<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MAY 22, 2000
REGISTRATION NO. 333-______
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM S-3
REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933
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PAN PACIFIC RETAIL PROPERTIES, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS GOVERNING INSTRUMENTS)
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<TABLE>
<S> <C> <C>
1631-B SOUTH MELROSE DRIVE
MARYLAND VISTA, CALIFORNIA 92083
(STATE OR OTHER JURISDICTION (760) 727-1002 33-0752457
OF INCORPORATION OR ORGANIZATION) (ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (I.R.S. EMPLOYER IDENTIFICATION NUMBER)
</TABLE>
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STUART A. TANZ Copies to:
1631-B SOUTH MELROSE DRIVE WILLIAM J. CERNIUS
VISTA, CALIFORNIA 92083 LATHAM & WATKINS
(760) 727-1002 650 TOWN CENTER DRIVE, 20TH FLOOR
(NAME AND ADDRESS OF AGENT FOR SERVICE) COSTA MESA, CALIFORNIA 92626
(714) 540-1235
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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: From time
to time after the effective date of this Registration Statement.
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If the only securities being registered on this form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. [ ]
If any of the securities being registered on this form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. [X]
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement of the same offering. [ ] ________________
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]___________.
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
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CALCULATION OF REGISTRATION FEE
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<CAPTION>
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PROPOSED MAXIMUM PROPOSED MAXIMUM
AMOUNT TO BE OFFERING PRICE AGGREGATE OFFERING AMOUNT OF
TITLE OF SECURITIES TO BE REGISTERED REGISTERED PER SHARE(1) PRICE(1) REGISTRATION FEE
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<S> <C> <C> <C> <C>
Common Stock, $.01 par value per
share............................... 832,617 $19.84 $16,519,121 $4,361.05
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</TABLE>
(1) Estimated solely for the purpose of determining the registration fee
pursuant to Rule 457(c), based on the average of the high and low sales
prices of the Registrant's common stock as reported on the New York Stock
Exchange on May 19, 2000.
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The registrant hereby amends this registration statement on such date or
dates as may be necessary to delay its effective date until the registrant shall
file a further amendment which specifically states that this registration
statement shall thereafter become effective in accordance with Section 8(a) of
The Securities Act of 1933 or until the registration statement shall become
effective on such date as the commission, acting pursuant to said Section 8(a),
may determine.
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<PAGE> 2
SUBJECT TO COMPLETION, DATED MAY 22, 2000
PROSPECTUS
832,617 Shares
PAN PACIFIC RETAIL PROPERTIES, INC.
COMMON STOCK
----------------
Pan Pacific Retail Properties, Inc. is a self-administered and self-managed
real estate investment trust engaged in owning, acquiring, managing, leasing and
developing community and neighborhood shopping centers.
This prospectus relates to the offer and sale from time to time of up to
832,617 shares of our common stock, par value $.01 per share that may be issued
to holders of up to 832,617 units of non-managing member interests in Pan
Pacific (Portland), LLC if these holders tender their LLC units for cash
redemption and we elect, in our sole and absolute discretion, to exchange the
tendered LLC units on a one-for-one basis for shares of our common stock in lieu
of a cash redemption. The LLC units were issued, and these exchange shares were
reserved for issuance, in connection with the formation of Pan Pacific
(Portland), LLC and the acquisition of seven shopping centers in Oregon in
October, 1998. We will not receive any proceeds from either the issuance of
these exchange shares or the sale of these exchange shares by the holders of the
LLC units. See "Plan of Distribution." We are registering the offer and sale of
these exchange shares by the holders of the LLC units, but the registration of
these exchange shares does not necessarily mean that any of these shares will be
offered or sold by the holders of the LLC units.
The registration statement of which this prospectus is a part is being
filed pursuant to our contractual obligations.
Our common stock is listed on the New York Stock Exchange under the symbol
"PNP." On May 19, 2000 the last reported sales price of our common stock on the
NYSE was $20.00 per share.
----------------
See "Risk Factors" beginning on page 2 for certain factors relevant to an
investment in our common stock.
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These securities have not been approved or disapproved by the Securities and
Exchange Commission or any state securities commission nor has the Securities
and Exchange Commission or any state securities commission passed upon the
accuracy or adequacy of this prospectus. Any representation to the contrary is a
criminal offense.
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The date of this prospectus is ____________, 2000
<PAGE> 3
TABLE OF CONTENTS
Available Information....................................................... 1
Incorporation Of Certain Documents By Reference............................. 1
Risk Factors................................................................ 2
Pan Pacific Retail Properties, Inc.......................................... 2
Pan Pacific (Portland), LLC................................................. 3
Use of Proceeds............................................................. 3
Forward-Looking Statements.................................................. 3
Description Of Capital Stock................................................ 4
Material Federal Income Tax Consequences.................................... 7
Selling Stockholders........................................................ 17
Plan Of Distribution........................................................ 18
Experts..................................................................... 18
Legal Matters............................................................... 19
<PAGE> 4
AVAILABLE INFORMATION
We are subject to the informational requirements of the Securities Exchange
Act of 1934, as amended, and in accordance with the Exchange Act we file
reports, proxy statements and other information with the Securities and Exchange
Commission. These reports, proxy statements and other information filed can be
inspected and copied at the Commission's Public Reference Section, 450 Fifth
Street, N.W., Washington, D.C. 20549, and at the following regional offices of
the Commission: Seven World Trade Center, 13th Floor, New York, New York 10048,
and 500 West Madison Street, Suite 1400, Chicago, Illinois 60661-2511. Copies of
this material can be obtained from the Public Reference Section of the
Commission, 450 Fifth Street, N.W., Washington, D.C. 20549, at prescribed rates.
The Commission also maintains a web site that contains reports, proxy and
information statements and other information regarding registrants, including
ourselves, that file electronically with the Commission. The address of the
Commission's site is http://www.sec.gov. In addition, our common stock is listed
on the New York Stock Exchange and similar information concerning us can be
inspected and copied at the offices of the New York Stock Exchange, Inc., 20
Broad Street, New York, New York 10005.
We have filed with the Commission a registration statement on Form S-3
(herein, together with all amendments and exhibits, referred to as the
"registration statement"), of which this prospectus is a part, under the
Securities Act of 1933, as amended, with respect to the shares of our common
stock offered by this registration statement. This prospectus does not contain
all of the information set forth in the registration statement, certain portions
of which have been omitted as permitted by the rules and regulations of the
Commission. Statements contained in this prospectus, in any prospectus
supplement or in any document incorporated by reference herein or therein, as to
the contents of any contract or other document are not necessarily complete, and
in each instance we make reference to the copy of that contract or other
document filed as an exhibit to, or incorporated by reference in, the
registration statement, each statement being qualified in all respects by this
reference and the exhibits and schedules thereto. For further information
regarding us and the shares of our common stock offered by this registration
statement, reference is made to this registration statement and the exhibits and
schedules which may be obtained from the Commission at its principal office in
Washington, D.C., upon payment of the fees prescribed by the Commission.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
We have filed the documents listed below under the Exchange Act with the
Commission and they are incorporated herein by reference:
(a) Our Annual Report on Form 10-K for the fiscal year ended December 31,
1999;
(b) Our Proxy Statement, with respect to our Annual Meeting of
Stockholders held on May 5, 2000, filed with the Commission on March
30, 2000;
(c) Our Quarterly Report on Form 10-Q for the quarter ended March 31,
2000; and
(c) The description of our common stock contained in our Registration
Statement on Form 8-A (No. 001-13243), including any subsequently
filed amendments and reports filed for the purpose of updating such
description.
All documents we file under Section 13(a), 13(c), 14 or 15(d) of the
Exchange Act after the date of this registration statement and prior to the
filing of a post-effective amendment that indicates that all securities offered
have been sold or that deregisters all securities then remaining unsold, will be
deemed to be incorporated by reference in this registration statement and to be
a part of it from the respective dates of filing those documents. Any statement
contained in a document incorporated or deemed to be incorporated by reference
in this prospectus will be deemed to be modified or superseded for purposes of
this registration statement to the extent that a statement contained herein
modifies or supersedes that statement. Any statement so modified or superseded
will not be deemed, except as so modified or superseded, to constitute a part of
this registration statement.
Copies of all documents that are incorporated herein by reference (not
including the exhibits to these documents, unless the exhibits are specifically
incorporated by reference in these documents) will be provided without charge to
each person, including any beneficial owner, to whom this prospectus and the
applicable prospectus supplement are delivered upon written or oral request.
Requests should be directed to the Chief Financial Officer, Pan Pacific Retail
Properties, Inc., 1631-B South Melrose Drive, Vista, California 92083, telephone
number (760) 727-1002.
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RISK FACTORS
In addition to the other information contained or incorporated by reference
in this prospectus (including the information contained in our Annual Report on
Form 10-K under the heading "Certain Cautionary Statements"), prospective
investors should carefully consider the following factors before investing in
the securities offered by this prospectus.
Possible Adverse Effect on Common Stock Price of Shares Available for Future
Sale
Sales of a substantial number of shares of our common stock, or the
perception that sales could occur, could adversely affect prevailing market
prices of our common stock. We have reserved 832,617 shares of our common stock
for issuance upon the exchange of LLC units issued in connection with the
formation of Pan Pacific (Portland), LLC and our acquisition of seven shopping
centers in Oregon. We have agreed to register these exchange shares under
contractual obligations. We cannot predict the effect that future sales of these
shares of our common stock will have on the market price of our common stock.
PAN PACIFIC RETAIL PROPERTIES, INC.
General
Pan Pacific Retail Properties, Inc., a Maryland corporation, is a
self-administered and self-managed real estate investment trust formed in April
1997 to continue and expand the acquisition, ownership, management, leasing and
development business of Revenue Properties (U.S.), Inc. and its affiliates. Our
portfolio consists principally of community and neighborhood shopping centers
predominantly located in five key western U.S. markets. As of December 31, 1999,
we owned or controlled a portfolio of 58 shopping center properties of which 54
are located in the western United States including 13 in Northern California, 11
in Southern California, 7 in Nevada, 14 in Oregon and 9 in Washington.
We employ personnel in the areas of administration, accounting services,
property management, maintenance, design, leasing, acquisitions and business
development. Our executive offices are located at 1631-B South Melrose Drive,
Vista, California, and our telephone number is (760) 727-1002. In addition to
personnel located at our executive offices, we operate regional offices in Las
Vegas, Nevada; Kent, Washington; Portland, Oregon; Chino, California; and
Sacramento, California. Each of our regional offices is responsible for property
maintenance, management and leasing.
We were incorporated as a Maryland corporation in April 1997 and in August
1997 we completed an initial public offering of our common stock which is listed
on the New York Stock Exchange under the symbol "PNP."
Business Strategies
Our business strategies involve three fundamental practices:
- Owning and operating shopping centers in select key markets with
strong economic and demographic characteristics in order to maintain a
portfolio of real estate assets with stable income and the potential
for long-term growth;
- Developing local and regional market expertise through the hands-on
participation of senior management in property operations and leasing
in order to capitalize on market trends, retailing trends and
acquisition opportunities; and
- Maintaining a diversified and complementary tenant mix with an
emphasis on tenants that provide day-to-day consumer necessities in
order to provide steady rental revenue.
Through our regional offices, we implement our business strategies by:
- Our on-going analysis of regional and submarket demographic, economic
and retailing trends;
- Developing and maintaining relationships with key retailers, real
estate brokers and financial institutions;
- Emphasizing tenant satisfaction and retention through our proactive
communication with tenants, community oriented marketing activities
and comprehensive maintenance programs; and
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- Applying aggressive cost control practices and by capitalizing on cost
reduction and economy of scale opportunities arising from the size and
proximity of our properties within each region.
Growth Strategies
We seek to continue to utilize our in-depth market knowledge within our
five key markets to pursue our strategy of opportunistic acquisitions of
shopping centers for long-term investment. We believe that significant
opportunities exist within these markets to acquire shopping center properties
that are consistent with our existing portfolio in terms of quality of
construction, positive submarket demographics and location attributes that
provide attractive initial capitalization rates with potential for growth in
cash flow. We further believe we have certain competitive advantages which
enhance our ability to identify and capitalize on acquisition opportunities,
including: (i) long-standing relationships with institutional and other owners
of shopping center properties in our five primary regions; (ii) fully integrated
real estate operations which enable us to respond quickly to acquisition
opportunities and to capitalize on the resulting economies of scale; and (iii)
access to capital as a public company.
PAN PACIFIC (PORTLAND), LLC
On October 9, 1998, we as managing member of Pan Pacific (Portland), LLC
and Portland Fixture Limited Partnership, PFMGP, Inc., Byron P. Henry and Steven
J. Oliva as non-managing members of Pan Pacific (Portland), LLC, entered into an
Amended and Restated Limited Liability Company Agreement of Pan Pacific
(Portland), LLC. We currently own approximately 56% of Pan Pacific (Portland),
LLC with the balance owned by the non-managing members.
