid in full (or a sum sufficient for such full payment is not
so set apart) upon Preferred Stock of any series and the shares of any other
series of Preferred Stock ranking on a parity as to dividends with the Preferred
Stock of such series, all dividends declared upon Preferred Stock of such series
and any other series of Preferred Stock ranking on a parity as to dividends with
such Preferred Stock shall be declared PRO RATA so that the amount of dividends
declared per share of Preferred Stock of such series and such other series of
Preferred Stock shall in all cases bear to each other the same ratio that
accrued dividends per share on the Preferred Stock of such series (which shall
not include any accumulation in respect of unpaid dividends for prior dividend
periods if such Preferred Stock does not have a cumulative dividend) and such
other series of Preferred Stock bear to each other. No interest, or sum of money
in lieu of interest, shall be payable in respect of any dividend payment or
payments on Preferred Stock of such series which may be in arrears.
Except as provided in the immediately preceding paragraph, unless (i) if
such series of Preferred Stock has a cumulative dividend, full cumulative
dividends on the Preferred Stock of such series have been or contemporaneously
are declared and paid or declared and a sum sufficient for the payment thereof
is set apart for payment for all past dividend periods and the then current
dividend period, and (ii) if such series of Preferred Stock does not have a
cumulative dividend, full dividends on the Preferred Stock of such series have
been or contemporaneously are declared and paid or declared and a sum sufficient
for the payment thereof is set apart for payment for the then current dividend
period, no dividends (other than in shares of Common Stock or other shares of
capital stock ranking junior to the Preferred Stock of such series as to
dividends and upon liquidation) shall be declared or paid or set aside for
payment nor shall any other distribution be declared or made upon the Common
Stock, or any other capital stock of the Company ranking junior to or on a
parity with the Preferred Stock of such series as to dividends or upon
liquidation, nor shall any shares of Common Stock, or any other shares of
capital stock of the Company ranking junior to or on a parity with the Preferred
Stock of such series as to dividends or upon liquidation be redeemed, purchased
or otherwise acquired for any consideration (or any moneys be paid to or made
available for a sinking fund for the redemption of any such shares) by the
Company (except by conversion into or exchange for other capital stock of the
Company ranking junior to the Preferred Stock of such series as to dividends and
upon liquidation).
Any dividend payment made on shares of a series of Preferred Stock shall
first be credited against the earliest accrued but unpaid dividend due with
respect to shares of such series which remains payable.
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REDEMPTION
If so provided in the applicable Prospectus Supplement, the Preferred Stock
will be subject to mandatory redemption or redemption at the option of the
Company, as a whole or in part, in each case upon the terms, at the times and at
the redemption prices set forth in such Prospectus Supplement.
The Prospectus Supplement relating to a series of Preferred Stock that is
subject to mandatory redemption will specify the number of shares of such
Preferred Stock that shall be redeemed by the Company in each year commencing
after a date to be specified, at a redemption price per share to be specified,
together with an amount equal to all accrued and unpaid dividends thereon (which
shall not, if such Preferred Stock does not have a cumulative dividend, include
any accumulation in respect of unpaid dividends for prior dividend periods) to
the date of redemption. The redemption price may be payable in cash or other
property, as specified in the applicable Prospectus Supplement. If the
redemption price for Preferred Stock of any series is payable only from the net
proceeds of the issuance of shares of capital stock of the Company, the terms of
such Preferred Stock may provide that, if no such shares of capital stock shall
have been issued or to the extent the net proceeds from any issuance are
insufficient to pay in full the aggregate redemption price then due, such
Preferred Stock shall automatically and mandatorily be converted into the
applicable shares of capital stock of the Company pursuant to conversion
provisions specified in the applicable Prospectus Supplement.
Notwithstanding the foregoing, unless (i) if a series of Preferred Stock has
a cumulative dividend, full cumulative dividends on all shares of such series of
Preferred Stock shall have been or contemporaneously are declared and paid or
declared and a sum sufficient for the payment thereof set apart for payment for
all past dividend periods and the then current dividend period, and (ii) if a
series of Preferred Stock does not have a cumulative dividend, full dividends on
all shares of the Preferred Stock of such series have been or contemporaneously
are declared and paid or declared and a sum sufficient for the payment thereof
set apart for payment for the then current dividend period, no shares of such
series of Preferred Stock shall be redeemed unless all outstanding shares of
Preferred Stock of such series are simultaneously redeemed; PROVIDED, HOWEVER,
that the foregoing shall not prevent the purchase or acquisition of Preferred
Stock of such series to preserve the REIT status of the Company or pursuant to a
purchase or exchange offer made on the same terms to holders of all outstanding
shares of Preferred Stock of such series. In addition, unless (i) if such series
of Preferred Stock has a cumulative dividend, full cumulative dividends on all
outstanding shares of such series of Preferred Stock have been or
contemporaneously are declared and paid or declared and a sum sufficient for the
payment thereof set apart for payment for all past dividend periods and the then
current dividend period, and (ii) if such series of Preferred Stock does not
have a cumulative dividend, full dividends on the Preferred stock of such series
have been or contemporaneously are declared and paid or declared and a sum
sufficient for the payment thereof set apart for payment for the then current
dividend period, the Company shall not purchase or otherwise acquire directly or
indirectly any shares of Preferred Stock of such series (except by conversion
into or exchange for capital shares of the Company ranking junior to the
Preferred Stock of such series as to dividends and upon liquidation); PROVIDED,
HOWEVER, that the foregoing shall not prevent the purchase or acquisition of
shares of Preferred Stock of such series to preserve the REIT status of the
Company or pursuant to a purchase or exchange offer made on the same terms to
holders of all outstanding shares of Preferred Stock of such series.
If fewer than all of the outstanding shares of Preferred Stock of any series
are to be redeemed, the number of shares to be redeemed will be determined by
the Company and such shares may be redeemed pro rata from the holders of record
of such shares in proportion to the number of such shares held or for which
redemption is requested by such holder (with adjustments to avoid redemption of
fractional shares) or by any other equitable manner determined by the Company.
Notice of redemption will be mailed at least 30 days but not more than 60
days before the redemption date to each holder of record of Preferred Stock of
any series to be redeemed at the address shown on the stock transfer books of
the Company. Each notice shall state: (i) the redemption date; (ii) the number
of
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shares and series of the Preferred Stock to be redeemed; (iii) the redemption
price; (iv) the place or places where certificates for such Preferred Stock are
to be surrendered for payment of the redemption price; (v) that dividends on the
shares to be redeemed will cease to accrue on such redemption date; and (vi) the
date upon which the holder's conversion rights, if any, as to such shares shall
terminate. If fewer than all the shares of Preferred Stock of any series are to
be redeemed, the notice mailed to each such holder thereof shall also specify
the number of shares of Preferred Stock to be redeemed from each such holder. If
notice of redemption of any Preferred Stock has been given and if the funds
necessary for such redemption have been set aside by the Company in trust for
the benefit of the holders of any Preferred Stock so called for redemption, then
from and after the redemption date dividends will cease to accrue on such
Preferred Stock, and all rights of the holders of such shares will terminate,
except the right to receive the redemption price.
LIQUIDATION PREFERENCE
Upon any voluntary or involuntary liquidation, dissolution or winding up of
the affairs of the Company, then, before any distribution or payment shall be
made to the holders of any Common Stock or any other class or series of capital
stock of the Company ranking junior to the Preferred Stock in the distribution
of assets upon any liquidation, dissolution or winding up of the Company, the
holders of each series of Preferred Stock shall be entitled to receive out of
assets of the Company legally available for distribution to stockholders
liquidating distributions in the amount of the liquidation preference per share,
if any, set forth in the applicable Prospectus Supplement, plus an amount equal
to all dividends accrued and unpaid thereon (which shall not include any
accumulation in respect of unpaid noncumulative dividends for prior dividend
periods). After payment of the full amount of the liquidating distributions to
which they are entitled, the holders of Preferred Stock will have no right or
claim to any of the remaining assets of the Company. In the event that, upon any
such voluntary or involuntary liquidation, dissolution or winding up, the
available assets of the Company are insufficient to pay the amount of the
liquidating distributions on all outstanding shares of Preferred Stock and the
corresponding amounts payable on all shares of other classes or series of
capital stock of the Company ranking on a parity with the Preferred Stock in the
distribution of assets, then the holders of the Preferred Stock and all other
such classes or series of capital stock shall share ratably in any such
distribution of assets in proportion to the full liquidating distributions to
which they would otherwise be respectively entitled.
If liquidating distributions shall have been made in full to all holders of
Preferred Stock, the remaining assets of the Company shall be distributed among
the holders of any other classes or series of capital stock ranking junior to
the Preferred Stock upon liquidation, dissolution or winding up, according to
their respective rights and preferences and in each case according to their
respective number of shares. For such purposes, the consolidation or merger of
the Company with or into any other corporation, trust or entity, or the sale,
lease or conveyance of all or substantially all of the property or business of
the Company, shall not be deemed to constitute a liquidation, dissolution or
winding up of the Company.
VOTING RIGHTS
Holders of the Preferred Stock will not have any voting rights, except as
set forth below or as otherwise from time to time required by law or as
indicated in the applicable Prospectus Supplement.
Unless provided otherwise for any series of Preferred Stock, so long as any
shares of Preferred Stock of a series remain outstanding, the Company will not,
without the affirmative vote or consent of the holders of at least two-thirds of
the shares of such series of Preferred Stock outstanding at the time, given in
person or by proxy, either in writing or at a meeting (such series voting
separately as a class), (i) authorize or create, or increase the authorized or
issued amount of, any class or series of capital stock ranking prior to such
series of Preferred Stock with respect to payment of dividends or the
distribution of assets upon liquidation, dissolution or winding up or reclassify
any authorized capital stock of the Company into such shares, or create,
authorize or issue any obligation or security convertible into or
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evidencing the right to purchase any such shares; or (ii) amend, alter or repeal
the provisions of the Company's Articles of Incorporation or the Designating
Amendment for such series of Preferred Stock, whether by merger, consolidation
or otherwise (an "Event"), so as to materially and adversely affect any right,
preference, privilege or voting power of such series of Preferred Stock or the
holders thereof; PROVIDED, HOWEVER, with respect to the occurrence of any of the
Events set forth in (ii) above, so long as the Preferred Stock remains
outstanding with the terms thereof materially unchanged, taking into account
that upon the occurrence of an Event the Company may not be the surviving
entity, the occurrence of any such Event shall not be deemed to materially and
adversely affect such rights, preferences, privileges or voting power of holders
of Preferred Stock, and PROVIDED FURTHER that (x) any increase in the amount of
the authorized Preferred Stock or the creation or issuance of any other series
of Preferred Stock, or (y) any increase in the amount of authorized shares of
such series or any other series of Preferred Stock, in each case ranking on a
parity with or junior to the Preferred Stock of such series with respect to
payment of dividends or the distribution of assets upon liquidation, dissolution
or winding up, shall not be deemed to materially and adversely affect such
rights, preferences, privileges or voting powers.
The foregoing voting provisions will not apply if, at or prior to the time
when the act with respect to which such vote would otherwise be required shall
be effected, all outstanding shares of such series of Preferred Stock shall have
been redeemed or called for redemption and sufficient funds shall have been
deposited in trust to effect such redemption.
CONVERSION RIGHTS
The terms and conditions, if any, upon which any series of Preferred Stock
is convertible into Common Stock will be set forth in the applicable Prospectus
Supplement relating thereto. Such terms will include the number of shares of
Common Stock into which the shares of Preferred Stock are convertible, the
conversion price (or manner of calculation thereof), the conversion period,
provisions as to whether conversion will be at the option of the holders of the
Preferred Stock or the Company, the events requiring an adjustment of the
conversion price and provisions affecting conversion in the event of the
redemption of such series of Preferred Stock.
RESTRICTIONS ON OWNERSHIP
For the Company to qualify as a REIT under the Code, not more than 50% in
value of its outstanding capital stock may be owned, directly or indirectly, by
five or fewer individuals (as defined in the Code to include certain entities)
during the last half of a taxable year. To assist the Company in meeting this
requirement, the Company may take certain actions to limit the beneficial
ownership, directly or indirectly, by individuals of the Company's outstanding
equity securities, including any Preferred Stock. Therefore, the Designating
Amendment for each series of Preferred Stock may contain provisions restricting
the ownership and transfer of the Preferred Stock. The applicable Prospectus
Supplement will specify any additional ownership limitation relating to a series
of Preferred Stock. See "Restrictions on Transfers of Capital Stock."
TRANSFER AGENT
The transfer agent and registrar for the Preferred Stock will be set forth
in the applicable Prospectus Supplement.
DESCRIPTION OF DEPOSITARY SHARES
The Company may, at its option, elect to offer Depositary Shares rather than
full shares of Preferred Stock. In the event such option is exercised, each of
the Depositary Shares will represent ownership of and entitlement to all rights
and preferences of a fraction of a share of Preferred Stock of a specified
series (including dividend, voting, redemption and liquidation rights). The
applicable fraction will be specified in
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the Prospectus Supplement. The shares of Preferred Stock represented by the
Depositary Shares will be deposited with a Depositary (the "Depositary") named
in the applicable Prospectus Supplement, under a Deposit Agreement (the "Deposit
Agreement"), among the Company, the Depositary and the holders of the Depositary
Receipts. Certificates evidencing Depositary Shares ("Depositary Receipts") will
be delivered to those persons purchasing Depositary Shares in the offering. The
Depositary will be the transfer agent, registrar and dividend disbursing agent
for the Depositary Shares. Holders of Depositary Receipts agree to be bound by
the Deposit Agreement, which requires holders to take certain actions such as
filing proof of residence and paying certain charges.
The summary of terms of the Depositary Shares contained in this Prospectus
does not purport to be complete and is subject to, and qualified in its entirety
by, the provisions of the Deposit Agreement, the Articles of Incorporation and
the form of Designating Amendment for the applicable series of Preferred Stock.
All material terms of the Depository Shares, except those disclosed in the
applicable Prospectus Supplement, are described in this Prospectus.
DIVIDENDS
The Depositary will distribute all cash dividends or other cash
distributions received in respect of the series of Preferred Stock represented
by the Depositary Shares to the record holders of Depositary Receipts in
proportion to the number of Depositary Shares owned by such holders on the
relevant record date, which will be the same date as the record date fixed by
the Company for the applicable series of Preferred Stock. The Depositary,
however, will distribute only such amount as can be distributed without
attributing to any Depositary Share a fraction of one cent, and any balance not
so distributed will be added to and treated as part of the next sum received by
the Depositary for distribution to record holders of Depositary Receipts then
outstanding.
In the event of a distribution other than in cash, the Depositary will
distribute property received by it to the record holders of Depositary Receipts
entitled thereto, in proportion, as nearly as may be practicable, to the number
of Depositary Shares owned by such holders on the relevant record date, unless
the Depositary determines (after consultation with the Company) that it is not
feasible to make such distribution, in which case the Depositary may (with the
approval of the Company) adopt any other method for such distribution as it
deems equitable and appropriate, including the sale of such property (at such
place or places and upon such terms as it may deem equitable and appropriate)
and distribution of the net proceeds from such sale to such holders.
No distribution will be made in respect of any Depositary Share to the
extent that it represents any Preferred Stock converted into Excess Stock.
LIQUIDATION PREFERENCE
In the event of the liquidation, dissolution or winding up of the affairs of
the Company, whether voluntary or involuntary, the holders of each Depositary
Share will be entitled to the fraction of the liquidation preference accorded
each share of the applicable series of Preferred Stock, as set forth in the
Prospectus Supplement.
REDEMPTION
If the series of Preferred Stock represented by the applicable series of
Depositary Shares is redeemable, such Depositary Shares will be redeemed from
the proceeds received by the Depositary resulting from the redemption, in whole
or in part, of Preferred Stock held by the Depositary. Whenever the Company
redeems any Preferred Stock held by the Depositary, the Depositary will redeem
as of the same redemption date the number of Depositary Shares representing the
Preferred Stock so redeemed. The Depositary will mail the notice of redemption
promptly upon receipt of such notice from the Company and not less than 30 nor
more than 60 days prior to the date fixed for redemption of the Preferred Stock
and the Depositary Shares to the record holders of the Depositary Receipts.
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VOTING
Promptly upon receipt of notice of any meeting at which the holders of the
series of Preferred Stock represented by the applicable series of Depositary
Shares are entitled to vote, the Depositary will mail the information contained
in such notice of meeting to the record holders of the Depositary Receipts as of
the record date for such meeting. Each such record holder of Depositary Receipts
will be entitled to instruct the Depositary as to the exercise of the voting
rights pertaining to the number of shares of Preferred Stock represented by such
record holder's Depositary Shares. The Depositary will endeavor, insofar as
practicable, to vote such Preferred Stock represented by such Depositary Shares
in accordance with such instructions, and the Company will agree to take all
action which may be deemed necessary by the Depositary in order to enable the
Depositary to do so. The Depositary will abstain from voting any of the
Preferred Stock to the extent that it does not receive specific instructions
from the holders of Depositary Receipts.
WITHDRAWAL OF PREFERRED STOCK
Upon surrender of Depositary Receipts at the principal office of the
Depositary, upon payment of any unpaid amount due the Depositary, and subject to
the terms of the Deposit Agreement, the owner of the Depositary Shares evidenced
thereby is entitled to delivery of the number of whole shares of Preferred Stock
and all money and other property, if any, represented by such Depositary Shares.
Partial shares of Preferred Stock will not be issued. If the Depositary Receipts
delivered by the holder evidence a number of Depositary Shares in excess of the
number of Depositary Shares representing the number of whole shares of Preferred
Stock to be withdrawn, the Depositary will deliver to such holder at the same
time a new Depositary Receipt evidencing such excess number of Depositary
Shares. Holders of Preferred Stock thus withdrawn will not thereafter be
entitled to deposit such shares under the Deposit Agreement or to receive
Depositary Receipts evidencing Depositary Shares therefor.
AMENDMENT AND TERMINATION OF DEPOSIT AGREEMENT
The form of Depositary Receipt evidencing the Depositary Shares and any
provision of the Deposit Agreement may at any time and from time to time be
amended by agreement between the Company and the Depositary. However, any
amendment which materially and adversely alters the rights of the holders (other
than any change in fees) of Depositary Shares will not be effective unless such
amendment has been approved by at least a majority of the Depositary Shares then
outstanding. No such amendment may impair the right, subject to the terms of the
Deposit Agreement, of any owner of any Depositary Shares to surrender the
Depositary Receipt evidencing such Depositary Shares with instructions to the
Depositary to deliver to the holder the Preferred Stock and all money and other
property, if any, represented thereby, except in order to comply with mandatory
provisions of applicable law.
The Deposit Agreement will be permitted to be terminated by the Company upon
not less than 30 days prior written notice to the applicable Depositary if (i)
such termination is necessary to preserve the Company's status as a REIT or (ii)
a majority of each series of Preferred Stock affected by such termination
consents to such termination, whereupon such Depositary will be required to
deliver or make available to each holder of Depositary Receipts, upon surrender
of the Depositary Receipts held by such holder, such number of whole or
fractional shares of Preferred Stock as are represented by the Depositary Shares
evidenced by such Depositary Receipts together with any other property held by
such Depositary with respect to such Depositary Receipts. The Company will agree
that if the Deposit Agreement is terminated to preserve the Company's status as
a REIT, then the Company will use its best efforts to list the Preferred Stock
issued upon surrender of the related Depositary Shares on a national securities
exchange. In addition, the Deposit Agreement will automatically terminate if (i)
all outstanding Depositary Shares thereunder shall have been redeemed, (ii)
there shall have been a final distribution in respect of the related Preferred
Stock in connection with any liquidation, dissolution or winding up of the
Company and such distribution shall have been distributed to the holders of
Depositary Receipts evidencing the
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Depositary Shares representing such Preferred Stock or (iii) each share of the
related Preferred Stock shall have been converted into stock of the Company not
so represented by Depositary Shares.
CHARGES OF DEPOSITARY
The Company will pay all transfer and other taxes and governmental charges
arising solely from the existence of the depositary arrangements. The Company
will pay charges of the Depositary in connection with the initial deposit of the
Preferred Stock and initial issuance of the Depositary Shares, and redemption of
the Preferred Stock and all withdrawals of Preferred Stock by owners of
Depositary Shares. Holders of Depositary Receipts will pay transfer, income and
other taxes and governmental charges and certain other charges as are provided
in the Deposit Agreement to be for their accounts. In certain circumstances, the
Depositary may refuse to transfer Depositary Shares, may withhold dividends and
distributions and sell the Depositary Shares evidenced by such Depositary
Receipt if such charges are not paid.
MISCELLANEOUS
The Depositary will forward to the holders of Depositary Receipts all
reports and communications from the Company which are delivered to the
Depositary and which the Company is required to furnish to the holders of the
Preferred Stock. In addition, the Depositary will make available for inspection
by holders of Depositary Receipts at the principal office of the Depositary, and
at such other places as it may from time to time deem advisable, any reports and
communications received from the Company which are received by the Depositary as
the holder of Preferred Stock.
Neither the Depositary nor the Company assumes any obligation or will be
subject to any liability under the Deposit Agreement to holders of Depositary
Receipts other than for its negligence or willful misconduct. Neither the
Depositary nor the Company will be liable if it is prevented or delayed by law
or any circumstance beyond its control in performing its obligations under the
Deposit Agreement. The obligations of the Company and the Depositary under the
Deposit Agreement will be limited to performance in good faith of their duties
thereunder, and they will not be obligated to prosecute or defend any legal
proceeding in respect of any Depositary Shares or Preferred Stock unless
satisfactory indemnity is furnished. The Company and the Depositary may rely on
written advice of counsel or accountants, on information provided by holders of
the Depositary Receipts or other persons believed in good faith to be competent
to give such information and on documents believed to be genuine and to have
been signed or presented by the proper party or parties.
In the event the Depositary shall receive conflicting claims, requests or
instructions from any holders of Depositary Receipts, on the one hand, and the
Company, on the other hand, the Depositary shall be entitled to act on such
claims, requests or instructions received from the Company.
RESIGNATION AND REMOVAL OF DEPOSITARY
The Depositary may resign at any time by delivering to the Company notice of
its election to do so, and the Company may at any time remove the Depositary,
any such resignation or removal to take effect upon the appointment of a
successor Depositary and its acceptance of such appointment. Such successor
Depositary must be appointed within 60 days after delivery of the notice for
resignation or removal and must be a bank or trust company having its principal
office in the United States of America and having a combined capital and surplus
of at least $150,000,000.
FEDERAL INCOME TAX CONSEQUENCES
Owners of Depositary Shares will be treated for Federal income tax purposes
as if they were owners of the Preferred Stock represented by such Depositary
Shares. Accordingly, such owners will be entitled to
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take into account, for Federal income tax purposes, income and deductions to
which they would be entitled if they were holders of such Preferred Stock. In
addition, (i) no gain or loss will be recognized for Federal income tax purposes
upon the withdrawal of Preferred Stock in exchange for Depositary Shares, (ii)
the tax basis of each share of Preferred Stock to an exchanging owner of
Depositary Shares will, upon such exchange, be the same as the aggregate tax
basis of the Depositary Shares exchanged therefor, and (iii) the holding period
for Preferred Stock in the hands of an exchanging owner of Depositary Shares
will include the period during which such person owned such Depositary Shares.
DESCRIPTION OF COMMON STOCK
The description of the Company's Common Stock set forth below does not
purport to be complete and is qualified in its entirety by reference to the
Articles of Incorporation and the Bylaws. All material terms of the Company's
Common Stock are included in this Prospectus.
GENERAL
Under the Articles of Incorporation, the Company has authority to issue 100
million shares of Common Stock, par value $.01 per share. Under Maryland law,
stockholders generally are not responsible for the corporation's debts or
obligations. At September 19, 1997, the Company had outstanding 30,824,783
shares of Common Stock.
TERMS
Subject to the preferential rights of any other shares or series of stock
(including Preferred Stock outstanding from time to time) and to the provisions
of the Articles of Incorporation regarding Excess Stock, holders of shares of
Common Stock will be entitled to receive dividends on shares of Common Stock if,
as and when authorized and declared by the Board of Directors of the Company out
of assets legally available therefor and to share ratably in the assets of the
Company legally available for distribution to its stockholders in the event of
its liquidation, dissolution or winding up after payment of, or adequate
provision for, all known debts and liabilities of the Company.
Subject to the provisions of the Articles of Incorporation regarding Excess
Stock, each outstanding share of Common Stock entitles the holder to one vote on
all matters submitted to a vote of stockholders, including the election of
Directors, and, except as otherwise required by law or except as provided with
respect to any other class or series of stock, the holders of Common Stock will
possess the exclusive voting power. There is no cumulative voting in the
election of Directors, which means that the holders of a majority of the
outstanding shares of Common Stock can elect all of the Directors then standing
for election, and the holders of the remaining shares of Common Stock will not
be able to elect any Directors.
Holders of Common Stock have no conversion, sinking fund or redemption
rights, or preemptive rights to subscribe for any securities of the Company.
Subject to the provisions of the Articles of Incorporation regarding Excess
Stock, all shares of Common Stock will have equal dividend, distribution,
liquidation and other rights, and will have no preference, appraisal or exchange
rights.
Pursuant to the MGCL, a corporation generally cannot dissolve, amend its
Articles of Incorporation, merge, sell all or substantially all of its assets,
engage in a share exchange or engage in similar transactions outside the
ordinary course of business unless approved by the affirmative vote of
stockholders holding at least two-thirds of the shares entitled to vote on the
matter unless a lesser percentage (but not less than a majority of all of the
votes to be cast on the matter) is set forth in the corporation's Articles of
Incorporation. The Articles of Incorporation do not provide for a lesser
percentage in such situations.
