<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MAY 15, 1998
REGISTRATION NO. 333-49163
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
AMENDMENT NO. 1
TO
FORM S-11
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
<TABLE>
<S> <C> <C>
AMB PROPERTY, L.P.
(EXACT NAME OF ISSUER OF THE NOTES AS SPECIFIED IN ITS CHARTER)
DELAWARE 94-3285362
(STATE OR OTHER (I.R.S. EMPLOYER
JURISDICTION AND ITS NOTES GUARANTORS IDENTIFICATION NO.)
OF INCORPORATION)
MARYLAND AMB PROPERTY CORPORATION 94-3281941
DELAWARE AMB PROPERTY II, L.P. 94-3285360
DELAWARE LONG GATE LLC 52-1936207
(STATE OR OTHER (I.R.S. EMPLOYER
JURISDICTION IDENTIFICATION NO.)
OF INCORPORATION)
</TABLE>
505 MONTGOMERY STREET
SAN FRANCISCO, CALIFORNIA 94111
(415) 394-9000
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES, INCLUDING ZIP CODE AND TELEPHONE
NUMBER)
------------------------
S. DAVIS CARNIGLIA
MANAGING DIRECTOR AND
CHIEF FINANCIAL OFFICER
AMB PROPERTY CORPORATION
505 MONTGOMERY STREET
SAN FRANCISCO, CALIFORNIA 94111
(415) 394-9000
(NAME, ADDRESS AND TELEPHONE NUMBER OF AGENT FOR SERVICE)
------------------------
COPIES TO:
<TABLE>
<S> <C>
EDWARD SONNENSCHEIN, JR., ESQ. KENNETH M. DORAN, ESQ.
J. SCOTT HODGKINS, ESQ. GIBSON, DUNN & CRUTCHER LLP
LATHAM & WATKINS 333 SOUTH GRAND AVENUE
633 WEST FIFTH STREET, SUITE 4000 LOS ANGELES, CALIFORNIA 90071
LOS ANGELES, CALIFORNIA 90071 (213) 229-7000
(213) 485-1234
</TABLE>
------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
As soon as practicable after the effective date of this Registration Statement.
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 this Form is a post-effective amendment filed pursuant to Rule 462(d)
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. [ ]
------------------------
THE REGISTRANTS HEREBY AMEND THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANTS
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.
================================================================================
<PAGE> 2
CROSS REFERENCE SHEET
<TABLE>
<CAPTION>
FORM S-11 ITEM NO. AND HEADING LOCATION OR HEADING IN PROSPECTUS
------------------------------ ---------------------------------
<C> <S> <C>
1. Forepart of Registration Statement and Outside
Front Cover Page of Prospectus................... Outside Front Cover Page
2. Inside Front and Outside Back Cover Pages of
Prospectus....................................... Inside Front Cover Page; Outside Back Cover
Page
3. Summary Information, Risk Factors and Ratio of
Earnings to Fixed Charges........................ Prospectus Summary; Risk Factors
4. Determination of Offering Price.................. Underwriters
5. Dilution......................................... Not Applicable
6. Selling Security Holders......................... Not Applicable
7. Plan of Distribution............................. Underwriters
8. Use of Proceeds.................................. Use of Proceeds
9. Selected Financial Data.......................... Selected Financial and Other Data
10. Management's Discussion and Analysis of Financial
Condition and Results of Operations.............. Management's Discussion and Analysis of
Financial Condition and Results of Operations
11. General Information as to Registrant............. Prospectus Summary; Business and Properties;
Management; Principal Stockholders;
Description of Certain Provisions of the
Partnership Agreement of the Operating
Partnership
12. Policy with Respect to Certain Activities........ Policies With Respect to Certain Activities
13. Investment Policies of Registrant................ Policies With Respect to Certain Activities
14. Description of Real Estate....................... Management's Discussion and Analysis of
Financial Condition and Results of
Operations; Business and Properties
15. Operating Data................................... Business and Properties
16. Tax Treatment of Registrant and Its Security