On November 5, 1998, Pan Pacific (Portland), LLC acquired Sunset Mall, a
112,746 square foot neighborhood shopping center located in Portland, Oregon by
acquiring MIKZ Development, LLC, the entity which owns Sunset Mall. MIKZ was
acquired pursuant to a Contribution Agreement dated September 23, 1998, and
related amendments. The purchase price, net of associated debt of $7,576,000,
was $4,442,000. Pan Pacific (Portland), LLC issued 198,597 LLC units in exchange
for all of the outstanding ownership interests in MIKZ.
On November 9, 1998, Pan Pacific (Portland), LLC acquired a 99% ownership
interest in three shopping centers located in Oregon by acquiring Smudik
Development, LLC, the entity which owns the three shopping centers. The 99%
interest in Smudik was acquired pursuant to a Contribution Agreement, dated
September 23, 1998, and related amendments. The purchase price, net of
associated debt of $16,995,000, was $13,831,000. Pan Pacific (Portland), LLC
issued 634,019 LLC units in exchange for 99% of the outstanding ownership
interests in Smudik. The remaining 1% interest in Smudik was acquired for cash
by us through a wholly-owned subsidiary of ours. The three properties acquired
from Smudik are Sandy Marketplace, a 98,638 square foot neighborhood shopping
center located in Sandy, Oregon, Southgate Shopping Center, a 50,862 square foot
shopping center located in Milwaukie, Oregon and Oregon City Shopping Center, a
238,711 square foot community shopping center located in Oregon City, Oregon.
USE OF PROCEEDS
We are filing the registration statement of which this prospectus is a part
under our contractual obligation to the holders named in the section entitled
"Selling Stockholders." We will not receive any of the proceeds from the
issuances of shares of our common stock to the holders of LLC units or the
resale of the shares by these holders. However, we will pay registration
expenses which we estimate to be approximately $24,000.
FORWARD-LOOKING STATEMENTS
This prospectus contains statements which constitute "forward-looking
statements" within the meaning of Section 27A of the Securities Act and Section
21E of the Exchange Act. When used in this prospectus, the words "may", "will",
"expect", "anticipate," "continue", "estimate", "project", "intend" and similar
expressions are intended to identify forward-looking statements regarding
events, conditions, and financial trends that may affect our future plans of
operations, business strategy, results of operations and financial position.
Prospective investors are cautioned that any forward-looking statements are not
guarantees of future performance and are subject to risks and uncertainties, and
that actual results may differ materially from those included within the
forward-looking statements as a result of various factors.
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DESCRIPTION OF CAPITAL STOCK
The following summary of the terms of our stock does not purport to be
complete and is subject to and qualified in its entirety by reference to our
Charter and Bylaws, copies of which are on file with the Commission as exhibits
to registration statements previously filed by us. See "Available Information."
General
Under our Charter, our authorized capital stock consists of 100,000,000
shares of common stock $.01 par value per share, and 30,000,000 shares of
preferred stock $.01 par value per share. As of March 31, 2000, there were
21,252,512 shares of our common stock issued and outstanding and no shares of
preferred stock were issued and outstanding. Under Maryland law, stockholders
generally are not liable for the corporation's obligations solely as a result of
their status as stockholders.
Common Stock
Each outstanding share of our common stock entitles the holder to one vote
on all matters presented to stockholders for a vote, including the election of
directors, and, except as otherwise required by law and except as provided in
our Charter, the holders of these shares will possess the exclusive voting
power, subject to the provisions of our Charter regarding the ownership of
shares of common stock in excess of the Ownership Limit, or such other limit as
provided in our Charter or as otherwise permitted by our board of directors
described below. Holders of shares of our common stock have no preference,
conversion, exchange, sinking fund, redemption or appraisal rights and, with the
exception of Revenue Properties (U.S.) Inc.'s proportional participation rights,
have no preemptive rights to subscribe for any of our securities and no
cumulative voting rights in the election of directors. All shares of our common
stock issued and outstanding are duly authorized, fully paid and nonassessable.
Subject to the preferential rights of any other shares or series of stock and to
the provisions of our Charter regarding ownership of shares of common stock in
excess of the Ownership Limit, or such other limit as provided in our Charter or
as otherwise permitted by our board of directors described below, distributions
are paid to the holders of shares of common stock if and when authorized by our
board of directors out of assets legally available therefor.
If we are liquidated, subject to the right of any holders of preferred
stock to receive preferential distributions, each outstanding share of our
common stock will be entitled to participate pro rata in the assets remaining
after payment of, or adequate provision for, all of our known debts and
liabilities.
Subject to the provisions of our Charter regarding the ownership of shares
of our common stock in excess of the Ownership Limit, or such other limit as
provided in our Charter or as otherwise permitted by our board of directors as
described below, all shares of our common stock will have equal distribution,
liquidation and voting rights, and will have no preference or exchange rights.
See "--Restrictions on Ownership and Transfer."
Under the Maryland General Corporation Law, a Maryland corporation
generally cannot dissolve, amend its charter, merge, sell all or substantially
all of its assets or engage in a share exchange 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 entitled to be cast on the matter) is set forth in
the corporation's charter. The phrase "substantially all of the assets" is not
defined in the MGCL and is, therefore, subject to interpretation by courts
applying Maryland law in the context of the facts and circumstances of any
particular case. Our Charter provides that each of these matters may be approved
by the stockholders by a majority of all the votes entitled to be cast on the
matter.
Our Charter authorizes our board of directors to reclassify any unissued
shares of our common stock into other classes or series of classes of stock and
to establish the number of shares in each class or series and to set the
preferences, conversion and other rights, voting powers, restrictions,
limitations and restrictions on ownership, limitations as to dividends or other
distributions, qualifications and terms or conditions of redemption for each
such class or series.
Transfer Agent and Registrar
The transfer agent and registrar for our common stock is The Bank of New
York.
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Preferred Stock
Preferred stock may be issued from time to time, in one or more series, as
authorized by our board of directors. No preferred stock is currently issued or
outstanding. Prior to the issuance of shares of each series, our board of
directors is required by the MGCL and our Charter to fix for each series,
subject to the provisions of our Charter regarding restrictions on transfer of
stock, the terms, preferences, conversion or other rights, voting powers,
restrictions, limitations as to distributions, qualifications and terms or
conditions of redemption, as permitted by Maryland law. Because our board of
directors has the power to establish the preferences, powers and rights of each
series of preferred stock, it may afford the holders of any series of preferred
stock preferences, powers and rights, voting or otherwise, senior to the rights
of holders of shares of our common stock. The issuance of preferred stock could
have the effect of delaying, deferring or preventing a transaction or a change
of control of the company that might involve a premium price for holders of our
common stock or otherwise be in their best interest. Our board of directors has
no present plans to issue any preferred stock.
Power to Issue Additional Shares of Common Stock and Preferred Stock
We believe that the power of our board of directors to issue additional
authorized but unissued shares of our common stock or preferred stock and to
classify or reclassify unissued shares of our common stock and preferred stock
and thereafter to cause us to issue such classified or reclassified shares of
stock will provide us with increased flexibility in structuring possible future
financings and acquisitions and in meeting other needs which might arise. The
additional classes or series, as well as our common stock, will be available for
issuance without further action by our stockholders, unless such action is
required by applicable law or the rules of any stock exchange or automated
quotation system on which its securities may be listed or traded. Although our
board of directors has no intention at the present time of doing so, it could
authorize us to issue a class or series that could, depending upon the terms of
such class or series, delay, defer or prevent a transaction or a change in
control of our company that might involve a premium price for holders of our
common stock or otherwise be in their best interest.
Restrictions on Ownership and Transfer
For us to qualify as a REIT under the Internal Revenue Code, subject to
certain exceptions, no more than 50% in value of our outstanding shares of stock
may be owned, actually or constructively, by five or fewer individuals (as
defined in the Internal Revenue Code to include certain entities) during the
last half of a taxable year (other than the first year for which an election to
be treated as a REIT has been made). In addition, if we, or an owner of 10% or
more of our company, actually or constructively owns 10% or more of a tenant of
ours (or a tenant of any partnership in which we are a partner), the rent
received by us (either directly or through any such partnership) from such
tenant will not be qualifying income for purposes of the REIT gross income tests
of the Internal Revenue Code. A REIT's stock must also be beneficially owned by
100 or more persons during at least 335 days of a taxable year of twelve months
or during a proportionate part of a shorter taxable year (other than the first
year for which an election to be treated as a REIT has been made).
Our Charter prohibits (i) any person from actually or constructively owning
shares of our common stock that would result in us being "closely held" under
Section 856(h) of the Internal Revenue Code or otherwise cause us to fail to
qualify as a REIT, and (ii) any person from transferring shares of our common
stock if such transfer would result in shares of our common stock being owned by
fewer than 100 persons. Our Charter contains restrictions on the ownership and
transfer of our common stock which are intended to assist us in enforcing these
prohibitions. The ownership limit set forth in our Charter (the "Ownership
Limit") provides that, subject to certain specified exceptions, no person or
entity may own, or be deemed to own by virtue of the applicable constructive
ownership provisions of the Internal Revenue Code, more than 6.25% (by number or
value, whichever is more restrictive) of the outstanding shares of our common
stock. The constructive ownership rules of the Internal Revenue Code are
complex, and may cause shares of our common stock owned actually or
constructively by a group of related individuals and/or entities to be
constructively owned by one individual or entity. As a result, the acquisition
of less than 6.25% of the shares of our common stock (or the acquisition of an
interest in an entity, such as Revenue Properties Company Limited or Acktion
Corporation, a Canadian corporation, or LaSalle Investment Management, Inc.,
and/or certain affiliates or subsidiaries of these entities, that owns, actually
or constructively, our common stock) by an individual or entity, could,
nevertheless cause that individual or entity, or another individual or entity,
to own constructively in excess of 6.25% of our outstanding common stock and
thus violate the Ownership Limit, or such other limit as provided in our Charter
or as otherwise permitted by our board of directors. For example, an increase in
the proportionate ownership interest in Revenue Properties Company Limited held
by Mark Tanz, Stuart Tanz or any other Tanz family members (collectively, the
"Tanz Family"), or some other individual or entity, could cause one or more
members of the Tanz Family or such other individual or entity to violate the
Ownership Limit, or such other limit as provided in our Charter or as otherwise
permitted by our board of
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directors. Our board of directors may, but in no event will be required to,
waive the Ownership Limit with respect to a particular stockholder if it
determines that the ownership will not jeopardize our status as a REIT and our
board of directors otherwise decides that action would be in our best interest.
As a condition of a waiver, our board of directors may require an opinion of
counsel satisfactory to it or undertakings or representations from the applicant
with respect to preserving our REIT status. Our board of directors has obtained
undertakings and representations from Revenue Properties (U.S.), Inc. and, as a
result, has waived the Ownership Limit with respect to Revenue Properties
(U.S.), Inc. and its affiliates and has permitted Revenue Properties (U.S.),
Inc. to own up to 55.0% of our outstanding common stock. Our board of directors
has also obtained undertakings and representations from the Tanz Family and, as
a result, has waived the Ownership Limit with respect to the Tanz Family and has
permitted the Tanz Family to own, in the aggregate, actually or constructively
(including through the ownership of stock of Revenue Properties (U.S.), Inc. or
Revenue Properties Company Limited), up to 24.0% (by number of shares or value,
whichever is more restrictive) of our outstanding common stock (the "Tanz Family
Ownership Limit"). Likewise, our board of directors has waived the Ownership
Limit with respect to (i) Acktion Corporation and certain entities affiliated
with that corporation, and has permitted that entity to actually or
constructively own up to 12.0% (by number of shares or value, whichever is more
restrictive) of our outstanding common stock (the "Acktion Ownership Limit"),
and (ii) LaSalle Investment Management, Inc. and certain entities affiliated
with that corporation, and has permitted those entities to actually or
constructively own up to 9.8% (by number of shares or value, whichever is more
restrictive) of our outstanding common stock (the "LaSalle Ownership Limit").
Any person who acquires or attempts or intends to acquire actual or
constructive ownership of shares of our stock (including by acquiring shares of
Revenue Properties (U.S.), Inc., Revenue Properties Company Limited or Acktion
Corporation), LaSalle Investment Management, Inc. and/or entities affiliated
with any of the foregoing companies) that will or may violate any of the
foregoing restrictions on transferability and ownership is required to give
notice immediately to us and provide us with any other information as we may
request in order to determine the effect of a transfer on our status as a REIT.
The foregoing restrictions on transferability and ownership will not apply if
our board of directors determines that it is no longer in our best interest to
attempt to qualify, or to continue to qualify, as a REIT. Except as otherwise
described above, any change in the Ownership Limit would require an amendment to
our Charter. Amendments to our Charter require the affirmative vote of a
majority of all votes entitled to be cast on that matter.