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RESTRICTIONS ON OWNERSHIP
For the Company to qualify as a REIT under the Code, not more than 50% in
value of its outstanding capital stock may be owned, directly or indirectly, by
five or fewer individuals (as defined in the Code to include certain entities)
during the last half of a taxable year. To assist the Company in meeting this
requirement, the Company may take certain actions to limit the beneficial
ownership, directly or indirectly, by individuals of the Company's outstanding
equity securities. See "Restrictions on Transfers of Capital Stock."
TRANSFER AGENT
The transfer agent and registrar for the Common Stock is First Chicago Trust
Company of New York, New York.
SHAREHOLDER RIGHTS PLAN
On September 4, 1997, the Board of Directors adopted a shareholder rights
plan (the "Shareholder Rights Plan"). Under such plan, one right will be
attached to each outstanding share of Common Stock at the close of business on
October 19, 1997, and one right will be attached to each share of Common Stock
thereafter issued. Each right entitles the holder to purchase, under certain
conditions, one one-hundredth of a share of Junior Participating Preferred Stock
of the Company for $125.00. The rights may also, under certain conditions,
entitle the holders to receive Common Stock, or common stock of an entity
acquiring the Company, or other consideration, each having a value equal to
twice the exercise price of each right ($250.00). The Company has designated
1,000,000 shares as Junior Participating Preferred Stock and has reserved such
shares for issuance under the Shareholder Rights Plan. The rights are redeemable
by the Company at a price of $.001 per right. If not exercised or redeemed, all
rights expire on October 20, 2007. The description and terms of the rights are
set forth in a Shareholder Rights Agreement between the Company and First
Chicago Trust Company of New York.
CERTAIN PROVISIONS OF MARYLAND LAW AND
THE COMPANY'S ARTICLES OF INCORPORATION AND BYLAWS
The following summary of certain provisions of Maryland law and the
Company's Articles of Incorporation and Bylaws does not purport to be complete
and is qualified by reference to Maryland law and the Company's Articles of
Incorporation and Bylaws.
BUSINESS COMBINATIONS
Under the MGCL, certain "business combinations" (including a merger,
consolidation, share exchange or, in certain circumstances, an asset transfer or
issuance or reclassification of equity securities) between a Maryland
corporation and an Interested Stockholder or in certain circumstances, an
associate or an affiliate thereof are prohibited for five years after the most
recent date on which the Interested Stockholder became an Interested
Stockholder. Thereafter, any such business combination must be recommended by
the board of directors of the corporation and approved by the affirmative vote
of at least (a) 80% of the vote entitled to be cast by holders of outstanding
voting shares of the corporation and (b) two-thirds of the vote entitled to be
cast by holders of outstanding voting shares of the corporation other than
shares held by the Interested Stockholder with whom the business combination is
to be effected, unless, among other things, the corporation's stockholders
receive a minimum price (as defined in the MGCL) for their shares and the
consideration is received in cash or in the same form as previously paid by the
Interested Stockholder for its shares. These provisions of Maryland law do not
apply, however, to business combinations that are approved or exempted by the
board of directors of the corporation prior to the time that the Interested
Stockholder becomes an Interested Stockholder. The Articles of Incorporation
exempt from these provisions of the MGCL any business combination in which there
is no Interested
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<PAGE>
Stockholder other than Mr. Shidler or any entity controlled by Mr. Shidler
unless Mr. Shidler is an Interested Stockholder without taking into account Mr.
Shidler's ownership of shares of the Company's Common Stock and the right to
acquire shares of the Company's Common Stock in an aggregate amount which does
not exceed the number of shares of the Company's Common Stock which Mr. Shidler
owned and had the right to acquire (including through the exchange of Units) at
the time of the consummation of the Company's initial public offering.
CONTROL SHARE ACQUISITIONS
The MGCL provides that "control shares" of a Maryland corporation acquired
in a "control share acquisition" have no voting rights except to the extent
approved by a vote of two-thirds of the votes entitled to be cast on the matter,
excluding shares of stock owned by the acquiror or by officers or directors who
are employees of the corporation. "Control shares" are voting shares of stock
that, if aggregated, with all other shares of stock previously acquired by that
person, would entitle the acquiror to exercise voting power in electing
directors within one of the following ranges of voting power; (i) one-fifth or
more but less than one-third, (ii) one-third or more but less than a majority,
or (iii) a majority of all voting power. Control shares do not include shares
the acquiring person is then entitled to vote as a result of having previously
obtained stockholder approval. A "control share acquisition" means the
acquisition of control shares, subject to certain exceptions.
A person who has made or proposes to make a control share acquisition may
compel the board of directors, upon satisfaction of certain conditions
(including an undertaking to pay expenses), to call a special meeting of
stockholders to be held within 50 days of demand to consider the voting rights
of the shares. If no request for a meeting is made, the corporation may itself
present the question at any stockholders meeting.
If voting rights are not approved at the meeting or if the acquiring person
does not deliver an acquiring person statement as required by statute, then
subject to certain conditions and limitations, the corporation may redeem any or
all of the control shares (except those for which voting rights have previously
been approved) for fair value determined, without regard to voting rights, as of
the date of the last control share acquisition or of any meeting of stockholders
at which the voting rights of such shares are considered and not approved. If
voting rights for control shares are approved at a stockholders meeting and the
acquiror becomes entitled to vote a majority of the shares entitled to vote, all
other stockholders may exercise appraisal rights. The fair value of the shares
as determined for purposes of the appraisal rights may not be less than the
highest price per share paid in the control share acquisition. Certain
limitations and restrictions otherwise applicable to the exercise of dissenters'
rights do not apply in the context of a control share acquisition.
The control share acquisition statute does not apply to shares acquired in a
merger, consolidation or share exchange if the corporation is a party to the
transaction, or to acquisitions approved or exempted by the Company's Articles
of Incorporation or Bylaws.
The Company's Bylaws contain a provision exempting any and all acquisitions
of the Company's shares of capital stock from the control shares provisions of
the MGCL. There can be no assurance that this provision will not be amended or
eliminated in the future.
AMENDMENT OF ARTICLES OF INCORPORATION
The Company's Articles of Incorporation, including its provisions on
classification of the Board of Directors (discussed below), may be amended only
by the affirmative vote of the holders of not less than two-thirds of all of the
votes entitled to be cast on the matter.
33
<PAGE>
MEETINGS OF STOCKHOLDERS
The Company's Bylaws provide for annual meetings of stockholders to be held
on the third Wednesday in April or on any other day as may be established from
time to time by the Board of Directors. Special meetings of stockholders may be
called by (i) the Company's Chairman of the Board or the Company's President,
(ii) a majority of the Board of Directors or (iii) stockholders holding at least
25% of the outstanding capital stock of the Company entitled to vote at the
meeting.
The Company's Bylaws provide that any stockholder of record wishing to
nominate a director or have a stockholder proposal considered at an annual
meeting must provide written notice and certain supporting documentation to the
Company relating to the nomination or proposal not less than 75 days nor more
than 180 days prior to the anniversary date of the prior year's annual meeting
or special meeting in lieu thereof (the "Anniversary Date"). In the event that
the annual meeting is called for a date more than seven calendar days before the
Anniversary Date, stockholders generally must provide written notice within 20
calendar days after the date on which notice of the meeting is mailed to
stockholders or the date of the meeting is publicly disclosed.
The purpose of requiring stockholders to give the Company advance notice of
nominations and other business is to afford the Board of Directors a meaningful
opportunity to consider the qualifications of the proposed nominees or the
advisability of the other proposed business and, to the extent deemed necessary
or desirable by the Board of Directors, to inform stockholders and make
recommendations about the qualifications or business, as well as to provide a
more orderly procedure for conducting meetings of stockholders. Although the
Company's Bylaws do not give the Board of Directors any power to disapprove
stockholder nominations for the election of directors or proposals for action,
they may have the effect of precluding a contest for the election of directors
or the consideration of stockholder proposals if the proper procedures are not
followed, and of discouraging or deterring a third party from conducting a
solicitation of proxies to elect its own slate of directors or to approve its
own proposal, without regard to whether consideration of the nominees or
proposal might be harmful or beneficial to the Company and its stockholders.
CLASSIFICATION OF THE BOARD OF DIRECTORS
The Company's Bylaws provide that the number of directors of the Company may
be established by the Board of Directors but may not be fewer than the minimum
number required by Maryland law nor more than nine. Any vacancy will be filled,
at any regular meeting or at any special meeting called for that purpose, by a
majority of the remaining directors, except that a vacancy resulting from an
increase in the number of directors will be filled by a majority of the entire
Board of Directors. Pursuant to the terms of the Articles of Incorporation, the
directors are divided into three classes. One class holds office for a term
expiring at the annual meeting of stockholders to be held in 1998, and the other
two classes hold office for terms expiring at the annual meetings of
stockholders to be held in 1999 and 2000, respectively. As the term of each
class expires, directors in that class will be elected for a term of three years
and until their successors are duly elected and qualified. The Company believes
that classification of the Board of Directors will help to assure the continuity
and stability of the Company's business strategies and policies as determined by
the Board of Directors.
The classified board provision could have the effect of making the removal
of incumbent directors more time-consuming and difficult, which could discourage
a third party from making a tender offer or otherwise attempting to obtain
control of the Company, even though such an attempt might be beneficial to the
Company and its stockholders. At least two annual meetings of stockholders,
instead of one, will generally be required to effect a change in a majority of
the Board of Directors. Thus, the classified board provision could increase the
likelihood that incumbent directors will retain their positions. Holders of
34
<PAGE>
shares of Common Stock will have no right to cumulative voting for the election
of directors. Consequently, at each annual meeting of stockholders, the holders
of a majority of the shares of Common Stock will be able to elect all of the
successors of the class of directors whose term expires at that meeting.
RESTRICTIONS ON TRANSFERS OF CAPITAL STOCK
For the Company to qualify as a REIT under the Code, among other things, not
more than 50% in value of its outstanding capital stock may be owned, directly
or indirectly, by five or fewer individuals (as defined in the Code to include
certain entities) during the last half of a taxable year, and such capital stock
must be beneficially owned by 100 or more persons during at least 335 days of a
taxable year of 12 months or during a proportionate part of a shorter tax year.
See "Certain Federal Income Tax Considerations." To ensure that the Company
remains a qualified REIT, the Articles of Incorporation, subject to certain
exceptions, provide that no holder may own, or be deemed to own by virtue of the
attribution provisions of the Code, more than an aggregate of 9.9% in value of
the Company's capital stock. Any transfer of capital stock or any security
convertible into capital stock that would create a direct or indirect ownership
of capital stock in excess of the ownership limit or that would result in the
disqualification of the Company as a REIT, including any transfer that results
in the capital stock being owned by fewer than 100 persons or results in the
Company being "closely held" within the meaning of Section 856(h) of the Code,
shall be null and void, and the intended transferee will acquire no rights to
the capital stock. Capital stock owned, or deemed to be owned, or transferred to
a stockholder in excess of the ownership limit will automatically be exchanged
for shares of Excess Stock that will be transferred, by operation of law, to the
Company as trustee of a trust for the exclusive benefit of the transferees to
whom such capital stock may be ultimately transferred without violating the
ownership limit. While the Excess Stock is held in trust, it will not be
entitled to vote, it will not be considered for purposes of any stockholder vote
or the determination of a quorum for such vote, and it will not be entitled to
participate in the accumulation or payment of dividends or other distributions.
A transferee of Excess Stock may, at any time such Excess Stock is held by the
Company in trust, designate as beneficiary of the transferee stockholder's
interest in the trust representing the Excess Stock any individual whose
ownership of the capital stock exchanged into such Excess Stock would be
permitted under the ownership limit, and may transfer such interest to such
beneficiary at a price not in excess of the price paid by the original
transferee-stockholder for the capital stock that was exchanged into Excess
Stock. Immediately upon the transfer to the permitted beneficiary, the Excess
Stock will automatically be exchanged for capital stock of the class from which
it was converted. In addition, the Company will have the right, for a period of
90 days during the time any Excess Stock is held by the Company in trust, and,
with respect to Excess Stock resulting from the attempted transfer of Preferred
Stock, at any time when any outstanding shares of Preferred Stock of such series
are being redeemed, to purchase all or any portion of the Excess Stock from the
original transferee-stockholder at the lesser of the price paid for the capital
stock by the original transferee-stockholder and the market price (as determined
in the manner set forth in the Articles of Incorporation) of the capital stock
on the date the Company exercises its option to purchase or, in the case of a
purchase of Excess Stock attributed to Preferred Stock which has been called for
redemption, at its stated value, plus all accumulated and unpaid dividends to
the date of redemption. The 90-day period begins on the date of the violative
transfer if the original transferee-stockholder gives notice to the Company of
the transfer or, if no such notice is given, the date the Board of Directors
determines that a violative transfer has been made.
POLICIES WITH RESPECT TO CERTAIN ACTIVITIES OF THE OPERATING PARTNERSHIP
The following is a discussion of certain investment, financing, conflicts of
interest and other policies of the Operating Partnership. These policies have
been determined by the Board of Directors of the Company, which is the General
Partner of the Operating Partnership, and generally may be amended or revised
from time to time by the Board of Directors without a vote of stockholders.
35
<PAGE>
INVESTMENT POLICIES
It is the Company's policy that First Industrial Realty Trust, Inc. ("First
Industrial") will only engage in business activities through the Operating
Partnership and its subsidiaries. For the purpose of these policies, the term
"subsidiaries" when used with respect to the Operating Partnership includes
partnerships in which the Operating Partnership owns a majority of the economic
interests and Securities L.P.
INVESTMENTS IN REAL ESTATE OR INTERESTS IN REAL ESTATE. The Operating
Partnership's investment objectives are to increase cash flow and the value of
its properties, to acquire established income-producing industrial properties
with cash flow growth potential and, in limited circumstances, to develop
build-to-suit properties or undertake redevelopment projects. Additionally,
where prudent and possible, the Operating Partnership will seek to expand and
upgrade both its existing properties and any newly acquired properties. The
Operating Partnership's business will be focused solely on industrial
properties. The Operating Partnership's policy is to acquire assets primarily
for generation of current income and long-term value appreciation; however,
where appropriate, the Operating Partnership may sell certain properties.
The Operating Partnership expects to pursue its investment objectives
through the direct and indirect ownership of properties and the ownership of
interests in other entities. The Operating Partnership currently expects that it
will make further investments in the Company's current markets and will expand
into other markets within the Company's operating region as investment
opportunities the Operating Partnership considers attractive become available.
The Operating Partnership believes that opportunities exist to acquire, on
attractive terms, established properties which do not pose the risks of
development.
The Operating Partnership also may participate with other entities in
property ownership through joint ventures or other types of co-ownership. Equity
investments may be subject to existing mortgage financing and other
indebtedness, or such financing or indebtedness may be incurred in connection
with acquiring investments. Any such financing or indebtedness will have
priority over the Company's equity interest in such property.
INVESTMENTS IN REAL ESTATE MORTGAGES. While the Operating Partnership will
emphasize equity real estate investments in industrial properties, it may, in
its discretion, invest in mortgage loans and other interests related to
industrial properties. The Operating Partnership does not presently intend to
invest to a significant extent in mortgage loans, but may do so subject to the
investment restrictions applicable to REITs. The mortgage loans in which the
Operating Partnership may invest may be either first mortgage loans or junior
mortgage loans, and may or may not be insured by a government agency.
SECURITIES OF OR INTERESTS IN PERSONS PRIMARILY ENGAGED IN REAL ESTATE
ACTIVITIES AND OTHER ISSUERS. Subject to the ownership limitations and gross
income tests necessary for REIT qualification, the Operating Partnership also
may invest in securities of entities engaged in real estate activities or
securities of other issuers, including for the purpose of exercising control
over such entities. The Operating Partnership may acquire all or substantially
all of the securities or assets of other REITs or similar entities where such
investments would be consistent with the Operating Partnership's investment
policies. In any event, the Operating Partnership does not intend that its
investments in securities will require it to register as an "investment company"
under the Investment Company Act of 1940, and the Operating Partnership would
intend to divest securities before any such registration would be required.
FINANCING POLICIES
It is the Company's policy that First Industrial shall not incur
indebtedness other than short-term trade, employee compensation, dividends
payable or similar indebtedness that will be paid in the ordinary course of
business, and that indebtedness shall instead be incurred by the Operating
Partnership to the extent necessary to fund the business activities conducted by
the Operating Partnership and its subsidiaries.
36
<PAGE>
The Operating Partnership has no separate policy regarding the amount of
debt it may incur, but rather is encompassed by the Company's policy in this
regard. The Company currently has a policy of maintaining a ratio of debt to
total market capitalization (I.E., total consolidated debt of the Company
(excluding the 1994 Defeased Mortgage Loan which was defeased in April 1997) as
a percentage of the aggregate market value of all outstanding shares of Common
Stock, assuming the exchange of all Units for Common Stock, plus the aggregate
stated value of all outstanding shares of preferred stock, plus total
consolidated debt (excluding the 1994 Defeased Mortgage Loan)) which generally
will not exceed 50% and a coverage ratio (computed as total revenues (excluding
interest income on U.S. government securities collateralizing the 1994 Defeased
Mortgage Loan) minus property expenses and general and administrative expenses
divided by interest expense (excluding interest on the 1994 Defeased Mortgage
Loan accruing after the date of defeasance) plus dividends on preferred stock)
of at least 2.0:1. As of June 30, 1997, the Company's ratio of debt to total
market capitalization was 29.6%, and for the twelve months ended June 30, 1997,
the Company's coverage ratio was 3.12. However, the organizational documents of
the Company do not contain any limitation on the amount or percentage of
indebtedness the Company may incur and the Company's Board of Directors has the
power to alter the current policy. Accordingly, the Company could become more
highly leveraged, resulting in an increase in debt service that could adversely
affect the Company's ability to make expected distributions to stockholders and
in an increased risk of default on its obligations. In addition, except as may
be set forth in any Prospectus Supplement, the Debt Securities will not contain
any provision that would afford holders of Debt Securities protection in the
event of a highly leveraged transaction or change in control of the Operating
Partnership or the Company.
To the extent that the Board of Directors determines to obtain additional
debt financing, the Company intends to do so generally through mortgages on its
properties and lines of credit, but also may do so through the issuance of debt
securities. These mortgages may be recourse, non-recourse or cross-
collateralized and may contain cross-default provisions. The Company does not
have a policy limiting the number or amount of mortgages that may be placed on
any particular property, but mortgage financing instruments usually limit
additional indebtedness on such properties. Future credit facilities and lines
of credit may be used for the purpose of making acquisitions or capital
improvements or providing working capital to the Company or meeting the taxable
income distribution requirements for REITs under the Code if the Company has
taxable income without receipt of cash sufficient to enable the Company to meet
such distribution requirements.
In the future, the Company may seek to extend, expand, reduce or renew its
acquisition facility, or obtain new credit facilities or lines of credit or
issue debt securities, subject to its general policy on debt capitalization.
POLICIES WITH RESPECT TO OTHER ACTIVITIES
The Operating Partnership may, but does not presently intend to, make
investments other than as previously described. The Operating Partnership has
authority to offer Units and other equity or debt securities in exchange for
property and to repurchase or otherwise reacquire Units or any other securities
and may engage in such activities in the future. The Operating Partnership also
may make loans to joint ventures in which it participates. The Operating
Partnership will not engage in trading, underwriting or the agency distribution
or sale of securities of other issuers. At all times, the Operating Partnership
intends to make investments in such a manner as to be consistent with the
requirements of the Code for the Company to qualify as a REIT unless, because of
circumstances or changes in the Code (or the regulations promulgated
thereunder), the Company's Board of Directors determines that it is no longer in
the best interests of the Company to continue to have the Company qualify as a
REIT. The Company's policies with respect to such activities may be reviewed and
modified from time to time by the Company's directors without notice to or the
vote of the stockholders.
37
<PAGE>
PROPERTIES OF THE OPERATING PARTNERSHIP
AND THE OTHER REAL ESTATE PARTNERSHIPS
GENERAL
The Operating Partnership and the Other Real Estate Partnerships
collectively owned, as of June 30, 1997, 453 in service properties (208 of which
were owned by the Operating Partnership and 245 of which were owned by the Other
Real Estate Partnerships) containing an aggregate of approximately 39.1 million
square feet of GLA in 16 states (18.1 million square feet of which comprised the
properties owned by the Operating Partnership and 21.0 million square feet of
which comprised the properties owned by the Other Real Estate Partnerships) with
a diverse base of 1,340 tenants (742 of which were tenants of the Operating
Partnership and 598 of which were tenants of the Other Real Estate Partnerships)
engaged in a wide variety of businesses, including manufacturing, retailing,
wholesale trade, distribution and professional services. The properties are
generally located in business parks which have convenient access to interstate
highways and rail and air transportation. The median age of the properties is
approximately 14 years. The Operating Partnership and the Other Real Estate
Partnerships maintain insurance coverage on their respective properties which
the Operating Partnership believes to be adequate.
The Operating Partnership and the Other Real Estate Partnerships classify
their properties into two industrial categories: bulk warehouse and light
industrial. The bulk warehouse properties are generally used for bulk storage of
materials and manufactured goods and the light industrial properties are
generally used for the design, assembly, packaging and distribution of goods
and, in some cases, the provision of services.
The Operating Partnership and the Other Real Estate Partnerships compete
with numerous commercial developers, real estate companies and other owners of
real estate in seeking properties for acquisition and land for development. In
addition, many of the properties owned by the Operating Partnership and the
Other Real Estate Partnerships are located in areas that include other bulk
warehouse and light industrial properties which compete for the same tenants as
the Operating Partnership and the Other Real Estate Parterships.
The following table summarizes certain information as of June 30, 1997 with
respect to properties owned by the Operating Partnership. Information in the
table excludes properties under development at June 30, 1997.
<TABLE>
<CAPTION>
BULK WAREHOUSE LIGHT INDUSTRIAL TOTAL GLA AS
-------------------------- -------------------------- ----------------------------------------- A % OF
NUMBER OF NUMBER OF NUMBER OF AVERAGE TOTAL
METROPOLITAN AREA GLA PROPERTIES GLA PROPERTIES GLA PROPERTIES OCCUPANCY PORTFOLIO
- ------------------ --------- --------------- --------- --------------- --------- --------------- ------------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Atlanta........... 2,338,856 8 294,264 4 2,633,120 12 92% 15%
Chicago........... 1,632,052 7 898,541 8 2,530,593 15 100% 14%
Cincinnati........ 951,080 3 111,375 5 1,062,455 8 85% 6%
Cleveland......... -- -- 102,500 1 102,500 1 100% (2)
Columbus.......... 1,353,334 3 56,849 1 1,410,183 4 100% 8%
Dayton............ -- -- 322,746 6 322,746 6 100% 2%
Detroit........... 959,215 24 499,076 13 1,458,291 37 96% 8%
Indianapolis...... 1,169,586 6 1,073,780 26 2,243,366 32 89% 12%
Long Island....... 924,385 8 1,703,182 30 2,627,567 38 95% 15%
Milwaukee......... -- -- 331,155 7 331,155 7 95% 2%
Minneapolis/St.
Paul............. 534,527 6 1,275,015 19 1,809,542 25 91% 10%
Nashville......... 538,811 3 -- -- 538,811 3 100% 3%
New Jersey........ 344,176 3 459,786 13 803,962 16 96% 4%
St. Louis......... 198,413 3 -- -- 198,413 3 38% 1%
Other(1).......... -- -- 25,254 1 25,254 1 0% (2)
--
--------- --------- --- --------- --- ----- -----
10,944,435 74 7,153,523 134 18,097,958 208 94% 100%
--
--
--------- --------- --- --------- --- ----- -----
--------- --------- --- --------- --- ----- -----
</TABLE>
- ------------------------------
(1) Green Bay, WI.
(2) Less than 1%.
38
<PAGE>
The following table summarizes certain information as of June 30, 1997 with
respect to properties owned by the Other Real Estate Partnerships. Information
in the table excludes properties under development at June 30, 1997.
<TABLE>
<CAPTION>
BULK WAREHOUSE LIGHT INDUSTRIAL TOTAL GLA AS
-------------------------- -------------------------- ----------------------------------------- A % OF
NUMBER OF NUMBER OF NUMBER OF AVERAGE TOTAL
METROPOLITAN AREA GLA PROPERTIES GLA PROPERTIES GLA PROPERTIES OCCUPANCY PORTFOLIO
- ------------------ --------- --------------- --------- --------------- --------- --------------- ------------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Atlanta........... 985,501 9 213,467 5 1,198,968 14 97% 6%
Central
Pennsylvania(1).. 2,773,519 17 843,508 14 3,617,027 31 99% 17%
Chicago........... 1,602,121 13 528,740 8 2,130,861 21 97% 10%
Des Moines........ 878,992 5 -- -- 878,992 5 100% 4%
Detroit........... 1,533,058 34 2,034,239 47 3,567,297 81 99% 17%
Grand Rapids...... 2,786,591 22 40,400 3 2,826,991 25 96% 13%
Indianapolis...... 976,273 1 -- -- 976,273 1 98% 5%
Milwaukee......... -- -- 133,173 3 133,173 3 100% (3)
Minneapolis/St.