Holders.......................................... Certain Federal Income Tax Considerations
Relating to the REPS
17. Market Price of and Dividends on the Registrant's
Common Equity and Related Stockholder Matters.... Risk Factors; Price Range of Common Stock and
Distribution History; Principal Stockholders
18. Description of Registrant's Securities........... Description of Capital Stock; Description of
Certain Provisions of the Partnership
Agreement of the Operating Partnership
19. Legal Proceedings................................ Business and Properties; Legal Proceedings
20. Security Ownership of Certain Beneficial Owners
and Management................................... Principal Stockholders
21. Directors and Executive Officers................. Management
</TABLE>
<PAGE> 3
<TABLE>
<CAPTION>
FORM S-11 ITEM NO. AND HEADING LOCATION OR HEADING IN PROSPECTUS
------------------------------ ---------------------------------
<C> <S> <C>
22. Executive Compensation........................... Management
23. Certain Relationships and Related Transactions... Risk Factors; Business and Properties;
Management; Certain Relationships and Related
Transactions; Principal Stockholders
24. Selection, Management and Custody of Registrant's
Investments...................................... Risk Factors; Business and Properties;
Policies With Respect to Certain Activities
25. Policies with Respect to Certain Transactions.... Risk Factors; Business and Properties;
Policies With Respect to Certain Activities;
Management; Certain Relationships and Related
Transactions; Principal Stockholders
26. Limitations of Liability......................... Management; Description of Certain Provisions
of the Partnership Agreement of the Operating
Partnership
27. Financial Statements and Information............. Index to Financial Statements
28. Interests of Named Experts and Counsel........... Not Applicable
29. Disclosure of Commission Position on
Indemnification for Securities Act Liabilities... Not Applicable
30. Quantitative and Qualitative Disclosures About
Market Risk...................................... Risk Factors
</TABLE>
<PAGE> 4
This Prospectus and the information contained herein are subject to change,
completion or amendment without notice. These securities may not be sold nor may
an offer to buy be accepted prior to the time the Prospectus is delivered in
final form. Under no circumstances shall this Prospectus constitute an offer to
sell or the solicitation of an offer to buy, nor shall there be any sale of
these securities in any jurisdiction in which such offer, solicitation or sale
would be unlawful prior to registration or qualification under the securities
laws of any such jurisdictions.
PROSPECTUS (Subject to Completion)
Issued May , 1998
$350,000,000
AMB Property, L.P.
Unconditionally Guaranteed by AMB Property Corporation and Certain Subsidiaries
$ % NOTES DUE 2008
$ % NOTES DUE 2018
$ % RESET PUT SECURITIES (REPS(SM)) DUE 2015 -- PUTABLE/CALLABLE
2005*
------------------------
Interest payable and
------------------------
AMB PROPERTY, L.P., A DELAWARE LIMITED PARTNERSHIP (THE "OPERATING PARTNERSHIP")
OWNS 159 PROPERTIES ENCOMPASSING APPROXIMATELY 52.1 MILLION SQUARE FEET. AMB
PROPERTY CORPORATION, A MARYLAND CORPORATION (THE "COMPANY"), IS THE OPERATING
PARTNERSHIP'S SOLE GENERAL PARTNER AND OWNS A 95.9% INTEREST IN THE OPERATING
PARTNERSHIP. THE COMPANY EXPECTS THAT IT HAS QUALIFIED AND WILL CONTINUE TO
QUALIFY AS A REAL ESTATE INVESTMENT TRUST FOR FEDERAL INCOME TAX PURPOSES
BEGINNING WITH ITS TAXABLE YEAR ENDED DECEMBER 31, 1997.
------------------------
THE % NOTES DUE 2008 (THE "2008 NOTES"), THE % NOTES DUE 2018 (THE "2018
NOTES") AND THE % RESET PUT SECURITIES (REPS) DUE 2015 -- PUTABLE/CALLABLE
2005 (THE "REPS," AND COLLECTIVELY WITH THE 2008 NOTES AND THE 2018 NOTES, THE
"NOTES") WILL MATURE ON , 2008, 2018 AND 2015 RESPECTIVELY.
