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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON DECEMBER 5, 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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<S> <C> <C>
1631-B SOUTH MELROSE DRIVE
VISTA, CALIFORNIA 92083
MARYLAND (760) 727-1002 33-0752457
(STATE OR OTHER JURISDICTION (ADDRESS OF PRINCIPAL (I.R.S. EMPLOYER
OF INCORPORATION OR ORGANIZATION) EXECUTIVE OFFICES) IDENTIFICATION NUMBER)
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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>
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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Common Stock, $.01 par value
per share......................... 3,000,000 $20.72 $62,160,000 $16,411
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(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 November 30, 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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The information in this preliminary prospectus is not complete and may be
changed. These securities may not be sold until the registration statement filed
with the Securities and Exchange Commission becomes effective. This preliminary
prospectus is not an offer to sell these securities nor does it seek offers to
buy these securities in any jurisdiction where the offer or sale is not
permitted.
SUBJECT TO COMPLETION DATED DECEMBER 5, 2000
PROSPECTUS
3,000,000 Shares
PAN PACIFIC RETAIL PROPERTIES, INC.
COMMON STOCK
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We are 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 offering from time to time by Revenue
Properties (U.S.), Inc. of up to 3,000,000 shares of our common stock, par value
$.01 per share. We will not receive any proceeds from the sale of shares covered
by this prospectus.
In connection with our formation and the completion of our initial
public offering in August 1997, Revenue Properties (U.S.), Inc. and certain of
Revenue Properties (U.S.), Inc.'s subsidiaries transferred their ownership
interests in shopping center properties and other assets and contributed cash to
us. As consideration for these contributions of properties and cash, we issued
unregistered shares of our common stock to Revenue Properties (U.S.), Inc. and
certain of its subsidiaries. We granted to Revenue Properties (U.S.), Inc.
contractual registration rights that obligate us to register these shares for
resale by Revenue Properties (U.S.), Inc. and its subsidiaries.
The registration statement of which this prospectus is a part was filed
under our contractual obligations.
Our common stock is listed on the New York Stock Exchange under the
symbol "PNP." On November 30, 2000 the last reported sales price of our common
stock on the NYSE was $20.69 per share.
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See "Risk Factors" on page 2 for certain factors relevant to an
investment in our common stock.
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 December __, 2000
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TABLE OF CONTENTS
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Where You Can Find More Information...........................................1
Documents We Have By Reference................................................1
Pan Pacific Retail Properties, Inc............................................2
Risk Factors..................................................................2
Use of Proceeds...............................................................2
Forward-Looking Statements....................................................3
Description Of Our Stock......................................................3
Material Federal Income Tax Consequences......................................6
Selling Stockholder..........................................................16
Plan Of Distribution.........................................................16
Experts......................................................................17
Legal Matters................................................................17
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WHERE YOU CAN FIND MORE 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. You can inspect and copy these reports, proxy statements
and other information 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. You can
obtain copies of this material from the Commission at prescribed rates. You may
obtain information on the operation of the Public Reference Room by calling the
Commission at 1-800-SEC-0330. 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 you can
inspect and copy similar information concerning us 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 covered by this registration statement. This prospectus does not contain
all of the information set forth in the registration statement, some 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, we refer you to the
registration statement and the exhibits and schedules which may be obtained from
the Commission.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
We filed the documents listed below under the Exchange Act with the
Commission and these documents are incorporated into this registration statement
by reference:
(a) Our Annual Report on Form 10-K for the year ended December 31,
1999;
(b) Our Quarterly Report on Form 10-Q for the quarter ended March
31, 2000;
(c) Our Quarterly Report on Form 10-Q for the quarter ended June 30,
2000;
(d) Our Quarterly Report on Form 10-Q for the quarter ended
September 30, 2000;
(e) Our Current Report on Form 8-K dated August 21, 2000;
(f) Our Current Report on Form 8-K dated November 28, 2000;
(g) Our Definitive Proxy Statement on Schedule 14A relating to the
2000 annual meeting of Pan Pacific stockholders held on May 5,
2000; and
(h) The description of our common stock contained in our
Registration Statement on Form 8-A (File No. 001-13243),
including any subsequently filed amendments and reports filed
for the purpose of updating that 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, shall
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 herein shall 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
shall not be deemed, except as so modified or superseded, to constitute a part
of this registration statement.
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Copies of all documents which 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.
PAN PACIFIC RETAIL PROPERTIES, INC.
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. On
November 13, 2000, we acquired Western Properties Trust, a California real
estate investment trust, in a stock-for-stock merger. Our portfolio consists
principally of community and neighborhood shopping centers predominantly located
in five key western U.S. markets. As of November 30, 2000, we owned or
controlled a portfolio of 111 shopping center properties of which 107 are
located in the western United States, including 46 in Northern California, 14 in
Southern California, 13 in Nevada, 24 in Oregon and 10 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. 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."
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 hereby.
THE FUTURE SALE OF THESE SHARES MAY HAVE AN ADVERSE EFFECT ON OUR STOCK PRICE.
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. We have agreed
to register the shares offered by this prospectus under contractual obligations.
The market price of our common stock could decline as a result of sales of these
shares in the market or the perception that these sales could occur. This could
also make it more difficult for us to raise funds through future offerings of
our common stock.
WE MAY NOT REALIZE THE EXPECTED BENEFITS OF OUR ACQUISITION OF WESTERN
PROPERTIES TRUST, SUCH AS COST SAVINGS, OPERATING EFFICIENCIES AND OTHER
SYNERGIES.
We recently acquired Western Properties Trust, a California real
investment trust, in a stock-for-stock merger. Unforeseen difficulties in
integrating the Western Properties Trust portfolio may cause the disruption of,
or a loss of momentum in, the activities of our business and may materially harm
our financial performance.