Under our Charter, if any purported transfer of our common stock or any
other event would otherwise result in any person violating the Ownership Limit
or other limit as provided in our Charter or as otherwise permitted by our board
of directors (including, but not limited to, the Revenue Properties (U.S.), Inc.
Ownership Limit, the Tanz Family Ownership Limit, the Acktion Ownership Limit
and the LaSalle Ownership Limit), then any purported transfer will be void and
of no force or effect with respect to the purported transferee (the "Prohibited
Transferee") as to that number of shares in excess of the Ownership Limit or
other limit (the "Excess Shares"), and the Prohibited Transferee will acquire no
right or interest (or, in the case of any event other than a purported transfer,
the person or entity holding record title to any Excess Shares (the "Prohibited
Owner") will cease to own any right or interest) in the Excess Shares.
Furthermore, an acquisition or increase in the actual or constructive ownership
of stock in Revenue Properties Company Limited, Revenue Properties (U.S.), Inc.
or Acktion Corporation by one or more members of the Tanz Family, or some other
individual or entity, or the actual or constructive acquisition by Revenue
Properties (U.S.), Inc. or Acktion Corporation of additional shares of our
common stock, could result in our disqualification as a REIT (a "Violative
Indirect Transfer"). In these circumstances, pursuant to our Charter, we will
treat Revenue Properties (U.S.), Inc. or Acktion Corporation, as applicable, as
a Prohibited Owner with respect to the number of shares (the "Excess Revenue
Properties (U.S.), Inc. Shares") of Revenue Properties (U.S.), Inc. common stock
owned by it which, if divested, would permit us to continue to maintain our REIT
status. Any Excess Shares or Excess Revenue Properties (U.S.), Inc. Shares
described above will be transferred automatically, by operation of law, to a
trust, the beneficiary of which will be a qualified charitable organization
selected by us (the "Beneficiary"). This automatic transfer will be deemed to be
effective as of the close of business on the business day prior to the date of
such violative transfer (including any Violative Indirect Transfer). Within 20
days of receiving notice from us of the transfer of shares to the trust, the
trustee of the trust (who will be designated by us and be unaffiliated with us
and any Prohibited Transferee or Prohibited Owner) will be required to sell
Excess Shares to a person or entity who could own the shares without violating
the Ownership Limit, or any other limit as provided in our Charter or as
otherwise permitted by our board of directors, and distribute to the Prohibited
Transferee or Prohibited Owner an amount equal to the lesser of the price paid
by the Prohibited Transferee or Prohibited Owner for Excess Shares or the sales
proceeds received by the trust for Excess Shares. In the case of any Excess
Shares resulting from any event other than a transfer (such as a Violative
Indirect Transfer), or from a transfer for no consideration (such as a gift),
the trustee will be required to sell Excess Shares (or Excess Revenue Properties
(U.S.), Inc. Shares) to a qualified person or entity and distribute to the
Prohibited Owner an amount equal to the lesser of the fair market value (as
defined in our Charter) of Excess Shares (or Excess Revenue Properties (U.S.),
Inc. Shares) as of the date of such event (including the date of a Violative
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Indirect Transfer) or the sales proceeds received by the trust for Excess Shares
(or Excess Revenue Properties (U.S.), Inc. Shares). In either case, any proceeds
in excess of the amount distributable to the Prohibited Transferee or Prohibited
Owner, as applicable, will be distributed to the Beneficiary. Prior to a sale of
any Excess Shares (or Excess Revenue Properties (U.S.), Inc. Shares) by the
trust, the trustee will be entitled to receive, in trust for the Beneficiary,
all dividends and other distributions paid by us with respect to Excess Shares
(or Excess Revenue Properties (U.S.), Inc. Shares), and also will be entitled to
exercise all voting rights with respect to Excess Shares (or Excess Revenue
Properties (U.S.), Inc. Shares). Subject to Maryland law, effective as of the
date that these shares have been transferred to the trust, the trustee will have
the authority (at the trustee's sole discretion) (i) to rescind as void any vote
cast by a Prohibited Transferee or Prohibited Owner, as applicable, prior to our
discovery that these shares have been transferred to the trust and (ii) to
recast the vote in accordance with the desires of the trustee acting for the
benefit of the Beneficiary. However, if we have already taken irreversible
corporate action, then the trustee shall not have the authority to rescind and
recast the vote. Any dividend or other distribution paid to the Prohibited
Transferee or Prohibited Owner (prior to our discovery that these shares had
been automatically transferred to a trust as described above) will be required
to be repaid to the trustee upon demand for distribution to the Beneficiary. In
the event that the transfer to the trust as described above is not automatically
effective (for any reason) to prevent violation of the Ownership Limit or any
other limit as provided in our Charter or as otherwise permitted by our board of
directors, then our Charter provides that the transfer of the Excess Shares will
be void or, in the case of a Violative Indirect Transfer, the Excess Revenue
Properties (U.S.), Inc. Shares will be redeemable by us at our sole option at a
price equal to the fair market value of the shares at the time of the Violative
Indirect Transfer.
In addition, shares of our stock held in the trust will be deemed to have
been offered for sale to us, or our designee, at a price per share equal to the
lesser of (i) the price per share in the transaction that resulted in the
transfer to the trust (or, in the case of a devise, gift or Violative Indirect
Transfer, the fair market value at the time of the devise, gift or transfer) and
(ii) the fair market value on the date we, or our designee, accepts the offer.
We will have the right to accept the offer until the trustee has sold the shares
of stock held in the trust. Upon a sale to us, the interest of the Beneficiary
in the shares sold will terminate and the trustee will distribute the net
proceeds of the sale to the Prohibited Transferee or Prohibited Owner.
If any purported transfer of shares of our common stock would cause us to
be beneficially owned by fewer than 100 persons, the transfer will be null and
void in its entirety and the intended transferee will acquire no rights to the
stock.
All certificates representing shares of our common stock will bear a legend
referring to the restrictions described above. The foregoing ownership
limitations could delay, defer or prevent a transaction or a change in control
of our company that might involve a premium price for our common stock or
otherwise be in the best interest of stockholders.
Every owner of a specified percentage (or more) of the outstanding shares
of our common stock must file a completed questionnaire with us containing
information regarding their ownership of such shares, as set forth in the
Treasury Regulations. Under current Treasury Regulations, the percentage will be
set between 0.5% and 5.0%, depending upon the number of record holders of our
shares. In addition, pursuant to our Charter, each stockholder will upon demand
be required to disclose to us in writing information as we may request in order
to determine the effect, if any, of a stockholder's actual and constructive
ownership of our common stock on our status as a REIT and to ensure compliance
with the Ownership Limit, or any other limit as provided in our Charter or as
otherwise permitted by our board of directors.
MATERIAL FEDERAL INCOME TAX CONSEQUENCES
The following is a summary of the federal income tax considerations we
believe are material to a holder of our common stock. This summary is based on
current law, is for general information only and is not tax advice. Your tax
treatment will vary depending on your particular situation and this discussion
does not purport to deal with all aspects of taxation that may be relevant to a
holder of common stock or LLC units in light of his or her personal investments
or tax circumstances, or to stockholders or unitholders who receive special
treatment under the federal income tax laws except to the extent discussed under
the headings "--Taxation of tax-exempt stockholders" and "--Taxation of non-U.S.
stockholders." Stockholders and unitholders receiving special treatment include,
without limitation:
- insurance companies;
- financial institutions or broker-dealers;
- tax-exempt organizations;
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- stockholders holding securities as part of a conversion transaction,
or a hedge or hedging transaction, or as a position in a straddle for
tax purposes;
- foreign corporations or partnerships; and
- persons who are not citizens or residents of the United States.
In addition, this summary does not purport to deal with aspects of taxation
that may be relevant to a holder of LLC units except to the extent described in
"--Tax consequences of the exercise of exchange rights." Furthermore, the
summary below does not consider the effect of any foreign, state, local or other
tax laws that may be applicable to you as a holder of our common units or our
common stock.
The information in this section is based on:
- the Internal Revenue Code;
- current, temporary and proposed treasury regulations promulgated under
the Internal Revenue Code;
- the legislative history of the Internal Revenue Code;
- current administrative interpretations and practices of the Internal
Revenue Service; and
- court decisions;
in each case, as of the date of this prospectus. In addition, the administrative
interpretations and practices of the Internal Revenue Service include its
practices and policies as expressed in private letter rulings which are not
binding on the Internal Revenue Service, except with respect to the particular
taxpayers who requested and received these rulings. Future legislation, treasury
regulations, administrative interpretations and practices and/or court decisions
may adversely affect the tax considerations contained in this discussion. Any
change could apply retroactively to transactions preceding the date of the
change. We have not requested, and do not plan to request, any rulings from the
Internal Revenue Service concerning our tax treatment, and the statements in
this prospectus are not binding on the Internal Revenue Service or any court.
Thus, we can provide no assurance that the tax considerations contained in this
discussion will not be challenged by the Internal Revenue Service or if
challenged, will be sustained by a court.
You are urged to consult your tax advisor regarding the specific tax
consequences to you of:
- the ownership and disposition of LLC units;
- the acquisition, ownership and sale or other disposition of our common
stock, including the federal, state, local, foreign and other tax
consequences;
- our election to be taxed as a real estate investment trust for federal
income tax purposes; and
- potential changes in the tax laws.
Tax Consequences of the Exercise of Exchange Rights.
If you exercise your right to require us to acquire all or part of your LLC
units, and instead, we elect to acquire some or all of your LLC units in
exchange for our common stock, the exchange will be a fully taxable transaction,
and you will generally recognize gain in an amount equal to the value of our
common stock received, plus the amount of liabilities of Pan Pacific (Portland),
LLC allocable to your LLC units being exchanged, less your tax basis in those
LLC units. The recognition of any loss is subject to a number of limitations set
forth in the Internal Revenue Code. The character of any gain or loss as capital
or ordinary will depend on the nature of the assets of Pan Pacific (Portland),
LLC at the time of the exchange. The tax treatment of the acquisition of your
LLC units by Pan Pacific (Portland), LLC in exchange for cash may be similar,
depending on your circumstances.
Taxation of Pan Pacific Retail Properties, Inc.
General. We elected to be taxed as a real estate investment trust under
Sections 856 through 860 of the Internal Revenue Code of 1986, as amended,
commencing with our taxable year ended December 31, 1997. We believe we have
been organized and have operated in a manner which allows us to qualify for
taxation as a real estate investment trust under the Internal Revenue Code
commencing with our taxable year ended December 31, 1997. We intend to continue
to operate in this manner. However, our qualification and taxation as a real
estate investment trust depends upon our ability to meet, through actual annual
operating results, asset diversification, distribution levels and diversity of
stock ownership, the various qualification tests imposed under the Internal
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Revenue Code. Accordingly, there is no assurance that we have operated or will
continue to operate in a manner so as to qualify or remain qualified as a real
estate investment trust. See "--Failure to Qualify."
The sections of the Internal Revenue Code that relate to the qualification
and operation as a real estate investment trust are highly technical and
complex. The following describes the material aspects of the sections of the
Internal Revenue Code that govern the federal income tax treatment of a real
estate investment trust and its stockholders. This summary is qualified in its
entirety by the Internal Revenue Code, relevant rules and treasury regulations
promulgated under the Internal Revenue Code, and administrative and judicial
interpretations of the Internal Revenue Code and these rules and treasury
regulations. Moreover, our qualification and taxation as a real estate
investment trust depends upon our ability to meet the various qualification
tests imposed under the Internal Revenue Code and discussed below, relating to
our actual annual operating results, asset diversification, distribution levels
and diversity of stock ownership. Accordingly, no assurance can be given that
the actual results of our operations for any particular taxable year will
satisfy these requirements. See "--Failure to Qualify" in this prospectus.
Further, the anticipated income tax treatment described in this prospectus may
be changed, perhaps retroactively, by legislative, administrative or judicial
action at any time.
If we qualify for taxation as a real estate investment trust, we generally
will not be required to pay federal corporate income taxes on our net income
that is currently distributed to our stockholders. This treatment substantially
eliminates the "double taxation" that ordinarily results from investment in a
corporation. Double taxation means taxation once at the corporate level when
income is earned and once again at the stockholder level when this income is
distributed. We will be required to pay federal income tax, however, as follows:
- - We will be required to pay tax at regular corporate rates on any
undistributed "real estate investment trust taxable income," including
undistributed net capital gains.
- - We may be required to pay the "alternative minimum tax" on our items of tax
preference.
- - If we have: (a) net income from the sale or other disposition of
"foreclosure property" which is held primarily for sale to customers in the
ordinary course of business; or (b) other nonqualifying income from
foreclosure property, we will be required to pay tax at the highest
corporate rate on this income. Foreclosure property is generally defined as
property acquired through foreclosure or after a default on a loan secured
by the property or a lease of the property.