BY PURCHASING THE REPS, EACH PURCHASER AND SUBSEQUENT HOLDER IS DEEMED TO
HAVE IRREVOCABLY AGREED THAT THE REPS WILL BE SUBJECT TO MANDATORY
REDEMPTION FROM THE THEN EXISTING HOLDERS ON , 2005 EITHER (I)
THROUGH THE EXERCISE OF THE CALL OPTION (AS DEFINED HEREIN) BY MORGAN
STANLEY & CO. INTERNATIONAL LIMITED (THE "CALLHOLDER") OR (II) IN THE
EVENT THE CALLHOLDER DOES NOT EXERCISE THE CALL OPTION, THE AUTOMATIC
EXERCISE OF THE MANDATORY PUT (AS DEFINED HEREIN) BY THE TRUSTEE ON
BEHALF OF THE HOLDERS WITHOUT THEIR CONSENT. SEE "DESCRIPTION OF THE
NOTES -- CALL OPTION AND MANDATORY PUT WITH RESPECT TO THE REPS." THE
2008 NOTES AND THE 2018 NOTES WILL BE REDEEMABLE AS SET FORTH UNDER
"DESCRIPTION OF NOTES -- REDEMPTION OF THE 2008 NOTES AND THE 2018
NOTES AT THE OPTION OF THE OPERATING PARTNERSHIP." THE NOTES WILL
BE UNCONDITIONALLY GUARANTEED, JOINTLY AND SEVERALLY, ON AN
UNSECURED BASIS BY THE COMPANY, AMB PROPERTY II, L.P., LONG GATE
LLC AND EACH OTHER SUBSIDIARY OF THE OPERATING PARTNERSHIP THAT
GUARANTEES THE OPERATING PARTNERSHIP'S OBLIGATIONS UNDER ANY
CREDIT AGREEMENT (AS DEFINED HEREIN). THE NOTES WILL RANK PARI
PASSU WITH ALL OUTSTANDING INDEBTEDNESS OF THE OPERATING
PARTNERSHIP, AND WILL BE SUBORDINATED TO THE MORTGAGES AND OTHER
SECURED INDEBTEDNESS OF THE OPERATING PARTNERSHIP AND ALL OF THE
OUTSTANDING LIABILITIES OF ITS SUBSIDIARIES. IN ADDITION, THE
GUARANTEES WILL BE SUBORDINATED TO ALL OF THE MORTGAGES AND
OTHER SECURED INDEBTEDNESS OF EACH GUARANTOR AND ALL OF THE
OUTSTANDING LIABILITIES OF THEIR RESPECTIVE SUBSIDIARIES. THE
NOTES WILL BE REPRESENTED BY ONE OR MORE GLOBAL NOTES
REGISTERED IN THE NAME OF A NOMINEE OF THE DEPOSITORY TRUST
COMPANY, AS DEPOSITARY (THE "DEPOSITARY"). BENEFICIAL
INTERESTS IN THE NOTES WILL BE SHOWN ON, AND TRANSFERS
THEREOF WILL BE EFFECTED ONLY THROUGH, RECORDS MAINTAINED
BY THE PARTICIPANTS OF THE DEPOSITARY. EXCEPT IN THE
LIMITED CIRCUMSTANCES DESCRIBED IN THIS PROSPECTUS, NOTES
IN CERTIFICATED FORM WILL NOT BE ISSUED IN EXCHANGE FOR
THE GLOBAL NOTES.
------------------------
SEE "RISK FACTORS" BEGINNING ON PAGE 11 HEREIN FOR A DISCUSSION OF MATERIAL
FACTORS THAT SHOULD BE CONSIDERED BY PROSPECTIVE PURCHASERS OF THE NOTES.
------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE COMMISSION OR
ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
------------------------
<TABLE>
<CAPTION>
UNDERWRITING PROCEEDS TO
PRICE TO DISCOUNTS AND OPERATING
PUBLIC(1) COMMISSIONS(2) PARTNERSHIP(1)(3)(4)
--------- -------------- --------------------
<S> <C> <C> <C>
Per 2008 Note............................................... % % %
Per 2018 Note............................................... % % %
Per 2015 REPS............................................... % % %
Total............................................. $ $ $
</TABLE>
- ---------------
(1) Plus accrued interest, if any, from , 1998.