USE OF PROCEEDS
We are filing the registration statement of which this prospectus is a
part under our contractual obligations to Revenue Properties (U.S.), Inc. We
will not receive any of the proceeds from the sale of these shares by the
selling stockholder.
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FORWARD-LOOKING STATEMENTS
This prospectus contains statements that 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.
DESCRIPTION OF OUR 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 we previously filed. See "Where You Can Find More
Information."
GENERAL
Our charter provides that we may issue up to 100,000,000 shares of
common stock, $.01 par value per share, and up to 30,000,000 shares of preferred
stock, $.01 par value per share. As of November 30, 2000, 32,007,807 shares of
our common stock and no shares of preferred stock were issued and outstanding.
Under the Maryland General Corporation Law, our stockholders generally are not
liable for our debts or obligations.
COMMON STOCK
All issued and outstanding shares of our common stock are duly
authorized, fully paid and nonassessable. Holders of our common stock are
entitled to receive dividends when authorized by our board of directors out of
assets legally available for the payment of dividends. They are also entitled to
share ratably in our assets legally available for distribution to our
stockholders in the event of our liquidation, dissolution or winding up, after
payment of or adequate provision for all of our known debts and liabilities.
These rights are subject to the preferential rights of any other class or series
of our stock and to the provisions of our charter regarding restrictions on
transfer of our stock.
Subject to our charter restrictions on transfer of our stock, each
outstanding share of our common stock entitles the holder to one vote on all
matters submitted to a vote of stockholders, including the election of
directors. Except as provided by the terms of any other class or series of our
stock, the holders of our common stock will possess the exclusive voting power.
There is no cumulative voting in the election of directors, which means that the
holders of a majority of our voting power can elect all of the directors then
standing for election, and the holders of the remaining shares may not be able
to elect any directors.
Revenue Properties (U.S.), Inc. has a contractual right to purchase a
proportionate interest of specified issuances of our stock. Except for this
right of Revenue Properties (U.S.), Inc., common stockholders have no
preference, conversion, exchange, sinking fund, redemption or appraisal rights
and have no preemptive rights to subscribe for any of our securities. Subject to
our charter restrictions on transfer of stock, all shares of our common stock
have equal dividend, liquidation and other rights.
Under the Maryland General Corporation Law, a Maryland corporation
generally cannot dissolve, amend its charter, merge, sell all or substantially
all of its assets, engage in a share exchange or engage in similar transactions
outside the ordinary course of business, unless approved by the affirmative vote
of stockholders holding at least two-thirds of the shares entitled to vote on
the matter. A Maryland corporation, however, may provide in its charter for
approval of these matters by a lesser percentage, but not less than a majority
of all of the votes entitled to be cast on the matter. Our charter provides that
these matters may be approved by the affirmative vote of stockholders holding a
majority of all the votes entitled to be cast on the matter.
POWER TO RECLASSIFY UNISSUED SHARES OF OUR STOCK
Our charter authorizes our board of directors to classify and reclassify
any unissued shares of our common stock and preferred stock into other classes
or series of stock. Prior to the issuance of shares of each class or series, our
board is required by Maryland law and by our charter to set, subject to charter
restrictions on transfer of stock, the terms, preferences, conversion or other
rights, voting powers, restrictions, limitations as to dividends or other
distributions, qualifications and terms or conditions of redemption for each
class or series. Thus, our board could authorize the issuance of shares of
preferred stock with terms and conditions which could
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have the effect of delaying, deferring or preventing a transaction or a change
in control that might involve a premium price for holders of our common stock or
otherwise be in their best interest. No shares of our preferred stock are
presently outstanding and we have no present plans to issue any preferred stock.
POWER TO ISSUE ADDITIONAL SHARES OF COMMON STOCK AND PREFERRED STOCK
We believe that the power to issue additional shares of common stock or
preferred stock and to classify or reclassify unissued shares of common or
preferred stock and thereafter to issue the classified or reclassified shares
provides us with increased flexibility in structuring possible future financings
and acquisitions and in meeting other needs that might arise. These actions can
be taken without stockholder approval, unless stockholder approval is required
by applicable law or the rules of any stock exchange or automated quotation
system on which we may list or trade our securities. Although we have no present
intention of doing so, we could issue a class or series of stock that could
delay, defer or prevent a transaction or a change in control 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 real estate investment trust under the Internal
Revenue Code, subject to specified 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 specified
entities) during the last half of a taxable year (other than the first year for
which an election to be treated as a real estate investment trust has been
made). In addition, if we, or an owner of 10% or more of our outstanding stock,
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 that tenant will not be
qualifying income for purposes of the real estate investment trust gross income
tests of the Internal Revenue Code. A real estate investment trust'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
real estate investment trust has been made).
Our charter contains restrictions on the ownership and transfer of our
common stock which is intended to assist us in complying with the Internal
Revenue Code's requirement for qualification as a real estate investment trust.
The ownership limit set forth in our charter provides that, subject to specified
exceptions, no person or entity may own more than 6.25% (by number or value,
whichever is more restrictive) of the outstanding shares of our common stock.
Our charter also (i) prohibits 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 real estate investment trust, and (ii) voids any transfer of our
common stock that would result in shares of our common stock being owned by
fewer than 100 persons. 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, Acktion
Corporation, a Canadian corporation, and/or certain affiliates or subsidiaries
of these entities, that own, actually or constructively, Pan Pacific 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 6.25% ownership
limit, or other limit 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, or some other individual or entity, could cause
one or more members of the Tanz family or other individual or entity to violate
the 6.25% ownership limit, or any other limit provided in our charter or as
otherwise permitted by our board of directors. Our board of directors may, but
in no event will be required to, waive the 6.25% ownership limit with respect to
a particular stockholder if it determines that the ownership will not jeopardize
our status as a real estate investment trust. As a condition of any waiver, our
board of directors may require a ruling from the Internal Revenue Service or an
opinion of counsel satisfactory to it and will obtain undertakings or
representations from the applicant with respect to preserving its real estate
investment trust status. Our board of directors has obtained undertakings and
representations from Revenue Properties (U.S.), Inc. and, as a result, has
waived the 6.25% 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 6.25% 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. Likewise, our
board of directors has waived the 6.25% ownership limit with respect to Acktion
Corporation and certain entities affiliated with such corporation, and has
permitted
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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.