Paul............. 1,330,460 10 1,877,406 25 3,207,866 35 97% 15%
Nashville......... 760,229 4 -- -- 760,229 4 100% 4%
St. Louis......... 674,682 12 385,713 3 1,060,395 15 99% 5%
Other(2).......... 301,355 4 378,603 6 679,958 10 100% 3%
--------- --- --------- --- --------- --- ----- -----
14,602,781 131 6,435,249 114 21,038,030 245 98% 100%
--------- --- --------- --- --------- --- ----- -----
--------- --- --------- --- --------- --- ----- -----
</TABLE>
- ------------------------------
(1) Includes the Harrisburg, Allentown and Reading markets.
(2) Includes Denton, TX; Wichita, KS; West Lebanon, NH and Abilene, TX.
(3) Less than 1%.
As of June 30, 1997, 25 properties owned by the Operating Partnership were
subject to encumbrances securing indebtedness thereof and 219 properties owned
by the Other Real Estate Partnerships, including 192 properties encumbered by a
$300 million mortgage loan which was defeased in April 1997, were subject to
encumbrances securing indebtedness thereof.
TENANT AND LEASE INFORMATION
As of June 30, 1997, the Operating Partnership and the Other Real Estate
Partnerships had a diverse base of 1,340 tenants (742 of which were tenants of
the Operating Partnership and 598 of which were tenants of the Other Real Estate
Partnerships), engaged in a wide variety of businesses including manufacturing,
retailing, wholesale trade, distribution and professional services. Most leases
have an initial term of between three and five years and provide for periodic
rental increases that are either fixed or based on changes in the Consumer Price
Index. Industrial tenants typically have net or semi-net leases and pay as
additional rent their percentage of the property's operating costs, including
the costs of common area maintenance, property taxes and insurance. As of June
30, 1997, approximately 94% and 98% of the GLA of the properties owned by the
Operating Partnership and the Other Real Estate Partnerships, respectively, was
leased, and no single tenant or group of related tenants accounted for more than
2.4% of the Operating Partnership's rent revenues or more than 2.8% of the Other
Real Estate Partnerships' rent revenues, nor did any single tenant or group of
related tenants occupy more than 3.9% of the total GLA of the Operating
Partnership or more than 3.7% of the total GLA of the Other Real Estate
Partnerships.
39
<PAGE>
The following table shows scheduled lease expirations for all leases for the
properties owned by the Operating Partnership as of June 30, 1997.
<TABLE>
<CAPTION>
PERCENTAGE OF PERCENTAGE OF TOTAL
GLA SUBJECT TO GLA ANNUAL BASE RENT ANNUAL BASE RENT
NUMBER OF EXPIRING REPRESENTED BY UNDER EXPIRING REPRESENTED BY
YEAR OF EXPIRATION(1) LEASES EXPIRING LEASES(2) EXPIRING LEASES LEASES(3) EXPIRING LEASES
- ----------------------- ------------------- ----------------- --------------- ----------------- -------------------
<S> <C> <C> <C> <C> <C>
1997................... 121 1,639,593 9.7% $ 7,303 9.7%
1998................... 191 2,574,474 15.2% 11,730 15.5%
1999................... 166 3,829,447 22.6% 19,869 26.3%
2000................... 122 2,723,832 16.1% 10,859 14.4%
2001................... 79 1,977,695 11.7% 8,230 10.9%
2002................... 52 935,566 5.5% 4,842 6.4%
2003................... 14 457,154 2.7% 1,590 2.1%
2004................... 13 868,776 5.1% 2,803 3.7%
2005................... 7 324,838 1.9% 2,317 3.1%
2006................... 8 325,111 1.9% 1,217 1.6%
Thereafter............. 10 1,287,105 7.6% 4,770 6.3%
--- ----------------- ------- -------- -------
Total................ 783 16,943,591 100.0% $ 75,530 100.0%
--- ----------------- ------- -------- -------
--- ----------------- ------- -------- -------
</TABLE>
- ------------------------------
(1) Lease expirations as of June 30, 1997, assuming tenants do not exercise
existing renewal, termination or purchase options.
(2) Does not include existing vacancies of 1,154,367 aggregate square feet.
(3) In thousands, reflects monthly base rent provided for under the terms of
each expiring lease as in effect at June 30, 1997, multiplied by 12, and
does not take into account contractual rent escalations.
The following table shows scheduled lease expirations for all leases for the
properties owned by the Other Real Estate Partnerships as of June 30, 1997.
<TABLE>
<CAPTION>
PERCENTAGE OF PERCENTAGE OF TOTAL
GLA SUBJECT TO GLA ANNUAL BASE RENT ANNUAL BASE RENT
NUMBER OF EXPIRING REPRESENTED BY UNDER EXPIRING REPRESENTED BY
YEAR OF EXPIRATION(1) LEASES EXPIRING LEASES(2) EXPIRING LEASES LEASES(3) EXPIRING LEASES
- ----------------------- ------------------- ----------------- --------------- ----------------- -------------------
<S> <C> <C> <C> <C> <C>
1997................... 79 1,765,600 8.6% $ 6,803 8.0%
1998................... 150 4,069,147 19.7% 17,287 20.3%
1999................... 123 3,206,603 15.6% 13,965 16.4%
2000................... 106 3,571,364 17.3% 15,764 18.5%
2001................... 65 3,352,695 16.2% 11,793 13.8%
2002................... 35 1,515,855 7.3% 6,300 7.4%
2003................... 17 1,215,330 5.9% 4,877 5.7%
2004................... 7 472,983 2.3% 1,852 2.2%
2005................... 7 759,013 3.7% 3,130 3.7%
2006................... 6 272,980 1.3% 1,354 1.6%
Thereafter............. 9 433,163 2.1% 2,027 2.4%
--- ----------------- ------- -------- -------
Total................ 604 20,634,733 100.0% $ 85,152 100.0%
--- ----------------- ------- -------- -------
--- ----------------- ------- -------- -------
</TABLE>
- ------------------------------
(1) Lease expirations as of June 30, 1997, assuming tenants do not exercise
existing renewal, termination or purchase options.
(2) Does not include existing vacancies of 403,297 aggregate square feet.
(3) In thousands, reflects monthly base rent provided for under the terms of
each expiring lease as in effect at June 30, 1997, multiplied by 12, and
does not take into account contractual rent escalations.
FEDERAL INCOME TAX CONSIDERATIONS
This section is a summary of the material federal income tax matters of
general application pertaining to REITs under the Code. The discussion is based
on current law and does not purport to deal with all aspects of federal income
taxation that may be relevant to investors subject to special treatment under
the federal income tax laws, such as tax-exempt investors, dealers in securities
or foreign persons. The
40
<PAGE>
provisions of the Code pertaining to REITs are highly technical and complex and
sometimes involve mixed questions of fact and law. In addition, this section
does not discuss foreign, state or local taxation. In the opinion of Cahill
Gordon & Reindel, the conclusions of law expressed in this summary are correct
in all material respects. Prospective investors should consult their own tax
advisors regarding the federal, state, local, foreign and other tax consequences
specific to them of holding and disposing of the Securities.
TAXATION OF THE COMPANY
In the opinion of Cahill Gordon & Reindel, commencing with its taxable year
ended December 31, 1994, the Company has been organized in conformity with the
requirements for qualification as a REIT under the Code, the Company's method of
operation has enabled it to meet the requirements for qualification as a REIT
under the Code, and, provided that the Company continues to satisfy the various
requirements applicable under the Code to REITs, as described herein, it will
continue to so qualify. Cahill Gordon & Reindel's opinion is based on various
assumptions and is conditioned upon certain representations as to factual
matters made by the Company and, the Operating Partnership and the Other Real
Estate Partnerships (such partnerships being hereinafter collectively referred
to as the "Partnerships"). Moreover, such qualification and taxation as a REIT
depend upon the Company's ability to meet, as a matter of fact, through actual
annual operating results, distribution levels, diversity of stock ownership and
various other qualification tests imposed under the Code discussed below, the
results of which will not be reviewed by Cahill Gordon & Reindel. Accordingly,
no assurance can be given that the actual results of the Company's operation for
any one taxable year will satisfy such requirements.
To qualify as a REIT under the Code for a taxable year, the Company must
meet certain organizational and operational requirements, which generally
require it to be a passive investor in operating real estate and to avoid
excessive concentration of ownership of its capital stock. Initially, its
principal activities must be real estate related. Generally, at least 75% of the
value of the total assets of the Company at the end of each calendar quarter
must consist of real estate assets, cash or governmental securities. The Company
may not own more than 10% of the outstanding voting securities of any
corporation and the value of any one issuer's securities may not exceed 5% of
the Company's gross assets; shares of qualified REITs, qualified temporary
investments and shares of certain wholly owned subsidiary corporations are
exempt from these prohibitions. The Company holds assets through certain wholly
owned subsidiary corporations and holds Preferred Stock interests in certain
corporations that provide property management services to third parties; in the
opinion of Cahill Gordon & Reindel, based on certain factual representations,
these holdings do not violate the prohibition on ownership of voting securities.
Additionally, gross income from the sale or other disposition of stock and
securities held for less than one year and of real property held for less than
four years must constitute less than 30% of the gross income for each taxable
year of a REIT. For each taxable year, at least 75% of a REIT's gross income
must be derived from specified real estate sources and 95% must be derived from
such real estate sources plus certain other permitted sources. Real estate
income for purposes of these requirements includes gain from the sale of real
property not held primarily for sale to customers in the ordinary course of
business, dividends on REIT shares, interest on loans secured by mortgages on
real property, certain rents from real property and income from foreclosure
property. For rents to qualify, they may not be based on the income or profits
of any person, except that they may be based on a percentage or percentages of
gross income or receipts and, subject to certain limited exceptions, the REIT
may not manage the property or furnish services to tenants except through an
independent contractor which is paid an arm's-length fee and from which the REIT
derives no income. Substantially all of the Company's assets are held through
the Partnerships. In general, in the case of a REIT that is a partner in a
partnership, applicable regulations treat the REIT as holding directly its
proportionate share of the assets of the partnership and as being entitled to
the income of the partnership attributable to such share.
The Company must satisfy certain ownership restrictions that limit (i)
concentration of ownership of the Company's capital stock by a few individuals
and (ii) ownership by the Company of its tenants. The
41
<PAGE>
outstanding capital stock of the Company must be held by at least 100
stockholders. No more than 50% in value of the outstanding capital stock,
including in some circumstances capital stock into which outstanding securities
might be converted, may be owned actually or constructively by five or fewer
individuals or certain other entities at any time during the last half of the
Company's taxable year. Accordingly, the Articles of Incorporation contain
certain restrictions regarding the transfer of Common Stock, Preferred Stock and
any other outstanding securities convertible into Common Stock when necessary to
maintain the Company's qualification as a REIT under the Code. However, because
the Code imposes broad attribution rules in determining constructive ownership,
no assurance can be given that the restrictions contained in the Articles of
Incorporation will be effective in maintaining the Company's REIT status. See
"Restrictions on Transfers of Capital Stock."
So long as the Company qualifies for taxation as a REIT and distributes at
least 95% of its REIT taxable income (computed without regard to net capital
gain or the dividends paid deduction) for its taxable year to its stockholders
annually, the Company itself will not be subject to federal income tax on that
portion of such income distributed to stockholders. The Company will be taxed at
regular corporate rates on all income not distributed to stockholders. The
Company's policy is to distribute at least 95% of its taxable income. REITs also
may incur taxes for certain other activities or to the extent distributions do
not satisfy certain other requirements.
Failure of the Company to qualify during any taxable year as a REIT could,
unless certain relief provisions were available, have a material adverse effect
upon its stockholders. If disqualified for taxation as a REIT for a taxable
year, the Company also would be disqualified for taxation as a REIT for the next
four taxable years, unless the failure were considered to be due to reasonable
cause and not willful neglect. The Company would be subject to federal income
tax at corporate rates on all of its taxable income and would not be able to
deduct the dividends paid, which could result in a discontinuation of or
substantial reduction in dividends to stockholders. Dividends also would be
subject to the regular tax rules applicable to dividends received by
stockholders of corporations. Should the failure to qualify as a REIT be
determined to have occurred retroactively in an earlier tax year of the Company,
the imposition of a substantial federal income tax liability on the Company
attributable to any nonqualifying tax years may adversely affect the Company's
ability to pay dividends. In the event that the Company fails to meet certain
income tests applicable to REITs, it may, generally, nonetheless retain its
qualification as a REIT if it pays a 100% tax on the amount by which it failed
to meet the relevant income test so long as such failure was considered to be
due to reasonable cause and not willful neglect. Any such taxes would adversely
affect the Company's ability to pay dividends and distributions.
The Taxpayer Relief Act of 1997 (the "1997 Act") which was recently signed
into law by President Clinton on August 5, 1997, modified many of the provisions
relating to the requirements for qualification as, and the taxation of, a REIT.
Among other things, the 1997 Act (i) replaced the rule that disqualifies a REIT
for any year in which the REIT fails to comply with Treasury regulations to
ascertain its ownership with an intermediate penalty for failing to do so; (ii)
permits a REIT to render a de minimis amount of impermissible services to
tenants, or in connection with the management of property, and still treat
amounts received with respect to that property as rents form real property;
(iii) permits a REIT to elect to retain and pay income tax on net long-term
capital gains; (iv) repealed a rule that required that less than 30% of a REIT's
gross income be derived from gain from the sale or other disposition of stock or
securities held for less than one year, certain real property held for less than
four years, and property that is sold or disposed of in a prohibited
transaction; (v) lengthened the original grace period for foreclosure property
from two years after the REIT acquired the property to a period ending on the
last day of the third full taxable year following the election; (vi) treat
income from all hedges that reduce the interest rate risk of REIT laibilities,
not just interest rate swaps and caps, as qualifying income under the 95% gross
income test; and (vii) permits any corporation wholly-owned by a REIT to be
treated as a qualified subsidiary, regardless of whether the corporation has
always been owned by a REIT. The changes are effective for taxable years
beginning after the date of enactment.
42
<PAGE>
PLAN OF DISTRIBUTION
The Company and the Operating Partnership may sell Securities through
underwriters or dealers, directly to one or more purchasers, through agents or
through a combination of any such methods of sale. Any underwriter or agent
involved in the offer and sale of the Securities will be named in the applicable
Prospectus Supplement.
The distribution of the Securities may be effected from time to time in one
or more transactions at a fixed price or prices, which may be changed, at market
prices prevailing at the time of sale, at prices related to such prevailing
market prices, or at negotiated prices.
In connection with the sale of Securities, underwriters or agents may
receive compensation from the Company, from the Operating Partnership or from
purchasers of Securities, for whom they may act as agents, in the form of
discounts, concessions or commissions. Underwriters may sell Securities to or
through dealers, and such dealers may receive compensation in the form of
discounts, concessions or commissions from the underwriters and/or commissions
from the purchasers for whom they may act as agents. Underwriters, dealers and
agents that participate in the distribution of Securities may be deemed to be
underwriters under the Securities Act, and any discounts or commissions they
receive from the Company or the Operating Partnership and any profit on the
resale of Securities they realize may be deemed to be underwriting discounts and
commissions under the Securities Act. Any such underwriter or agent will be
identified, and any such compensation received from the Company or the Operating
Partnership will be described, in the applicable Prospectus Supplement.
Unless otherwise specified in the applicable Prospectus Supplement, each
series of Securities will be a new issue with no established trading market,
other than the Common Stock, which is listed on the NYSE. Any shares of Common
Stock sold pursuant to a Prospectus Supplement will be listed on the NYSE,
subject to official notice of issuance. The Company or the Operating Partnership
may elect to list any series of Debt Securities, Preferred Stock or Depositary
Shares on an exchange, but neither is obligated to do so. It is possible that
one or more underwriters may make a market in a series of Securities, but will
not be obligated to do so and may discontinue any market making at any time
without notice. Therefore, no assurance can be given as to the liquidity of the
trading market for the Securities.
Under agreements into which the Company or the Operating Partnership may
enter, underwriters, dealers and agents who participate in the distribution of
Securities may be entitled to indemnification by the Company or the Operating
Partnership against certain liabilities, including liabilities under the
Securities Act.
Underwriters, dealers and agents may engage in transactions with, or perform
services for, or be tenants of, the Company or the Operating Partnership in the
ordinary course of business.
If so indicated in the applicable Prospectus Supplement, the Company or the
Operating Partnership will authorize underwriters or other persons acting as the
Company's or the Operating Partnership's agents to solicit offers by certain
institutions to purchase Securities from the Company or the Operating
Partnership pursuant to contracts providing for payment and delivery on a future
date. Institutions with which such contracts may be made include commercial and
savings banks, insurance companies, pension funds, investment companies,
educational and charitable institutions and others, but in all cases such
institutions must be approved by the Company or the Operating Partnership, as
the case may be. The obligations of any purchaser under any such contract will
be subject to the condition that the purchase of the Securities shall not at the
time of delivery be prohibited under the laws of the jurisdiction to which such
purchaser is subject. The underwriters and such other agents will not have any
responsibility in respect of the validity or performance of such contracts.
In order to comply with the securities laws of certain states, if
applicable, the Securities offered hereby will be sold in such jurisdictions
only through registered or licensed brokers or dealers. In addition, in certain
states Securities may not be sold unless they have been registered or qualified
for sale in the
43
<PAGE>
applicable state or an exemption from the registration or qualification
requirement is available and is complied with.
Under applicable rules and regulations under the Exchange Act, any person
engaged in the distribution of Securities offered hereby may not engage in
market making activities with respect to the Securities for a period of two
business days prior to the commencement of such distribution.
LEGAL MATTERS
Certain legal matters, including the legality of the Securities covered by
this Prospectus and certain tax matters, will be passed upon for the Company by
Cahill Gordon & Reindel (a partnership including a professional corporation),
New York, New York, and for any underwriters, dealers or agents by Rogers &
Wells, New York, New York. Cahill Gordon & Reindel and Rogers & Wells will rely
as to all matters of Maryland law on the opinion of McGuire Woods Battle &
Boothe LLP, Baltimore, Maryland.
EXPERTS
The financial statements and schedule thereto of the Company and the
Contributing Businesses, the financial statements of the Acquisition Properties
(as defined in the Company's Current Report on Form 8-K filed February 12,
1997), the financial statements of the Lazarus Burman Properties (as defined in
the Company's Current Report on Form 8-K filed February 12, 1997, as amended by
Form 8-K/A No. 1 filed April 10, 1997) and the financial statements of the Punia
Acquisition Properties (as defined in each of the Company's and the Operating
Partnership's Current Report on Form 8-K filed July 15, 1997 as amended by Form
8-K/A No. 1 each filed September 4, 1997), each incorporated by reference in
this Prospectus or elsewhere in the Registration Statement, and the financial
statements and schedule thereto of the Operating Partnership and the
Contributing Businesses and the financial statements of the Other Real Estate
Partnerships included in this Prospectus, to the extent and for the periods
indicated in their reports, have been audited by Coopers & Lybrand L.L.P.,
independent accountants, and are included or incorporated herein in reliance
upon the authority of said firm as experts in giving said reports.
44
<PAGE>
FIRST INDUSTRIAL, L.P. AND CONTRIBUTING BUSINESSES
AND
OTHER REAL ESTATE PARTNERSHIPS
INDEX TO FINANCIAL STATEMENTS AND OTHER INFORMATION
<TABLE>
<CAPTION>
PAGE
-----------
<S> <C>
FIRST INDUSTRIAL, L.P. AND CONTRIBUTING BUSINESSES
FINANCIAL STATEMENTS
Report of Independent Accountants......................................................................... F-2
Balance Sheets of First Industrial, L.P. (the "Operating Partnership") as of December 31, 1996 and 1995... F-3
Statements of Operations of the Operating Partnership for the Years Ended December 31, 1996 and 1995 and
for the Period July 1, 1994 to December 31, 1994 and Combined Statement of Operations of the
Contributing Businesses for the Period January 1, 1994 to June 30, 1994................................. F-4
Statements of Changes in Partners' Capital of the Operating Partnership for the Years Ended December 31,
1996 and 1995 and for the Period July 1, 1994 to December 31, 1994 and Combined Statement of Changes in
Net Deficit of the Contributing Businesses for the Period January 1, 1994 to June 30, 1994.............. F-5
Statements of Cash Flows of the Operating Partnership for the Years Ended December 31, 1996 and 1995 and
for the Period July 1, 1994 to December 31, 1994 and Combined Statement of Cash Flows of the
Contributing Businesses for the Period January 1, 1994 to June 30, 1994................................. F-6
Notes to Financial Statements............................................................................. F-7
Schedule III: Real Estate and Accumulated Depreciation.................................................... F-19
UNAUDITED PRO FORMA FINANCIAL STATEMENTS
Unaudited Pro Forma Balance Sheet of the Operating Partnership as of December 31, 1996.................... F-24
Unaudited Pro Forma Statement of Operations of the Operating Partnership for the Year Ended December 31,
1996.................................................................................................... F-25
Notes to Unaudited Pro Forma Financial Statements......................................................... F-26
OTHER INFORMATION
Management's Discussion and Analysis of Financial Condition and Results of Operations..................... F-28
Selected Financial Data................................................................................... F-32
OTHER REAL ESTATE PARTNERSHIPS
FINANCIAL STATEMENTS
Report of Independent Accountants......................................................................... F-33
Combined Balance Sheets of the Other Real Estate Partnerships as of December 31, 1996 and 1995............ F-34
Combined Statements of Operations of the Other Real Estate Partnerships for the Years Ended December 31,
1996 and 1995 and for the Period July 1, 1994 to December 31, 1994...................................... F-35
Combined Statements of Changes in Partners' Capital of the Other Real Estate Partnerships for the Years
Ended December 31, 1996 and 1995 and for the Period July 1, 1994 to December 31, 1994................... F-36
Combined Statements of Cash Flows of the Other Real Estate Partnerships for the Years Ended December 31,
1996 and 1995 and for the Period July 1, 1994 to December 31, 1994...................................... F-37
Notes to Combined Financial Statements.................................................................... F-38
OTHER INFORMATION
Selected Financial Data................................................................................... F-45
</TABLE>
F-1
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Partners of First Industrial, L.P.
We have audited the financial statements and the financial statement
schedule of First Industrial, L.P. (the "Operating Partnership") and the
combined financial statements of the Contributing Businesses as listed on page
F-1 of this Prospectus. These financial statements and the financial statement
schedule are the responsibility of the Operating Partnership's and the
Contributing Businesses' (as defined in Note 2 hereof) management. Our
responsibility is to express an opinion on these financial statements and the
financial statement schedule based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of the Operating Partnership as
of December 31, 1996 and 1995, and the results of its operations and its cash
flows for the years ended December 31, 1996 and 1995 and for the period July 1,
1994 through December 31, 1994 and of the Contributing Businesses for the period
January 1, 1994 to June 30, 1994, in conformity with generally accepted
accounting principles. In addition, in our opinion, the financial statement
schedule referred to above, when considered in relation to the basic financial
statements taken as a whole, presents fairly, in all material respects, the
information required to be included therein.
COOPERS & LYBRAND L.L.P.
Chicago, Illinois
February 12, 1997
F-2
<PAGE>
FIRST INDUSTRIAL, L.P.
BALANCE SHEETS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31,
1996 1995
------------ ------------
<S> <C> <C>
ASSETS
Assets:
Investment in Real Estate:
Land............................................................................. $ 55,425 $ 14,253
Buildings and Improvements....................................................... 291,942 81,384
Furniture, Fixtures and Equipment................................................ -- 362
Construction in Progress......................................................... 6,414 393
Less: Accumulated Depreciation................................................... (8,133) (4,852)
------------ ------------
Net Investment in Real Estate.................................................. 345,648 91,540
Investment in Other Real Estate Partnerships....................................... 258,411 241,918
Cash and Cash Equivalents.......................................................... 4,295 6,493
Restricted Cash.................................................................... -- 2,557
Tenant Accounts Receivable, Net.................................................... 1,021 533
Deferred Rent Receivable........................................................... 1,280 676
Interest Rate Protection Agreements, Net........................................... 1,723 664
Deferred Financing Costs, Net...................................................... 1,140 2,269
Prepaid Expenses and Other Assets, Net............................................. 8,604 9,410
------------ ------------
Total Assets................................................................... $ 622,122 $ 356,060
------------ ------------
------------ ------------
LIABILITIES AND PARTNERS' CAPITAL
Liabilities:
Mortgage Loans Payable............................................................. $ 45,578 $ --
Construction Loans Payable......................................................... -- 4,873
Acquisition Facilities Payable..................................................... 4,400 48,235
Promissory Notes Payable........................................................... 9,919 --
Accounts Payable and Accrued Expenses.............................................. 8,770 5,735
Rents Received in Advance and Security Deposits.................................... 1,942 494
Distributions Payable.............................................................. 16,281 9,954
------------ ------------
Total Liabilities.............................................................. 86,890 69,291
------------ ------------
Commitments and Contingencies........................................................ -- --
Partners' Capital:
General Partner................................................................ 496,169 269,357
Limited Partners............................................................... 39,063 17,412
------------ ------------
Total Partners' Capital........................................................ 535,232 286,769
------------ ------------
Total Liabilities and Partners' Capital........................................ $ 622,122 $ 356,060
------------ ------------
------------ ------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-3
<PAGE>
FIRST INDUSTRIAL, L.P.