- - We will be required to pay a 100% tax on any net income from prohibited
transactions. Prohibited transactions are, in general, sales or other
taxable dispositions of property, other than foreclosure property, held
primarily for sale to customers in the ordinary course of business.
- - If we fail to satisfy the 75% or 95% gross income test, as described below,
but have otherwise maintained our qualification as a real estate investment
trust, we will be required to pay a 100% tax on an amount equal to (a) the
gross income attributable to the greater of the amount by which we fail the
75% or 95% gross income test multiplied by (b) a fraction intended to
reflect our profitability.
- - We will be required to pay a 4% excise tax on the excess of the required
distribution over the amounts actually distributed if we fail to distribute
during each calendar year at least the sum of (a) 85% of our real estate
investment trust ordinary income for the year, (b) 95% of our real estate
investment trust capital gain net income for the year, and (c) any
undistributed taxable income from prior periods.
- - If we acquire any asset from a corporation which is or has been a C
corporation in a transaction in which the basis of the asset in our hands
is determined by reference to the basis of the asset in the hands of the C
corporation, and we subsequently recognize gain on the disposition of the
asset during the ten-year period beginning on the date on which we acquired
the asset, then under temporary treasury regulations, we will be required
to pay tax at the highest regular corporate tax rate on this gain to the
extent of the excess of (a) the fair market value of the asset over (b) our
adjusted basis in the asset, in each case determined as of the date on
which we acquired the asset. A C corporation is generally defined as a
corporation required to pay full corporate-level tax. The results described
in this paragraph with respect to the recognition of gain assume that we
will make an election pursuant to the temporary treasury regulations
referred to above.
Requirements for qualification as a real estate investment trust. The
Internal Revenue Code defines a real estate investment trust as a corporation,
trust or association:
(1) that is managed by one or more trustees or directors;
(2) that issues transferable shares or transferable certificates to
evidence beneficial ownership;
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(3) that would be taxable as a domestic corporation but for Sections
856 through 860 of the Internal Revenue Code;
(4) that is not a financial institution or an insurance company
within the meaning of the Internal Revenue Code;
(5) that is beneficially owned by 100 or more persons;
(6) not more than 50% in value of the outstanding stock of which is
owned, actually or constructively, by five or fewer individuals,
as defined in the Internal Revenue Code to include certain
entities, during the last half of each taxable year; and
(7) that meets other tests, described below, regarding the nature of
its income and assets and the amount of its distributions.
The Internal Revenue Code provides that conditions (1) to (4), inclusive,
must be met during the entire taxable year and that condition (5) must be met
during at least 335 days of a taxable year of twelve months, or during a
proportionate part of a taxable year of less than twelve months. Conditions (5)
and (6) do not apply until after the first taxable year for which an election is
made to be taxed as a real estate investment trust. For purposes of condition
(6), pension funds and other specified tax-exempt entities generally are treated
as individuals, except that a "look-through" exception applies with respect to
pension funds.
We believe that we have satisfied conditions (1) through (7) inclusive. In
addition, our charter provides for restrictions regarding ownership and transfer
of shares. These restrictions are intended to assist us in continuing to satisfy
the share ownership requirements described in (5) and (6) above. These ownership
and transfer restrictions are described in "Description of Capital
Stock--Restrictions on Ownership and Transfer." These restrictions, however, may
not ensure that we will, in all cases, be able to satisfy the share ownership
requirements described in (5) and (6) above. If we fail to satisfy these share
ownership requirements, except as provided in the next sentence, our status as a
real estate investment trust will terminate. If, however, we comply with the
rules contained in the treasury regulations that require us to ascertain the
actual ownership of our shares, and we do not know, or would not have known
through the exercise of reasonable diligence, that we failed to meet the
requirement described in condition (6) above, we will be treated as having met
this requirement. See "--Failure to Qualify." In addition, approximately 50.9%
of our stock is currently owned by Revenue Properties (U.S.), Inc., which is
itself a wholly-owned subsidiary of Revenue Properties Company Limited, and by
certain of Revenue Properties Company Limited's affiliates. There are no
ownership or transfer restrictions of the type described in "Description of
Capital Stock--Restrictions on Ownership and Transfer" in effect with respect to
Revenue Properties (U.S.), Inc.'s stock. Approximately 38.9% of Revenue
Properties (U.S.), Inc.'s outstanding shares of common stock are currently owned
by the Tanz Family and approximately an additional 22.2% are owned by Acktion
Corporation. If the ownership concentration of the Tanz Family or Acktion
Corporation (or some other party) in Revenue Properties (U.S.), Inc. were to
increase, then we might no longer satisfy condition (vii) above, and therefore,
might no longer be qualified as a REIT. See "--Failure to Qualify" below.
However, our Charter permits us to cause the transfer of such number of shares
of common stock owned by Revenue Properties (U.S.), Inc. to a trust having a
charitable beneficiary so as to avoid REIT disqualification.
In addition, we may not maintain our status as a real estate investment trust
unless our taxable year is a calendar year. We have and will continue to have a
calendar taxable year.
Ownership of a partnership interest. We own and operate one or more
properties through partnerships. Treasury regulations provide that if we are a
partner in a partnership, we will be deemed to own our proportionate share of
the assets of the partnership. Also, we will be deemed to be entitled to our
proportionate share of the income of the partnership. The character of the
assets and gross income of the partnership retains the same character in our
hands for purposes of Section 856 of the Internal Revenue Code, including
satisfying the gross income tests and the asset tests. In addition, for these
purposes, the assets and items of income of any partnership in which we own an
interest include such partnership's share of assets and items of income of any
partnership in which it owns an interest. We have included a brief summary of
the rules governing the federal income taxation of partnerships and their
partners below in "--Tax Aspects of the Partnerships." We have direct control of
all of the partnerships in which we are a partner, and will continue to operate
them in a manner consistent with the requirements for qualification as a real
estate investment trust. The treatment described above also applies with respect
to the ownership of interests in limited liability companies that are treated as
partnerships for tax purposes.
Ownership of Subsidiaries. We own and operate a number of properties
through our wholly-owned subsidiaries. We will have owned 100% of the stock of
each of these subsidiaries at all times that each of the subsidiaries has been
in existence. As a result, these subsidiaries will be treated as "qualified REIT
subsidiaries" under the Internal Revenue Code. A corporation that is a qualified
REIT subsidiary is not be treated as a separate corporation, and all assets,
liabilities and items of income, deduction and credit of a qualified REIT
subsidiary are treated as assets, liabilities and items of income, deduction and
credit (as the case may be) of the parent real estate
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investment trust for all purposes under the Internal Revenue Code (including all
real estate investment trust qualification tests). Thus, in applying the
requirements described in this prospectus, the subsidiaries in which we own a
100% interest will be ignored, and all assets, liabilities and items of income,
deduction and credit of such subsidiaries will be treated as our assets,
liabilities and items of income, deduction and credit. A qualified REIT
subsidiary is not subject to federal income tax and our ownership of the stock
of such a subsidiary will not violate the real estate investment trust asset
tests, described below under "--Asset Tests."
Income tests. We must satisfy two gross income requirements annually to
maintain our qualification as a real estate investment trust:
- First, each taxable year we must derive directly or indirectly at
least 75% of our gross income, excluding gross income from prohibited
transactions, from (a) investments relating to real property or
mortgages on real property, including "rents from real property" and,
in some circumstances, interest, or (b) some types of temporary
investments;
- Second, each taxable year we must derive at least 95% of our gross
income, excluding gross income from prohibited transactions, from (a)
the real property investments described above, or (b) dividends,
interest and gain from the sale or disposition of stock or securities
or (c) any combination of the foregoing.
For these purposes, the term "interest" generally does not include any
amount received or accrued, directly or indirectly, if the determination of all
or some of the amount depends in any way on the income or profits of any person.
An amount received or accrued generally will not be excluded from the term
"interest," however, solely by reason of being based on a fixed percentage or
percentages of receipts or sales.
Rents we receive from a tenant will qualify as "rents from real property" in
satisfying the gross income requirements for a real estate investment trust
described above only if the following conditions are met:
- the amount of rent must not be based in any way on the income or
profits of any person. An amount received or accrued generally will
not be excluded from the term "rents from real property" solely
because it is based on a fixed percentage or percentages of receipts
or sales;
- We, or an actual or constructive owner of 10% or more of our capital
stock, do not actually or constructively own 10% or more of the
interests in the tenant;
- rent attributable to personal property, leased in connection with a
lease of real property, is not greater than 15% of the total rent
received under the lease. If this condition is not met, then the
portion of the rent attributable to personal property will not qualify
as "rents from real property"; and
- We generally must not operate or manage our property or furnish or
render services to our tenants, subject to a 1% de minimis exception,
other than through an independent contractor from whom we derive no
revenue. We may, however, directly perform services that are "usually
or customarily rendered" in connection with the rental of space for
occupancy only and are not otherwise considered "rendered to the
occupant" of the property. Examples of these services include the
provision of light, heat, or other utilities, trash removal and
general maintenance of common areas. Under recently enacted
legislation, described in greater detail below, beginning in 2001, we
may employ a "taxable REIT subsidiary" which may be wholly or
partially owned by us, to provide both customary and noncustomary
services to our tenants without causing the rent we receive from those
tenants to fail to qualify as "rents from real property."
We generally do not intend to receive rent which fails to satisfy any of the
above conditions. Notwithstanding the foregoing, we may have taken and may
continue to take the actions which fail to satisfy one or more of the above
conditions to the extent that we determine, based on the advice of our tax
counsel, that those actions will not jeopardize our status as a real estate
investment trust.
We believe that the aggregate amount of our nonqualifying income, from all
sources, in any taxable year will not exceed the limit on nonqualifying income
under the gross income tests. If we fail to satisfy one or both of the 75% or
95% gross income tests for any taxable year, we may nevertheless qualify as a
real estate investment trust for the year if we are entitled to relief under the
Internal Revenue Code. Generally, we may avail ourselves of the relief
provisions if:
- - our failure to meet these tests was due to reasonable cause and not due to
willful neglect;
- - we attach a schedule of the sources of our income to our federal income tax
return; and
- - any incorrect information on the schedule was not due to fraud with intent
to evade tax.
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It is not possible, however, to state whether in all circumstances we would
be entitled to the benefit of these relief provisions. For example, if we fail
to satisfy the gross income tests because nonqualifying income that we
intentionally accrue or receive exceeds the limits on nonqualifying income, the
IRS could conclude that our failure to satisfy the tests was not due to
reasonable cause. If these relief provisions do not apply to a particular set of
circumstances, we will not qualify as a real estate investment trust. As
discussed above in "-- Taxation of the Pan Pacific Retail, Inc. -- General,"
even if these relief provisions apply, and we retain our status as a real estate
investment trust, a tax would be imposed with respect to our non- qualifying
income. We may not always be able to maintain compliance with the gross income
tests for real estate investment trust qualification despite our periodic
monitoring of our income.
Prohibited transaction income. Any gain that we realize on the sale of any
property held as inventory or other property held primarily for sale to
customers in the ordinary course of business will be treated as income from a
prohibited transaction that is subject to a 100% penalty tax. This prohibited
transaction income may also adversely affect our ability to satisfy the income
tests for qualification as a real estate investment trust. Under existing law,
whether property is held as inventory or primarily for sale to customers in the
ordinary course of a trade or business depends on all the facts and
circumstances surrounding the particular transaction. We intend to hold our
properties for investment with a view to long-term appreciation, to engage in
the business of acquiring, developing and owning its properties. We may make
occasional sales of the properties as are consistent with our investment
objectives. We do not intend to enter into any sales that are prohibited
transactions. The IRS may contend, however, that one or more of these sales is
subject to the 100% penalty tax.
Asset tests. At the close of each quarter of our taxable year, we also must
satisfy three tests relating to the nature and diversification of our assets.
- First, at least 75% of the value of our total assets must be
represented by real estate assets, cash, cash items and government
securities. For purposes of this test, real estate assets include stock
or debt instruments that are purchased with the proceeds of a stock
offering or a long-term public debt offering with a term of at least
five years, but only for the one-year period beginning on the date we
receive these proceeds.
- Second, not more than 25% of our total assets may be represented by
securities, other than those securities includable in the 75% asset
test.
- Third, of the investments included in the 25% asset class, the value of
any one issuer's securities may not exceed 5% of the value of our total
assets, and we may not own more than 10% of any one issuer's
outstanding voting securities.
After initially meeting the asset tests at the close of any quarter, we will
not lose our status as a real estate investment trust for failure to satisfy the
asset tests at the end of a later quarter solely by reason of changes in asset
values. If we fail to satisfy the asset tests because we acquire securities or
other property during a quarter, we can cure this failure by disposing of
sufficient nonqualifying assets within 30 days after the close of that quarter.