(2) The Operating Partnership and the Company have agreed to indemnify the
several Underwriters against certain liabilities, including liabilities
under the Securities Act of 1933, as amended. See "Underwriters."
(3) Before deducting expenses payable by the Operating Partnership estimated
at $ .
(4) Represents consideration for the REPS, which includes consideration for
the Call Option.
------------------------
* REPS is a service mark of Morgan Stanley Dean Witter & Co.
------------------------
The Notes are offered, subject to prior sale, when, as, and if accepted by
the Underwriters, and subject to approval of certain legal matters by Gibson,
Dunn & Crutcher LLP, counsel for the Underwriters. It is expected that delivery
of the Notes will be made on or about , 1998, through the book-entry
facilities of the Depositary, against payment therefor in immediately available
funds.
------------------------
MORGAN STANLEY DEAN WITTER
GOLDMAN, SACHS & CO.
J.P. MORGAN & CO.
, 1998
<PAGE> 5
CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE NOTES. SUCH
TRANSACTIONS MAY INCLUDE STABILIZING AND THE PURCHASE OF NOTES TO COVER
SYNDICATE SHORT POSITIONS. FOR A DESCRIPTION OF THESE ACTIVITIES, SEE
"UNDERWRITERS."
NO DEALER, SALESPERSON OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED OR
INCORPORATED HEREIN BY REFERENCE IN THIS PROSPECTUS IN CONNECTION WITH THE OFFER
MADE BY THIS PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR
REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE
OPERATING PARTNERSHIP, THE COMPANY OR THE UNDERWRITERS. THIS PROSPECTUS DOES NOT
CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY ANY SECURITY
OTHER THAN THE NOTES OFFERED HEREBY, NOR DOES IT CONSTITUTE AN OFFER TO SELL OR
A SOLICITATION OF ANY OFFER TO BUY THE NOTES BY ANYONE IN ANY JURISDICTION IN
WHICH SUCH OFFER OR SOLICITATION IS NOT AUTHORIZED, OR IN WHICH THE PERSON
MAKING SUCH OFFER OR SOLICITATION IS NOT QUALIFIED TO DO SO, OR TO ANY PERSON TO
WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION. NEITHER THE DELIVERY OF
THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES,
CREATE ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE
OPERATING PARTNERSHIP OR THE COMPANY SINCE THE DATE HEREOF.
------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
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<S> <C>
PROSPECTUS SUMMARY.................................. 1
The Company and the Operating Partnership........... 1
Recent Developments................................. 3
Risk Factors........................................ 3
The Offering........................................ 5
Organization........................................ 6
Business and Operating Strategies................... 7
Summary Financial and Other Data.................... 8
RISK FACTORS........................................ 11
General Real Estate Risks........................... 11
Uncontrollable Factors Affecting Performance and
Value............................................ 11
Concentration of Properties in California.......... 11
Concentration of Properties in Industrial and
Retail Sectors................................... 11
Illiquidity of Real Estate Investments............. 11
Renewal of Leases and Reletting of Space........... 12
Uninsured Loss..................................... 12
Uninsured Losses from Seismic Activity............. 12
Impact on Control Over and Liabilities With Respect
to Properties Owned Through Partnerships and
Joint Ventures................................... 12
Possible Inability to Consummate Acquisitions on
Advantageous Terms............................... 13
Possible Inability to Complete Renovation and
Development on Advantageous Terms................ 13
Limited Restrictions on Total Indebtedness and
Changes of Control................................. 14
Debt Financing...................................... 14
Debt Financing and Existing Debt Maturities........ 14
Impact of Rising Interest Rates and Variable Rate
Debt............................................. 15
Possible Impact of Defaults on Cross-Collateralized
and Cross-Defaulted Debt......................... 15
Ranking of the Notes................................ 15
Optional Redemption of the 2008 Notes or the 2018
Notes.............................................. 16
Contingent or Unknown Liabilities................... 16
Conflicts of Interest............................... 17
Continued Involvement of Executive Officers in
Other Real Estate Activities and Investments..... 17
Conflicts of Interest in Connection with Properties
Owned or Controlled by Executive Officers and
Directors........................................ 17
Conflicts Relating to the Operating Partnership.... 18
Influence of Directors, Executive Officers and
Significant Stockholders......................... 18
Failure to Enforce Terms of Certain Agreements..... 19
Conflicts Relating to Use of Proceeds.............. 19