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, Acktion
Corporation 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 written notice immediately to us and provide us
with any other information we may request in order to determine the effect of
the transfer on our status as a real estate investment trust. The foregoing
restrictions on transferability and ownership will not apply if our board of
directors determines, and such determination is approved by the affirmative vote
of the holders of not less than two-thirds of all votes entitled to be cast on
the matter, that it is no longer in our best interest to attempt to qualify, or
to continue to qualify, as a real estate investment trust. Except as otherwise
described above, any change in the 6.25% 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.
Pursuant to our charter, if any purported transfer of our common stock
or any other event would otherwise result in any person violating the 6.25%
ownership limit or other limit 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 and the Acktion
ownership limit), then the transfer will be void and of no force or effect with
respect to the prohibited transferee as to that number of shares in excess of
the ownership limit or any other limit, and the prohibited transferee will
acquire no right or interest (or, in the case of any event other than a
prohibited transfer, the person or entity holding record title to any excess
shares, referred to as a prohibited owner, shall 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 (referred to as a
"violative indirect transfer"), could result in our disqualification as a real
estate investment trust. In these circumstances, under 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 of our common stock
owned by it which, if divested, would permit us to continue to maintain our real
estate investment trust status. Any of these excess shares described above will
be transferred automatically, pursuant to our charter, to a trust, the
beneficiary of which will be a qualified charitable organization we select. This
automatic transfer will be deemed to be effective as of the close of business on
the business day prior to the date of the 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 the excess shares to a person or
entity who could own the shares without violating the 6.25% ownership limit, or
any other limit provided in our charter or 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 the excess shares or the sales proceeds received by the
trust for the 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 the excess 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 the excess shares as of the date of the event or the
sales proceeds received by the trust for the excess 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 qualified charitable
organization we select. Prior to a sale of any excess shares by the trust, the
trustee will be entitled to receive, in trust for the qualified charitable
organization we select, all dividends and other distributions paid by us with
respect to the excess shares, and also will be entitled to exercise all voting
rights with respect to the excess shares. Subject to Maryland law, effective as
of the date that the 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 the 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 qualified charitable organization selected by us. If we have
already taken irreversible corporate action, however, then the trustee will not
have the authority to rescind and recast the vote. Any dividend or other
distribution we pay to the prohibited transferee or prohibited owner (prior to
our discovery that the 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 qualified charitable organization we select. If the transfer
to the trust as described above is not automatically effective (for any reason)
to prevent violation of the 6.25% 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 shares will be redeemable by
us at our sole option at a price equal to the fair market value of such shares
at the time of the violative indirect transfer.
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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 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 this offer. We will have
the right to accept such offer until the trustee has sold the shares of stock
held in the trust. Upon a sale to us, the interest of the qualified charitable
organization we select 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 us that might involve a premium price for our common stock or otherwise be in
the best interest of our 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, under our charter, each stockholder will upon demand
be required to disclose to us in writing any information we may request in order
to determine the effect, if any, of that stockholder's actual and constructive
ownership of our common stock on our status as a real estate investment trust
and to ensure compliance with the 6.25% ownership limit, or any other limit
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 in light of his or her personal investments or tax
circumstances, or to stockholders who receive special treatment under the
federal income tax laws except to the extent discussed under the headings
"--Taxation of tax-exempt stockholders" and "--Taxation of non-U.S.
stockholders." Stockholders receiving special treatment include, without
limitation:
- insurance companies;
- financial institutions or broker-dealers;
- tax-exempt organizations;
- 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 consider the effect of any foreign,
state, local or other tax laws that may be applicable to you as a holder of 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
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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 cannot assure you that the tax considerations contained in
this discussion will not be challenged by the Internal Revenue Service or if
challenged, will be sustained by a court.
You are urged to consult your tax advisor regarding the specific tax
consequences to you of:
- the acquisition, ownership and sale or other disposition of our
common stock, including the federal, state, local, foreign and
other tax consequences;
- our election to be taxed as a real estate investment trust for
federal income tax purposes; and
- potential changes in the tax laws.
TAXATION OF PAN PACIFIC
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. Our qualification and taxation as a real estate
investment trust, however, depends upon our ability to meet, through actual
annual operating results, asset, however, diversification, distribution levels
and diversity of stock ownership, the various qualification tests imposed under
the Internal Revenue Code. Accordingly, we cannot assure you 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. The law firm of Latham & Watkins has acted
as our tax counsel in connection with our election to be taxed as a real estate
investment trust. In the opinion of Latham & Watkins, commencing with our
taxable year ended December 31, 1997, we have been organized and have operated
in conformity with the requirements for qualification and taxation as a real
estate investment trust under the Internal Revenue Code, and our proposed method
of operation will enable us to continue to meet the requirements for
qualification and taxation as a real estate investment trust under the Internal
Revenue Code. This opinion was rendered as of December __, 2000, and Latham &
Watkins has no obligation to update its opinion subsequent to this date.
The opinion of Latham & Watkins is based on various assumptions and
representations made by us as to factual matters, including representations made
by us in this prospectus and a factual certificate provided by one of our
officers. 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, the results of which have not been and will not be
reviewed by Latham & Watkins. Accordingly, neither Latham & Watkins nor we can
assure you that the actual results of our operations for any particular taxable
year will satisfy these requirements. See " -- Failure to Qualify." Further, the
anticipated income tax treatment described in this prospectus may be changed,
perhaps retroactively, by legislative, administrative or judicial action at any
time. With respect to the enforceability of the stock ownership limits in our
charter, Latham & Watkins has relied on the opinion of Ballard Spahr Andrews &
Ingersoll, LLP, our Maryland counsel.