For this purpose, an increase in our interests in any partnership in which we
own an interest will be treated as an acquisition of a portion of the securities
or other property owned by that partnership. We believe we have maintained and
intend to continue to maintain adequate records of the value of our assets to
ensure compliance with the asset tests. In addition, we intend to take those
other actions within the 30 days after the close of any quarter as may be
required to cure any noncompliance. If we fail to cure noncompliance with the
asset tests within this time period, we would cease to qualify as a real estate
investment trust.
As discussed above, a real estate investment trust cannot currently own more
than 10% of the outstanding voting securities of any one issuer. Recently,
legislation was enacted that, beginning in 2001, limits a real estate investment
trust's ability to own more than 10% by vote or value of the securities of any
single issuer. This legislation, however, allows a real estate investment trust
to own up to 100% of the vote and/or value of a corporation which jointly elects
with the real estate investment trust to be treated as a "taxable REIT
subsidiary," provided that, in the aggregate, a real estate investment trust's
total investment in its taxable REIT subsidiaries does not exceed 20% of the
real estate investment trust's total assets, and at least 75% of the real estate
investment trust's total assets are real estate or other qualifying assets. In
addition, dividends from taxable REIT subsidiaries will be nonqualifying income
for purposes of the 75%, but not the 95%, gross income test. Other than certain
activities relating to lodging and health care facilities, a taxable REIT
subsidiary may generally engage in any business, including the provision of
customary or noncustomary services to tenants of its parent real estate
investment trust.
This new legislation contains provisions generally intended to insure that
transactions between a real estate investment trust and its taxable REIT
subsidiary occur "at arm's length" and on commercially reasonable terms. These
requirements include a provision that prevents a taxable REIT subsidiary from
deducting interest on direct or indirect indebtedness to its parent real estate
investment trust if, under a specified series of tests, the taxable REIT
subsidiary is considered to have an excessive interest expense level or debt to
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equity ratio. In some cases the new legislation also imposes a 100% tax on the
real estate investment trust if its rental, service and/or other agreements with
its taxable REIT subsidiary are not on arm's length terms.
This new legislation will require us to monitor our investments in the
entities in which we own an interest and, in some circumstances, modify those
investments if we own more than 10% of the voting power or value of another
entity, other than a qualified REIT subsidiary or a taxable REIT subsidiary, as
described above. The legislation concerning taxable REIT subsidiaries is
generally effective only for taxable years beginning after December 31, 2000.
Annual distribution requirements. To maintain our qualification as a real
estate investment trust, we are required to distribute dividends, other than
capital gain dividends, to our stockholders in an amount at least equal to the
sum of:
- 95% of our "REIT taxable income"; and
- 95% of our after tax net income, if any, from foreclosure
property; minus
- the excess of the sum of specified items of our noncash income
items over 5% of "REIT taxable income" as described below.
Our "REIT taxable income" is computed without regard to the dividends paid
deduction and our net capital gain. In addition, for purposes of this test,
non-cash income means income attributable to leveled stepped rents, original
issue discount on purchase money debt, or a like-kind exchange that is later
determined to be taxable.
We must pay these distributions in the taxable year to which they relate, or
in the following taxable year if they are declared before we timely file our tax
return for that year and paid on or before the first regular dividend payment
following their declarations. Except as provided below, these distributions are
taxable to our stockholders, other than tax-exempt entities, as discussed below,
in the year in which paid. This is so even though these distributions relate to
the prior year for purposes of our 95% distribution requirement. The amount
distributed must not be preferential. To avoid being preferential, every
stockholder of the class of stock to which a distribution is made must be
treated the same as every other stockholder of that class, and no class of stock
may be treated otherwise than according to its dividend rights as a class. To
the extent that we do not distribute all of our net capital gain or distribute
at least 95%, but less than 100%, of our "REIT taxable income," as adjusted, we
will be required to pay tax on this income at regular ordinary and capital gain
corporate tax rates. We believe we have made, and intend to continue to make,
timely distributions sufficient to satisfy these annual distribution
requirements.
We expect that our "REIT taxable income" will be less than our cash flow
because of depreciation and other non-cash charges included in computing our
"REIT taxable income." Accordingly, we anticipate that we will generally have
sufficient cash or liquid assets to enable us to satisfy our distribution
requirements. However, we may not have sufficient cash or other liquid assets to
meet these distribution requirements because of timing differences between the
actual receipt of income and actual payment of deductible expenses, and the
inclusion of income and deduction of expenses in determining our taxable income.
If these timing differences occur, we may need to arrange for short-term, or
possibly long-term, borrowings or need to pay dividends in the form of taxable
stock dividends in order to meet the distribution requirements. In addition,
pursuant to recently enacted legislation, the 95% distribution requirement
discussed above will be reduced to 90%, effective for taxable years beginning
after December 31, 2000.
We may be able to rectify an inadvertent failure to meet the 95% distribution
requirement for a year by paying "deficiency dividends" to stockholders in a
later year, which we may include in our deduction for dividends paid for the
earlier year. Thus, we may be able to avoid being taxed on amounts distributed
as deficiency dividends. However, we will be required to pay interest based upon
the amount of any deduction taken for deficiency dividends.
In addition, we will be required to pay a 4% excise tax on the excess of the
required distribution over the amounts actually distributed if we fail to
distribute during each calendar year, or in the case of distributions with
declaration and record dates falling in the last three months of the calendar
year, by the end of January immediately following that year, at least the sum of
85% of our ordinary income for the year, 95% of our capital gain net income for
the year plus, in each case, any undistributed ordinary income or capital gain
net income, as the case may be, from prior periods. Any ordinary income or
capital gain net income on which this excise tax is imposed for any year is
treated as an amount distributed during that year for purposes of calculating
the tax.
Distributions with declaration and record dates falling in the last three
months of the calendar year, which are paid to our stockholders by the end of
January immediately following that year, will be treated for federal income tax
purposes as having been paid on December 31 of the prior year.
Failure to Qualify.
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<PAGE> 17
If we fail to qualify for taxation as a real estate investment trust in any
taxable year, and the relief provisions of the Internal Revenue Code do not
apply, we will be required to pay tax, including any alternative minimum tax, on
our taxable income at regular corporate rates. Distributions to stockholders in
any year in which we fail to qualify as a real estate investment trust will not
be deductible by us and we will not be required to distribute any amounts to our
stockholders. As a result, we anticipate that our failure to qualify as a real
estate investment trust would reduce the cash available for distribution by us
to our stockholders. In addition, if we fail to qualify as a real estate
investment trust, all distributions to stockholders will be taxable at ordinary
income rates to the extent of our current and accumulated earnings and profits.
In this event, corporate distributees may be eligible for the dividends-received
deduction. Unless entitled to relief under specific statutory provisions, we
will also be disqualified from taxation as a real estate investment trust for
the four taxable years following the year in which we lose our qualification. It
is not possible to state whether in all circumstances we would be entitled to
this statutory relief.
Tax Aspects of the Partnerships.
General. We currently own interest in several partnerships and may own
interests in additional partnerships in the future. Our ownership of an interest
in such partnerships involves special tax considerations. These special tax
considerations include, for example, the possibility that the IRS might
challenge the status of one or more of the partnerships in which we own an
interest as partnerships, as opposed to associations taxable as corporations,
for federal income tax purposes. If a partnership in which we own an interest,
or one or more of its subsidiary partnerships, were treated as an association,
it would be taxable as a corporation and therefore be subject to an entity-level
tax on its income. In this situation, the character of our assets and items of
gross income would change, and could prevent us from satisfying the real estate
investment trust asset tests and/or the real estate investment trust income
tests. This, in turn, would prevent us from qualifying as a real estate
investment trust. In addition, a change in the tax status of one or more of the
partnerships in which we own an interest might be treated as a taxable event. If
so, we might incur a tax liability without any related cash distributions.
Treasury regulations that apply for tax periods beginning on or after January
1, 1997, provide that a domestic business entity not otherwise organized as a
corporation and which has at least two members may elect to be treated as a
partnership for federal income tax purposes. Unless it elects otherwise, an
eligible entity in existence prior to January 1, 1997, will have the same
classification for federal income tax purposes that it claimed under the entity
classification treasury regulations in effect prior to this date. In addition,
an eligible entity which did not exist or did not claim a classification prior
to January 1, 1997, will be classified as a partnership for federal income tax
purposes unless it elects otherwise. All of the partnerships in which we own an
interest intend to claim classification as partnerships under these treasury
regulations. As a result, we believe that these partnerships will be classified
as partnerships for federal income tax purposes. The treatment described above
also applies with respect to our ownership of interests in limited liability
companies that are treated as partnerships for tax purposes.
Allocations of Income, Gain, Loss and Deduction. A partnership or limited
liability company agreement will generally determine the allocation of income
and losses among partners or members. These allocations, however, will be
disregarded for tax purposes if they do not comply with the provisions of
Section 704(b) of the Internal Revenue Code and the treasury regulations.
Generally, Section 704(b) of the Internal Revenue Code and the related treasury
regulations require that partnership and limited liability company allocations
respect the economic arrangement of the partners and members. If an allocation
is not recognized for federal income tax purposes, the relevant item will be
reallocated according to the partners' or members' interests in the partnership
or limited liability company. This reallocation will be determined by taking
into account all of the facts and circumstances relating to the economic
arrangement of the partners or members with respect to such item. The
allocations of taxable income and loss in each of the partnerships and limited
liability companies in which we own an interest are intended to comply with the
requirements of Section 704(b) of the Internal Revenue Code and the treasury
regulations thereunder.
Tax Allocations With Respect to the Properties. Under Section 704(c) of the
Internal Revenue Code, income, gain, loss and deduction attributable to
appreciated or depreciated property that is contributed to a partnership or
limited liability company in exchange for an interest in the partnership or
limited liability company must be allocated in a manner so that the contributing
partner or member is charged with the unrealized gain or benefits from the
unrealized loss associated with the property at the time of the contribution.
The amount of the unrealized gain or unrealized loss is generally equal to the
difference between the fair market value or book value and the adjusted tax
basis of the contributed property at the time of contribution. These allocations
are solely for federal income tax purposes. These allocations do not affect the
book capital accounts or other economic or legal arrangements among the partners
or members. Some of the partnerships and/or limited liability companies in which
we own an interest were formed by way of contributions of appreciated property.
The relevant partnership and/or limited liability company agreements require
that allocations be made in a manner consistent with Section 704(c) of the
Internal Revenue Code.
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<PAGE> 18
Consequences of the Formation Transactions on Our Qualification as a
REIT--Earnings and Profits Distribution Requirement.
A real estate investment trust is not permitted to have accumulated earnings and
profits attributable to non-real estate investment trust years. A real estate
investment trust has until the close of its first taxable year in which it has
non-real estate investment trust earnings and profits to distribute all such
earnings and profits. Our failure to comply with this rule would result in the
loss of our real estate investment trust status. See "--Failure to Qualify." As
part of the transactions consummated in connection with our formation and
initial public offering in August 1997, we may have acquired earnings and
profits attributable to non-real estate investment trust years from certain of
Revenue Properties (U.S.), Inc.'s wholly-owned subsidiaries. While not free from
doubt, we believe, and intend to take the position, that the earnings and
profits of the Revenue Properties (U.S.), Inc. subsidiaries remained with the
Revenue Properties (U.S.), Inc. affiliated group and were not acquired by us.
For purposes of applying the rules requiring the distribution of non-real estate
investment trust earnings and profits, however, we have assumed that the
earnings and profits of the Revenue Properties (U.S.), Inc. subsidiaries did
carry over to us, and therefore that we were required to have distributed, or
been deemed to have distributed, those earnings and profits prior to the end of
1997 in order to avoid a loss of our status as a real estate investment trust in
1997. The calculation of the amount of Revenue Properties (U.S.), Inc. earnings
and profits that we would have acquired, and the amount of distributions
necessary to distribute those earnings and profits, is subject to challenge by
the IRS. However, even if the IRS should challenge our calculation of the amount
of acquired earnings and profits, we believe that we did not have earnings and
profits attributable to non-real estate investment trust years as of the close
of 1997, and therefore that we qualified as a real estate investment trust for
1997. See "--Failure to Qualify."
Taxation of Taxable U.S. Stockholders.
As used below, the term "U.S. stockholder" means a holder of shares of common
stock who is for United States federal income tax purposes:
- a citizen or resident of the United States;
- a corporation, partnership, or other entity created or organized
in or under the laws of the United States or of any state or in
the District of Columbia, unless, in the case of a partnership,
treasury regulations provide otherwise;
- an estate which is required to pay United States federal income
tax regardless of the source of its income; or
- a trust whose administration is under the primary supervision of
a United States court and which has one or more United States
persons who have the authority to control all substantial
decisions of the trust.
Notwithstanding the preceding sentence, to the extent provided in treasury
regulations, some trusts in existence on August 20, 1996, and treated as United
States persons prior to this date that elect to continue to be treated as United
States persons, shall also be considered U.S. stockholders.