AMB Investment Management........................... 19
Adverse Consequences of Lack of Control Over the
Business of AMB Investment Management............ 19
Uncertainty of AMB Investment Management
Operations....................................... 19
Government Regulations.............................. 20
Cost of Compliance with Americans
with Disabilities Act............................ 20
Environmental Matters.............................. 20
Other Regulations.................................. 21
United States Federal Income Tax Risk............... 21
Absence of Market for the Notes..................... 21
THE COMPANY AND THE OPERATING PARTNERSHIP........... 22
General............................................. 22
Recent Developments................................. 22
BUSINESS AND OPERATING STRATEGIES................... 24
National Property Company........................... 24
Two Complementary Property Types.................... 24
Select Market Focus................................. 24
</TABLE>
<TABLE>
<CAPTION>
PAGE
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<S> <C>
Property Management................................. 25
Disciplined Investment Process...................... 25
Renovation, Expansion and Development............... 26
Financing Strategy.................................. 26
AMB Investment Management........................... 27
STRATEGIES FOR GROWTH............................... 28
Growth Through Operations........................... 28
Growth Through Acquisitions......................... 28
Growth Through Renovation, Expansion and
Development........................................ 28
USE OF PROCEEDS..................................... 29
PRICE RANGE OF COMMON STOCK AND DISTRIBUTION
HISTORY............................................ 29
CAPITALIZATION...................................... 30
SELECTED FINANCIAL AND OTHER DATA................... 31
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS................ 36
General............................................. 36
Company and Predecessor Results of Operations....... 36
Operating Partnership and AMB Contributed Properties
Results of Operations.............................. 37
Liquidity and Capital Resources..................... 40
Inflation........................................... 41
Year 2000 Compliance................................ 41
Funds From Operations............................... 41
Property Operating Income........................... 43
BUSINESS AND PROPERTIES............................. 44
Industrial Properties............................... 44
Industrial Property Summary......................... 46
Industrial Property Tenant Information.............. 50
Industrial Property Lease Expirations............... 51
Retail Properties................................... 52
Retail Property Summary............................. 55
Retail Property Tenant Information.................. 58
Retail Property Lease Expirations................... 59
Historical Tenant Retention Rates and Rent
Increases.......................................... 60
Recurring Tenant Improvements and Leasing
Commissions........................................ 60
Occupancy and Base Rent............................. 60
Renovation, Expansion and Development Projects In
Progress........................................... 61
Properties Held Through Joint Ventures, Limited
Liability Companies and Partnerships............... 61
Debt Financing...................................... 62
Insurance........................................... 66
Government Regulations.............................. 67
Management and Employees............................ 68
Legal Proceedings................................... 68
POLICIES WITH RESPECT TO CERTAIN ACTIVITIES......... 69
Investment Policies................................. 69
Financing Policies.................................. 70
Lending Policies.................................... 70
Conflict of Interest Policies....................... 70
Policies with Respect to Other Activities........... 71
Policies with Respect to Investment Advisory
Services........................................... 71
Other Policies...................................... 71
MANAGEMENT.......................................... 73
Committees of the Board of Directors................ 76
Compensation of the Board of Directors.............. 77
Executive Compensation.............................. 77
Option Grants in Last Fiscal Year................... 78
Aggregate Option Exercises in Last Fiscal Year and
Fiscal Year-End Option Values...................... 78
Employment Agreements............................... 78
</TABLE>
i
<PAGE> 6
<TABLE>
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PAGE
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Stock Incentive Plan................................ 79
401(k) Plan......................................... 82
Limitation of Directors' and Officers' Liability.... 82