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
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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 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 under Internal Revenue Service Notice 88-19 or
Treasury Regulation Section 1.337(d)-5T.
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;
(3) that would be taxable as a domestic corporation but for
Sections 856 through 860 of the Internal Revenue Code;
(4) that is not a financial institution or an insurance
company within the meaning of the Internal Revenue Code;
(5) that is beneficially owned by 100 or more persons;
(6) not more than 50% in value of the outstanding stock of
which is owned, actually or constructively, by five or
fewer individuals, including specified entities, during
the last half of each taxable year; and
(7) that meets other tests, described below, regarding the
nature of its income and assets and the amount of its
distributions.
The Internal Revenue Code provides that all of conditions (1) to (4),
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) during the
relevant time periods. 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 Our 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 33.8% 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 Our Stock--Restrictions on Ownership and Transfer"
in effect with respect to Revenue Properties
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(U.S.), Inc.'s stock. Approximately 44.7% of Revenue Properties (U.S.), Inc.'s
outstanding shares of common stock are currently owned by Mark Tanz and members
of his family and approximately an additional 22.5% 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 (7) above, and therefore,
might no longer be qualified as a REIT. See "Failure to Qualify" below. Our
charter, however, permits us to cause the transfer of that 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 the 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 a
direct or indirect 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 intend to
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 that we believe will be treated as
"qualified REIT subsidiaries" under the Internal Revenue Code. A corporation
will qualify as a qualified REIT subsidiary if we own 100% of its outstanding
stock. A corporation that is a qualified REIT subsidiary is not 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 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 all of 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.
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- 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."
- 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 is 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 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.
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 Pan Pacific -- 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. Our gain would
include our share of any gain realized by any of the partnerships, limited
liability companies or qualified REIT subsidiaries in which we own an interest.
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 and to
engage in the business of acquiring, developing and owning our 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, including
assets held by our qualified REIT subsidiaries and our allocable
share of the assets held by the partnerships and limited
liability companies in which we own an interest, 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 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 included in the 75%
asset test; and
- 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.
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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 or limited liability company 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 or limited liability company. 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
equity ratio. In some cases the new legislation also imposes a 100% tax on the
real estate investment trust if its, or its tenants', 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 the
outstanding securities 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. Recently, we acquired an interest in Western
Kienows L.P., a Delaware limited partnership, which partnership holds 100% of
the non-voting preferred stock, representing approximately 97% of the economic
value, of Western Real Estate Services, Inc., a California corporation. We
believe that our indirect ownership of Western Real Estate Services, Inc., will
not cause us to violate the 5% asset test described above. In addition, because
our ownership of Western Real Estate Services, Inc., will consist exclusively of
non-voting preferred stock, we believe that for the taxable year ending December
31, 2000, we will be in compliance with the 10% asset test described above.
Because we expect to own indirectly in excess of 10% of the value of the
outstanding securities Western Real Estate Services, Inc., however, we may be
required to restructure our ownership of this subsidiary or make a joint
election for this subsidiary to be treated as a taxable REIT subsidiary in order
to comply with the newly enacted legislation discussed in the preceding
paragraphs.
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.
In addition, if we dispose of any asset we acquired from a corporation
which is or has been a C corporation in a transaction in which our basis in the
asset is determined by reference to the basis of the asset in the hands of that
C corporation, within the ten-year period following our acquisition of such
asset, we would be required, under Treasury Regulations, to distribute at least
95% of the after-tax gain, if any, we recognize on the disposition of the asset,
to the extent that gain does not exceed the excess of (a) the fair market value
of the asset on the date we acquired the asset over (b) our adjusted basis in
the asset on the date we acquired the asset.
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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 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 other 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. We may not, however, 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, if any, by which our actual
distributions during a calendar year are less than 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 taxable income or net
capital gain 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.
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 interests 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
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<PAGE> 16
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.
EARNINGS AND PROFITS DISTRIBUTION REQUIREMENTS
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. Even if the IRS, however, 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."
Tax Liabilities and Attributes Inherited from Western Properties.
Recently, we acquired in a merger certain assets and subsidiaries of Western
Properties Trust, a California real estate investment trust. If, prior to this
transaction, Western Properties Trust failed to qualify as a real estate
investment trust in any taxable year, it would be subject to federal income tax
(including any applicable alternative minimum tax) on its taxable income at
regular corporate rates. Unless statutory relief provisions apply, Western
13
<PAGE> 17
Properties Trust would be disqualified from treatment as a real estate
investment trust for the four taxable years following the year during which it
lost qualification. As successor-in-interest to Western Properties Trust, we
would be required to pay this tax. In addition, the built-in gain rules
described above would apply with respect to any assets we acquired from Western
Properties Trust. In that case, if we were not to make an election under
Treasury Regulation section 1.337(d)-5T, Western Properties would recognize
taxable gain as a result of the transaction under the built-in gain rules, even
though the transaction otherwise qualified as a tax-free reorganization under
the Internal Revenue Code. We would be liable for any tax due with respect to
the gain described above. We intend, however, to make a protective election
under Treasury Regulation section 1.337(d)-5T with respect to the merger to
prevent the recognition of this gain. Even having made this election, under
these circumstances, if we disposed of any of the assets acquired from Western
Properties Trust during the ten-year period following the transaction, any
resulting gain, to the extent of the built-in gain at the time of the merger,
would be subject to tax at the highest corporate tax rate under the built-in
gain rules. In addition, if Western Properties Trust failed to qualify as a real
estate investment trust for any year, then it is possible that we would have
acquired undistributed C corporation earnings and profits from Western
Properties Trust. If we failed to distribute these C corporation earnings and
profits prior to the end of the taxable year in which the merger occurred, we
would fail to qualify as a real estate investment trust.
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
under the laws of 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 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.