Distributions Generally. Distributions out of our current or accumulated
earnings and profits, other than capital gain dividends discussed below, will
constitute dividends taxable to our taxable U.S. stockholders as ordinary
income. As long as we qualify as a real estate investment trust, these
distributions will not be eligible for the dividends-received deduction in the
case of U.S. stockholders that are corporations. For purposes of determining
whether distributions to holders of common stock are out of current or
accumulated earnings and profits, our earnings and profits will be allocated
first to our outstanding preferred stock, if any, and then to our common stock.
To the extent that we make distributions, other than capital gain dividends
discussed below, in excess of our current and accumulated earnings and profits,
these distributions will be treated first as a tax-free return of capital to
each U.S. stockholder. This treatment will reduce the adjusted basis which each
U.S. stockholder has in his or her shares of stock for tax purposes by the
amount of the distribution, but not below zero. Distributions in excess of a
U.S. stockholder's adjusted basis in his or her shares will be taxable as
capital gain, provided that the shares were held as capital assets. This gain
will be taxable as long-term capital gain if the shares have been held for more
than one year. Dividends we declare in October, November, or December of any
year and payable to a stockholder of record on a specified date in any of these
months will be treated as both paid by us and received by the stockholder on
December 31 of that year, provided we actually pay the dividend on or before
January 31 of the following calendar year. Stockholders may not include in their
own income tax returns any of our net operating losses or capital losses.
Capital gain distributions. Distributions that we properly designate as
capital gain dividends will be taxable to taxable U.S. stockholders as gains
from the sale or disposition of a capital asset to the extent that these gains
do not exceed our actual net capital
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<PAGE> 19
gain for the taxable year. Depending on the tax characteristics of the assets
which produced these gains, and on specified designations, if any, which we may
make, these gains may be taxable to non-corporate U.S. stockholders at a 20% or
25% rate. U.S. stockholders that are corporations may, however, be required to
treat up to 20% of some capital gain dividends as ordinary income.
Passive Activity Losses and Investment Interest Limitations. Distributions we
make and gain arising from the sale or exchange by a U.S. stockholder of our
shares will not be treated as passive activity income. As a result, U.S.
stockholders will generally be unable to apply any "passive losses" against this
income or gain. Distributions we make, to the extent they do not constitute a
return of capital, generally will be treated as investment income for purposes
of computing the investment interest limitation. Gain arising from the sale or
other disposition of our shares, however, may not be treated as investment
income depending upon your particular situation.
Retention of Net Long-Term Capital Gains. We may elect to retain, rather than
distribute as a capital gain dividend, our net long-term capital gains. If we
make this election, we would pay tax on our retained net long-term capital
gains. In addition, to the extent we designate, a U.S. stockholder generally
would:
- include its proportionate share of our undistributed long-term
capital gains in computing its long-term capital gains in its
return for its taxable year in which the last day of our taxable
year falls;
- be deemed to have paid the capital gains tax imposed on us on the
designated amounts included in the U.S. stockholder's long-term
capital gains;
- receive a credit or refund for the amount of tax deemed paid by
it;
- increase the adjusted basis of its common stock by the difference
between the amount of includable gains and the tax deemed to have
been paid by it; and
- in the case of a U.S. stockholder that is a corporation,
appropriately adjust its earnings and profits for the retained
capital gains as required by treasury regulations to be
prescribed by the IRS.
Dispositions of Common Stock. If you are a U.S. stockholder and you sell
or dispose of your shares of common stock, you will recognize gain or loss for
federal income tax purposes in an amount equal to the difference between the
amount of cash and the fair market value of any property you receive on the sale
or other disposition and your adjusted basis in the shares for tax purposes.
This gain or loss will be capital if you have held the common stock as a capital
asset. This gain or loss will be long-term capital gain or loss if you have held
the common stock for more than one year. In general, if you are a U.S.
stockholder and you recognize loss upon the sale or other disposition of common
stock that you have held for six months or less, then after applying the
relevant holding period rules, the loss you recognize will be treated as a
long-term capital loss to the extent you received distributions from us which
were required to be treated as long-term capital gains.
Backup Withholding. We report to our U.S. stockholders and the IRS the
amount of dividends paid during each calendar year and the amount of any tax
withheld. Under the backup withholding rules, a stockholder may be subject to
backup withholding at the rate of 31% with respect to dividends paid unless the
holder is a corporation or is otherwise exempt and, when required, demonstrates
this fact or provides a taxpayer identification number, certifies as to no loss
of exemption from backup withholding, and otherwise complies with the backup
withholding rules. A U.S. stockholder who does not provide us with his or her
correct taxpayer identification number may also be subject to penalties imposed
by the IRS. Backup withholding is not an additional tax. Any amount paid as
backup withholding will be creditable against the stockholder's income tax
liability. In addition, we may be required to withhold a portion of capital gain
distributions to any stockholders who fail to certify their non-foreign status.
Taxation of Tax-Exempt Stockholders.
The IRS has ruled that amounts distributed as dividends by a qualified real
estate investment trust do not constitute unrelated business taxable income when
received by a tax-exempt entity. Based on that ruling, except as described
below, dividend income from us will not be unrelated business taxable income to
a tax-exempt stockholder. Similarly, except as described below, gain from the
sale of shares will not be unrelated business taxable income. This income or
gain will be unrelated business taxable income, however, if the tax-exempt
stockholder holds its shares as "debt financed property" within the meaning of
the Internal Revenue Code or if the shares are used in a trade or business of
the tax-exempt stockholder. Generally, debt financed property is property, the
acquisition or holding of which was financed through a borrowing by the
tax-exempt stockholder.
For tax-exempt stockholders which are social clubs, voluntary employee
benefit associations, supplemental unemployment benefit trusts, and qualified
group legal services plans exempt from federal income taxation under Sections
501(c)(7), (c)(9), (c)(17) and (c)(20) of the Internal Revenue Code,
respectively, income from an investment in our shares will constitute unrelated
business taxable
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<PAGE> 20
income unless the organization is able to properly claim a deduction for amounts
set aside or placed in reserve for specific purposes so as to offset the income
generated by its investment in our shares. These prospective investors should
consult their tax advisors concerning these "set aside" and reserve
requirements.
Notwithstanding the above, however, a portion of the dividends paid by a
"pension-held REIT" will be treated as unrelated business taxable income as to
specified tax exempt trusts which hold more than 10%, by value, of the interests
in the real estate investment trust. A real estate investment trust's tax status
as a "pension held REIT" depends, in part, on the ownership of its stock. As a
result of the limitations on the transfer and ownership of stock contained in
our charter, we do not expect to be classified as a "pension-held REIT."
Taxation of Non-U.S. Stockholders.
The preceding discussion does not address the rules governing U.S. federal
income taxation of the ownership and disposition of common stock by persons that
are non-U.S. stockholders. When we use the term "non-U.S. stockholder" we mean
stockholders who are not U.S. stockholders. In general, non-U.S. stockholders
may be subject to special tax withholding requirements on distributions from us
and with respect to their sale or other disposition of our common stock, except
to the extent reduced or eliminated by an income tax treaty between the United
States and the non-U.S. stockholder's country. A non-U.S. stockholder who is a
stockholder of record and is eligible for reduction or elimination of
withholding must file an appropriate form with us in order to claim this
treatment. Non-U.S. stockholders should consult their tax advisors concerning
the federal income tax consequences to them of an acquisition of shares of
common stock, including the federal income tax treatment of dispositions of
interests in and the receipt of distributions from us.
Recently Proposed Legislation.
As set forth above, Revenue Properties (U.S.), Inc., which is a wholly-owned
subsidiary of Revenue Properties Company Limited, currently holds in excess of
50% of the voting power and value of our stock. President Clinton's 2001 Federal
Budget Proposal contains language which, if enacted in its present form, would
impose as an additional requirement for real estate investment trust
qualification that no person (defined to include certain entities such as
corporations) be permitted to own stock possessing more than 50 percent of the
total combined voting power of all classes of voting stock or more than 50
percent of the total value of shares of all classes of stock. It is not possible
to predict with certainty whether this portion of the President's Budget
Proposal will ultimately be enacted into law, the character and details of the
provisions which would be included in any legislation so enacted and whether and
to what extent such legislation would affect us and our stockholders or whether
any such effect would be adverse. Depending upon the final language of any
legislation actually enacted, it is possible that Revenue Properties (U.S.),
Inc. could be required to dispose of a sufficient number of shares of common
stock to preserve our status as a REIT, or, pursuant to our Charter, such shares
would be transferred to a trust for the benefit of a charitable beneficiary. See
"Description of Capital Stock--Restrictions on Ownership and Transfer."
Other Tax Consequences.
We may be required to pay state or local taxes in various state or local
jurisdictions, including those in which we transact business. Our stockholders
may be required to pay state or local taxes in various state or local
jurisdictions, including those in which they reside. Our state and local tax
treatment may not conform to the federal income tax consequences summarized
above. In addition, your state and local tax treatment may not conform to the
federal income tax consequences summarized above. Consequently, you should
consult your tax advisor regarding the effect of state and local tax laws on a
disposition of Pan Pacific (Portland) LLC units or an investment in our common
stock.
SELLING STOCKHOLDERS
As described elsewhere in this prospectus, "selling stockholders" are only
those persons who may receive exchange shares upon the exchange of LLC units. In
connection with the exchange, we have agreed to file a registration statement
with the Commission covering the resale of the exchange shares issued to each
selling stockholder. The following table provides the names of and the maximum
number of exchange shares to be owned by each selling stockholder. The number of
shares on the following table represents the number of exchange shares into
which LLC units held by the person are exchangeable. Because the selling
stockholders may sell all or part of their exchange shares under this
prospectus, and this offering is not being underwritten on a firm commitment
basis, no estimate can be given as to the number and percentage of shares of our
common stock that will be held by each selling stockholder upon termination of
this offering.
The exchange shares offered by this prospectus may be offered from time to
time by the selling stockholders named below:
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<PAGE> 21
<TABLE>
<CAPTION>
MAXIMUM NUMBER
OF EXCHANGE SHARES AGGREGATE SHARES
ISSUABLE IN THE OF COMMON STOCK PERCENTAGE OF
NUMBER OF EXCHANGE AND AVAILABLE OWNED FOLLOWING OUTSTANDING
NAME SHARES HELD(1) FOR RESALE(1) THE EXCHANGE(2) COMMON SHARES(2)(3)
- ------------------------- -------------- ----------------------- --------------- -------------------
<S> <C> <C> <C> <C>
Portland Fixture Limited
Partnership 13,000 799,041 812,041 3.68%
PFMGP, Inc. 0 1,986 1,986 *
Steven J. Oliva 0 15,795 15,795 *
Byron P. Henry 0 15,795 15,795 *
- -----------------------------------------------------------------------------------------------------------
</TABLE>
* Less than one percent.
(1) Based on information available to us as of March 31, 2000.
(2) Assumes all LLC Units held by the selling stockholders are exchanged for
the exchange shares. Also assumes that no transactions with respect to the
shares of our common stock or Pan Pacific (Portland), LLC Units occur other
than the exchange.
(3) Based on 21,252,512 shares of our common stock outstanding as of March 31,
2000.
PLAN OF DISTRIBUTION
This prospectus relates to the offer and sale from time to time by the
selling stockholders of up to 832,617 exchange shares that may be issued to
holders of up to 832,617 units of non-managing member interests in Pan Pacific
(Portland), LLC if these holders tender their LLC units for cash redemption and
we elect, in our sole and absolute discretion, to exchange the tendered LLC
units for shares of our common stock in lieu of a cash redemption. We are
registering the offer and sale of the exchange shares by the selling
stockholders. We are registering the offer and sale of the exchange shares by
the selling stockholders, but the registration of these exchange shares does not
necessarily mean that any of these shares will be offered or sold by the holders
of these shares.
We will not receive any proceeds from the sale of the exchange shares by
the selling stockholders or by any of their donors or transferees. The exchange
shares may be sold from time to time to purchasers directly by any of the
selling stockholders. Alternatively, the selling stockholders may from time to
time offer exchange shares through dealers or agents that participate in the
distribution of exchange shares, who may receive compensation. The selling
stockholders and any dealers or agents that participate in the distribution of
the exchange shares may be deemed to be "underwriters" within the meaning of the
Securities Act and any profit on the sale of the exchange shares by them and any
commissions received by any dealers or agents in connection with the sale of the
exchange shares might be deemed to be underwriting commissions under the
Securities Act.
At a time a particular offer of exchange shares is made by the selling
stockholders, a prospectus supplement, if required, will be distributed that
will set forth the name and names of any dealers or agents and any commissions
and other terms constituting compensation from the selling stockholders and any
other required information. The exchange shares may be sold from time to time at
varying prices determined at the time of sale or at negotiated prices.