Indemnification Agreements.......................... 82
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS...... 84
Formation Transactions.............................. 84
Other Related Transactions.......................... 84
Conflicts of Interest............................... 85
PRINCIPAL STOCKHOLDERS.............................. 87
DESCRIPTION OF NOTES................................ 88
General............................................. 88
Denominations, Maturity, Interest, Registration and
Transfer........................................... 89
Guarantees.......................................... 90
Redemption of the 2008 Notes and the 2018 Notes at
the Option of the Operating Partnership............ 90
Call Option and Mandatory Put with Respect to the
REPS............................................... 92
Coupon Reset Process if REPS are Called............. 93
Merger, Consolidation or Sale....................... 95
Certain Covenants................................... 95
Definitions......................................... 97
Events of Default, Notice and Waiver................ 98
Modification of the Indenture....................... 100
Discharge, Defeasance and Covenant Defeasance....... 101
Global Notes........................................ 103
CERTAIN FEDERAL INCOME TAX CONSIDERATIONS RELATING
TO THE REPS........................................ 106
Treatment of REPS................................... 106
Backup Withholding.................................. 107
DESCRIPTION OF CERTAIN PROVISIONS OF THE PARTNERSHIP
AGREEMENT OF THE OPERATING PARTNERSHIP............. 108
General............................................. 108
Purpose, Business and Management.................... 108
Engaging in Other Businesses; Conflicts of
Interest........................................... 109
Reimbursement of the Company; Transactions with the
Company and its Affiliates......................... 109
</TABLE>
<TABLE>
<CAPTION>
PAGE
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<S> <C>
Exculpation and Indemnification of the Company...... 110
Sales of Assets; Liquidation........................ 110
Capital Contribution................................ 111
Removal of the General Partner; Transferability of
the Company's Interests; Treatment of Units in
Significant Transactions........................... 111
Redemption/Exchange Rights.......................... 112
Performance Units................................... 112
Registration Rights................................. 113
Duties and Conflicts................................ 113
Meetings; Voting.................................... 113
Amendment of the Partnership Agreement.............. 113
Books and Reports................................... 114
Term................................................ 114
CERTAIN PROVISIONS OF MARYLAND LAW AND OF THE
COMPANY'S ARTICLES OF INCORPORATION AND BYLAWS..... 115
Board of Directors.................................. 115
Removal of Directors................................ 115
Opt Out of Business Combinations and Control Share
Acquisition Statutes............................... 115
Amendment to the Articles of Incorporation and
Bylaws............................................. 115
Meetings of Stockholders............................ 116
Advance Notice of Director Nominations and New
Business........................................... 116
Dissolution of the Company.......................... 116
Limitation of Directors' and Officers' Liability.... 116
DESCRIPTION OF CAPITAL STOCK........................ 118
General............................................. 118
Common Stock........................................ 118
Preferred Stock..................................... 119
UNDERWRITERS........................................ 120
LEGAL MATTERS....................................... 121
EXPERTS............................................. 121
AVAILABLE INFORMATION............................... 121
GLOSSARY............................................ 122
INDEX TO FINANCIAL INFORMATION...................... F-1
</TABLE>
AMB and its logo are registered service marks of the Company. All other
trademarks and service marks appearing in this Prospectus are the property of
their respective holders.
In addition to historical information, the information included in this
Prospectus contains forward-looking statements, such as those pertaining to the
Company's (including for purposes of this paragraph, certain of its other
subsidiaries') capital resources, portfolio performance and results of
operations. Likewise, the pro forma financial statements and other pro forma
information included in this Prospectus also contain certain such
forward-looking statements. In addition, all statements regarding anticipated
growth in the Company's funds from operations and anticipated market conditions,
demographics and results of operations are forward-looking statements.