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<PAGE> 18
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. Long-term capital gains of a
non-corporate U.S. stockholder will generally be subject to a maximum tax rate
of 20%. 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, 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 and gain arising upon a sale of our shares will
not be unrelated business taxable income to a tax-exempt stockholder. This
income or gain will be unrelated business taxable income, however, if the
tax-exempt stockholder holds its shares as "debt financed property" within the
meaning of the Internal Revenue Code or if the shares are used in a trade or
business of the tax-exempt stockholder. Generally, debt financed property is
property, the acquisition or holding of which was financed through a borrowing
by the tax-exempt stockholder.
For tax-exempt stockholders which are social clubs, voluntary employee
benefit associations, supplemental unemployment benefit trusts, and qualified
group legal services plans exempt from federal income taxation under Sections
501(c)(7), (c)(9), (c)(17) and (c)(20) of the Internal Revenue Code,
respectively, income from an investment in our shares will constitute unrelated
business taxable income unless the organization is able to properly claim a
deduction for amounts set aside or placed in reserve for specific purposes so as
to offset the income generated by its investment in our shares. These
prospective investors should consult their tax advisors concerning these "set
aside" and reserve requirements.
Notwithstanding the above, however, a portion of the dividends paid by a
"pension-held REIT" will be treated as unrelated business taxable income as to
specified tax exempt trusts which hold more than 10%, by value, of the interests
in the 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."
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<PAGE> 19
TAXATION OF NON-U.S. STOCKHOLDERS
The preceding discussion does not address the rules governing U.S.
federal income taxation of the ownership and disposition of common stock by
persons that are non-U.S. stockholders. When we use the term "non-U.S.
stockholder" we mean stockholders who are not U.S. stockholders. In general,
non-U.S. stockholders may be subject to special tax withholding requirements on
distributions from us and with respect to their sale or other disposition of our
common stock, except to the extent reduced or eliminated by an income tax treaty
between the United States and the non-U.S. stockholder's country. A non- U.S.
stockholder who is a stockholder of record and is eligible for reduction or
elimination of withholding must file an appropriate form with us in order to
claim this treatment. Non-U.S. stockholders should consult their tax advisors
concerning the federal income tax consequences to them of an acquisition of
shares of common stock, including the federal income tax treatment of
dispositions of interests in and the receipt of distributions from us.
OTHER TAX CONSEQUENCES
We may be required to pay state or local taxes in various state or local
jurisdictions, including those in which we transact business. Our stockholders
may be required to pay state or local taxes in various state or local
jurisdictions, including those in which they reside. Our state and local tax
treatment may not conform to the federal income tax consequences summarized
above. In addition, your state and local tax treatment may not conform to the
federal income tax consequences summarized above. Consequently, you should
consult your tax advisor regarding the effect of state and local tax laws on an
investment in our common stock.
SELLING STOCKHOLDER
As described elsewhere in this prospectus, the "selling stockholder" is
only the person listed in the table below. The following table provides the name
of and the number of shares owned by the selling stockholder and the number of
shares which can be sold by the selling stockholder.
The shares offered by this prospectus may be offered from time to time
by the selling stockholder named below:
<TABLE>
<CAPTION>
Maximum Number of Percentage of
Shares Available Outstanding
Total Number of For Sale Pursuant Shares of Common
Name Shares Held(1) to this Prospectus Stock(2)
---- --------------- ------------------ -----------------
<S> <C> <C> <C>
Revenue Properties (U.S.), Inc. 10,668,421 3,000,000 9.37%
</TABLE>
------------------------
(1) Based on information available to us as of November 30, 2000.
(2) Based on 32,007,807 shares of our common stock outstanding as of
November 30, 2000.
PLAN OF DISTRIBUTION
This prospectus relates to the offering from time to time by the selling
stockholder of up to an aggregate of 3,000,000 shares. We are registering the
offer and sale of these shares by the selling stockholder on behalf of the
selling stockholder. Sales of these shares may be effected by the selling
stockholder from time to time in one or more types of transactions (which may
include block transactions) on the New York Stock Exchange, in the
over-the-counter market, in negotiated transactions, through put or call options
transactions relating to these shares, through short sales of these shares, or a
combination of these methods of sale, at market prices prevailing at the time of
sale, or at negotiated prices. These transactions may or may not involve
underwriters, brokers or dealers.
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<PAGE> 20
The selling stockholder may also sell the shares directly to market
makers acting as principals and/or broker-dealers acting as agents for
themselves or their customers. These broker-dealers may receive compensation in
the form of discounts, concessions or commissions from the selling stockholder
and/or the purchasers of shares for whom the broker-dealers may act as agents or
to whom they sell as principal or both, which compensation as to a particular
broker-dealer might be in excess of customary commissions. Market makers and
block purchasers purchasing the shares will do so for their own account and at
their own risk. It is possible that the selling stockholder will attempt to sell
shares of common stock in block transactions to market makers or other
purchasers at a price per share which may be below the then market price. The
selling stockholder cannot assure that all or any of the shares offered in this
prospectus will be issued to, or sold by, the selling stockholder. The selling
stockholder and any brokers, dealers or agents, upon effecting the sale of any
of the shares offered in this prospectus, may be deemed "underwriters" as that
term is defined under the Securities Act or the Exchange Act, or the rules and
regulations under such acts.
The selling stockholder, alternatively, may sell all or any part of the
shares offered in this prospectus through an underwriter. The selling
stockholder has not entered into any agreement with a prospective underwriter
and we cannot assure you that any such agreement will be entered into. If the
selling stockholder enters into this type of an agreement or agreements, the
relevant details will be set forth in a supplement or revisions to this
prospectus.