We have not registered of qualified offers or sales of the exchange shares
under the laws of any country, other than the United States. In order to comply
with the securities laws of certain states, if applicable, the exchange shares
may be sold by the selling stockholders only through registered or licensed
brokers or dealers. In addition, in certain states, the exchange shares may not
be sold unless they have been registered or qualified for sale in that state or
an exemption from the registration or qualification requirement is available and
is complied with. Under an agreement with the selling stockholders, we will pay
substantially all of the expenses incident to the registration of the resale of
the exchange shares, estimated to be approximately $24,000. Under agreements we
have entered into with the selling stockholders, and any underwriter they may
utilize, we will indemnify them against certain civil liabilities, including
liabilities under the Securities Act.
EXPERTS
Our consolidated financial statements and Schedule III as of December 31,
1999 and for each of the years in the three-year period ended December 31, 1999
included in the Annual Report on Form 10-K for the year ended December 31, 1999,
have been
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<PAGE> 22
incorporated herein by reference in reliance upon the report of KPMG LLP,
independent certified public accountants, and upon authority of said firm as
experts in accounting and auditing.
LEGAL MATTERS
The validity of the shares of our common stock offered hereby will be
passed upon for us by Ballard Spahr Andrews & Ingersoll, LLP, Baltimore,
Maryland. In addition, the description of federal income tax consequences
contained in this prospectus under the heading "Material Federal Income Tax
Consequences" is based upon the opinion of Latham & Watkins. Latham & Watkins
will rely upon the opinion of Ballard Spahr Andrews & Ingersoll, LLP, as to
certain matters of Maryland law.
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<PAGE> 23
================================================================================
No dealer, salesperson or any other person has been authorized to give any
information or to make any representations other than those contained in this
prospectus in connection with the offer made by this prospectus and, if given or
made, such information or representations must not be relied upon as having been
authorized by Pan Pacific Retail Properties, Inc. or any of the selling
stockholders. This prospectus does not constitute an offer to sell or the
solicitation of any offer to buy any security other than the shares of common
stock offered by this prospectus, nor does it constitute an offer to sell or a
solicitation of any offer to buy the shares of common stock by anyone in a
jurisdiction in which such offer or solicitation is not authorized, or in which
the person making such offer or solicitation is not qualified to do so, or to
any person to whom it is unlawful to make such offer or solicitation. Neither
the delivery of this prospectus nor any sale made hereunder shall, under any
circumstances, create any implication that the information contained herein is
correct as of any time subsequent to the date hereof.
----------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
<S> <C>
Available Information.............................1
Incorporation Of Certain Documents By Reference...1
Risk Factors......................................2
Pan Pacific Retail Properties, Inc................2
Pan Pacific (Portland), LLC.......................3
Use of Proceeds...................................3
Forward-Looking Statements........................3
Description Of Capital Stock......................4
Material Federal Income Tax Consequences..........7
Selling Stockholders.............................17
Plan Of Distribution.............................18
Experts..........................................18
Legal Matters....................................19
</TABLE>
================================================================================
================================================================================
832,617 Shares
PAN PACIFIC
RETAIL PROPERTIES, INC.
Common Stock
----------------
PROSPECTUS
----------------
____________, 2000
================================================================================
<PAGE> 24
PART II.
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The expenses, other than underwriting discounts and commissions, in
connection with the offering of the securities being registered are set forth
below. All of such expenses are estimates, except the Securities Act
registration fee.
<TABLE>
<S> <C>
Registration Fee - Securities and
Exchange Commission..................... $ 4,360
Legal Fees and Expenses................. 15,000
Accounting Fees and Expenses............ 4,000
Miscellaneous Expenses.................. 1,000
--------
Total............................... $ 24,360
========
</TABLE>
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS
The MGCL permits a Maryland corporation to include in its charter a
provision limiting the liability of its directors and officers to the
corporation and its stockholders for money damages except for liability
resulting from (a) actual receipt of an improper benefit or profit in money,
property or services or (b) active and deliberate dishonesty established by a
final judgment which is material to the cause of action. Our Charter contains
such a provision which eliminates such liability to the maximum extent permitted
by Maryland law.
Our Charter authorizes us, to the maximum extent permitted by Maryland law,
to obligate ourselves to indemnify and to pay or reimburse reasonable expenses
in advance of final disposition of a proceeding to (a) any present or former
director or officer or (b) any individual who, while a director of ours and at
our request, serves or has served another corporation, real estate investment
trust, partnership, joint venture, trust, employee benefit plan or any other
enterprise as a director, officer, partner or trustee of such corporation, real
estate investment trust, partnership, joint venture, trust, employee benefit
plan or other enterprise from and against any claim or liability to which such
person may become subject or may incur by reason of his or her status as a
present or former stockholder, director or officer of ours. Our Bylaws obligate
us, to the maximum extent permitted by Maryland law, to indemnify and to pay or
reimburse reasonable expenses in advance of final disposition of a proceeding to
(a) any present or former director or officer who is made a party to the
proceeding by reason of his service in that capacity or (b) any individual who,
while a director of ours and at our request, serves or has served another
corporation, real estate investment trust, partnership, joint venture, trust,
employee benefit plan or any other enterprise as a director, officer, partner or
trustee of such corporation, real estate investment trust, partnership, joint
venture, trust, employee benefit plan or other enterprise and who is made party
to the proceeding by reason of his service in that capacity. Our Charter and
Bylaws also permit us to indemnify and advance expenses to any person who served
a predecessor of our in any of the capacities described above and to any
employee or agent of ours or a predecessor of ours.
The MGCL requires a corporation (unless its charter provides otherwise,
which our Charter does not) to indemnify a director or officer who has been
successful, on the merits or otherwise, in the defense of any proceeding to
which he is made a party by reason of his service in that capacity. The MGCL
permits a corporation to indemnify its present and former directors and
officers, among others, against judgments, penalties, fines, settlements and
reasonable expenses actually incurred by them in connection with any proceeding
to which they may be made a party by reason of their service in those or other
capacities unless it is established that (a) the act or omission of the director
or officer was material to the matter giving rise to the proceeding and (i) was
committed in bad faith or (ii) was the result of active and deliberate
dishonesty, (b) the director or officer actually received an improper personal
benefit in money, property or services, or (c) in the case of any criminal
proceeding, the director or officer had reasonable cause to believe that the act
or omission was unlawful. However, a Maryland corporation may not indemnify for
an adverse judgment in a suit by or in the right of the corporation or for a
judgment of liability on the basis that personal benefit was improperly
received, unless in either case a court orders indemnification and then only for
expenses. In addition, the MGCL permits a corporation to advance reasonable
expenses to a director or officer upon the corporation's receipt of (a) a
written affirmation by the director or officer of his good faith belief that he
has met the standard of conduct necessary for indemnification by us as
authorized by our Bylaws and (b) a written undertaking by him or on his behalf
to repay the amount paid or reimbursed by the corporation if it shall ultimately
be determined that the standard of conduct was not met.
The inclusion of the above provisions in our Charter and Bylaws may have
the effect of reducing the likelihood of stockholder derivative suits against
directors and may discourage or deter stockholders or management from bringing a
lawsuit against directors for breach of their duty of care, even though such an
action, if successful, might otherwise have benefited us and our stockholders.
<PAGE> 25
We have entered into indemnification agreements with each of our executive
officers and directors. The indemnification agreements require, among other
matters, that we indemnify our executive officers and directors to the fullest
extent permitted by law and advance to the executive officers and directors all
related expenses, subject to reimbursement if it is subsequently determined that
indemnification is not permitted. Under the indemnification agreements, we must
also indemnify and advance all expenses incurred by executive officers and
directors seeking to enforce their rights under the indemnification agreements
and may cover executive officers and directors under our directors' and
officers' liability insurance. Although the form of indemnification agreement
offers substantially the same scope of coverage afforded by law, it provides
greater assurance to directors and executive officers that indemnification will
be available, because, as a contract, it cannot be modified unilaterally in the
future by our board of directors or the stockholders to eliminate the rights it
provides.
ITEM 16. EXHIBITS
3.1 Articles of Amendment and Restatement of Pan Pacific Retail Properties,
Inc. (previously filed as Exhibit 3.1 to our Registration Statement on
Form S-11 (Registration No. 333-28715) and incorporated by this
reference)
3.2 Amended and Restated Bylaws of Pan Pacific Retail Properties, Inc.
(previously filed as Exhibit 3.2 to our Registration Statement on Form
S-11 (Registration No. 333-28715) and incorporated by this reference)
4.1 Form of Certificate of Common Stock (previously filed as Exhibit 4.1 to
our Registration Statement on Form S-11 (Registration No. 333-28715)
and incorporated by this reference)
5.1 Opinion of Ballard Spahr Andrews & Ingersoll, LLP
8.1 Opinion of Latham & Watkins as to tax matters
10.1 Amended and Restated Limited Liability Company Agreement of Pan Pacific
(Portland), LLC (previously filed as Exhibit 99.1 to our current report
on Form 8-K filed October 23, 1998 and incorporated by this reference)
23.1 Consent of KPMG LLP
23.2 Consent of Ballard Spahr Andrews & Ingersoll, LLP (included in Exhibit
5.1)
23.3 Consent of Latham & Watkins (included in Exhibit 8.1)
24.1 Power of Attorney (included on Signature Page)
ITEM 17. UNDERTAKINGS
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the provisions described under Item 15 above, or
otherwise, the Registrant has been advised that in the opinion of the Commission
such indemnification is against public policy as expressed in the Securities Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Registrant of expenses
incurred or paid by a director, officer or controlling person of the Registrant
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it against public
policy as expressed in the Securities Act and will be governed by the final
adjudication of such issue.
The undersigned Registrant hereby undertakes that:
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement:
II-2
<PAGE> 26
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after the
effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the aggregate,
represent a fundamental change in the information set forth in this
registration statement. Notwithstanding the foregoing, any increase or
decrease in volume of securities offered (if the total dollar value of
securities offered would not exceed that which was registered) and any
deviation from the low or high and of the estimated maximum offering price
may be reflected in the form of prospectus filed with the Commission
pursuant to Rule 424(b) if, in the aggregate the changes in volume and
price represent no more than 20 percent change in the maximum aggregate
offering price set forth in the "Calculation of Registration Fee" table in
the effective registration statement; and
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in this registration statement or any
material change to such information in this registration statement;
Provided, however, that subparagraphs (i) and (ii) do not apply if the
information required to be included in a post-effective amendment by those
paragraphs is contained in the periodic reports filed by the Registrant pursuant
to Section 13 or Section 15(d) of the Securities Exchange Act of 1934 that are
incorporated by reference in this registration statement.
(2) That, for the purpose of determining any liability under the Securities
Act of 1933, each such post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered herein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
(3) To remove from registration by means of a post-effective amendment any
of the securities being registered which remain unsold at the termination of the
offering.
The undersigned Registrant hereby further undertakes that, for the purposes
of determining any liability under the Securities Act of 1933, each filing of
the Registrant's annual reports pursuant to Section 13(a) or Section 15(d) of
the Securities Exchange Act of 1934 that is incorporated by reference in this
registration statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
The undersigned Registrant hereby further undertakes to deliver or cause to
be delivered with the prospectus, to each person to whom the prospectus is sent
or given, the latest annual report to security holders that is incorporated by
reference in the prospectus and furnished pursuant to and meeting the
requirements of Rule 14a-3 or Rule 14c-3 under the Exchange Act; and, where
interim financial information required to be presented by Article 3 of
Regulation S-X is not set forth in the Prospectus, to deliver, or cause to be
delivered to each person to whom the prospectus is sent or given, the latest
quarterly report that is specifically incorporated by reference in the
prospectus to provide such interim financial information.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933, as amended, may be permitted to directors, officers and controlling
persons of the Registrant pursuant to the foregoing provisions, or otherwise,
the Registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Securities Exchange Act of 1934, as amended, and is, therefore,
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by the Registrant of expenses incurred or
paid by a director, officer or controlling person of the Registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Securities Exchange Act of 1934, as amended, and will
be governed by the final adjudication of such issue.
II-3
<PAGE> 27
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Vista, State of California, on the 15th day of May,
2000.
PAN PACIFIC RETAIL PROPERTIES, INC.
By: /s/ STUART A. TANZ
---------------------------------------
Stuart A. Tanz
Chief Executive Officer and President
POWER OF ATTORNEY
Each person whose signature appears below appoints Stuart A. Tanz and
Joseph B. Tyson, and both or either of them, as his true and lawful
attorneys-in-fact and agents with full power of substitution and resubstitution,
for him and his name, place and steed, in any and all capacities, to sign any or
all amendments (including post-effective amendments) to this Registration
Statement and any subsequent registration statement thereto pursuant to Rule
462(b) of the Securities Act, and to file the same, with all exhibits thereto,
and all documents in connection therewith, with the Securities and Exchange
Commission, granting unto said attorneys-in-fact and agents, and each of them,
full power and authority to do and perform each and every act and thing
requisite and necessary to be done in and about the foregoing, as fully to all
intents and purposes as he might or could do in person, hereby ratifying and
confirming all that said attorneys-in-fact and agents, or either of them or
their or his substitutes, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities indicated on May 15, 2000.