STATEMENTS OF OPERATIONS
AND CONTRIBUTING BUSINESSES
COMBINED STATEMENT OF OPERATIONS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
THE OPERATING PARTNERSHIP CONTRIBUTING
---------------------------------------- BUSINESSES
SIX MONTHS -------------
YEAR ENDED YEAR ENDED ENDED SIX MONTHS
DECEMBER 31, DECEMBER 31, DECEMBER 31, ENDED
1996 1995 1994 JUNE 30, 1994
------------ ------------ ------------ -------------
<S> <C> <C> <C> <C>
Revenues:
Rental Income........................................ $ 29,166 $ 22,094 $ 7,731 $ 18,041
Tenant Recoveries and Other Income................... 8,421 5,348 1,873 4,775
------------ ------------ ------------ -------------
Total Revenues................................... 37,587 27,442 9,604 22,816
------------ ------------ ------------ -------------
Expenses:
Real Estate Taxes.................................... 6,109 4,863 1,485 3,273
Repairs and Maintenance.............................. 1,071 848 213 1,225
Property Management.................................. 1,153 904 195 677
Utilities............................................ 1,047 235 82 570
Insurance............................................ 271 279 81 184
Other................................................ 284 349 64 107
General and Administrative........................... 4,014 3,792 1,047 795
Interest............................................. 4,685 6,581 807 9,868
Interest (affiliated)................................ -- -- -- 1,905
Amortization of Interest Rate Protection Agreements
and Deferred Financing Costs....................... 196 222 187 858
Depreciation and Other Amortization.................. 6,310 5,087 1,916 4,744
------------ ------------ ------------ -------------
Total Expenses................................... 25,140 23,160 6,077 24,206
------------ ------------ ------------ -------------
Income (Loss) Before Gain on Sales of Properties,
Management and Construction Loss, Equity in Income of
Other Real Estate Partnerships and Extraordinary
Item................................................. 12,447 4,282 3,527 (1,390)
Gain on Sales of Properties............................ 4,344 -- -- --
------------ ------------ ------------ -------------
Income (Loss) Before Management and Construction Loss,
Equity in Income of Other Real Estate Partnerships
and Extraordinary Item............................... 16,791 4,282 3,527 (1,390)
Management and Construction Loss....................... -- -- -- (81)
------------ ------------ ------------ -------------
Income (Loss) Before Equity in Income of Other Real
Estate Partnerships and Extraordinary Item........... 16,791 4,282 3,527 (1,471)
Equity in Income of Other Real Estate Partnerships..... 20,130 7,841 6,767 --
------------ ------------ ------------ -------------
Income (Loss) Before Extraordinary Item................ 36,921 12,123 10,294 (1,471)
Extraordinary Loss..................................... (2,273) -- -- (1,449)
------------ ------------ ------------ -------------
Net Income (Loss)...................................... $ 34,648 $ 12,123 $ 10,294 $ (2,920)
------------ ------------ ------------ -------------
------------ ------------ ------------ -------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-4
<PAGE>
FIRST INDUSTRIAL, L.P.
STATEMENTS OF CHANGES IN PARTNERS' CAPITAL
AND CONTRIBUTING BUSINESSES
COMBINED STATEMENT OF CHANGES
IN NET DEFICIT
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
THE OPERATING CONTRIBUTING
PARTNERSHIP BUSINESSES
--------------------- ------------
GENERAL LIMITED NET
TOTAL PARTNER PARTNERS DEFICIT
---------- ---------- --------- ------------
<S> <C> <C> <C> <C>
Balance at December 31, 1993.................................... $ (37,548) $ 216 $ -- $ (37,764)
Contributions................................................. 343,501 324,705 -- 18,796
Distributions................................................. (29,011) -- -- (29,011)
Net Loss...................................................... (2,920) -- -- (2,920)
Acquisition and Contribution of Contributing Businesses'
Interests................................................... 18,112 (53,869) 21,082 50,899
---------- ---------- --------- ------------
Balance at June 30, 1994........................................ 292,134 271,052 21,082 --
---------- ---------- --------- ------------
Contributions................................................. 30,412 30,412 -- --
Distributions................................................. (19,296) (17,843) (1,453) --
Net Income.................................................... 10,294 9,519 775 --
---------- ---------- --------- ------------
Balance at December 31, 1994.................................... 313,544 293,140 20,404 --
---------- ---------- --------- ------------
Distributions................................................. (38,898) (36,003) (2,895) --
Unit Conversions.............................................. -- 1,005 (1,005) --
Net Income.................................................... 12,123 11,215 908 --
---------- ---------- --------- ------------
Balance at December 31, 1995.................................... 286,769 269,357 17,412 --
---------- ---------- --------- ------------
Contributions................................................. 268,133 244,269 23,864 --
Distributions................................................. (54,318) (50,418) (3,900) --
Unit Conversions.............................................. -- 943 (943) --
Net Income.................................................... 34,648 32,018 2,630 --
---------- ---------- --------- ------------
Balance at December 31, 1996.................................... $ 535,232 $ 496,169 $ 39,063 $ --
---------- ---------- --------- ------------
---------- ---------- --------- ------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-5
<PAGE>
FIRST INDUSTRIAL, L.P.
STATEMENTS OF CASH FLOWS
AND CONTRIBUTING BUSINESSES
COMBINED STATEMENT OF CASH FLOWS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
THE OPERATING PARTNERSHIP CONTRIBUTING
----------------------------------------- BUSINESSES
SIX MONTHS -------------
YEAR ENDED YEAR ENDED ENDED SIX MONTHS
DECEMBER 31, DECEMBER 31, DECEMBER 31, ENDED
1996 1995 1994 JUNE 30, 1994
------------ ------------- ------------ -------------
<S> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income (Loss).................................... $ 34,648 $ 12,123 $ 10,294 $ (2,920)
Adjustments to Reconcile Net Income (Loss) to Net
Cash Provided by Operating Activities:
Depreciation....................................... 5,115 4,092 1,532 4,661
Amortization of Interest Rate Protection Agreements
and Deferred Financing Costs..................... 196 222 187 858
Other Amortization................................. 1,195 995 384 83
Equity in Income of Other Real Estate
Partnerships..................................... (20,130) (7,841) (6,767) --
Provision for Bad Debts............................ 35 158 -- --
Gain on Sales of Properties........................ (4,344) -- -- --
Extraordinary Items................................ 2,273 -- -- 1,449
(Increase) Decrease in Accounts Receivable and
Other Assets..................................... (965) (3,903) 1,223 (4,544)
Increase in Deferred Rent Receivable............... (1,179) (606) (457) (92)
Increase (Decrease) in Accounts Payable, Accrued
Expenses, Rents Received in Advance and Security
Deposits......................................... (498) 2,295 (16,695) 7,692
Increase in Organization Costs..................... (32) (115) -- (1,466)
(Increase) Decrease in Restricted Cash............. 2,557 (3,238) -- (810)
------------ ------------- ------------ -------------
Net Cash Provided by Operating Activities........ 18,871 4,182 (10,299) 4,911
------------ ------------- ------------ -------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of and Additions to Investment in Real
Estate............................................. (221,282) (67,605) (62,449) (367,257)
Proceeds from Sale of Investment in Real Estate...... 14,972 -- -- --
(Increase) Decrease in Restricted Cash............... -- -- -- (7,500)
Contributions to Investment in Other Real Estate
Partnerships....................................... (25,473) (6,664) (4,051) --
Distributions from Investment in Other Real Estate
Partnerships....................................... 29,110 33,363 5,148 --
------------ ------------- ------------ -------------
Net Cash Used in Investing Activities............ (202,673) (40,906) (61,352) (374,757)
------------ ------------- ------------ -------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Contributions........................................ 244,269 -- 30,412 348,243
Distributions........................................ (47,991) (38,592) (9,648) (29,011)
Proceeds from Mortgage Loans Payable................. 36,750 -- -- 381,743
Repayments on Mortgage Loans Payable................. (589) -- -- (268,935)
Proceeds from Acquisition Facilities Payable......... 103,523 83,943 48,700 5,000
Repayments on Acquisition Facilities Payable......... (147,358) (2,958) -- --
Proceeds from Construction Loans Payable............. -- 4,873 -- --
Repayment of Construction Loans Payable.............. (4,873) -- -- --
Repayment of Notes Payable........................... -- -- -- (34,553)
Cost of Debt Issuance and Interest Rate Protection
Agreements......................................... (1,768) (4,084) (3,232) (28,335)
Prepayment Fee....................................... (359) -- -- --
------------ ------------- ------------ -------------
Net Cash Provided by Financing Activities........ 181,604 43,182 66,232 374,152
------------ ------------- ------------ -------------
Net Increase (Decrease) in Cash and Cash
Equivalents........................................ (2,198) 6,458 (5,419) 4,306
Cash and Cash Equivalents, Beginning of Period....... 6,493 35 5,454 2,812
------------ ------------- ------------ -------------
Cash and Cash Equivalents, End of Period............. $ 4,295 $ 6,493 $ 35 $ 7,118
------------ ------------- ------------ -------------
------------ ------------- ------------ -------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-6
<PAGE>
FIRST INDUSTRIAL, L.P.
NOTES TO FINANCIAL STATEMENTS
AND CONTRIBUTING BUSINESSES
NOTES TO COMBINED FINANCIAL STATEMENTS
(Dollars in thousands, except per share data)
1. ORGANIZATION AND FORMATION
First Industrial, L.P. (the "Operating Partnership") was organized as a
limited partnership in the state of Delaware on November 23, 1993. The sole
general partner is First Industrial Realty Trust, Inc. (the "Company") with an
approximate 92.4% ownership interest at December 31, 1996. The limited partners
owned approximately a 7.6% aggregate ownership interest at December 31, 1996.
The Company is a real estate investment trust (REIT) as defined in the Internal
Revenue Code. The Company's operations are conducted primarily through the
Operating Partnership. As of December 31, 1996, the Operating Partnership
directly owned 137 in-service properties, containing an aggregate of
approximately 12.7 million square feet (unaudited) of gross leasable area
("GLA"), as well as a 99% limited partnership interest (subject in one case as
described below to a preferred limited partnership interest) in First Industrial
Financing Partnership, L.P. (the "Financing Partnership"), First Industrial
Securities, L.P. (the "Securities Partnership"), First Industrial Mortgage
Partnership, L.P. (the "Mortgage Partnership"), First Industrial Pennsylvania
Partnership, L.P. (the "Pennsylvania Partnership"), First Industrial Harrisburg,
L.P. (the "Harrisburg Partnership"), First Industrial Indianapolis, L.P. (the
"Indianapolis Partnership") and First Industrial Development Services Group,
L.P. (together, the "Other Real Estate Partnerships"). On a combined basis, as
of December 31, 1996, the Other Real Estate Partnerships owned 242 in-service
properties containing an aggregate of approximately 20.0 million square feet
(unaudited) of GLA. Of the 242 properties owned by the Other Real Estate
Partnerships, 195 were owned by the Financing Partnership, 19 were owned by the
Securities Partnership, 23 were owned by the Mortgage Partnership, one was owned
by the Pennsylvania Partnership, three were owned by the Harrisburg Partnership
and one was owned by the Indianapolis Partnership.
The general partners of the Other Real Estate Partnerships are separate
corporations, each with a one percent general partnership interest. Each general
partner of the Other Real Estate Partnerships is a wholly owned subsidiary of
the Company. The general partner of the Securities Partnership, First Industrial
Securities Corporation, also owns a preferred limited partnership interest which
entitles it to receive a fixed quarterly distribution, and results in it being
allocated income in the same amount, equal to the fixed quarterly dividend the
Company pays on its 9.5% Series A Preferred Stock.
Profits, losses and distributions of the Operating Partnership are allocated
to the general partner and the limited partners in accordance with the
provisions contained within its restated and amended partnership agreement.
On June 30, 1994, the Company completed its initial public offering of
15,175,000 shares of $.01 par value common stock (the "Initial Offering") and,
in July 1994, issued an additional 1,400,000 shares pursuant to an
over-allotment option. The proceeds per share in the Initial Offering and the
over-allotment option was $23.50, resulting in gross offering proceeds of
approximately $389,512. Net of underwriters' discount and total offering
expenses, the Company received approximately $355,217 in proceeds from the
Initial Offering and the over-allotment option. The net proceeds received from
the Initial Offering and subsequent equity offerings (See Note 6) are reflected
in the Operating Partnership's financial statements as contributions. On June
30, 1994, the Company (through the Financing Partnership) borrowed $300,000 (the
"1994 Mortgage Loan") from an institutional lender. The net proceeds from the
Initial Offering and the 1994 Mortgage Loan were used primarily to acquire
properties, repay indebtedness and pay certain fees and expenses. The Company
and the Operating Partnership began operations on July 1, 1994.
F-7
<PAGE>
FIRST INDUSTRIAL, L.P.
NOTES TO FINANCIAL STATEMENTS
AND CONTRIBUTING BUSINESSES
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
2. BASIS OF PRESENTATION
The accompanying financial statements as of December 31, 1996 and 1995 and
for the years ended December 31, 1996 and 1995 and for the six month period
ended December 31, 1994 present the ownership and operating results of the
properties owned directly by the Operating Partnership. Such financial
statements present the Operating Partnership's limited partnership interests in
each of the Other Real Estate Partnerships under the equity method of
accounting.
The combined statements of operations, changes in partners' capital and net
deficit and cash flows for the six months ended June 30, 1994 reflect the
operations, equity and deficit and cash flows of the properties and business
contributed by The Shidler Group and the properties and business contributed by
three other contributing businesses (together, the "Contributing Businesses") at
or prior to the consummation of the Initial Offering.
Purchase accounting has been applied when ownership interests in properties
were acquired for cash. The historical cost basis of properties has been carried
over when the Contributing Businesses ownership interests were exchanged for
units in the Operating Partnership (the "Units") and purchase accounting has
been used for all other properties that were acquired for Units.
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
In order to conform with generally accepted accounting principles,
management, in preparation of the Operating Partnership's financial statements,
is required to make estimates and assumptions that affect the reported amounts
of assets and liabilities and disclosure of contingent assets and liabilities as
of December 31, 1996 and 1995, and the reported amounts of revenues and expenses
for the years ended December 31, 1996 and 1995 and the six months ended December
31, 1994 and June 30, 1994. Actual results could differ from those estimates.
REVENUE RECOGNITION:
Rental income is recognized on a straight-line method under which
contractual rent increases are recognized evenly over the lease term. Tenant
recovery income includes payments from tenants for taxes, insurance and other
property operating expenses and is recognized as revenues in the same period the
related expenses are incurred by the Operating Partnership.
The Operating Partnership provides an allowance for doubtful accounts
against the portion of tenant accounts receivable which is estimated to be
uncollectible. Accounts receivable in the consolidated balance sheets are shown
net of an allowance for doubtful accounts of $221 and $186 as of December 31,
1996 and December 31, 1995, respectively.
INVESTMENT IN REAL ESTATE AND DEPRECIATION:
Effective January 1, 1995, the Operating Partnership adopted Financial
Accounting Standards Statement No. 121, "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to be Disposed Of." Real estate
assets are carried at the lower of depreciated cost or fair value as determined
by the Operating Partnership. The Operating Partnership reviews its properties
on a quarterly basis for impairment and provides a provision if impairments are
determined. First, to determine if impairment may exist, the Operating
Partnership reviews its properties and identifies those which have had either an
event
F-8
<PAGE>
FIRST INDUSTRIAL, L.P.
NOTES TO FINANCIAL STATEMENTS
AND CONTRIBUTING BUSINESSES
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
of change or event of circumstances warranting further assessment of
recoverability. Then, the Operating Partnership estimates the fair value of
those properties on an individual basis by capitalizing the expected net
operating income and discounting the expected cash flows of the properties. Such
amounts are then compared to the property's depreciated cost to determine
whether an impairment exists.
Interest expense, real estate taxes and other directly related expenses
incurred during construction periods are capitalized and depreciated commencing
with the date placed in service, on the same basis as the related assets.
Depreciation expense is computed using the straight-line method based on the
following useful lives:
<TABLE>
<CAPTION>
YEARS
-----------
<S> <C>
Buildings and Improvements....................................................... 31.5 to 40
Land Improvements................................................................ 15
Furniture, Fixtures and Equipment................................................ 5 to 10
</TABLE>
Construction expenditures for tenant improvements and leasing commissions
are capitalized and amortized over the terms of each specific lease. Maintenance
and repairs are charged to expense when incurred. Expenditures for improvements
are capitalized.
When assets are sold or retired, their costs and related accumulated
depreciation are removed from the accounts with the resulting gains or losses
reflected in net income or loss.
INVESTMENT IN OTHER REAL ESTATE PARTNERSHIPS:
Investment in Other Real Estate Partnerships represents the Operating
Partnership's limited partnership interests in the Other Real Estate
Partnerships. The Operating Partnership accounts for its Investment in Other
Real Estate Partnerships under the equity method of accounting. Under the equity
method of accounting, the Operating Partnership's share of earnings or losses of
the Other Real Estate Partnerships is reflected in income as earned and
contributions or distributions increase or decrease, respectively, the Operating
Partnership's Investment in Other Real Estate Partnerships as paid or received,
respectively.
CASH AND CASH EQUIVALENTS:
Cash and Cash Equivalents include all cash and liquid investments with an
initial maturity of three months or less. The carrying amount approximates fair
value due to the short maturity of these investments.
INCOME TAXES:
In accordance with partnership taxation, each of the partners are
responsible for reporting their shares of taxable income or loss.
The Operating Partnership is subject to certain state and local income,
excise and franchise taxes. The provision for such state and local taxes has
been reflected in general and administrative expense in the statement of
operations and has not been separately stated due to its insignificance.
F-9
<PAGE>
FIRST INDUSTRIAL, L.P.
NOTES TO FINANCIAL STATEMENTS
AND CONTRIBUTING BUSINESSES
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
FAIR VALUE OF FINANCIAL INSTRUMENTS:
The Operating Partnership's financial instruments include short-term
investments, tenant accounts receivable, accounts payable, other accrued
expenses, construction loans payable, acquisition facilities payable and
promissory notes payable. The fair values of these financial instruments were
not materially different from their carrying or contract values. The Operating
Partnership's financial instruments also include mortgage loans for which the
fair value was not materially different from its carrying value. The
determination of the fair value of the mortgage loans was made using available
market information and appropriate valuation techniques. The Operating
Partnership's financial instruments also include interest rate protection
agreements as described in the next paragraph.
DERIVATIVE FINANCIAL INSTRUMENTS:
The Operating Partnership's interest rate protection agreements (together,
the "Agreements") are used to hedge the interest rate on the 1994 Mortgage Loan.
As such, receipts or payments resulting from the Agreements are recognized as
adjustments to equity in income of Other Real Estate Partnerships (specifically,
the Financing Partnership). The credit risks associated with the Agreements are
controlled through the evaluation and monitoring of the creditworthiness of the
counterparty. In the event that the counterparty fails to meet the terms of the
Agreements, the Operating Partnership's exposure is limited to the current value
of the interest rate differential, not the notional amount, and the Operating
Partnership's carrying balance of the Agreements on the balance sheet. The
Agreements have been executed with a creditworthy financial institution. As
such, the Operating Partnership considers the risk of nonperformance to be
remote. In the event that the Operating Partnership terminates the Agreements,
the Operating Partnership would recognize a gain (loss) from the disposition of
the Agreements equal to the amount of cash received or paid at termination less
the carrying balance of the Agreements on the Operating Partnership's balance
sheet.
At December 31, 1996, the fair market value of the Agreements was
approximately $3.8 million, which was greater than the $1.7 million net book
value by approximately $2.1 million. The fair market value was determined by a
third party evaluation and is based on estimated discounted future cash flows.
DEFERRED FINANCING COSTS:
Deferred financing costs include fees and costs incurred to obtain long-term
financing. These fees and costs are being amortized over the terms of the
respective loans. Accumulated amortization of deferred financing costs was $32
and $957 at December 31, 1996 and 1995, respectively. Unamortized deferred
financing fees are written-off when debt is retired before the maturity date
(see Note 12).
4. INVESTMENT IN OTHER REAL ESTATE PARTNERSHIPS
The Investment in Other Real Estate Partnerships reflects the Operating
Partnership's 99% limited partnership equity interest in the entities described
in Note 1 to these financial statements.
Summarized financial information as derived from the audited financial
statements of the Other Real Estate Partnerships is shown below.
F-10
<PAGE>
FIRST INDUSTRIAL, L.P.
NOTES TO FINANCIAL STATEMENTS
AND CONTRIBUTING BUSINESSES
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
4. INVESTMENT IN OTHER REAL ESTATE PARTNERSHIPS (CONTINUED)
Combined Balance Sheets:
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31,
1996 1995
------------ ------------
<S> <C> <C>
ASSETS
Assets:
Investment in Real Estate, Net....................................... $ 613,685 $ 597,227
Other Assets......................................................... 48,602 45,938
------------ ------------
Total Assets..................................................... $ 662,287 $ 643,165
------------ ------------
------------ ------------
LIABILITIES AND PARTNERS' CAPITAL
Liabilities:
Mortgage Loans Payable............................................... $ 346,504 $ 346,850
Other Liabilities.................................................... 13,326 10,714
------------ ------------
Total Liabilities................................................ 359,830 357,564
------------ ------------
Partners' Capital........................................................ 302,457 285,601
------------ ------------
Total Liabilities and Partners' Capital.......................... $ 662,287 $ 643,165
------------ ------------
------------ ------------
</TABLE>
Combined Statements of Operations:
<TABLE>
<CAPTION>
SIX MONTH
PERIOD
YEAR ENDED YEAR ENDED ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31,
1996 1995 1994
------------ ------------ ------------
<S> <C> <C> <C>
Total Revenues............................................ $ 102,322 $ 79,032 $ 36,953
------------ ------------ ------------
Property Expenses......................................... 28,933 20,824 9,733
Interest Expense.......................................... 24,268 22,010 9,781
Amortization of Interest Rate Protection Agreements and
Deferred Financing Costs................................ 3,090 4,216 2,717
Depreciation and Other Amortization....................... 21,737 17,177 7,886
Disposition of Interest Rate Protection Agreement......... -- 6,410 --
------------ ------------ ------------
Net Income................................................ $ 24,294 $ 8,395 $ 6,836
------------ ------------ ------------
------------ ------------ ------------
</TABLE>
5. MORTGAGE LOANS, ACQUISITION FACILITIES, CONSTRUCTION LOANS AND PROMISSORY
NOTES PAYABLE
MORTGAGE LOANS:
On March 20, 1996, the Operating Partnership entered into a $36,750 mortgage
loan (the "CIGNA Loan") that is collateralized by seven properties in
Indianapolis, Indiana and three properties in Cincinnati, Ohio. The CIGNA Loan
bears interest at a fixed interest rate of 7.5% and provides for monthly
principal and interest payments based on a 25-year amortization schedule. The
CIGNA Loan will mature on April 1, 2003. The outstanding mortgage loan balance
at December 31, 1996 was approximately $36,363. Interest payable related to the
CIGNA Loan was $0 at December 31, 1996.
F-11
<PAGE>
FIRST INDUSTRIAL, L.P.
NOTES TO FINANCIAL STATEMENTS
AND CONTRIBUTING BUSINESSES
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
5. MORTGAGE LOANS, ACQUISITION FACILITIES, CONSTRUCTION LOANS AND PROMISSORY
NOTES PAYABLE (CONTINUED)
On March 20, 1996, the Operating Partnership assumed a $6,424 mortgage loan
and a $2,993 mortgage loan (together, the "Assumed Loans") that are
collateralized by 13 properties in Indianapolis, Indiana and one property in
Indianapolis, Indiana, respectively. The Assumed Loans bear interest at a fixed
rate of 9.25% and provide for monthly principal and interest payments based on a
16.75-year amortization schedule. The Assumed Loans will mature on January 1,
2013. At December 31, 1996, the outstanding mortgage loan balances under the
$6,424 mortgage loan and $2,993 mortgage loan were approximately $6,286 and
$2,929, respectively. Interest payable related to the Assumed Loans was $0 at
December 31, 1996.
ACQUISITION FACILITIES:
On June 30, 1994, the Operating Partnership entered into a three-year,
$100,000 collateralized revolving credit facility (the "1994 Acquisition
Facility"). During the quarter ended June 30, 1995, the capacity of the 1994
Acquisition Facility was increased to $150,000. The Operating Partnership could
borrow under the facility to finance the acquisition of additional properties
and for other purposes, including to obtain additional working capital. The
Company had guaranteed repayment of the 1994 Acquisition Facility. Borrowings
under the 1994 Acquisition Facility bore interest at a floating rate equal to
LIBOR plus 2.0% or a "Corporate Base Rate" plus .5%, at the Operating
Partnership's election. Effective July 12, 1996, the lenders reduced the
interest rate to LIBOR plus 1.75%. Under the 1994 Acquisition Facility, LIBOR
contracts were entered into by the Operating Partnership as draws were made.
Borrowings under the 1994 Acquisition Facility at December 31, 1995 were
$36,941. Interest payable related to the 1994 Acquisition Facility was $488 at
December 31, 1995. In December 1996, the Operating Partnership terminated the
1994 Acquisition Facility (see Note 12) and entered into a $200 million
unsecured revolving credit facility (the "1996 Unsecured Acquisition Facility")
which initially bears interest at LIBOR plus 1.10% or a "Corporate Base Rate"
plus .25% and provides for interest only payments until the maturity date. At
December 31, 1996, borrowings under the 1996 Acquisition Facility bore interest
at a weighted average interest rate of 8.25%. The borrowings under the 1996
Unsecured Acquisition Facility were converted to an interest rate of 6.6% on
January 7, 1997. The Operating Partnership may borrow under the facility to
finance the acquisition of additional properties and for other purposes,
including to obtain additional working capital. The 1996 Unsecured Acquisition
Facility matures in April 2000. Borrowings under the 1996 Unsecured Acquisition
Facility at December 31, 1996 were $4,400. Interest payable related to the 1996
Unsecured Acquisition Facility was $3 at December 31, 1996. The 1996 Unsecured
Acquisition Facility contains certain financial covenants relating to debt
service coverage, market value net worth, distribution payout ratio and total
funded indebtedness.