The selling stockholder and any other persons participating in the sale
or distribution of the shares will be subject to applicable provisions of the
Exchange Act and the rules and regulations under such act, including, without
limitation, Regulation M. These provisions may restrict certain activities of,
and limit the timing of purchases and sales of any of the shares by, the selling
stockholder or any other person. Furthermore, under Regulation M, persons
engaged in a distribution of securities are prohibited from simultaneously
engaging in market making and certain other activities with respect to the
securities for a specified period of time prior to the commencement of the
distributions, subject to specified exceptions or exemptions. All of these
limitations may affect the marketability of the shares.
The selling stockholder also may sell all or a portion of its shares in
open market transactions in reliance upon Rule 144 under the Securities Act,
provided it meets the criteria and conforms to the requirements of Rule 144.
Under agreements entered into with us, the selling stockholder and any
underwriter it may utilize may be indemnified by us against certain civil
liabilities, including liabilities under the Securities Act. Underwriter
commissions, brokerage commissions and similar selling expenses, if any,
attributable to the sale of these shares will be borne by the selling
stockholder.
EXPERTS
The consolidated financial statements and Schedule III of Pan Pacific
Retail Properties, Inc. as of December 31, 1999 and 1998, and for each of the
years in the three-year period ended December 31, 1999, have been incorporated
by reference herein, and in the registration statement in reliance upon the
report of KPMG LLP, independent certified public accountants, incorporated by
reference herein, and upon the authority of said firm as experts in accounting
and auditing.
The consolidated financial statements and Schedule III of Western
Properties Trust as of December 31, 1999 and 1998, and for each of the years in
the three-year period ended December 31, 1999, have been incorporated by
reference herein, and in the registration statement in reliance upon the report
of KPMG LLP, independent certified public accountants, incorporated by reference
herein, and upon the 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 material 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> 21
================================================================================
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, the information or representations must not be relied upon as having been
authorized by Pan Pacific Retail Properties, Inc. or the selling stockholder.
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 the
offer or solicitation is not authorized, or in which the person making the offer
or solicitation is not qualified to do so, or to any person to whom it is
unlawful to make an offer or solicitation. Neither the delivery of this
prospectus nor any sale made hereunder will, 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>
<S> <C>
Where You Can Find More Information...........................................1
Documents We Have By Reference................................................1
Pan Pacific Retail Properties, Inc............................................2
Risk Factors..................................................................2
Use of Proceeds...............................................................2
Forward-Looking Statements....................................................3
Description Of Our Stock......................................................3
Material Federal Income Tax Consequences......................................6
Selling Stockholder..........................................................16
Plan Of Distribution.........................................................16
Experts......................................................................17
Legal Matters................................................................17
</TABLE>
================================================================================
================================================================================
3,000,000 Shares
PAN PACIFIC
RETAIL PROPERTIES, INC.
Common Stock
----------------
PROSPECTUS
----------------
December ___, 2000
================================================================================
18
<PAGE> 22
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 $16,410
Legal Fees and Expenses 15,000
Accounting Fees and Expenses 6,000
Miscellaneous Expenses 2,000
-------
Total $39,410
=======
</TABLE>
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Our charter limits the liability of our directors and officers to us and
our stockholders for money damages to the fullest extent permitted by the laws
of the State of Maryland. The Maryland General Corporation Law presently permits
the liability of directors and officers to a corporation or its stockholders for
money damages to be limited by the corporate charter, except (i) to the extent
that it is proved that the director or officer actually received an improper
benefit or profit for the amount of the benefit or profit actually received or
(ii) if a judgment or other final adjudication is entered in a proceeding based
on a finding that the directors or officers action, or failure to act, was a
result of active or deliberate dishonesty and was material to the cause of
action adjudicated in the proceeding. The provisions of our charter do not limit
our ability or the ability of our stockholders to obtain other relief, such as
injunction or rescission.
Article XII of our Amended and Restated Bylaws provides that we shall
indemnify and hold harmless, to the fullest extent permitted by law, any person
who is made a party to any proceeding, by reason of the fact that such person is
or was a director or officer of ours, or, as a director or officer of ours, is
or was serving at our request as a director, officer, trustee or partner, of
another corporation, partnership, joint venture, trust, employee benefit plan or
other enterprise. To the fullest extent permitted by law, such indemnification
shall include expenses (including attorneys' fees), judgments, fines and amounts
paid in settlement and any such expenses may be paid by us in advance of the
final disposition of such proceeding. However, a Maryland corporation may not
indemnify for an adverse judgment in a suit by or in the right of the
corporation unless ordered by a court of appropriate jurisdiction, in which case
indemnification is limited to expenses. In addition, the Maryland General
Corporation Law requires a corporation, as a condition to advancing expenses, to
obtain (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
such corporation as set forth in Section 2-418 of the Maryland General
Corporation Law and (b) a written undertaking by him or on his behalf to repay
the amount paid or reimbursed by us if it shall ultimately be determined that
the standard of conduct was not met.
Article XII of our bylaws further provides that we may, with the
approval of our board, provide such indemnification and advancement of expenses
as set forth in the above paragraph to our agents and employees as well as those
of our predecessor.
Section 2-418 of the Maryland General Corporation Law 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 against reasonable expenses incurred in
connection with the proceeding. Section 2-418 of the Maryland General
Corporation Law generally permits indemnification of any director or officer
made a party to any proceeding by reason of service as a director or officer
unless it is established that (i) the act or omission of such person was
material to the matter giving rise to the proceeding and was committed in bad
faith or was the result of active and deliberate dishonesty; or (ii) such person
actually received an improper personal benefit in money, property or services;
or (iii) in the case of any criminal proceeding, such person had reasonable
cause to believe that the act or omission was unlawful. The indemnity may
include judgments, penalties, fines, settlements and reasonable expenses
actually incurred by the director or officer in connection with the proceeding;
provided, however, that if the proceeding is one by, or in the right of the
corporation, indemnification is not permitted with respect to any proceeding in
which the director or officer has been adjudged to be liable to the corporation.