Forward-looking statements involve numerous risks and uncertainties and should
not be relied upon as predictions of future events, and there can be no
assurance that the events or circumstances reflected in such forward-looking
statements will be achieved or occur. Certain such forward-looking statements
can be identified by the use of forward-looking terminology such as "believes,"
"expects," "may," "will," "should," "seeks," "approximately," "intends,"
"plans," "pro forma," "estimates," or "anticipates" or the negative thereof or
other variations thereof or comparable terminology, or by discussions of
strategy, plans or intentions. Such forward-looking statements are necessarily
dependent on assumptions, data or methods that may be incorrect or imprecise and
they may be incapable of being realized. The following factors, among others,
could cause actual results and future events to differ materially from those set
forth or contemplated in the forward-looking statements: defaults or non-renewal
of leases, increased interest rates and operating costs, failure to obtain
necessary outside financing, difficulties in identifying properties to acquire
and in effecting acquisitions, failure to successfully integrate acquired
properties and operations, risks and uncertainties affecting property
development and construction (including, without limitation, construction
delays, cost overruns, inability to obtain necessary permits and public
opposition to such activities), failure to qualify as a real estate investment
trust (a "REIT") under the Internal Revenue Code of 1986, as amended (the
"Code"), environmental uncertainties, risks related to natural disasters,
financial market fluctuations, changes in real estate and zoning laws and
increases in real property tax rates. The success of the Company also depends
upon economic trends generally, including interest rates, income tax laws,
governmental regulation, legislation, population changes and those risk factors
discussed in the section entitled "Risk Factors." Readers are cautioned not to
place undue reliance on forward-looking statements, which reflect management's
analysis only.
ii
<PAGE> 7
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by the more detailed
information and financial data, including the financial statements and notes
thereto, set forth elsewhere in this Prospectus. Unless the context otherwise
requires, the "Company" shall include its subsidiaries, including the Operating
Partnership and with respect to the period prior to the IPO, the AMB
Predecessors (as defined). The statements herein regarding the Company's tax
status as a REIT are based upon the Company's belief that it has satisfied and
continues to satisfy the requirements for qualification as a REIT set forth in
the Code (as defined). Capitalized terms shall have the meanings set forth
herein and in the Glossary beginning on page 122.
THE COMPANY AND THE OPERATING PARTNERSHIP
AMB Property, L.P. was organized in November 1997 and commenced operations
in connection with the completion of the initial public offering of AMB Property
Corporation, its sole general partner (the "IPO") and the consummation of the
Formation Transactions (as defined) in November 1997. AMB Property Corporation
is one of the largest publicly-traded real estate companies in the United
States. The Company owns 159 Properties, comprised of 122 industrial properties
(the "Industrial Properties") and 37 retail properties (the "Retail Properties")
located in 28 markets throughout the United States (including four Industrial
Properties acquired since March 31, 1998). The Industrial Properties (comprising
427 buildings), principally warehouse distribution properties, encompass
approximately 45.3 million rentable square feet and, as of March 31, 1998, were
94.6% leased to over 1,000 tenants. The Retail Properties, principally
grocer-anchored community shopping centers, encompass approximately 6.8 million
rentable square feet and, as of the same date, were 94.6% leased to over 900
tenants. See "Business and Properties."
The Operating Partnership conducts substantially all of the Company's
activities and owns substantially all of the economic interests in the
Properties. As of March 31, 1998, the Company owned an approximate 95.9% general
partner interest in the Operating Partnership, with the remaining 4.1% limited
partner interest owned by nonaffiliated investors. As the sole general partner
of the Operating Partnership, the Company has control over the management of the
Operating Partnership and over each of the 116 Properties (comprising
approximately 36.9 million rentable square feet) owned directly by the Operating
Partnership. The Operating Partnership owns 99% of the economic interests in the
remaining 43 Properties (comprising approximately 16.2 million rentable square
feet) through AMB Property II, L.P., a Delaware limited partnership, and Long
Gate LLC, a Delaware limited liability company, and the Company (through a
wholly owned subsidiary) owns a 1% interest.