In December 1995, the Operating Partnership entered into a $24,219
collateralized revolving credit facility (the "1995 Acquisition Facility"). The
1995 Acquisition Facility was paid off in full and retired in February 1996 with
a portion of the proceeds of the February 1996 Equity Offering (hereinafter
defined). The 1995 Acquisition Facility was collateralized by six properties and
bore interest at a floating rate of LIBOR plus 2.45%. As of December 31, 1995,
borrowings under the 1995 Acquisition Facility were $11,294 and bore interest at
a rate of 8.3%. Interest payable related to the 1995 Acquisition Facility was
$27 at December 31, 1995. The Operating Partnership terminated the 1995
Acquisition Facility in February 1996 (See Note 12).
F-12
<PAGE>
FIRST INDUSTRIAL, L.P.
NOTES TO FINANCIAL STATEMENTS
AND CONTRIBUTING BUSINESSES
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
5. MORTGAGE LOANS, ACQUISITION FACILITIES, CONSTRUCTION LOANS AND PROMISSORY
NOTES PAYABLE (CONTINUED)
In May 1996, the Operating Partnership entered into a $10,000 collateralized
revolving credit facility (the "1996 Credit Line"). The 1996 Credit Line was
collateralized by three properties. The Company had guaranteed repayment of the
1996 Credit Line. Borrowings under the 1996 Credit Line bore interest at a
floating rate from LIBOR plus 2.45% to LIBOR plus 2.75%, depending on the term
of the interest rate option. The 1996 Credit Line would have matured on December
14, 1998. The Operating Partnership terminated the 1996 Credit Line in November
1996 (See Note 12).
In September 1996, the Operating Partnership entered into a $40,000
revolving credit facility (the "1996 Acquisition Facility"). The Operating
Partnership could have borrowed under the facility to finance the acquisition of
additional properties and for other purposes, including to obtain additional
working capital. The Company had guaranteed the repayment of the 1996
Acquisition Facility. The 1996 Acquisition Facility would have matured on March
31, 1997. Borrowings under the 1996 Acquisition Facility bore interest at a
floating rate equal to LIBOR plus 2.0% or a "Corporate Base Rate" plus .5%, at
the Operating Partnership's election. The Operating Partnership terminated the
1996 Acquisition Facility in November 1996 (See Note 12).
CONSTRUCTION LOANS:
In 1995, the Operating Partnership entered into two construction loans
(together, the "Construction Loans") with commercial banks providing total
funding commitments of $5,860. Both construction loans were paid off in full and
retired in February 1996 with a portion of the proceeds of the February 1996
Equity Offering (hereinafter defined) (See Note 12). At December 31, 1995, the
Operating Partnership had borrowed $4,873 under such construction loans which
were collateralized by two properties held by the Operating Partnership. Such
borrowings bore interest at LIBOR plus 2.0% and provided for interest only
payments.
PROMISSORY NOTES PAYABLE:
On September 30, 1996, the Operating Partnership entered into a $6,489
promissory note and a $3,430 promissory note (together, the "Promissory Notes")
as partial consideration for the purchase of two properties in Columbus, Ohio.
The $6,489 promissory note was collateralized by a letter of credit pledged by
the Operating Partnership in the amount of $2,715. The $3,430 promissory note
was collateralized by a letter of credit pledged by the Operating Partnership in
the amount of $967. Both promissory notes bore interest at 8% and matured on
January 6, 1997, at which time they were repaid and the letters of credit were
released. Interest payable related to both promissory notes was $68 at December
31, 1996.
F-13
<PAGE>
FIRST INDUSTRIAL, L.P.
NOTES TO FINANCIAL STATEMENTS
AND CONTRIBUTING BUSINESSES
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
5. MORTGAGE LOANS, ACQUISITION FACILITIES, CONSTRUCTION LOANS AND PROMISSORY
NOTES PAYABLE (CONTINUED)
The following is a schedule of mortgage principal payments and maturities of
the mortgage loans, acquisition facilities and promissory notes for the next
five years ending December 31, and thereafter:
<TABLE>
<CAPTION>
AMOUNT
---------
<S> <C>
1997............................................................................... $ 10,663
1998............................................................................... 877
1999............................................................................... 950
2000............................................................................... 5,430
2001............................................................................... 1,117
Thereafter....................................................................... 40,860
---------
Total $ 59,897
---------
---------
</TABLE>
6. PARTNERS' CAPITAL
On February 2, 1996, the Company issued 5,175,000 shares of $.01 par value
common stock (the "February 1996 Equity Offering"). The net proceeds of $106,343
received from the February 1996 Equity Offering are reflected in the Operating
Parnership's financial statements as contributions.
On October 25, 1996, the Company issued 5,750,000 shares of $.01 par value
common stock (the "October 1996 Equity Offering"). The net proceeds of $137,697
received from the October 1996 Equity Offering are reflected in the Operating
Parnership's financial statements as contributions.
7. SALES OF REAL ESTATE
In 1996, the Operating Partnership sold a property located in suburban
Detroit, Michigan, three properties located in Huntsville, Alabama, one property
located in Grand Rapids, Michigan, and one property located in Atlanta, Georgia.
Gross proceeds from these sales were approximately $15.0 million. The gain on
sales was approximately $4.3 million.
8. RELATED PARTY TRANSACTIONS
The Operating Partnership leases office space in Chicago, Illinois from an
affiliate of The Shidler Group at an aggregate annual cost of approximately
$131.
On December 5, 1994, the Operating Partnership purchased for approximately
$.9 million, five acres of land from a partnership in which an officer and
director of the Company owns approximately a 2.5% general partner interest.
The Operating Partnership often obtains title insurance coverage for its
properties from an entity which an independent director of the Company became
the President, Chief Executive Officer and a director of in 1996.
F-14
<PAGE>
FIRST INDUSTRIAL, L.P.
NOTES TO FINANCIAL STATEMENTS
AND CONTRIBUTING BUSINESSES
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
9. EMPLOYEE BENEFIT PLANS
In September 1994, the Board of Directors approved and the Company adopted a
401(k)/Profit Sharing Plan on behalf of the employees of the Operating
Partnership. Under the Company's 401(k)/Profit Sharing Plan, all eligible
employees may participate by making voluntary contributions. The Operating
Partnership may make, but is not required to make, matching contributions. For
the years ended December 31, 1996 and 1995, the Operating Partnership did not
make any matching contributions. In March 1996, the Board of Directors approved
and the Company adopted a Deferred Income Plan (the "Plan") on behalf of the
employees of the Operating Partnership. Under the Plan, 138,500 unit awards were
granted, providing the recipients with deferred income benefits which vest over
three years in quarterly installments. The expense related to these deferred
income benefits is included in general and administrative expenses in the
statements of operations. In the first quarter of 1997, approximately $141 was
paid to the recipients under the Plan.
10. FUTURE RENTAL REVENUES
The Operating Partnership's properties are leased to tenants under net and
semi-net operating leases. Minimum lease payments receivable, excluding tenant
reimbursements of expenses, under noncancelable operating leases in effect as of
December 31, 1996 are approximately as follows:
<TABLE>
<S> <C>
1997.............................................................. $ 36,864
1998.............................................................. 31,207
1999.............................................................. 25,706
2000.............................................................. 17,384
2001.............................................................. 13,020
Thereafter........................................................ 35,684
---------
Total $ 159,865
---------
---------
</TABLE>
F-15
<PAGE>
FIRST INDUSTRIAL, L.P.
NOTES TO FINANCIAL STATEMENTS
AND CONTRIBUTING BUSINESSES
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
11. SUPPLEMENTAL INFORMATION TO STATEMENTS OF CASH FLOWS
Supplemental disclosure of cash flow information:
<TABLE>
<CAPTION>
CONTRIBUTING
THE OPERATING PARTNERSHIP BUSINESSES
---------------------------------------- ------------
SIX MONTHS SIX MONTHS
YEAR ENDED YEAR ENDED ENDED ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31, JUNE 30,
1996 1995 1994 1994
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Interest paid, net of capitalized interest............ $ 5,069 $ 6,255 $ 678 $ 13,697
------------ ------------ ------------ ------------
------------ ------------ ------------ ------------
Interest capitalized.................................. $ 501 $ 266 $ 20 $ --
------------ ------------ ------------ ------------
------------ ------------ ------------ ------------
Supplemental schedule of noncash investing and financing
activities:
Distribution payable on Units......................... $ 16,281 $ 9,954 $ 9,648 $ --
------------ ------------ ------------ ------------
------------ ------------ ------------ ------------
Sale of interest rate protection agreements........... $ -- $ 4,380 $ -- $ --
Purchase of interest rate protection agreements....... -- (4,380) -- --
------------ ------------ ------------ ------------
$ -- $ -- $ -- $ --
------------ ------------ ------------ ------------
------------ ------------ ------------ ------------
In conjunction with the property acquisitions, the
following assets and liabilities were assumed:
Purchase of real estate............................... $ 252,991 $ 63,855 $ 66,230 $ 372,642
Mortgage loans........................................ (9,417) -- -- --
Promissory notes...................................... (9,919) -- -- --
Units................................................. (23,863) -- -- --
Accounts receivable................................... -- 153 80 2,453
Accounts payable and accrued expenses................. (2,626) (1,115) (991) (4,642)
Acquisitions of interests in properties............... -- -- -- (4,281)
------------ ------------ ------------ ------------
Acquisition of real estate............................ $ 207,166 $ 62,893 $ 65,319 $ 366,172
------------ ------------ ------------ ------------
------------ ------------ ------------ ------------
</TABLE>
In conjunction with the capitalization of the Other Real Estate Partnerships
in 1995, the following assets and liabilities were contributed:
<TABLE>
<CAPTION>
Land............................................................... $ 20,151
<S> <C>
Building and improvements.......................................... 115,192
Accumulated depreciation........................................... (3,446)
Restricted cash.................................................... 802
Deferred rent receivable........................................... 387
Deferred financing costs........................................... 854
Prepaid expenses and other assets.................................. 579
Acquisition facilities payable..................................... (81,450)
Accounts payable and accrued expenses.............................. (513)
---------
Investment in affiliates....................................... $ 52,556
---------
---------
</TABLE>
F-16
<PAGE>
FIRST INDUSTRIAL, L.P.
NOTES TO FINANCIAL STATEMENTS
AND CONTRIBUTING BUSINESSES
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
12. EXTRAORDINARY ITEMS
Upon consummation of the Initial Offering, certain Contributing Businesses'
loans were paid off and the related unamortized deferred financing fees totaling
$1,449 were written off. The write-off is shown as an extraordinary loss in the
combined statement of operations of the Contributing Businesses for the six
months ended June 30, 1994.
In 1996, the Operating Partnership terminated the 1994 Acquisition Facility,
the 1995 Acquisition Facility, the 1996 Acquisition Facility, the Construction
Loans and the 1996 Credit Line before their contractual maturity date. The
resulting write-off of unamortized deferred financing costs and prepayment fee
incurred to retire the above mentioned loans is shown as an extraordinary loss
in the statement of operations for the year ended December 31, 1996.
13. COMMITMENTS AND CONTINGENCIES
In the normal course of business, the Operating Partnership is involved in
legal actions arising from the ownership of its properties. In management's
opinion, the liabilities, if any, that may ultimately result from such legal
actions are not expected to have a materially adverse effect on the financial
position, operations or liquidity of the Operating Partnership.
Nine properties have leases granting the tenants options to purchase the
property. Such options are exercisable at various times and at appraised fair
market value or at a fixed purchase price generally in excess of the Operating
Partnership's purchase price. The Operating Partnership has not received notice
for the exercise of any tenant purchase options.
The Operating Partnership has committed to the construction of two light
industrial and five bulk warehouse properties totaling approximately 1.0 million
square feet (unaudited). The estimated total construction costs are
approximately $27.4 million (unaudited). The Operating Partnership is not acting
as the general contractor for these construction projects.
The Operating Partnership is the guarantor of the 1994 Mortgage Loan.
14. SUBSEQUENT EVENTS (UNAUDITED)
On January 9, 1997, the Operating Partnership purchased a 482,400 square
foot bulk warehouse located in Indianapolis, Indiana for approximately $7.1
million.
On January 31, 1997, the Operating Partnership purchased 10 bulk warehouses
and 29 light industrial properties located in Long Island, New York and northern
New Jersey totaling 2,733,414 square feet for approximately $138.8 million.
On February 20, 1997, the Operating Partnership purchased a 58,746 square
foot light industrial property in Dayton, Ohio. The purchase price for the
property was approximately $1.5 million.
On March 4, 1997, the Operating Partnership declared a distribution of $.505
per unit payable on April 21, 1997 to unitholders of record on March 31, 1997.
On March 21, 1997, the Operating Partnership purchased a 179,400 square foot
bulk warehouse in Taylor, Michigan for approximately $5.1 million.
On March 28, 1997, the Operating Partnership purchased a 84,956 square foot
light industrial property in Buffalo Grove, Illinois for approximately $4.1
million.
F-17
<PAGE>
FIRST INDUSTRIAL, L.P.
NOTES TO FINANCIAL STATEMENTS
AND CONTRIBUTING BUSINESSES
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
14. SUBSEQUENT EVENTS (UNAUDITED) (CONTINUED)
On March 31, 1997, the Operating Partnership purchased a 112,082 square foot
light industrial property in New Brighton, Minnesota for approximately $3.2
million.
On March 31, 1997, the Operating Partnership purchased a 79,675 square foot
light industrial property in Brooklyn Park, Minnesota for approximately $4.4
million.
On April 3, 1997, the Operating Partnership purchased a 49,190 square foot
light industrial property in Eden Prairie, Minnesota for approximately $2.1
million.
On April 4, 1997, the Operating Partnership purchased a 243,000 square foot
bulk warehouse property in Columbus, Ohio for approximately $5.4 million.
On April 4, 1997, the Operating Partnership borrowed $309.8 million from an
institutional lender (the "Defeasance Loan"). The Defeasance Loan is unsecured,
bears interest at LIBOR plus 1% and matures July 1, 1999, unless extended by the
Operating Partnership, subject to certain conditions, for an additional two-year
period, thereby maturing July 1, 2001. The gross proceeds from the Defeasance
Loan were contributed to the Financing Partnership, which used the gross
proceeds to defease (as defined by the terms of the 1994 Mortgage Loan
agreement) the 1994 Mortgage Loan.
15. PRO FORMA FINANCIAL INFORMATION (UNAUDITED)
The following Pro Forma Condensed Statements of Operations for the years
ended December 31, 1996 and 1995 are presented as if the acquisition of 128
properties between January 1, 1995 and December 31, 1996 and the February 1996
Equity Offering and the October 1996 Equity Offering had occurred at January 1,
1995, and therefore include pro forma information. The pro forma information is
based upon historical information and does not purport to present what actual
results would have been had such transactions, in fact, occurred at January 1,
1995, or to project results for any future period.
PRO FORMA CONDENSED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------
1996 1995
------------ ------------
<S> <C> <C>
Total Revenues....................................................................... $ 52,283 $ 57,918
Property Expenses.................................................................... 13,914 16,723
General and Administrative Expense................................................... 4,014 3,792
Interest Expense..................................................................... 4,991 7,811
Depreciation and Amortization........................................................ 8,695 10,059
------------ ------------
Income Before Gain on Sales of Properties, Equity in Income of Other Real Estate
Partnerships and Extraordinary loss................................................. 20,669 19,533
Gain on Sales of Properties.......................................................... 4,344 --
------------ ------------
Income Before Equity in Income of Other Real Estate Partnerships..................... 25,013 19,533
Equity in Income of Other Real Estate Partnerships................................... 20,130 7,841
------------ ------------
Income Before Extraordinary Loss..................................................... $ 45,143 $ 27,374
------------ ------------
------------ ------------
</TABLE>
F-18
<PAGE>
FIRST INDUSTRIAL, L.P.
SCHEDULE III:
REAL ESTATE AND ACCUMULATED DEPRECIATION
AS OF DECEMBER 31, 1996
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
GROSS
AMOUNT
CARRIED
AT CLOSE
COSTS OF PERIOD
(F) CAPITALIZED 12/31/96
INITIAL COST SUBSEQUENT TO ---------
LOCATION (E) ---------------------- ACQUISITION
BUILDING ADDRESS (CITY/STATE) ENCUMBRANCES LAND BUILDINGS OR COMPLETION LAND
- ---------------------------- ---------------------------- ------------- --------- ----------- ------------- ---------
<S> <C> <C> <C> <C> <C> <C>
ATLANTA
700 Westlake Parkway Atlanta, GA $ 213 $ 1,551 $ 509 $ 223
800 Westlake Parkway Atlanta, GA 450 2,645 350 479
900 Westlake Parkway Atlanta, GA 266 0 1 267
4050 Southmeadow Parkway Atlanta, GA 401 2,813 157 425
4051 Southmeadow Parkway Atlanta, GA 697 3,486 686 726
4071 Southmeadow Parkway Atlanta, GA 750 4,460 714 828
4081 Southmeadow Parkway Atlanta, GA 1,012 5,450 611 1,157
1875 Rockdale Industrial Atlanta, GA
Blvd. 386 2,264 30 386
1605 Indian Brook Way Gwinnett, GA 1,008 3,800 1,180 1,012
3312 N. Berkeley Lake Road Duluth, GA 2,937 16,644 777 3,045
5015 Oakbrook Parkway Atlanta, GA 1,183 0 3,271 1,247
]5570 Tulane Drive (c) Atlanta, GA 527 2,984 129 546
3495 Bankhead Highway (c) Atlanta, GA 983 5,568 148 1,003
755 Selig Drive Atlanta, GA 143 808 88 155
CHICAGO
305-311 Era Drive Northbrook, IL 200 1,154 133 205
700-714 Landwehr Road Northbrook, IL 357 2,052 101 357
4330 South Racine Avenue Chicago, IL 448 1,893 239 468
13040 S. Crawford Ave. Alsip, IL 1,073 6,193 24 1,073
12241 Melrose Street Franklin Park, IL 332 1,931 1,066 469
7200 S Leamington Bedford Park, IL 798 4,595 159 818
12301-12325 S Laramie Ave Alsip, IL 650 3,692 424 659
6300 W Howard Street Niles, IL 743 4,208 343 782
301 Hintz Wheeling, IL 160 905 71 167
301 Alice Wheeling, IL 218 1,236 58 225
410 W 169th Street South Holland, IL 462 2,618 124 476
CINCINNATI
9900-9970 Princeton Cincinnati, OH (a) 545 3,088 616 566
2940 Highland Avenue Cincinnati, OH (a) 1,717 9,730 415 1,770
4700-4750 Creek Road Cincinnati, OH (a) 1,080 6,118 267 1,109
4860 Duff Drive Cincinnati, OH 67 378 8 68
4866 Duff Drive Cincinnati, OH 67 379 7 68
4884 Duff Drive Cincinnati, OH 104 591 13 106
4890 Duff Drive Cincinnati, OH 104 592 12 106
9636-9643 Interocean Drive Cincinnati, OH 123 695 14 125
<CAPTION>
ACCUMULATED
BUILDING AND DEPRECIATION YEAR BUILT/ DEPRECIABLE
BUILDING ADDRESS IMPROVEMENTS TOTAL 12/31/96 RENOVATED LIVES (YEARS)
- ---------------------------- ------------- --------- ------------- ----------- -----------------
<S> <C> <C> <C> <C> <C>
ATLANTA
700 Westlake Parkway $ 2,050 $ 2,273 $ 165 1990 (g)
800 Westlake Parkway 2,966 3,445 204 1991 (g)
900 Westlake Parkway 0 267 0
4050 Southmeadow Parkway 2,946 3,371 203 1991 (g)
4051 Southmeadow Parkway 4,143 4,869 295 1989 (g)
4071 Southmeadow Parkway 5,096 5,924 351 1991 (g)
4081 Southmeadow Parkway 5,916 7,073 394 1989 (g)
1875 Rockdale Industrial
Blvd. 2,294 2,680 142 1966 (g)
1605 Indian Brook Way 4,976 5,988 138 1995 (g)
3312 N. Berkeley Lake Road 17,313 20,358 395 1969 (g)
5015 Oakbrook Parkway 3,207 4,454 0 (i)
]5570 Tulane Drive (c) 3,094 3,640 6 1996 (g)
3495 Bankhead Highway (c) 5,696 6,699 12 1986 (g)
755 Selig Drive 884 1,039 0 (i)
CHICAGO
305-311 Era Drive 1,282 1,487 83 1978 (g)
700-714 Landwehr Road 2,153 2,510 139 1978 (g)
4330 South Racine Avenue 2,112 2,580 1,135 1978 (g)
13040 S. Crawford Ave. 6,217 7,290 362 1976 (g)
12241 Melrose Street 2,860 3,329 175 1969 (g)
7200 S Leamington 4,734 5,552 128 1950 (g)
12301-12325 S Laramie Ave 4,107 4,766 105 1975 (g)
6300 W Howard Street 4,512 5,294 110 1956/1964 (g)
301 Hintz 969 1,136 24 1960 (g)
301 Alice 1,287 1,512 32 1965 (g)
410 W 169th Street 2,728 3,204 56 1974 (g)
CINCINNATI
9900-9970 Princeton 3,683 4,249 70 1970 (g)
2940 Highland Avenue 10,092 11,862 209 1969/1974 (g)
4700-4750 Creek Road 6,356 7,465 132 1960 (g)
4860 Duff Drive 385 453 1 1979 (g)
4866 Duff Drive 385 453 1 1979 (g)
4884 Duff Drive 602 708 1 1979 (g)
4890 Duff Drive 602 708 1 1979 (g)
9636-9643 Interocean Drive 707 832 1 1983 (g)
</TABLE>
F-19
<PAGE>
FIRST INDUSTRIAL, L.P.