In addition, a director or officer may not be indemnified with respect to any
proceeding charging improper personal benefit if the director or officer is
adjudged to be liable on the basis that personal benefit was improperly
received. A court of appropriate jurisdiction may order indemnification, but
only for expenses, in proceedings by or in the right of the corporation or in
which liability has been adjudged on the basis of improper personal benefit. The
termination of any proceeding by conviction or upon a plea of nolo contenders or
its equivalent or an entry of an order of probation prior to judgment creates a
rebuttable presumption that the director or
<PAGE> 23
officer did not meet the requisite standard of conduct required for permitted
indemnification. The termination of any proceeding by judgment, order or
settlement, however, does not create a presumption that the director or officer
failed to meet the requisite standard of conduct for permitted indemnification.
ITEM 16. EXHIBITS
See Exhibit Index.
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:
(i) To include any prospectus required by Section 10(a)(3) of
the Securities Act;
(ii) To reflect in the prospectus any facts or events arising
after the effective date of the registration statement (or the most
recent post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth
in 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 Exchange Act that are incorporated by
reference in this registration statement.
(2) That, for the purpose of determining any liability under the
Securities Act, each such post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered 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, each filing of
the Registrant's annual reports pursuant to Section 13(a) or Section 15(d) of
the Securities Exchange Act 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
II-2
<PAGE> 24
be delivered to each person to whom the prospectus is sent or given, the latest
quarterly report that is specifically incorporated by reference in the
prospectus to provide such interim financial information.
Insofar as indemnification for liabilities arising under the Securities
Act, may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the foregoing provisions, or otherwise, the Registrant
has been advised that in the opinion of the Commission such indemnification is
against public policy as expressed in the Exchange Act, and is, therefore,
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by the Registrant of expenses incurred or
paid by a director, officer or controlling person of the Registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Exchange Act, and will be governed by the final
adjudication of such issue.
II-3
<PAGE> 25
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 4th day of
December, 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
Mark J. Riedy, and both or either of them, as his or her true and lawful
attorneys-in-fact and agents with full power of substitution and resubstitution,
for him or her and his or her 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 or her 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 December 4, 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 Executive Vice President and 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. RIEDY
-------------------------------------------------
Mark J. Riedy Director
/s/ BERNARD M. FELDMAN
-------------------------------------------------
Bernard M. Feldman Director
</TABLE>
S-1
<PAGE> 26
<TABLE>
<CAPTION>
TITLE
-----
<S> <C>
/s/ DAVID P. ZIMEL
-------------------------------------------------
David P. Zimel Director
/s/ JOSEPH P. COLMERY Director
-------------------------------------------------
Joseph P. Colmery
/s/ JAMES L. STELL
-------------------------------------------------
James L. Stell Director
</TABLE>
S-2
<PAGE> 27
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<S> <C>
3.1 Articles of Amendment and Restatement of Pan Pacific Retail
Properties, Inc.(previously filed as Exhibit 3.1 to Pan Pacific
Retail Property, Inc.'s Registration Statement on Form S-11
(Registration No. 333-28715) and incorporated herein by
reference).
3.2 Amended and Restated Bylaws of Pan Pacific Retail Properties,
Inc.(previously filed as Exhibit 3.2 to Pan Pacific Retail
Property, Inc.'s Registration Statement on Form S-11
(Registration No. 333-28715) and incorporated herein by
reference).
4.1 Form of Certificate of Common Stock (previously filed as Exhibit
4.1 to Pan Pacific Retail Properties, Inc.'s Registration
Statement on Form S-11 (Registration No. 333-28715) and
incorporated herein by reference).
4.2 Form of Indenture relating to the Senior Notes (previously filed
as Exhibit 4.1 to Western Properties Trust's Registration
Statement on Form S-3 (Registration No. 333-32721) and
incorporated herein by reference.
4.3 Form of Senior Notes (previously filed as Exhibit 4.1 to Western
Properties Trust's Registration Statement on Form S-3
(Registration No. 333-32721) and incorporated herein by
reference).
4.4 Form of Supplemental Indenture relating to the 7.1% Senior
Notes due 2006 (previously filed as Exhibit 4.5 to Western
Properties Trust's Form 8-K, dated September 24, 1997, and
incorporated herein by reference).
4.5 Form of Supplemental Indenture relating to the 7.2% Senior
Notes due 2008 (previously filed as Exhibit 4.6 to Western
Properties Trust's Form 8-K, dated September 24, 1997, and
incorporated herein by reference).
4.6 Form of Supplemental Indenture relating to the 7.3% Senior
Notes due 2010 (previously filed as Exhibit 4.7 to Western
Properties Trust's Form 8-K, dated September 24, 1997, and
incorporated herein by reference).
*4.7 Form of Supplemental Indenture relating to the assumption by
Pan Pacific Retail Properties, Inc. of the Indenture relating
to the 7.1% Senior Notes due 2006, the 7.2% Senior Notes due
2008 and the 7.3% Senior Notes due 2010.
4.8 Form of Indenture relating to the 7.875% Senior Notes due 2004
(previously filed as Exhibit 4.2 to Western Properties Trust
Registration Statement on Form S-3 (Registration No. 333-71270)
and incorporated herein by reference).
*4.9 Form of Supplemental Indenture relating to the assumption by
Pan Pacific Retail Properties, Inc. of the Indenture relating
to the 7.875% Senior Notes due 2004.
+5.1 Opinion of Ballard Spahr Andrews & Ingersoll, LLP as to the
legality of the securities to be issued.
+8.1 Opinion of Latham & Watkins regarding tax matters.
10.1 The 1997 Stock Option and Incentive Plan of Pan Pacific Retail
Properties, Inc.(previously filed as Exhibit 10.1 to Pan Pacific
Retail Properties, Inc. Registration Statement on Form S-11
(Registration No. 333-28715) and incorporated herein by
reference).
10.2 The 2000 Stock Incentive Plan of Pan Pacific Retail Properties,
Inc.(previously filed as Appendix A to Pan Pacific Retail
Properties, Inc.'s Proxy Statement for the 2000 Annual Meeting
of Stockholders).