<TABLE>
<CAPTION>
TITLE
-----
<S> <C>
/s/ STUART A. TANZ
- ----------------------------------------------------
Stuart A. Tanz Director, Chief Executive Officer and
President
/s/ JOSEPH B. TYSON
- ----------------------------------------------------
Joseph B. Tyson Chief Financial Officer
/s/ LAURIE A. SNEVE
- ----------------------------------------------------
Laurie A. Sneve Vice President and Controller (Principal Accounting
Officer)
/s/ PAUL D. CAMPBELL
- ----------------------------------------------------
Paul D. Campbell Director
/s/ MARK J. REIDY
- ----------------------------------------------------
Mark J. Riedy Director
</TABLE>
II-4
<PAGE> 28
TITLE
-----
/s/ BERNARD M. FELDMAN
- ----------------------------------------------------
Bernard M. Feldman Director
/s/ DAVID P. ZIMEL
- ----------------------------------------------------
David P. Zimel Director
II-5
<PAGE> 29
EXHIBIT INDEX
3.1 Articles of Amendment and Restatement of Pan Pacific Retail Properties,
Inc. (previously filed as Exhibit 3.1 to our Registration Statement on
Form S-11 (Registration No. 333-28715) and incorporated by this
reference)
3.2 Amended and Restated Bylaws of Pan Pacific Retail Properties, Inc.
(previously filed as Exhibit 3.2 to our Registration Statement on Form
S-11 (Registration No. 333-28715) and incorporated by this reference)
4.1 Form of Certificate of Common Stock (previously filed as Exhibit 4.1 to
our Registration Statement on Form S-11 (Registration No. 333-28715)
and incorporated by this reference)
5.1 Opinion of Ballard Spahr Andrews & Ingersoll, LLP
8.1 Opinion of Latham & Watkins as to tax matters
10.1 Amended and Restated Limited Liability Company Agreement of Pan Pacific
(Portland), LLC (previously filed as Exhibit 99.1 to our current report
on Form 8-K filed October 23, 1998 and incorporated by this reference)
23.1 Consent of KPMG LLP
23.2 Consent of Ballard Spahr Andrews & Ingersoll, LLP (included in Exhibit
5.1)
23.3 Consent of Latham & Watkins (included in Exhibit 8.1)
24.1 Power of Attorney (included on Signature Page)
<PAGE> 1
EXHIBIT 5.1
May 22, 2000
Pan Pacific Retail Properties, Inc.
1631-B South Melrose Drive
Vista, California 92083
Re: Registration Statement on Form S-3
----------------------------------
Ladies and Gentlemen:
We have served as Maryland counsel to Pan Pacific Retail Properties, Inc.,
a Maryland corporation (the "Company"), in connection with certain matters of
Maryland law arising out of the registration of up to 832,617 shares (the
"Shares") of Common Stock, $.01 par value per share, of the Company (the "Common
Stock"), covered by the above-referenced Registration Statement, and all
amendments thereto (the "Registration Statement"), under the Securities Act of
1933, as amended (the "1933 Act"). The Registration Statement relates to (i) the
possible issuance by the Company of up to 832,617 shares of Common Stock if, and
to the extent that, holders of up to 832,617 units of non-managing member
interests in Pan Pacific (Portland), LLC (the "Holders") tender their limited
liability company units (the "LLC Units") for cash redemption and the Company
elects, in its sole discretion, to exchange the tendered LLC Units on a
one-for-one basis for shares of Common Stock in lieu of a cash redemption and
(ii) the offer and sale by the Holders from time to time of the Shares. Unless
otherwise defined herein, capitalized terms used herein shall have the meanings
assigned to them in the Registration Statement.
In connection with our representation of the Company, and as a basis for
the opinion hereinafter set forth, we have examined originals, or copies
certified or otherwise identified to our satisfaction, of the following
documents (hereinafter collectively referred to as the "Documents"):
1
<PAGE> 2
Pan Pacific Retail Properties, Inc.
May 22, 2000
Page 2
1. The Registration Statement, including the related form of prospectus
included therein, in the form in which it was transmitted to the Securities and
Exchange Commission (the "Commission") under the 1933 Act;
2. The charter of the Company, certified as of a recent date by the State
Department of Assessments and Taxation of Maryland (the "SDAT");
3. The Bylaws of the Company, certified as of a recent date by an officer
of the Company;
4. Resolutions adopted by the Board of Directors of the Company relating to
the issuance of the Shares to the Holders upon their tender of the LLC Units and
the Company's election to redeem the units for Common Stock in lieu of a cash
redemption, certified as of a recent date by an officer of the Company;
5. The Amended and Restated Limited Liability Company Agreement of Pan
Pacific (Portland), LLC, dated as of October 9, 1998 (the "LLC Agreement"),
certified as of a recent date by an officer of the Company;
6. The form of certificate representing a share of Common Stock, certified
as of a recent date by an officer of the Company;
7. A certificate of the SDAT as to the good standing of the Company, dated
as of a recent date;
8. A certificate executed by an officer of the Company, dated as of the
date hereof; and
9. Such other documents and matters as we have deemed necessary or
appropriate to express the opinion set forth in this letter, subject to the
assumptions, limitations and qualifications stated herein.
In expressing the opinion set forth below, we have assumed the following:
1. Each individual executing any of the Documents, whether on behalf of
such individual or any other person, is legally competent to do so.
2
<PAGE> 3
Pan Pacific Retail Properties, Inc.
May 22, 2000
Page 3
2. Each individual executing any of the Documents on behalf of a party
(other than the Company) is duly authorized to do so.
3. Each of the parties (other than the Company) executing any of the
Documents has duly and validly executed and delivered each of the Documents to
which such party is a signatory, and such party's obligations set forth therein
are legal, valid and binding and are enforceable in accordance with all stated
terms.
4. Any Documents submitted to us as originals are authentic. The form and
content of the Documents submitted to us as unexecuted drafts do not differ in
any respect relevant to this opinion from the form and content of such Documents
as executed and delivered. All Documents submitted to us as certified or
photostatic copies conform to the original documents. All signatures on all such
Documents are genuine. All public records reviewed or relied upon by us or on
our behalf are true and complete. All statements and information contained in
the Documents are true and complete. There has been no oral or written
modification of or amendment to any of the Documents, and there has been no
waiver of any provision of any of the Documents, by action or conduct of the
parties or otherwise.
Based upon the foregoing, and subject to the assump tions, limitations
and qualifications stated herein, it is our opinion that:
1. The Company is a corporation duly incorporated and existing under and by
virtue of the laws of the State of Maryland and is in good standing with the
SDAT.
2. The Shares have been duly authorized for issuance and, when and if
issued and delivered upon the tender of the LLC Units by the Holders and
otherwise in the manner described in the Resolutions and the Registration
Statement, will be (assuming that upon any such issuance the total number of
shares of Common Stock issued and outstanding will not exceed the total number
of shares of Common Stock that the Company is then authorized to issue under the
Charter) validly issued, fully paid and non-assessable.
The foregoing opinion is limited to the substantive laws of the State of
Maryland and we do not express any opinion
3
<PAGE> 4
Pan Pacific Retail Properties, Inc.
May 22, 2000
Page 4
herein concerning any other law. We express no opinion as to the applicability
or effect of any federal or state securities laws, including the securities laws
of the State of Maryland, or as to federal or state laws regarding fraudulent
transfers. We express no opinion with respect to the actions which may be
required for the tender of the LLC Units by the Holders under the terms of the
LLC Agreement or otherwise. To the extent that any matter as to which our
opinion is expressed herein would be governed by any jurisdiction other than the
State of Maryland, we do not express any opinion on such matter.
We assume no obligation to supplement this opinion if any applicable law
changes after the date hereof or if we become aware of any fact that might
change the opinion expressed herein after the date hereof.
This opinion is being furnished to you solely for submission to the
Commission as an exhibit to the Registration Statement and, accordingly, may not
be relied upon by, quoted in any manner to, or delivered to any other person or
entity (other than Latham & Watkins, counsel to the Company, in connection with
any opinions to be delivered by it in connection with the Registration
Statement) without, in each instance, our prior written consent.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and to the use of the name of our firm therein in the
section entitled "Legal Matters" in the Registration Statement. In giving this
consent, we do not admit that we are within the category of persons whose
consent is required by Section 7 of the 1933 Act.
Very truly yours,
/s/ BALLARD SPAHR ANDREWS & INGERSOLL, LLP
------------------------------------------
Ballard Spahr Andrews & Ingersoll, LLP
4
<PAGE> 1
EXHIBIT 8.1
[LATHAM & WATKINS LETTERHEAD]
May 22, 2000
Pan Pacific Retail Properties, Inc.
1631-B S. Melrose Drive
Vista, California 92083
Re: Pan Pacific Retail Properties, Inc.
Ladies and Gentlemen:
We have acted as tax counsel to Pan Pacific Retail Properties,
Inc., a Maryland corporation (the "Company"), in connection with the filing of a
registration statement on Form S-3 under the Securities Act of 1933, as amended
(the "1933 Act"), registering up to 832,617 shares of the Company's common
stock, par value $.01 per share, filed with the Securities and Exchange
Commission (the "Commission") on May 19, 2000, as amended and supplemented as
of the date hereof (the "Registration Statement").
You have requested our opinion concerning certain of the federal
income tax consequences to the Company in connection with the Company's election
to be taxed as a real estate investment trust. This opinion is based on various
facts and assumptions, including the facts set forth in the Registration
Statement concerning the business, assets and governing documents of the
Company. We have also been furnished with, and with your consent, have relied
upon, certain representations made by the Company and the subsidiaries of the
Company as to certain factual matters through a certificate of an officer of the
Company (the "Officer's Certificate").
In our capacity as tax counsel to the Company, we have made such
legal and factual examinations and inquiries, including an examination of
originals or copies certified or otherwise identified to our satisfaction of
such documents, corporate records and other instruments, as we have deemed
necessary or appropriate for purposes of this opinion. In our examination, we
have assumed the authenticity of all documents submitted to us as originals, the
<PAGE> 2
LATHAM & WATKINS
May 22, 2000
Page 2
genuineness of all signatures thereon, the legal capacity of natural persons
executing such documents and the conformity to authentic original documents of
all documents submitted to us as copies.
We are opining herein as to the effect on the subject transaction
only of the federal income tax laws of the United States, and we express no
opinion with respect to the applicability thereto, or the effect thereon, of
other federal laws, the laws of any state or other jurisdiction or as to any
matters of municipal law or the laws of any other local agencies within any
state.
Based upon the facts set forth in the Registration Statement and
Officer's Certificate, it is our opinion that the statements set forth in the
Registration Statement under the caption "Federal Income Tax Consequences," to
the extent such statements constitute matters of law, summaries of legal
matters, documents or proceedings, or legal conclusions, are correct in all
material respects.
No opinion is expressed as to any matter not discussed herein.
This opinion is rendered to you as of the date of this letter,
and we undertake no obligation to update this opinion subsequent to the date
hereof. This opinion is based on various statutory provisions, regulations
promulgated thereunder and interpretations thereof by the Internal Revenue
Service and the courts having jurisdiction over such matters, all of which are
subject to change either prospectively or retroactively. Any such change may
affect the conclusions stated herein. Also, any variation or difference in the
facts from those set forth in the Registration Statement or Officer's
Certificate may affect the conclusions stated herein. Moreover, the Company's
qualification and taxation as a real estate investment trust depends upon the
Company's ability to meet, through actual annual operating results, asset
composition, distribution levels and diversity of stock ownership, the various
qualification tests imposed under the Internal Revenue Code of 1986, as amended,
the results of which have not been and will not be reviewed by Latham & Watkins.
Accordingly, no assurance can be given that the actual results of the Company's
operation for any particular taxable year will satisfy such requirements.
This opinion is rendered only to you and is solely for your
benefit in connection with the Registration Statement. We hereby consent to the
filing of this opinion as an exhibit to the Registration Statement. This opinion
may not be relied upon by you for any other purpose, or furnished to, quoted to
or relied upon by any other person, firm or corporation for any purpose, without
our prior written consent.
Very truly yours,
/S/ LATHAM & WATKINS
<PAGE> 1
EXHIBIT 23.1
CONSENT OF INDEPENDENT AUDITORS
The Board of Directors
Pan Pacific Retail Properties, Inc.:
We consent to the use of our report incorporated herein by reference and to the
reference to our firm under the heading "Experts" in the prospectus.
/s/ KPMG LLP
San Diego, California
May 16, 2000