SCHEDULE III:
REAL ESTATE AND ACCUMULATED DEPRECIATION (CONTINUED)
AS OF DECEMBER 31, 1996
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
GROSS
AMOUNT
CARRIED
AT CLOSE
COSTS OF PERIOD
(F) CAPITALIZED 12/31/96
INITIAL COST SUBSEQUENT TO ---------
LOCATION (E) ---------------------- ACQUISITION
BUILDING ADDRESS (CITY/STATE) ENCUMBRANCES LAND BUILDINGS OR COMPLETION LAND
- ---------------------------- ---------------------------- ------------- --------- ----------- ------------- ---------
<S> <C> <C> <C> <C> <C> <C>
CLEVELAND
6675 Parkland Blvd Cleveland, OH $ 548 $ 3,103 $ 154 $ 569
COLUMBUS
6911 Americana Parkway Columbus, OH 314 1,777 74 321
3800 Lockbourne Industrial Columbus, OH
Parkway 1,133 6,421 165 1,153
3800 Groveport Road Columbus, OH 2,145 12,154 173 2,163
DAYTON
6094-6104 Executive Blvd Dayton, OH 181 1,025 66 186
6202-6220 Executive Blvd Dayton, OH 268 1,521 86 275
6268-6294 Executive Blvd Dayton, OH 255 1,444 85 261
5749-5753 Executive Blvd Dayton, OH 50 282 37 53
6230-6266 Executive Blvd Dayton, OH 271 1,534 72 279
DETROIT
21477 Bridge Street Southfield, MI 244 1,386 214 253
46750 Port Street Plymouth, MI 360 33 1,072 361
32450 N Avis Drive Madison Heights, MI 281 1,590 50 286
32200 N Avis Drive Madison Heights, MI 408 2,311 39 411
32440-32442 Industrial Drive Madison Heights, MI 120 679 81 123
32450 Industrial Drive Madison Heights, MI 65 369 18 66
11813 Hubbard Livonia, MI 177 1,001 34 180
11844 Hubbard Livonia, MI 189 1,069 61 191
11866 Hubbard Livonia, MI 189 1,073 24 191
12050-12300 Hubbard (c) Livonia, MI 425 2,410 42 428
12707 Eckles Road Plymouth Township, MI 255 1,445 106 267
9300-9328 Harrison Rd Romulus, MI 147 834 50 154
9330-9358 Harrison Rd Romulus, MI 81 456 29 84
28420-28448 Highland Rd Romulus, MI 143 809 48 149
28450-28478 Highland Rd Romulus, MI 81 461 28 85
28421-28449 Highland Rd Romulus, MI 109 617 37 114
28451-28479 Highland Rd Romulus, MI 107 608 36 112
28825-28909 Highland Rd Romulus, MI 70 395 24 73
28933-29017 Highland Rd Romulus, MI 112 634 38 117
28824-28908 Highland Rd Romulus, MI 134 760 43 140
28932-29016 Highland Rd Romulus, MI 123 694 40 128
9710-9734 Harrison Rd Romulus, MI 125 706 41 130
9740-9772 Harrison Rd Romulus, MI 132 749 43 138
9840-9868 Harrison Rd Romulus, MI 144 815 46 150
9800-9824 Harrison Rd Romulus, MI 117 664 40 123
29265-29285 Airport Dr Romulus, MI 140 794 46 147
29185-29225 Airport Dr Romulus, MI 140 792 46 146
29149-29165 Airport Dr Romulus, MI 216 1,225 70 226
29101-29115 Airport Dr Romulus, MI 130 738 43 136
29031-29045 Airport Dr Romulus, MI 124 704 41 130
29050-29062 Airport Dr Romulus, MI 127 718 42 133
29120-29134 Airport Dr Romulus, MI 161 912 52 168
29200-29214 Airport Dr Romulus, MI 170 963 55 178
9301-9339 Middlebelt Rd Romulus, MI 124 703 41 130
38200 Plymouth Livonia, MI 2,700 0 2,617 2,753
<CAPTION>
ACCUMULATED
BUILDING AND DEPRECIATION YEAR BUILT/ DEPRECIABLE
BUILDING ADDRESS IMPROVEMENTS TOTAL 12/31/96 RENOVATED LIVES (YEARS)
- ---------------------------- ------------- --------- ------------- ----------- -----------------
<S> <C> <C> <C> <C> <C>
CLEVELAND
6675 Parkland Blvd $ 3,236 $ 3,805 $ 20 1991 (g)
COLUMBUS
6911 Americana Parkway 1,844 2,165 38 1980 (g)
3800 Lockbourne Industrial
Parkway 6,566 7,719 54 1986 (g)
3800 Groveport Road 12,309 14,472 102 1986 (g)
DAYTON
6094-6104 Executive Blvd 1,086 1,272 16 1975 (g)
6202-6220 Executive Blvd 1,600 1,875 23 1976 (g)
6268-6294 Executive Blvd 1,523 1,784 22 1989 (g)
5749-5753 Executive Blvd 316 369 4 1975 (g)
6230-6266 Executive Blvd 1,598 1,877 13 1979 (g)
DETROIT
21477 Bridge Street 1,591 1,844 66 1986 (g)
46750 Port Street 1,104 1,465 1 1996 (g)
32450 N Avis Drive 1,635 1,921 37 1974 (g)
32200 N Avis Drive 2,347 2,758 53 1973 (g)
32440-32442 Industrial Drive 757 880 19 1979 (g)
32450 Industrial Drive 386 452 9 1979 (g)
11813 Hubbard 1,032 1,212 23 1979 (g)
11844 Hubbard 1,128 1,319 25 1979 (g)
11866 Hubbard 1,095 1,286 25 1979 (g)
12050-12300 Hubbard (c) 2,449 2,877 56 1981 (g)
12707 Eckles Road 1,539 1,806 16 1990 (g)
9300-9328 Harrison Rd 877 1,031 4 1978 (g)
9330-9358 Harrison Rd 482 566 2 1978 (g)
28420-28448 Highland Rd 851 1,000 4 1979 (g)
28450-28478 Highland Rd 485 570 2 1979 (g)
28421-28449 Highland Rd 649 763 3 1980 (g)
28451-28479 Highland Rd 639 751 3 1980 (g)
28825-28909 Highland Rd 416 489 2 1981 (g)
28933-29017 Highland Rd 667 784 3 1982 (g)
28824-28908 Highland Rd 797 937 3 1982 (g)
28932-29016 Highland Rd 729 857 3 1982 (g)
9710-9734 Harrison Rd 742 872 3 1987 (g)
9740-9772 Harrison Rd 786 924 3 1987 (g)
9840-9868 Harrison Rd 855 1,005 4 1987 (g)
9800-9824 Harrison Rd 698 821 3 1987 (g)
29265-29285 Airport Dr 833 980 3 1983 (g)
29185-29225 Airport Dr 832 978 3 1983 (g)
29149-29165 Airport Dr 1,285 1,511 5 1984 (g)
29101-29115 Airport Dr 775 911 3 1985 (g)
29031-29045 Airport Dr 739 869 3 1985 (g)
29050-29062 Airport Dr 754 887 3 1986 (g)
29120-29134 Airport Dr 957 1,125 4 1986 (g)
29200-29214 Airport Dr 1,010 1,188 4 1985 (g)
9301-9339 Middlebelt Rd 738 868 3 1983 (g)
38200 Plymouth 2,564 5,317 0
</TABLE>
F-20
<PAGE>
FIRST INDUSTRIAL, L.P.
SCHEDULE III:
REAL ESTATE AND ACCUMULATED DEPRECIATION (CONTINUED)
AS OF DECEMBER 31, 1996
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
GROSS
AMOUNT
CARRIED
AT CLOSE
COSTS OF PERIOD
(F) CAPITALIZED 12/31/96
INITIAL COST SUBSEQUENT TO ---------
LOCATION (E) ---------------------- ACQUISITION
BUILDING ADDRESS (CITY/STATE) ENCUMBRANCES LAND BUILDINGS OR COMPLETION LAND
- ---------------------------- ---------------------------- ------------- --------- ----------- ------------- ---------
<S> <C> <C> <C> <C> <C> <C>
INDIANAPOLIS
1445 Brookville Way Indianpolis, IN (a) $ 459 $ 2,603 $ 242 $ 475
1440 Brookville Way Indianpolis, IN (a) 665 3,770 219 684
1240 Brookville Way Indianpolis, IN (a) 247 1,402 128 258
1220 Brookville Way Indianpolis, IN (a) 223 40 30 226
1345 Brookville Way Indianpolis, IN (b) 586 3,321 239 601
1350 Brookville Way Indianpolis, IN (a) 205 1,161 77 211
1315 Sadlier Circle E Dr Indianpolis, IN (b) 57 322 39 61
1341 Sadlier Circle E Dr Indianpolis, IN (b) 131 743 50 136
1322-1438 Sadlier Circle E Indianpolis, IN
Dr (b) 145 822 75 152
1327-1441 Sadlier Circle E Indianpolis, IN
Dr (b) 218 1,234 88 225
1304 Sadlier Circle E Dr Indianpolis, IN (b) 71 405 46 75
1402 Sadlier Circle E Dr Indianpolis, IN (b) 165 934 66 170
1504 Sadlier Circle E Dr Indianpolis, IN (b) 219 1,238 70 225
1311 Sadlier Circle E Dr Indianpolis, IN (b) 54 304 60 57
1365 Sadlier Circle E Dr Indianpolis, IN (b) 121 688 49 126
1352-1354 Sadlier Circle E Indianpolis, IN
Dr (b) 178 1,008 90 188
1338 Sadlier Circle E Dr Indianpolis, IN (b) 81 460 48 85
1327 Sadlier Circle E Dr Indianpolis, IN (b) 52 295 31 56
1428 Sadlier Circle E Dr Indianpolis, IN (b) 21 117 23 23
1230 Brookville Way Indianpolis, IN (a) 103 586 40 109
6951 E 30th St Indianpolis, IN 256 1,449 91 265
6701 E 30th St Indianpolis, IN 78 443 40 82
6737 E 30th St Indianpolis, IN 385 2,181 122 398
6555 E 30th St Indianpolis, IN 840 4,760 129 855
2432-2436 Shadeland Indianpolis, IN 212 1,199 167 229
8402-8440 E 33rd St Indianpolis, IN 222 1,260 35 227
8520-8630 E 33rd St Indianpolis, IN 326 1,848 50 333
8710-8768 E 33rd St Indianpolis, IN 175 993 30 184
3316-3346 N. Pagosa Court Indianpolis, IN 325 1,842 50 332
3331 Raton Court Indianpolis, IN 138 802 22 141
MILWAUKEE
6523 N. Sydney Place Milwaukee, WI 172 976 140 176
8800 W Bradley Milwaukee, WI 375 2,125 130 388
1435 North 113th St Wauwatosa, WI 300 1,699 79 309
MINNEAPOLIS
6701 Parkway Circle Brooklyn Center, MN 350 2,131 343 377
6601 Shingle Creek Parkway Brooklyn Center, MN 411 2,813 484 502
10120 W 76th Street Eden Prairie, MN 315 1,804 85 315
7615 Golden Triangle Eden Prairie, MN 268 1,532 255 268
7625 Golden Triangle Eden Prairie, MN 415 2,375 133 415
2605 Fernbrook Lane North Plymouth, MN 443 2,533 263 445
12155 Nicollet Ave. Burnsville, MN 286 0 1,673 287
73rd Avenue North Brooklyn Park, MN 504 2,856 73 512
1905 W Country Road C Roseville, MN 402 2,278 64 409
2730 Arthur Street Roseville, MN 824 4,671 76 832
10205 51st Avenue North Plymouth, MN 180 1,020 68 187
4100 Peavey Road Chaska, MN 399 2,261 124 415
11300 Hamshire Ave South Bloomington, MN 527 2,985 125 541
375 Rivertown Drive Woodbury, MN 1,083 6,135 266 1,119
5205 Highway 169 Plymouth, MN 446 2,525 331 473
6451-6595 Citywest Parkway Eden Prairie, MN 525 2,975 110 538
7100-7198 Shady Oak Rd (d) Eden Prairie, MN 1,118 6,333 146 1,135
7500-7546 Washington Square Eden Prairie, MN 229 1,300 28 233
<CAPTION>
ACCUMULATED
BUILDING AND DEPRECIATION YEAR BUILT/ DEPRECIABLE
BUILDING ADDRESS IMPROVEMENTS TOTAL 12/31/96 RENOVATED LIVES (YEARS)
- ---------------------------- ------------- --------- ------------- ----------- -----------------
<S> <C> <C> <C> <C> <C>
INDIANAPOLIS
1445 Brookville Way $ 2,829 $ 3,304 $ 61 1989 (g)
1440 Brookville Way 3,970 4,654 81 1990 (g)
1240 Brookville Way 1,519 1,777 32 1990 (g)
1220 Brookville Way 67 293 1 1990 (g)
1345 Brookville Way 3,545 4,146 74 1992 (g)
1350 Brookville Way 1,232 1,443 25 1994 (g)
1315 Sadlier Circle E Dr 357 418 7 1970/1992 (g)
1341 Sadlier Circle E Dr 788 924 16 1971/1992 (g)
1322-1438 Sadlier Circle E
Dr 890 1,042 18 1971/1992 (g)
1327-1441 Sadlier Circle E
Dr 1,315 1,540 28 1992 (g)
1304 Sadlier Circle E Dr 447 522 9 1971/1992 (g)
1402 Sadlier Circle E Dr 995 1,165 20 1970/1992 (g)
1504 Sadlier Circle E Dr 1,302 1,527 27 1971/1992 (g)
1311 Sadlier Circle E Dr 361 418 8 1971/1992 (g)
1365 Sadlier Circle E Dr 732 858 15 1971/1992 (g)
1352-1354 Sadlier Circle E
Dr 1,088 1,276 22 1970/1992 (g)
1338 Sadlier Circle E Dr 504 589 10 1971/1992 (g)
1327 Sadlier Circle E Dr 322 378 7 1971/1992 (g)
1428 Sadlier Circle E Dr 138 161 3 1971/1992 (g)
1230 Brookville Way 620 729 13 1995 (g)
6951 E 30th St 1,531 1,796 32 1995 (g)
6701 E 30th St 479 561 10 1992 (g)
6737 E 30th St 2,290 2,688 47 1995 (g)
6555 E 30th St 4,874 5,729 71 1969/1981 (g)
2432-2436 Shadeland 1,349 1,578 16 1968 (g)
8402-8440 E 33rd St 1,290 1,517 8 1977 (g)
8520-8630 E 33rd St 1,891 2,224 12 1976 (g)
8710-8768 E 33rd St 1,014 1,198 7 1979 (g)
3316-3346 N. Pagosa Court 1,885 2,217 12 1977 (g)
3331 Raton Court 821 962 5 1979 (g)
MILWAUKEE
6523 N. Sydney Place 1,112 1,288 29 1978 (g)
8800 W Bradley 2,242 2,630 32 1982 (g)
1435 North 113th St 1,769 2,078 11 1993 (g)
MINNEAPOLIS
6701 Parkway Circle 2,447 2,824 178 1987 (g)
6601 Shingle Creek Parkway 3,206 3,708 243 1985 (g)
10120 W 76th Street 1,889 2,204 87 1987 (g)
7615 Golden Triangle 1,787 2,055 123 1987 (g)
7625 Golden Triangle 2,508 2,923 150 1987 (g)
2605 Fernbrook Lane North 2,794 3,239 168 1987 (g)
12155 Nicollet Ave. 1,672 1,959 48 1995 (g)
73rd Avenue North 2,921 3,433 54 1995 (g)
1905 W Country Road C 2,335 2,744 44 1993 (g)
2730 Arthur Street 4,739 5,571 89 1995 (g)
10205 51st Avenue North 1,081 1,268 20 1990 (g)
4100 Peavey Road 2,369 2,784 34 1988 (g)
11300 Hamshire Ave South 3,096 3,637 38 1983 (g)
375 Rivertown Drive 6,365 7,484 53 1996 (g)
5205 Highway 169 2,829 3,302 26 1960 (g)
6451-6595 Citywest Parkway 3,072 3,610 25 1984 (g)
7100-7198 Shady Oak Rd (d) 6,462 7,597 40 1982 (g)
7500-7546 Washington Square 1,324 1,557 3 1975 (g)
</TABLE>
F-21
<PAGE>
FIRST INDUSTRIAL, L.P.
SCHEDULE III:
REAL ESTATE AND ACCUMULATED DEPRECIATION (CONTINUED)
AS OF DECEMBER 31, 1996
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
GROSS
AMOUNT
CARRIED
AT CLOSE
COSTS OF PERIOD
(F) CAPITALIZED 12/31/96
INITIAL COST SUBSEQUENT TO ---------
LOCATION (E) ---------------------- ACQUISITION
BUILDING ADDRESS (CITY/STATE) ENCUMBRANCES LAND BUILDINGS OR COMPLETION LAND
- ---------------------------- ---------------------------- ------------- --------- ----------- ------------- ---------
<S> <C> <C> <C> <C> <C> <C>
7550-7588 Washington Square Eden Prairie, MN $ 153 $ 867 $ 19 $ 156
5240-5300 Valley Industrial Eden Prairie, MN
Blvd S 362 2,049 73 370
6656 Wedgewood Road Maple Grove, MN 219 -- 109 219
NASHVILLE
3099 Barry Drive Portland, TN 418 2,368 49 424
3150 Barry Drive Portland, TN 941 5,333 326 987
5599 Highway 31 West Portland, TN 564 3,196 62 571
ST. LOUIS
2337 Centerline Drive St. Louis, MO (b) 239 1,370 110 239
6951 N Hanley (c) Hazelwood, MO 405 2,295 93 417
------------- --------- ----------- ------------- ---------
$45,578 $ 53,570 $ 272,934 $ 27,277 $ 55,425
------------- --------- ----------- ------------- ---------
------------- --------- ----------- ------------- ---------
<CAPTION>
ACCUMULATED
BUILDING AND DEPRECIATION YEAR BUILT/ DEPRECIABLE
BUILDING ADDRESS IMPROVEMENTS TOTAL 12/31/96 RENOVATED LIVES (YEARS)
- ---------------------------- ------------- --------- ------------- ----------- -----------------
<S> <C> <C> <C> <C> <C>
7550-7588 Washington Square $ 883 $ 1,039 $ 2 1973 (g)
5240-5300 Valley Industrial
Blvd S 2,114 2,484 4 1975 (g)
6656 Wedgewood Road 109 328 7 1989 (g)
NASHVILLE
3099 Barry Drive 2,411 2,835 15 1995 (g)
3150 Barry Drive 5,613 6,600 35 1993 (g)
5599 Highway 31 West 3,251 3,822 20 1995 (g)
ST. LOUIS
2337 Centerline Drive 1,480 1,719 88 1967 (g)
6951 N Hanley (c) 2,376 2,793 5 1965 (g)
------------- --------- -------------
$ 298,356 $ 353,781 $ 8,133
------------- --------- -------------
------------- --------- -------------
</TABLE>
- ------------------------
NOTES:
(a) Collateralizes the CIGNA Loan.
(b) Collateralizes the Assumed Loans.
(c) Comprised of 2 properties.
(d) Comprised of 3 properties.
(e) See description of encumbrances in Note 4 to Notes to Financial Statements.
(f) Initial cost for each respective property is total acquisition costs
associated with its purchase.
(g) Depreciation is computed based upon the following estimated lives:
Buildings, Improvements 31.5 to 40 years
Tenant Improvements, Leasehold Improvements Life of lease
Furniture, Fixtures and equipment 5 to 10 years
(h) At December 31, 1996, the aggregate cost of land and buildings and equipment
for federal income tax purpose was approximately $326,284.
(i) These properties represent property developments that haven't been placed in
service.
F-22
<PAGE>
FIRST INDUSTRIAL, L.P. AND CONTRIBUTING BUSINESSES
SCHEDULE III:
REAL ESTATE AND ACCUMULATED DEPRECIATION (CONTINUED)
AS OF DECEMBER 31, 1996
(DOLLARS IN THOUSANDS)
The changes in total real estate assets for three years ended December 31,
1996 are as follows:
<TABLE>
<CAPTION>
1996 1995 1994
---------- ---------- ----------
<S> <C> <C> <C>
Balance, Beginning of Year................................................... $ 96,392 $ 163,168 $ 209,177
Transfer of Assets Between Contributing Businesses........................... -- -- (496,147)
Transfer of Assets Between Other Real Estate Partnerships.................... -- (135,343) --
Disposition of Real Estate Assets............................................ (11,890) -- --
Acquisition, Construction Costs and Improvements............................. 269,279 68,567 450,138
---------- ---------- ----------
Balance, End of Year......................................................... $ 353,781 $ 96,392 $ 163,168
---------- ---------- ----------
---------- ---------- ----------
</TABLE>
The changes in accumulated depreciation for three years ended December 31,
1996 are as follows:
<TABLE>
<CAPTION>
1996 1995 1994
---------- ---------- ----------
<S> <C> <C> <C>
Balance, Beginning of Year................................................... $ 4,852 $ 4,112 $ 38,015
Transfer of Assets Between Contributing Businesses........................... -- -- (38,022)
Transfer of Assets Between Other Real Estate Partnerships.................... -- (3,352) --
Disposition of Real Estate Assets............................................ (1,834) -- --
Depreciation for Year........................................................ 5,115 4,092 4,119
---------- ---------- ----------
Balance, End of Year......................................................... $ 8,133 $ 4,852 $ 4,112
---------- ---------- ----------
---------- ---------- ----------
</TABLE>
F-23
<PAGE>
FIRST INDUSTRIAL, L.P.
UNAUDITED PRO FORMA BALANCE SHEET
AS OF DECEMBER 31, 1996
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
FIRST INDUSTRIAL,
L.P. LAZARUS BURMAN FIRST INDUSTRIAL,
(HISTORICAL) PROPERTIES L.P.
NOTE 2(A) NOTE 2 (B) PRO FORMA
------------------ --------------- ------------------
<S> <C> <C> <C>
ASSETS
ASSETS:
Investment in Real Estate:
Land................................................... $ 55,425 $ 20,826 $ 76,251
Buildings and Improvements............................. 291,942 118,014 409,956
Construction in Progress............................... 6,414 -- 6,414
Less: Accumulated Depreciation......................... (8,133) -- (8,133)
-------- --------------- --------
Net Investment in Real Estate........................ 345,648 138,840 484,488
-------- --------------- --------
Investment in Other Real Estate Partnerships............. 258,411 -- 258,411
Cash and Cash Equivalents................................ 4,295 -- 4,295
Tenant Accounts Receivable, Net.......................... 1,021 -- 1,021
Deferred Rent Receivable................................. 1,280 -- 1,280
Interest Rate Protection Agreements, Net................. 1,723 -- 1,723
Deferred Financing Costs, Net............................ 1,140 -- 1,140
Prepaid Expenses and Other Assets, Net................... 8,604 -- 8,604
-------- --------------- --------
Total Assets......................................... $ 622,122 $ 138,840 $ 760,962
-------- --------------- --------
-------- --------------- --------
LIABILITIES AND PARTNERS' CAPITAL
LIABILITIES:
Mortgage Loans Payable................................... $ 45,578 $ 4,505 $ 50,083
Acquisition Facilities Payable........................... 4,400 86,476 90,876
Promissory Notes Payable................................. 9,919 -- 9,919
Accounts Payable and Accrued Expenses.................... 8,770 -- 8,770
Rents Received in Advance and Security Deposits.......... 1,942 -- 1,942
Distributions Payable.................................... 16,281 -- 16,281
-------- --------------- --------
Total Liabilities.................................... 86,890 90,981 177,871
-------- --------------- --------
Commitments and Contingencies.............................. -- -- --
PARTNERS' CAPITAL:
General Partner...................................... 496,169 -- 496,169
Limited Partners..................................... 39,063 47,859 86,922
-------- --------------- --------
Total Partners' Capital.............................. 535,232 47,859 583,091
-------- --------------- --------
Total Liabilities and Partners' Capital.............. $ 622,122 $ 138,840 $ 760,962
-------- --------------- --------
-------- --------------- --------
</TABLE>
The accompanying notes are an integral part of the unaudited pro forma financial
statements.
F-24
<PAGE>
FIRST INDUSTRIAL, L.P.
UNAUDITED PRO FORMA STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1996
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
AGGREGATE
FIRST 1996 LAZARUS
INDUSTRIAL, ACQUISITION BURMAN
L.P. PROPERTIES PRO FORMA PROPERTIES PRO FORMA
(HISTORICAL) (HISTORICAL) ADJUSTMENTS (HISTORICAL) ADJUSTMENTS
NOTE 3(A) NOTE 3(B) NOTE 3(C) SUBTOTAL NOTE 3(D) NOTE 3(E)
--------------- ----------- ------------- --------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Revenues:
Rental Income.......................... $ 29,166 $ 12,953 $ -- $ 42,119 $ 18,606 $ --
Tenant Recoveries and Other Income..... 8,421 1,743 -- 10,164 4,636 --
------- ----------- ------------- --------- ----------- -------------
Total Revenues................... 37,587 14,696 -- 52,283 23,242 --
------- ----------- ------------- --------- ----------- -------------
Expenses:
Real Estate Taxes...................... 6,109 2,178 -- 8,287 4,767 --
Repairs and Maintenance................ 1,071 813 -- 1,884 1,477 --
Property Management.................... 1,153 567 -- 1,720 732 --
Utilities.............................. 1,047 273 -- 1,320 959 --
Insurance.............................. 271 147 -- 418 275 --
Other.................................. 284 1 -- 285 457 --
General and Administrative............. 4,014 -- -- 4,014 -- --
Interest............................... 4,685 -- 306 4,991 -- 6,101
Amortization of Interest Rate
Protection Agreements, and Deferred
Financing Costs...................... 196 -- -- 196 -- --
Depreciation and Other Amortization.... 6,310 -- 2,189 8,499 -- 2,950
------- ----------- ------------- --------- ----------- -------------
Total Expenses................... 25,140 3,979 2,495 31,614 8,667 9,051
------- ----------- ------------- --------- ----------- -------------
Income Before Gain on Sales of
Properties, Equity in Income of Other
Real Estate Partnerships and
Extraordinary Item...................... 12,447 10,717 (2,495) 20,669 14,575 (9,051)
Gain on Sales of Properties.............. 4,344 -- -- 4,344 -- --
------- ----------- ------------- --------- ----------- -------------
Income Before Equity in Income of Other
Real Estate Partnerships and
Extraordinary Item...................... 16,791 10,717 (2,495) 25,013 14,575 (9,051)
Equity in Income of Other Real Estate
Partnerships............................ 20,130 -- -- 20,130 -- --
------- ----------- ------------- --------- ----------- -------------
Income Before Extraordinary Item......... $ 36,921 $ 10,717 $ (2,495) $ 45,143 $ 14,575 $ (9,051)
------- ----------- ------------- --------- ----------- -------------
------- ----------- ------------- --------- ----------- -------------
<CAPTION>
FIRST
INDUSTRIAL,
L.P.
PRO FORMA
---------------
<S> <C>
Revenues:
Rental Income.......................... $ 60,725
Tenant Recoveries and Other Income..... 14,800
-------
Total Revenues................... 75,525
-------
Expenses:
Real Estate Taxes...................... 13,054
Repairs and Maintenance................ 3,361
Property Management.................... 2,452
Utilities.............................. 2,279
Insurance.............................. 693
Other.................................. 742
General and Administrative............. 4,014
Interest............................... 11,092
Amortization of Interest Rate
Protection Agreements, and Deferred
Financing Costs...................... 196
Depreciation and Other Amortization.... 11,449
-------
Total Expenses................... 49,332
-------
Income Before Gain on Sales of
Properties, Equity in Income of Other
Real Estate Partnerships and
Extraordinary Item...................... 26,193
Gain on Sales of Properties.............. 4,344
-------
Income Before Equity in Income of Other
Real Estate Partnerships and
Extraordinary Item...................... 30,537
Equity in Income of Other Real Estate
Partnerships............................ 20,130
-------
Income Before Extraordinary Item......... $ 50,667
-------
-------
</TABLE>
The accompanying notes are an integral part of the unaudited pro forma financial
statements.
F-25
<PAGE>
FIRST INDUSTRIAL, L.P.