10.3 Form of Officers and Directors Indemnification Agreement
(previously filed as Exhibit 10.2 to Pan Pacific Retail
Properties, Inc.'s Registration Statement on Form S-11
(Registration No. 333-28715) and incorporated herein by
reference).
10.4 Amended and Restated Employment Agreement, dated as of August
14,2000, between Pan Pacific Retail Properties, Inc. and Mr.
Stuart A. Tanz.
10.5 Employment Agreement, dated as of October 11,1999, between Pan
Pacific Retail Properties, Inc. and Mr. Joseph B. Tyson.
10.6 Amended and Restated Employment Agreement, dated as of August
14, 2000, between Pan Pacific Retail Properties, Inc. and Mr.
Jeffrey S. Stauffer.
10.7 Form of Miscellaneous Rights Agreement (previously filed as
Exhibit 10.6 to the Pan Pacific Retail Properties, Inc.'s
Registration Statement on Form S-11 (Registration No. 333-28715)
and incorporated herein by reference).
10.8 Form of Non-Competition Agreement (previously filed as Exhibit
10.7 to Pan Pacific Retail Properties, Inc.'s Registration
Statement on Form S-11 (Registration No. 333-28715) and
incorporated herein by reference).
*10.9 Revolving Credit Agreement, dated as of November 13, 2000, by
and among Pan Pacific Retail Properties, Inc., certain
subsidiaries of Pan Pacific Retail Properties, Inc. and Bank of
America, N.A., as Administrative Agent, First Union National
Bank, as Syndication Agent, and U.S. Bank, National Association,
as Documentation Agent, Dresdner Bank AG, New York and Grand
Cayman Branches, Guaranty Federal Banks, F.S.B., as Co-Agent and
Wells Fargo Bank, N.A., as Co-Agent.
*10.10 Term Credit Agreement, dated as of November 13, 2000, by and
among Pan Pacific Retail Properties, Inc., certain subsidiaries
of Pan Pacific Retail Properties, Inc. and Bank of America,
N.A., as Administrative Agent, First Union National Bank, as
Syndication Agent, and U.S. Bank, National Association, as
Documentation Agent, Dresdner Bank AG, New York and Grand Cayman
Branches, Guaranty Federal Banks, F.S.B., as Co-Agent and Wells
Fargo Bank, N.A., as Co-Agent.
10.11 Amended and Restated Limited Liability Company Agreement of Pan
Pacific (Portland),LLC (previously filed as Exhibit 99.1 to Pan
Pacific Retail Properties, Inc.'s Current Report on Form 8-K
dated October 23,1998 and incorporated herein by reference).
10.12 Purchase and Sale and Ground Lease Assignment and Assumption
Agreement and Escrow Instructions (previously filed as Exhibit
99.2 to Pan Pacific Retail Properties, Inc.'s Current Report on
Form 8-K filed on October 23,1998 and incorporated herein by
reference).
10.13 First Amendment To Purchase and Sale Ground Lease Assignment and
Assumption Agreement and Escrow Instructions (previously filed
as Exhibit 99.3 to Pan Pacific Retail Properties, Inc.'s Current
Report on Form 8-K Filed October 23,1998 and incorporated herein
by reference).
10.14 Contribution Agreement and Escrow Instructions, dated as of
November 12,1998, by and between Portland Fixture Limited
Partnership, Independent Member Corp., Byron P. Henry, Steven J.
Oliva and Pan Pacific (Portland),and related amendments
(previously filed as Exhibit 99.3 to Pan Pacific Retail
Properties, Inc.'s Current Report on Form 8-K dated November
12,1998 and incorporated herein by reference).
10.15 Member's Interest Purchase Agreement, dated as of August 13,
1999, by and among Pan Pacific Retail Properties, Inc., Pan
Pacific (RLP), Inc. and Stanley W. Gribble (previously filed as
Exhibit 10.15 to Pan Pacific Retail Properties, Inc.'s
Registration Statement on Form S-4 (Registration No. 333-45944)
and incorporated herein by reference).
10.16 Loan Assumption and Modification Agreement, dated as of
September 23, 1999, by and between Pan Pacific Retail
Properties, Inc. and La Salle National Bank (previously filed as
Exhibit 10.16 to Pan Pacific Retail Properties, Inc.'s
Registration Statement on Form S-4 (Registration No. 333-45944)
and incorporated herein by reference).
10.17 Operating Agreement of Pan Pacific (Rancho Las Palmas), LLC,
dated as of September 23, 1999 (previously filed as Exhibit
10.17 to Pan Pacific Retail Properties, Inc.'s Registration
Statement on Form S-4 (Registration No. 333-45944) and
incorporated herein by reference).
</TABLE>
<PAGE> 28
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<S> <C>
10.18 Contribution Agreement and Escrow Instructions, dated as of
August 13, 1999, by and between Pan Pacific Retail Properties,
Inc. and Rancho Las Palmas Center Associates (previously filed
as Exhibit 10.18 to Pan Pacific Retail Properties, Inc.'s
Registration Statement on Form S-4 (Registration No. 333-45944)
and incorporated herein by reference).
21.1 List of subsidiaries of Pan Pacific Retail Properties,
Inc.(previously filed as Exhibit 21.1 to Pan Pacific Retail
Properties, Inc.'s Annual Report on Form 10-K for the year ended
December 31, 1999 and incorporated herein by reference).
*23.1 Consent of KPMG LLP.
*23.2 Consent of KPMG LLP.
+23.3 Consent of Ballard Spahr Andrews & Ingersoll, LLP (included in
Exhibit 5.1).
+23.4 Consent of Latham & Watkins (included in Exhibit 8.1).
24.1 Power of Attorney (contained on signature page).
</TABLE>
----------
*Filed herewith.
+To be filed by amendment.