NOTES TO UNAUDITED PRO FORMA FINANCIAL STATEMENTS
1. BASIS OF PRESENTATION
The accompanying unaudited pro forma balance sheet and pro forma statement
of operations for First Industrial, L.P. (the "Operating Partnership") reflect
the historical financial position of the Operating Partnership as of December
31, 1996, the historical operations for the year ended December 31, 1996, the
acquisition of 111 properties between January 1, 1996 and December 31, 1996 (the
"Aggregate 1996 Acquisition Properties") and the acquisition of 39 properties on
January 31, 1997 (the "Lazarus Burman Properties"). The accompanying unaudited
pro forma balance sheet and pro forma statement of operations exclude the other
properties acquired between December 31, 1996 and April 29, 1997. The pro forma
financial statements would not be materially different if such other properties
acquired between December 31, 1996 and April 29, 1997 were included in the pro
forma financial statements. The accompanying unaudited pro forma financial
statements have been prepared based upon certain pro forma adjustments to the
historical December 31, 1996 financial statements of the Operating Partnership.
The unaudited pro forma balance sheet as of December 31, 1996 has been prepared
as if the Lazarus Burman Properties had been acquired on December 31, 1996. The
unaudited pro forma statement of operations for the year ended December 31, 1996
have been prepared as if the Aggregate 1996 Acquisition Properties and the
Lazarus Burman Properties had been acquired on January 1, 1996 or the lease
commencement date if the property was developed during 1996 and as if the
5,175,000 Operating Partnership units (the "Units") issued on February 2, 1996
(the "February 1996 Capital Contribution") and the 5,750,00 Units issued on
October 25, 1996 (the "October 1996 Capital Contribution") had been issued on
January 1, 1996.
2. PRO FORMA ASSUMPTIONS - BALANCE SHEET
(a) The historical balance sheet reflects the financial position of the
Operating Partnership as of December 31, 1996 as reported in this
Prospectus.
(b) Represents the purchase of the Lazarus Burman Properties as if the
acquisition had occurred on December 31, 1996. The Lazarus Burman Properties
were acquired in a purchase transaction for approximately $138.8 million
which was funded with $86.4 million in cash through borrowings under the
Operating Partnership's $200 million unsecured revolving credit facility
(the "1996 Unsecured Acquisition Facility"), the assumption of $4.5 million
of mortgage debt and the issuance of 1,595,282 Units valued in the aggregate
at $47.9 million.
3. PRO FORMA ASSUMPTIONS AND ADJUSTMENTS - STATEMENT OF OPERATIONS
(a) The historical operations reflect the income from continuing operations of
the Operating Partnership for the year ended December 31, 1996 as reported
in this Prospectus.
(b) Represents the operations of the Aggregate 1996 Acquisition Properties for
the period January 1, 1996 through their respective acquisition dates or the
lease commencement date if the property was developed.
(c) In connection with the acquisition of certain properties which are included
in the Aggregate 1996 Acquisition Properties, the Operating Partnership
assumed two mortgage loans totaling $9.4 million (the "Assumed
Indebtedness") and also entered into a new mortgage loan in the amount of
$36.8 million (the "CIGNA Loan"). The interest expense adjustment reflects
interest on the Assumed Loans and the CIGNA Loan as if such indebtedness was
outstanding beginning January 1, 1996. The interest expense adjustment also
reflects an increase in the acquisition facility borrowings at LIBOR plus 2%
for borrowings under the Operating Partnership's $150 million secured
revolving credit facility or LIBOR plus 1.1% for borrowings under the 1996
Unsecured Acquisition Facility for the
F-26
<PAGE>
assumed earlier purchase of certain properties which are included in the
Aggregate 1996 Acquisition Properties, offset by a reduction in interest
expense related to the assumed earlier repayment of $59.4 million and $84.2
million of acquisition facility borrowings on January 1, 1996 from the
proceeds of the February 1996 Capital Contribution and the October 1996
Capital Contribution, respectively.
The depreciation and other amortization adjustment reflects the incremental
depreciation and other amortization expense for the Aggregate 1996
Acquisition Properties from January 1, 1996 through their respective
acquisition date.
(d) The historical operations reflect the operations of the Lazarus Burman
Properties for the year ended December 31, 1996.
(e) In connection with the purchase of the Lazarus Burman Properties, the
Operating Partnership assumed two mortgage loans totaling $4.5 million (the
"Lazarus Burman Mortgage Loans"). The interest expense adjustment reflects
interest on the Lazarus Burman Mortgage Loans as if such indebtedness was
outstanding beginning January 1, 1996. The interest expense adjustment also
reflects an increase in the acquisition facility borrowings at LIBOR plus
1.1% for borrowings under the Operating Partnership's 1996 Unsecured
Acquisition Facility for the assumed earlier purchase of the Lazarus Burman
Properties.
The depreciation and other amortization adjustment reflects the incremental
depreciation and other amortization expense for the Lazarus Burman
Properties from January 1, 1996 through December 31, 1996.
F-27
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
The following discussion should be read in conjunction with the historical
Financial Statements and Notes thereto appearing elsewhere in this Prospectus.
RESULTS OF OPERATIONS
COMPARISON OF YEAR ENDED DECEMBER 31, 1996 TO YEAR ENDED DECEMBER 31, 1995
At December 31, 1996, the Operating Partnership owned 137 in-service
properties containing approximately 12.7 million square feet of GLA, compared to
30 in-service properties with approximately 3.5 million square feet of GLA at
December 31, 1995. During 1996, the Operating Partnership acquired 111
properties containing approximately 9.4 million square feet of GLA, completed
development of two properties totaling .2 million square feet of GLA and sold
six properties totaling .4 million square feet of GLA.
Revenues increased in 1996 over 1995 by $10.1 million or 37.0% due primarily
to the properties acquired after December 31, 1994. Revenues from properties
owned prior to January 1, 1995 increased in 1996 over 1995 by $.5 million or
7.4% due primarily to a lease termination fee, an increase in rental rates and
an increase in tenant recovery income.
Property expenses, which include real estate taxes, repairs and maintenance,
property management, utilities, insurance and other expenses, increased in 1996
over 1995 by $2.5 million or 32.9% due primarily to properties acquired after
December 31, 1994. For properties owned prior to January 1, 1995, property
expenses remained unchanged.
General and administrative expense increased in 1996 over 1995 by $.2
million due primarily to the additional expenses associated with managing the
Operating Partnership's growing operations (including additional professional
fees relating to additional properties owned and personnel to manage and expand
the Operating Partnership's business).
Interest expense decreased from $6.6 million in 1995 to $4.7 million in
1996. The average outstanding debt balance was approximately $24.2 million lower
in 1996 due to capital contributions from the general partner of the Operating
Partnership that were used to pay down debt.
Depreciation and amortization increased in 1996 over 1995 by $1.2 million
due primarily to the additional depreciation and amortization related to the
properties acquired after December 31, 1994.
The $4.3 million gain on sales of properties in 1996 resulted from the sale
of three properties located in Huntsville, Alabama, one property located in
Detroit, Michigan, one property located in Grand Rapids, Michigan and one
property located in Atlanta, Georgia. Gross proceeds for these property sales
totaled approximately $15.0 million.
Equity in income of Other Real Estate Partnerships increased in 1996 over
1995 by $12.3 million or 156.7% due primarily to four of the Other Real Estate
Partnerships having a full year of operations in 1996 compared to a partial year
of operations in 1995 as well as one of the Other Real Estate Partnerships
incurring a loss from the disposition of an interest rate protection agreement
in 1995.
The $2.3 million extraordinary loss in 1996 represents the write-off of
unamortized deferred financing costs and a prepayment fee for loans that were
paid off in full and retired in 1996.
F-28
<PAGE>
COMPARISON OF YEAR ENDED DECEMBER 31, 1995 TO YEAR ENDED DECEMBER 31, 1994
The results of operations for the year ended December 31, 1994 include the
operations of the Contributing Businesses from January 1, 1994 through June 30,
1994 and the operations of the Operating Partnership from July 1, 1994 through
December 31, 1994.
At December 31, 1995, the Operating Partnership owned 30 in-service
properties containing approximately 3.5 million square feet of GLA, compared to
50 in-service properties with approximately 4.9 million square feet of GLA at
December 31, 1994. During 1995, the Operating Partnership acquired 17 properties
containing approximately 2.0 million square feet of GLA. The Operating
Partnership also completed the development of three properties totaling
approximately .3 million square feet of GLA. In addition, the Operating
Partnership also contributed 40 properties with approximately 3.7 million square
feet of GLA to the Other Real Estate Partnerships.
Revenues decreased in 1995 over 1994 by $5.0 million or 15.4% due primarily
to the Contributing Businesses' properties that were contributed to the Other
Real Estate Partnerships, the operating results of which are accounted for by
the Operating Partnership under the equity method of accounting. Revenues from
properties owned prior to January 1, 1994 remained unchanged.
Property expenses, which include real estate taxes, repairs and maintenance,
property management, utilities, insurance and other expenses, decreased in 1995
over 1994 by $.7 million or 8.3% due primarily to the Contributing Businesses'
properties that were contributed to the Other Real Estate Partnerships. For
properties owned prior to January 1, 1994, property expenses remained unchanged.
General and administrative expense increased in 1995 over 1994 by $2.0
million due primarily to the additional expenses of the Company associated with
being a public company and to the additional expenses associated with managing
the Operating Partnership's growing operations (including additional
professional fees relating to additional properties owned and personnel to
manage and expand the Operating Partnership's and the Other Real Estate
Partnership's business).
Interest expense decreased from $12.6 million in 1994 to $6.6 million in
1995. The decrease results primarily from lower average debt levels in 1995.
Depreciation and amortization decreased in 1995 over 1994 by $2.4 million
due primarily to the Contributing Businesses' properties that were contributed
to the Other Real Estate Partnerships of the Operating Partnership which are
accounted for under the equity method of accounting.
Equity in income of Other Real Estate Partnerships increased in 1995 over
1994 by $1.1 million or 15.9% due primarily to one of the Other Real Estate
Partnerships having a full year of operations in 1995 compared to a partial year
of operations in 1994 which was partially offset by a loss from the disposition
of an interest rate protection agreement in 1995.
LIQUIDITY AND CAPITAL RESOURCES
At December 31, 1996, the Operating Partnership's unrestricted cash and cash
equivalents totaled $4.3 million.
Net cash provided by operating activities was $18.9 million for the year
ended December 31, 1996 compared to $4.2 million for the year ended December 31,
1995 and $(5.3) million for the year ended December 31, 1994. The increases are
primarily due to the factors discussed in "Results of Operations" above.
Net cash used in investing activities was $202.7 million for the year ended
December 31, 1996 compared to $40.9 million and $436.1 million for the years
ended December 31, 1995 and December 31, 1994, respectively. The majority of the
cash used in investing activities was for acquisition of additional properties.
F-29
<PAGE>
Net cash provided by financing activities for the year ended December 31,
1996 increased to $181.6 million from $43.2 million for the year ended December
31, 1995, reflecting capital contributions from the general partner and proceeds
from the CIGNA Loan, offset in part by increased distributions, repayment of the
Construction Loans, and a net pay down on the Operating Partnership's
acquisition facilities. Net cash provided by financing activities for the year
ended December 31, 1995 was $43.2 million, compared to $440.4 million for the
year ended December 31, 1994, reflecting primarily debt and equity transactions
relating to the Company's Initial Offering in June 1994 and an increase in
indebtedness due to the properties acquired subsequent to the Initial Offering.
The ratio of earnings to fixed charges was 6.96 for the year ended December
31, 1996 compared to 2.56 for the year ended December 31, 1995 and 1.65 for the
year ended December 31, 1994. The increases are primarily due to increased
income from continuing operations resulting from additional properties acquired
by the Operating Partnership and increased equity in income of the Other Real
Estate Partnerships, as discussed in "Results of Operations" above.
In 1996, the Operating Partnership acquired 111 industrial properties
comprising approximately 9.4 million square feet of GLA for a total purchase
price of approximately $237 million, completed the development of two build-to
suit properties comprising approximately .2 million square feet of GLA at a cost
of approximately $9.0 million and sold six properties comprising approximately
.4 million square feet of GLA for $15 million. The acquisitions and developments
were financed in part by proceeds from capital contributions from the general
partner of the Operating Partnership, borrowings under the Operating
Partnership's acquisition facilities and by new mortgage debt.
The Operating Partnership has committed to the construction of two light
industrial and five bulk warehouse properties totaling approximately 1.0 million
square feet. The estimated total construction costs are approximately $27.4
million. These developments are expected to be funded with cash flow from
operations as well as borrowings under the 1996 Unsecured Acquisition Facility.
In 1996, the Operating Partnership paid a quarterly distribution of $.4875
per unit related to each of the first, second and third quarters. In addition,
the Operating Partnership paid a fourth quarter 1996 distribution of $.505 per
unit on January 20, 1997. The total distributions paid to the Operating
Partnership's partners related to 1996 totaled $54.3 million.
On February 2, 1996, the Company completed an offering of 5.175 million
shares (inclusive of the underwriters' over-allotment option) of common stock at
a purchase price of $22 per share. The net proceeds of $106.3 million were
contributed to the Operating Partnership and used to repay outstanding
borrowings totaling $59.4 million and to fund acquisitions closed subsequently
in the first quarter of 1996.
On October 25, 1996, the Company completed an offering of 5.75 million
shares (inclusive of the underwriters' over-allotment option) of common stock at
a purchase price of $25.50 per share. The net proceeds of $137.7 million were
contributed to the Operating Partnership and used to repay outstanding
borrowings totaling $84.2 million and to fund acquisitions closed in the fourth
quarter of 1996.
On March 20, 1996, the Operating Partnership entered into a $36.7 million
mortgage loan (the "CIGNA Loan") that is collateralized by seven properties in
Indianapolis, Indiana and three properties in Cincinnati, Ohio. The CIGNA Loan
bears interest at a fixed interest rate of 7.5% and provides for monthly
principal and interest payments based on a 25-year amortization schedule. The
CIGNA Loan will mature on April 1, 2003. The CIGNA Loan may be prepaid only
after April 30, 1999, in exchange for the greater of a 1% premium or a yield
maintenance premium.
On March 20, 1996, the Operating Partnership, assumed an approximately $6.4
million mortgage loan and an approximately $3.0 million mortgage loan (together,
the "Assumed Loans") that are collateralized by 13 properties in Indianapolis,
Indiana and one property in Indianapolis, Indiana, respectively. The Assumed
Loans bear interest at a fixed rate of 9.25% and provide for monthly principal
and interest payments based on a 16.75-year amortization schedule. The Assumed
Loans will mature on January 1,
F-30
<PAGE>
2013. The Assumed Loans may be prepaid only after December 22, 1999, in exchange
for the greater of a 1% premium or a yield maintenance premium.
In 1997, the Operating Partnership obtained investment grade ratings on its
senior unsecured debt from Moody's Investors Service, Standard & Poor's, Duff &
Phelps Credit Rating Co. and Fitch Investors Service, Inc.
In December 1996, the Operating Partnership terminated its $150 million 1994
Acquisition Facility and entered into a $200 million 1996 Unsecured Acquisition
Facility. Borrowings under the 1996 Unsecured Acquisition Facility will be used
to finance the acquisitions and development of additional properties and for
other purposes, including to obtain working capital. It is the Operating
Partnership's intent to, from time to time, replace borrowings under the 1996
Unsecured Acquisition Facility with long term sources of capital as the
Operating Partnership deems appropriate.
The Operating Partnership has considered its short-term (one year or less)
liquidity needs and the adequacy of its estimated cash flow from operations and
other expected liquidity sources to meet these needs. The Operating Partnership
believes that its principal short-term liquidity needs are to fund normal
recurring expenses, debt service requirements and the minimum distribution
required by the Company to maintain the Company's REIT qualification under the
Internal Revenue Code. The Operating Partnership anticipates that these needs
will be met with cash flows provided by operating activities.
The Operating Partnership expects to meet long-term (greater than one year)
liquidity requirements such as property acquisitions, scheduled debt maturities,
major renovations, expansions and other non-recurring capital improvements
through long-term unsecured indebtedness and capital contributions from the
general partner of the Operating Partnership. The Operating Partnership may
finance the acquisition or development of additional properties through
borrowings under the 1996 Unsecured Acquisition Facility. At December 31, 1996,
borrowings under the 1996 Unsecured Acquisition Facility bore interest at a
weighted average interest rate of 8.25%. The borrowings under the 1996 Unsecured
Acquisition Facility were converted to an interest rate of 6.6% on January 7,
1997. As of March 20, 1997, the Operating Partnership had $68.1 million
available in additional borrowings under the 1996 Unsecured Acquisition
Facility. While the Operating Partnership may sell properties if property or
market conditions make it desirable, the Operating Partnership does not expect
to sell assets in the foreseeable future to satisfy its liquidity requirements.
In April 1997, the Operating Partnership incurred the $309.8 million
Defeasance Loan, the proceeds of which were contributed to the Financing
Partnership and used by it to defease (as defined by the terms of the 1994
Mortgage Loan agreement) the 1994 Mortgage Loan.
INFLATION
For the last several years, inflation has not had a significant impact on
the Operating Partnership because of the relatively low inflation rates in the
Operating Partnership's markets of operation. Most of the Operating
Partnership's leases require the tenants to pay their share of operating
expenses, including common area maintenance, real estate taxes and insurance,
thereby reducing the Operating Partnership's exposure to increases in costs and
operating expenses resulting from inflation. In addition, many of the
outstanding leases expire within five years which may enable the Operating
Partnership to replace existing leases with new leases at higher base rentals if
rents of existing leases are below the then-existing market rate.
F-31
<PAGE>
FIRST INDUSTRIAL, L.P. AND CONTRIBUTING BUSINESSES
SELECTED FINANCIAL DATA(1)
(IN THOUSANDS, EXCEPT PROPERTY DATA)
<TABLE>
<CAPTION>
CONTRIBUTING
BUSINESSES
FIRST INDUSTRIAL, L.P. (COMBINED)
---------------------------------------------------------------------------- -----------
SIX MONTH SIX MONTH
PERIOD PERIOD
SIX MONTHS SIX MONTHS YEAR ENDED YEAR ENDED ENDED ENDED
ENDED ENDED DECEMBER 31, DECEMBER 31, DECEMBER 31, JUNE 30,
JUNE 30, 1997 JUNE 30, 1996 1996 1995 1994 1994
--------------- -------------- ------------- ------------- ------------- -----------
STATEMENTS OF OPERATIONS
DATA:
<S> <C> <C> <C> <C> <C> <C>
Total Revenues.............. $ 40,278 $ 15,203 $ 37,587 $ 27,442 $ 9,604 $ 22,816
Property Expenses........... 12,183 4,448 9,935 7,478 2,120 6,036
General and Administrative
Expense................... 2,642 2,058 4,014 3,792 1,047 795
Interest Expense............ 9,107 1,908 4,685 6,581 807 11,773
Amortization of Interest
Rate Protection Agreements
and Deferred Financing
Costs..................... 8 50 196 222 187 858
Depreciation and Other
Amortization.............. 6,243 2,684 6,310 5,087 1,916 4,744
Management and Construction
Income (Loss), Net........ -- -- -- -- -- (81)
Disposition of Interest Rate
Protection Agreements..... 4,038 -- -- -- -- --
Gain on Sales of
Properties................ 460 4,320 4,344 -- -- --
Equity in Income of Other
Real Estate
Partnerships.............. 8,030 9,619 20,130 7,841 6,767 --
--------------- -------------- ------------- ------------- ------------- -----------
Income (Loss) Before
Extraordinary Items....... 22,623 17,994 $ 36,921 $ 12,123 $ 10,294 $ (1,471)
Extraordinary Gain (Loss)... (3,428) (821) (2,273) -- -- (1,449)
--------------- -------------- ------------- ------------- ------------- -----------
Net Income.................. $ 19,195 $ 17,173 $ 34,648 $ 12,123 $ 10,294 $ (2,920)
--------------- -------------- ------------- ------------- ------------- -----------
--------------- -------------- ------------- ------------- ------------- -----------
BALANCE SHEET DATA (AT END
OF PERIOD):
Net Investment In Real
Estate.................... $ 574,680 $ 215,946 $ 345,648 $ 91,540 $ 159,056 $ 556,902
Investment in Other
Real Estate
Partnerships.............. 586,472 254,030 258,411 241,918 208,274 --
Total Assets................ $ 1,212,600 $ 485,881 $ 622,122 $ 356,060 $ 375,220 $ 616,767
Mortgage Loans/Acquisition
Facilities Payable, Senior
Unsecured Debt, Promissory
Notes Payable and
Construction Loans
Payable................... $ 453,841 $ 65,621 $ 59,897 $ 53,108 $ 48,700 $ 305,000
Mortgage Loans
(Affiliated).............. -- -- -- -- --
Total Liabilities........... 494,731 86,747 86,890 69,291 61,676 323,703
Partners' Capital/(Net
Deficit).................. $ 717,869 $ 399,134 $ 535,232 $ 286,769 $ 313,544 $ 269,326
OTHER DATA:
Cash Flows From:
Operating Activities...... $ 7,769 $ 7,475 $ 18,871 $ 4,182 $ (10,299) $ 4,911
Investing Activities...... (507,511) (98,623) (202,673) (40,906) (61,352) (374,757)
Financing Activities...... 502,875 86,272 181,604 43,182 66,232 374,152
Gross Leasable Area at End
of Period................. 18,097,958 8,208,903 12,650,986 3,488,921 4,857,281 17,393,813
Total Properties at End of
Period.................... 208 78 137 30 50 226
<CAPTION>
YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31,
1993 1992
------------- -------------
STATEMENTS OF OPERATIONS
DATA:
<S> <C> <C>
Total Revenues.............. $ 33,237 $ 31,145
Property Expenses........... 8,832 7,308
General and Administrative
Expense................... 1,416 1,699
Interest Expense............ 18,187 18,350
Amortization of Interest
Rate Protection Agreements
and Deferred Financing
Costs..................... 997 1,644
Depreciation and Other
Amortization.............. 7,105 6,328
Management and Construction
Income (Loss), Net........ (99) 136
Disposition of Interest Rate
Protection Agreements..... -- --
Gain on Sales of
Properties................ -- --
Equity in Income of Other
Real Estate
Partnerships.............. -- --
------------- -------------
Income (Loss) Before
Extraordinary Items....... $ (3,399) $ (4,048)
Extraordinary Gain (Loss)... -- 2,340
------------- -------------
Net Income.................. $ (3,399) $ (1,708)
------------- -------------
------------- -------------
BALANCE SHEET DATA (AT END
OF PERIOD):
Net Investment In Real
Estate.................... $ 171,162 $ 160,735
Investment in Other
Real Estate
Partnerships.............. -- --
Total Assets................ $ 189,789 $ 175,693
Mortgage Loans/Acquisition
Facilities Payable, Senior
Unsecured Debt, Promissory
Notes Payable and
Construction Loans
Payable................... $ 179,568 $ 168,559
Mortgage Loans
(Affiliated).............. 7,624 7,951
Total Liabilities........... 227,553 208,569
Partners' Capital/(Net
Deficit).................. $ (37,764) $ (32,876)
OTHER DATA:
Cash Flows From:
Operating Activities...... $ 8,700 $ 1,877
Investing Activities...... (17,124) (2,317)
Financing Activities...... 9,093 1,250
Gross Leasable Area at End
of Period................. 6,376,349 5,883,730
Total Properties at End of
Period.................... 124 118
</TABLE>
- ------------------------
(1) The selected financial data includes the combined statements of the
Contributing Businesses for the period prior to July 1, 1994 and the
financial statements of First Industrial, L.P., for the periods after June
30, 1994.
F-32
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Partners of the Other
Real Estate Partnerships
We have audited the combined financial statements of the Other Real Estate
Partnerships as listed on page F-1 of this Prospectus. These financial
statements are the responsibility of the Other Real Estate Partnerships'
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the combined financial position of the Other Real
Estate Partnerships as of December 31, 1996 and 1995, and the combined results
of their operations and their cash flows for the years ended December 31, 1996
and 1995 and for the period July 1, 1994 through December 31, 1994, in
conformity with generally accepted accounting principles.
COOPERS & LYBRAND L.L.P.
Chicago, Illinois
February 12, 1997
F-33
<PAGE>
OTHER REAL ESTATE PARTNERSHIPS
COMBINED BALANCE SHEETS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31,
1996 1995
------------ ------------
<S> <C> <C>
ASSETS
Assets:
Investment in Real Estate:
Land............................................................................. $ 97,965 $ 94,974
Buildings and Improvements....................................................... 588,993 564,488
Furniture, Fixtures and Equipment................................................ 1,662 1,662
Construction in Progress......................................................... 8,389 --
Less: Accumulated Depreciation................................................... (83,324) (63,897)
------------ ------------
Net Investment in Real Estate.................................................. 613,685 597,227
Cash and Cash Equivalents.......................................................... 3,314 1,880
Restricted Cash.................................................................... 11,837 9,175
Tenant Accounts Receivable, Net.................................................... 3,637 2,028
Deferred Rent Receivable........................................................... 7,010 7,000
Interest Rate Protection Agreements, Net........................................... 6,653 7,865
Deferred Financing Costs, Net...................................................... 6,302 7,153
Prepaid Expenses and Other Assets, Net............................................. 9,849 10,837
------------ ------------
Total Assets................................................................... $ 662,287 $ 643,165
------------ ------------
------------ ------------
LIABILITIES AND PARTNERS' CAPITAL
Liabilities:
Mortgage Loans Payable............................................................. $ 346,504 $ 346,850
Accounts Payable and Accrued Expenses.............................................. 9,144 7,084
Rents Received in Advance and Security Deposits.................................... 4,182 3,630
------------ ------------
Total Liabilities.............................................................. 359,830 357,564
------------ ------------
Commitments and Contingencies........................................................ -- --
Partners' Capital.................................................................... 302,457 285,601
------------ ------------
Total Liabilities and Partners' Capital........................................ $ 662,287 $ 643,165
------------ ------------
------------ ------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-34
<PAGE>
OTHER REAL ESTATE PARTNERSHIPS
COMBINED STATEMENTS OF OPERATIONS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
SIX MONTHS
YEAR ENDED YEAR ENDED ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31,
1996 1995 1994
------------ ------------ ------------
<S> <C> <C> <C>
Revenues:
Rental Income....................................................... $ 79,947 $ 61,428 $ 29,152
Tenant Recoveries and Other Income.................................. 22,375 17,604 7,801
------------ ------------ ------------
Total Revenues.................................................... 102,322 79,032 36,953
------------ ------------ ------------
Expenses:
Real Estate Taxes................................................... 17,261 12,135 5,924
Repairs and Maintenance............................................. 4,337 3,024 1,369
Property Management................................................. 3,558 2,635 1,162
Utilities........................................................... 2,535 1,825 740
Insurance........................................................... 605 624 304
Other............................................................... 637 581 234
Interest............................................................ 24,268 22,010 9,781
Amortization of Interest Rate Protection Agreements and Deferred
Financing Costs................................................... 3,090 4,216 2,717
Depreciation and Other Amortization................................. 21,737 17,177 7,886
Disposition of Interest Rate Protection Agreement................... -- 6,410 --
------------ ------------ ------------
Total Expenses.................................................... 78,028 70,637 30,117
------------ ------------ ------------
Net Income............................................................ $ 24,294 $ 8,395 $ 6,836
------------ ------------ ------------
------------ ------------ ------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-35
<PAGE>
OTHER REAL ESTATE PARTNERSHIPS
COMBINED STATEMENTS OF CHANGES IN PARTNERS' CAPITAL
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
TOTAL
------------
<S> <C>
Balance at June 30, 1994............................................................................ $ --
Contributions....................................................................................... 209,270
Distributions....................................................................................... (5,200)
Net Income.......................................................................................... 6,836
------------
Balance at December 31, 1994........................................................................ 210,906
------------
Contributions....................................................................................... 100,468
Distributions....................................................................................... (34,168)
Net Income.......................................................................................... 8,395
------------
Balance at December 31, 1995........................................................................ 285,601
------------
Contributions....................................................................................... 25,874
Distributions....................................................................................... (33,312)
Net Income.......................................................................................... 24,294
------------
Balance at December 31, 1996........................................................................ $ 302,457
------------
------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-36
<PAGE>
OTHER REAL ESTATE PARTNERSHIPS
COMBINED STATEMENTS OF CASH FLOWS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
SIX MONTHS
YEAR ENDED YEAR ENDED ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31,
1996 1995 1994
------------ ------------- -------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income.................................................................. $ 24,294 $ 8,395 $ 6,836
Adjustments to Reconcile Net Income to Net Cash
Provided by (Used in) Operating Activities:
Depreciation.............................................................. 19,427 15,232 7,174
Amortization of Interest Rate Protection Agreements and Deferred Financing
Costs................................................................... 3,090 4,216 2,717
Other Amortization........................................................ 2,310 1,945 712
Provision for Bad Debts................................................... 65 194 120
Loss from Disposition of Interest Rate Protection Agreement............... -- 6,410 --
Increase in Accounts Receivable and Other Assets.......................... (2,956) (3,339) (5,818)
Decrease (Increase) in Deferred Rent Receivable........................... 308 (978) (665)
Increase (Decrease) in Accounts Payable, Accrued Expenses, Rents Received
in Advance and Security Deposits........................................ 2,424 (2,931) (14,614)
Increase in Organization Costs............................................ (37) (27) --
(Increase) Decrease in Restricted Cash.................................... (4,275) 546 (12,155)
------------ ------------- -------------
Net Cash Provided by (Used in) Operating Activities......................... 44,650 29,663 (15,693)
------------ ------------- -------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of and Additions to Investment in Real Estate.................... (35,697) (19,341) (235,076)
Decrease (Increase) in Restricted Cash.................................... 1,613 3,749 (927)
------------ ------------- -------------
Net Cash Used in Investing Activities....................................... (34,084) (15,592) (236,003)
------------ ------------- -------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Contributions............................................................. 25,556 47,915 236,645
Distributions............................................................. (33,312) (34,168) (5,200)
Proceeds from Mortgage Loans Payable...................................... -- 46,850 300,000
Repayments on Mortgage Loans Payable...................................... (346) -- (241,672)
Repayments on Acquisition Facility Payable................................ -- (81,450) --
Cost of Debt Issuance and Interest Rate Protection Agreements............. (1,030) (289) (29,126)
------------ ------------- -------------
Net Cash (Used in) Provided by Financing Activities......................... (9,132) (21,142) 260,647
------------ ------------- -------------
Net Increase (Decrease) in Cash and Cash Equivalents........................ 1,434 (7,071) 8,951
Cash and Cash Equivalents, Beginning of Period.............................. 1,880 8,951 --
------------ ------------- -------------
Cash and Cash Equivalents, End of Period.................................... $ 3,314 $ 1,880 $ 8,951
------------ ------------- -------------
------------ ------------- -------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-37
<PAGE>
OTHER REAL ESTATE PARTNERSHIPS
NOTES TO COMBINED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS)
1. ORGANIZATION AND FORMATION
First Industrial, L.P. (the "Operating Partnership") was organized as a
limited partnership in the state of Delaware on November 23, 1993. The sole
general partner is First Industrial Realty Trust, Inc. (the "Company") with an
approximate 92.4% ownership interest at December 31, 1996. The limited partners
owned approximately a 7.6% aggregate ownership interest at December 31, 1996.
The Company is a real estate investment trust (REIT) as defined in the Internal
Revenue Code. The Company's operations are conducted primarily through the
Operating Partnership. As of December 31, 1996, the Operating Partnership
directly owned 137 in-service properties, containing an aggregate of
approximately 12.7 million square feet (unaudited) of gross leasable area
("GLA"), as well as a 99% limited partnership interest (subject in one case as
described below to a preferred limited partnership interest) in First Industrial
Financing Partnership, L.P. (the "Financing Partnership"), First Industrial
Securities, L.P. (the "Securities Partnership"), First Industrial Mortgage
Partnership, L.P. (the "Mortgage Partnership"), First Industrial Pennsylvania
Partnership, L.P. (the "Pennsylvania Partnership"), First Industrial Harrisburg,
L.P. (the "Harrisburg Partnership"), First Industrial Indianapolis, L.P. (the
"Indianapolis Partnership") and First Industrial Development Services Group,
L.P. (together, the "Other Real Estate Partnerships"). On a combined basis, as
of December 31, 1996, the Other Real Estate Partnerships owned 242 in-service
properties containing an aggregate of approximately 20.0 million square feet
(unaudited) of GLA. Of the 242 properties owned by the Other Real Estate
Partnerships, 195 were owned by the Financing Partnership, 19 were owned by the
Securities Partnership, 23 were owned by the Mortgage Partnership, one was owned
by the Pennsylvania Partnership, three were owned by the Harrisburg Partnership
and one was owned by the Indianapolis Partnership.
The general partners of the Other Real Estate Partnerships are separate
corporations, each with a one percent general partnership interest. Each general
partner of the Other Real Estate Partnerships is a wholly-owned subsidiary of
the Company. The general partner of the Securities Partnership, First Industrial
Securities Corporation, also owns a preferred limited partnership interest which
entitles it to receive a fixed quarterly distribution, and results in it being
allocated income in the same amount, equal to the fixed quarterly dividend the
Company pays on its 9.5% Series A Preferred Stock.
Profits, losses and distributions of the Other Real Estate Partnerships are
allocated to the general partners and the limited partner in accordance with the
provisions contained within the partnership agreement of each of the Other Real
Estate Partnerships.
2. BASIS OF PRESENTATION
The Combined Balance Sheets as of December 31, 1996 and 1995 and the
Combined Statements of Operations, Changes in Partners Capital and Cash Flows
for the years ended December 31, 1996 and 1995 and for the six months ended
December 31, 1994 reflect the operations, capital, and cash flows of the Other
Real Estate Partnerships on a combined basis.
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
In order to conform with generally accepted accounting principles,
management, in preparation of the Other Real Estate Partnerships' financial
statements, is required to make estimates and assumptions that affect the
reported amounts of assets and liabilities and disclosure of contingent assets
and liabilities as of December 31, 1996 and 1995, and the reported amounts of
revenues and expenses for the years ended
F-38
<PAGE>
OTHER REAL ESTATE PARTNERSHIPS
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS)
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
December 31, 1996 and 1995 and the six months ended December 31, 1994. Actual
results could differ from those estimates.
REVENUE RECOGNITION:
Rental income is recognized on a straight-line method under which
contractual rent increases are recognized evenly over the lease term. Tenant
recovery income includes payments from tenants for taxes, insurance and other
property operating expenses and is recognized as revenues in the same period the
related expenses are incurred by the Other Real Estate Partnerships.
The Other Real Estate Partnerships provide an allowance for doubtful
accounts against the portion of tenant accounts receivable which is estimated to
be uncollectible. Accounts receivable in the combined balance sheets are shown
net of an allowance for doubtful accounts of $379 and $314 as of December 31,
1996 and December 31, 1995, respectively.
INVESTMENT IN REAL ESTATE AND DEPRECIATION:
Effective January 1, 1995, the Other Real Estate Partnerships adopted
Financial Accounting Standards Statement No. 121, "Accounting for the Impairment
of Long-Lived Assets and for Long-Lived Assets to be Disposed Of." Real estate
assets are carried at the lower of depreciated cost or fair value as determined
by the Other Real Estate Partnerships. The Other Real Estate Partnerships review
their properties on a quarterly basis for impairment and provide a provision if
impairments are determined. First, to determine if impairment may exist, the
Other Real Estate Partnerships review their properties and identify those which
have had either an event of change or event of circumstances warranting further
assessment of recoverability. Then, the Other Real Estate Partnerships estimate
the fair value of those properties on an individual basis by capitalizing the
expected net operating income and discounting the expected cash flows of the
properties. Such amounts are then compared to the property's depreciated cost to
determine whether an impairment exists.
Interest expense, real estate taxes and other directly related expenses
incurred during construction periods are capitalized and depreciated commencing
with the date placed in service, on the same basis as the related assets.
Depreciation expense is computed using the straight-line method based on the
following useful lives:
<TABLE>
<CAPTION>
YEARS
-----------
<S> <C>
Buildings and Improvements....................................................... 31.5 to 40
Land Improvements................................................................ 15
Furniture, Fixtures and Equipment................................................ 5 to 10
</TABLE>
Construction expenditures for tenant improvements and leasing commissions
are capitalized and amortized over the terms of each specific lease. Maintenance
and repairs are charged to expense when incurred. Expenditures for improvements
are capitalized.
When assets are sold or retired, their costs and related accumulated
depreciation are removed from the accounts with the resulting gains or losses
reflected in net income or loss.
F-39
<PAGE>
OTHER REAL ESTATE PARTNERSHIPS
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS)
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
CASH AND CASH EQUIVALENTS:
Cash and Cash Equivalents include all cash and liquid investments with an
initial maturity of three months or less. The carrying amount approximates fair
value due to the short maturity of these investments.
INCOME TAXES:
In accordance with partnership taxation, each of the partners are
responsible for reporting their shares of taxable income or loss. Accordingly,
no provision has been made in the accompanying combined financial statements for
federal, state or local income taxes.
FAIR VALUE OF FINANCIAL INSTRUMENTS:
The Other Real Estate Partnerships' financial instruments include short-term
investments, tenant accounts receivable, accounts payable, other accrued
expenses and mortgage loans payable. The fair values of these financial
instruments were not materially different from their carrying or contract
values. The Other Real Estate Partnerships' financial instruments also include
interest rate protection agreements (see Note 4).
DERIVATIVE FINANCIAL INSTRUMENTS:
The Other Real Estate Partnerships' interest rate protection agreements (the
"Agreements") are used to limit the interest rate on the 1994 Mortgage Loan
(hereinafter defined) to 7.2%. As such, receipts resulting from the Agreements
are recognized as adjustments to interest expense. The credit risks associated
with the Agreements are controlled through the evaluation and monitoring of the
creditworthiness of the counterparty. In the event that the counterparty fails
to meet the terms of the Agreements, the Financing Partnership's exposure is
limited to the current value of the interest rate differential, not the notional
amount, and the Financing Partnership's carrying value of the Agreements on the
balance sheet. The Agreements have been executed with a creditworthy financial
institution. As such, the Other Real Estate Partnerships consider the risk of
nonperformance to be remote. In the event that the Financing Partnership
terminates the Agreements, the Financing Partnership would recognize a gain
(loss) from the disposition of the Agreements equal to the amount of cash
received or paid at termination less the carrying value of the Agreements on the
Financing Partnership's balance sheet.
DEFERRED FINANCING COSTS:
Deferred financing costs include fees and costs incurred to obtain long-term
financing. These fees and costs are being amortized over the terms of the
respective loans. Accumulated amortization of deferred financing costs was
$4,517 and $2,636 at December 31, 1996 and 1995, respectively.
4. MORTGAGE LOANS
On June 30, 1994, the Financing Partnership borrowed $300,000 under a
mortgage loan (the "1994 Mortgage Loan"). The 1994 Mortgage Loan is
cross-collateralized by, among other things, first mortgage liens on the 195
properties owned by the Financing Partnership. The 1994 Mortgage Loan will
mature on June 30, 1999, unless extended by the Financing Partnership, subject
to certain conditions, for an
F-40
<PAGE>
OTHER REAL ESTATE PARTNERSHIPS
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS)
4. MORTGAGE LOANS (CONTINUED)
additional two-year period, thereby maturing on June 30, 2001. The Operating
Partnership has guaranteed certain obligations of the Financing Partnership
under the 1994 Mortgage Loan. The 1994 Mortgage Loan provides for interest only
payments which have been effectively limited to 7.2% through June 30, 1999 by
certain interest rate protection agreements. Interest payable related to the
1994 Mortgage Loan was $1,750 and $1,905 at December 31, 1996 and 1995,
respectively. Payments to the Financing Partnership under the interest rate
protection agreements during 1996, 1995 and 1994 totaled $0, $584 and $51,
respectively, which have been included as a component of interest expense.
In conjunction with obtaining the 1994 Mortgage Loan, the Financing
Partnership purchased an interest rate protection agreement which effectively
limited the interest rate during the initial five-year term of the 1994 Mortgage
Loan to 7.2% per annum. Prior to the subsequent replacement of this interest
rate protection agreement, its cost of $18,450 had been capitalized and was
being amortized over the five-year term of the agreement.
Effective July 1, 1995, the Financing Partnership replaced such interest
rate protection agreement with new interest rate protection agreements with a
notional value of $300,000, which effectively limit the annual interest rate on
the 1994 Mortgage Loan to 7.2% through June 30, 1999. As a result of the
replacement of the interest rate protection agreement, the Financing Partnership
incurred a one-time loss of $6,410, of which $6,288 represents the difference
between the unamortized cost of the replaced interest rate protection agreement
and the cost of the new agreements. The costs of the new interest rate
protection agreements have been capitalized and are being amortized over the
respective terms of the agreements. Under the terms of the new interest rate
protection agreements, certain collateral may be required to be set aside for
amounts that could become due under the agreements. Accumulated amortization on
the interest rate protection agreements was $1,819 and $607 as of December 31,
1996 and 1995, respectively.
At December 31, 1996, the fair market value of the interest rate protection
agreements was approximately $3,900. The fair market value was determined by a
third party evaluation and is based on estimated discounted future cash flows.
Under the terms of the 1994 Mortgage Loan, certain cash reserves are
required to be and have been set aside for payment of tenant improvements,
capital expenditures, interest, real estate taxes, insurance and potential
environmental costs. The amount of cash reserves for payment of potential
environmental costs was determined by the lender and was established at the
closing of the 1994 Mortgage Loan. The amounts included in the cash reserves
relating to payments of tenant improvements, capital expenditures, interest,
real estate taxes and insurance were determined by the lender and approximate
the next periodic payment of such items. At December 31, 1996 and 1995, these
reserves totaled $10,223 and $8,787, respectively, and are included in
Restricted Cash. Such cash reserves were invested in a money market fund at
December 31, 1996. The maturity of these investments is one day; accordingly,
cost approximates fair market value.
On December 29, 1995, the Mortgage Partnership borrowed $40,200 under a
mortgage loan (the "1995 Mortgage Loan"). In the first quarter of 1996, the
Mortgage Partnership made a one time paydown of $200 on the 1995 Mortgage Loan
decreasing the outstanding balance to $40,000. The 1995 Mortgage Loan matures on
January 11, 2026 and provides for interest only payments through January 11,
1998, after which monthly principal and interest payments are required based on
a 28-year amortization schedule. The
F-41
<PAGE>
OTHER REAL ESTATE PARTNERSHIPS
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS)
4. MORTGAGE LOANS (CONTINUED)
interest rate under the 1995 Mortgage Loan is fixed at 7.22% per annum through
January 11, 2003. After January 11, 2003, the interest rate adjusts through a
predetermined formula based on the applicable Treasury rate. Interest payable
related to the 1995 Mortgage Loan was $168 and $24 at December 31, 1996 and
1995, respectively. The 1995 Mortgage Loan is collateralized by 23 properties
held by the Mortgage Partnership.
Under the terms of the 1995 Mortgage Loan, certain cash reserves are
required to be and have been set aside for payments of security deposits,
capital expenditures, interest, real estate taxes and insurance. The amount of
cash reserves segregated for security deposits is adjusted as tenants turn over.
The amounts included in the cash reserves relating to payments of capital
expenditures, interest, real estate taxes and insurance were determined by the
lender and approximate the next periodic payment of such items. At December 31,
1996 and 1995, these reserves totaled $1,614 and $388, respectively, and are
included in Restricted Cash. Such cash reserves were invested in a money market
fund at December 31, 1996. The maturity of these investments is one day;
accordingly, cost approximates fair market value.
On December 14, 1995, the Harrisburg Partnership entered into a $6,650
mortgage loan (the "Harrisburg Mortgage Loan") that is collateralized by three
properties in Harrisburg, Pennsylvania. The Harrisburg Mortgage Loan bears
interest at a rate based on LIBOR plus 1.5% or prime plus 2.25%, at the
Company's option, and provides for interest only payments through May 31, 1996,
with monthly principal and interest payments required subsequently based on a
26.5-year amortization schedule. At December 31, 1996, the interest rate was
6.875%. The Harrisburg Mortgage Loan will mature on December 15, 2000. The
outstanding mortgage loan balance at December 31, 1996 and 1995 was
approximately $6,504 and $6,650, respectively. Interest payable related to the
Harrisburg Mortgage Loan was $39 and $0 at December 31, 1996 and 1995,
respectively.
The following is a schedule of mortgage principal payments and maturities of
the mortgage loans for the next five years ending December 31, and thereafter:
<TABLE>
<CAPTION>
AMOUNT
----------
<S> <C>
1997 $ 251
1998 686
1999 300,760
2000 6,298
2001 566
Thereafter 37,943
----------
Total $ 346,504
----------
----------
</TABLE>
The 1994 Mortgage Loan matures in 1999 but may be extended at the Financing
Partnership's option, subject to certain conditions, for an additional two
years, thereby maturing on June 30, 2001.
F-42
<PAGE>
OTHER REAL ESTATE PARTNERSHIPS
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS)
5. FUTURE RENTAL REVENUES
The Other Real Estate Partnerships' properties are leased to tenants under
net and semi-net operating leases. Minimum lease payments receivable, excluding
tenant reimbursements of expenses, under noncancelable operating leases in
effect as of December 31, 1996 are approximately as follows:
<TABLE>
<S> <C>
1997 $ 79,638
1998 67,685
1999 53,070
2000 39,469
2001 24,893
Thereafter 62,247
---------
Total $ 327,002
---------
---------
</TABLE>
6. SUPPLEMENTAL INFORMATION TO STATEMENTS OF CASH FLOWS
Supplemental disclosure of cash flow information:
<TABLE>
<CAPTION>
SIX MONTHS
YEAR ENDED YEAR ENDED ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31,
1996 1995 1994
------------ ------------ ------------
<S> <C> <C> <C>
Interest paid, net of capitalized interest............................... $ 24,240 $ 21,993 $ 7,920
------------ ------------ ------------
------------ ------------ ------------
Interest capitalized..................................................... $ 0 $ 58 $ 30
------------ ------------ ------------
------------ ------------ ------------
Supplemental schedule of noncash investing and financing activities:
Sale of interest rate protection agreement............................... $ -- $ 8,472 $ --
Purchase of interest rate protection agreements.......................... -- (8,472) --
------------ ------------ ------------
$ -- $ -- $ --
------------ ------------ ------------
------------ ------------ ------------
In conjunction with the property acquisitions, the following assets, liabilities and capital were assumed:
Purchase of real estate, net............................................. $ -- $ 131,897 $ 496,147
Deferred rent receivable................................................. 318 387 --
Restricted cash.......................................................... -- 388 --
Deferred financing costs................................................. -- 854 --
Other assets............................................................. -- 993 --
Accounts receivable...................................................... -- -- 3,276
Accounts payable and accrued expenses.................................... -- (513) (29,949)
Mortgage loans........................................................... -- -- (241,672)
Acquisition facilities payable........................................... -- (81,450) --
Limited partnership interest............................................. (318) (52,556) --
------------ ------------ ------------
Acquisition of Real Estate............................................... $ -- $ -- $ 227,802
------------ ------------ ------------
------------ ------------ ------------
</TABLE>
On June 30, 1994, the Other Real Estate Partnerships received the following
non-cash contributions:
<TABLE>
<S> <C> <C> <C>
Acquisition of interest in properties, net.................. $ (34,436)
Deferred rent receivable.................................... 4,743
Other assets, net........................................... 2,318
Contributions other, net.................................... 27,375
-----------
$ --
-----------
-----------
</TABLE>
F-43
<PAGE>
OTHER REAL ESTATE PARTNERSHIPS
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS)
7. COMMITMENTS AND CONTINGENCIES
In the normal course of business, the Other Real Estate Partnerships are
involved in legal actions arising from the ownership of its properties. In
management's opinion, the liabilities, if any, that may ultimately result from
such legal actions are not expected to have a materially adverse effect on the
combined financial position, operations or liquidity of the Other Real Estate
Partnerships.
Sixteen properties have leases granting the tenants options to purchase the
property. Such options are exercisable at various times and at appraised fair
market value or at a fixed purchase price generally in excess of the Other Real
Estate Partnerships' purchase price. The Other Real Estate Partnerships have not
received notice for the exercise of any tenant purchase options.
8. SUBSEQUENT EVENTS (UNAUDITED)
On March 17, 1997, the Pennsylvania Partnership purchased a 312,500 square
foot bulk warehouse in York, Pennsylvania for approximately $8.4 million.
On March 24, 1997, the Pennsylvania Partnership purchased a 162,500 square
foot light industrial warehouse in Mechanicsburg, Pennsylvania for approximately
$3.4 million.
On April 4, 1997, the Operating Partnership borrowed $309.8 million from an
institutional lender (the "Defeasance Loan"). The Defeasance Loan is unsecured,
bears interest at LIBOR plus 1% and matures July 1, 1999, unless extended by the
Operating Partnership, subject to certain conditions, for an additional two-year
period, thereby maturing July 1, 2001. The gross proceeds from the Defeasance
Loan were contributed to the Financing Partnership which used the gross proceeds
to defease (as defined by the terms of the 1994 Mortgage Loan agreement) the
1994 Mortgage Loan.
F-44
<PAGE>
OTHER REAL ESTATE PARTNERSHIPS
SELECTED FINANCIAL DATA
(IN THOUSANDS, EXCEPT PROPERTY DATA)
<TABLE>
<CAPTION>
OTHER REAL ESTATE PARTNERSHIPS
----------------------------------------
SIX MONTH
PERIOD
YEAR ENDED YEAR ENDED ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31,
1996 1995 1994
------------ ------------ ------------
<S> <C> <C> <C>
STATEMENTS OF OPERATIONS DATA:
Total Revenues........................................................ $ 102,322 $ 79,032 $ 36,953
Property Expenses..................................................... 28,933 20,824 9,733
Interest Expense...................................................... 24,268 22,010 9,781
Amortization of Interest Rate Protection Agreements and Deferred
Financing Costs...................................................... 3,090 4,216 2,717
Depreciation and Other Amortization................................... 21,737 17,177 7,886
Disposition of Interest Rate Protection Agreement..................... -- 6,410 --
------------ ------------ ------------
Net Income............................................................ $ 24,294 $ 8,395 $ 6,836
------------ ------------ ------------
------------ ------------ ------------
BALANCE SHEET DATA (AT END OF PERIOD):
Net Investment in Real Estate......................................... $ 613,685 $ 597,227 $ 461,238
Total Assets.......................................................... 662,287 643,165 524,042
Mortgage Loans Payable................................................ 346,504 346,850 300,000
Total Liabilities..................................................... 359,830 357,564 313,136
Partners' Capital..................................................... $ 302,457 $ 285,601 $ 210,906
OTHER DATA:
Cash Flows From:
Operating Activities................................................ $ 44,650 $ 29,663 $ (15,693)
Investing Activities................................................ (34,084) (15,592) (236,003)
Financing Activities................................................ (9,132) (21,142) 260,647
Gross Leasable Area at End of Period.................................. 20,049,083 19,073,834 14,312.040
Total Properties at End of Period..................................... 242 241 196
</TABLE>
F-45