The Company is engaged in the business of acquiring and operating
industrial properties and community shopping centers in target markets
nationwide. The Company is led by Mr. Hamid R. Moghadam, its Chief Executive
Officer and one of the three founders of the Company. Messrs. Douglas D. Abbey
and T. Robert Burke, the other two founders, also play active roles in the
Company's operations as the Chairman of its Investment Committee and the
Chairman of its Board of Directors, respectively. The Company's 10 executive
officers have an average of 22 years of experience in the real estate industry
and have worked together for an average of eight years building the AMB real
estate business. The Company employs 123 individuals, 99 of whom are located in
its San Francisco headquarters and 24 in its Boston office. The Company operates
as a self-administered and self-managed real estate company and expects that it
has qualified and that it will continue to qualify as a REIT for federal and
state income tax purposes beginning with the year ended December 31, 1997.
The following table sets forth certain summary information with respect to
the Properties owned as of March 31, 1998.
INDUSTRIAL PROPERTIES
<TABLE>
<CAPTION>
PERCENTAGE
OF TOTAL PERCENTAGE
NUMBER RENTABLE INDUSTRIAL ANNUALIZED OF
OF SQUARE SQUARE PERCENTAGE BASE RENT ANNUALIZED
REGION BUILDINGS FEET FEET LEASED (000S)(1) BASE RENT
------ --------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Eastern..................................... 68 8,729,347 19.9% 92.7% $ 33,435 18.7%
Midwestern.................................. 92 11,199,515 25.5 93.0 39,075 21.9
Southern.................................... 114 11,262,975 25.6 95.2 45,096 25.3
Western..................................... 141 12,772,141 29.0 96.8 60,809 34.1
--- ---------- ----- ---- -------- -----
Total/Weighted Average...................... 415 43,963,978 100.0% 94.6% $178,415 100.0%
=== ========== ===== ==== ======== =====
</TABLE>
1
<PAGE> 8
RETAIL PROPERTIES
<TABLE>
<CAPTION>
PERCENTAGE
OF TOTAL PERCENTAGE
NUMBER RENTABLE RETAIL ANNUALIZED OF
OF SQUARE SQUARE PERCENTAGE BASE RENT ANNUALIZED
REGION CENTERS FEET FEET LEASED (000S)(1) BASE RENT
------ ------- --------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Eastern....................................... 4 1,272,968 18.6% 98.1% $14,381 18.8%
Midwestern.................................... 4 710,833 10.4 99.0 7,099 9.3
Southern...................................... 12 1,957,051 28.6 88.8 19,143 25.1
Western....................................... 17 2,907,986 42.4 95.9 35,666 46.8
-- --------- ----- ---- ------- -----
Total/Weighted Average........................ 37 6,848,838 100.0% 94.6% $76,289 100.0%
== ========= ===== ==== ======= =====
</TABLE>
TOTAL PROPERTIES
<TABLE>
<CAPTION>
PERCENTAGE PERCENTAGE
NUMBER RENTABLE OF TOTAL ANNUALIZED OF
OF SQUARE SQUARE PERCENTAGE BASE RENT ANNUALIZED
REGION BUILDINGS FEET FEET LEASED (000S)(1) BASE RENT
------ --------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Eastern..................................... 72 10,002,315 19.7% 93.3% $ 47,816 18.8%
Midwestern.................................. 96 11,910,348 23.4 93.4 46,174 18.1
Southern.................................... 126 13,220,026 26.0 94.3 64,239 25.2
Western..................................... 158 15,680,127 30.9 96.7 96,475 37.9
--- ---------- ----- ---- -------- -----
Total/Weighted Average...................... 452 50,812,816 100.0% 94.6% $254,704 100.0%
=== ========== ===== ==== ======== =====
</TABLE>
- ---------------
(1) Annualized Base Rent means the monthly contractual amount under existing
leases at March 31, 1998, multiplied by 12. This amount excludes expense
reimbursements and rental abatements.
2
<PAGE> 9
RECENT DEVELOPMENTS
Acquisitions. During the period from April 1, 1998 to May 8, 1998, the
Company acquired operating properties with an aggregate purchase price of $56.7
million. The properties acquired are comprised of four Industrial Properties
representing 12 buildings and 1.3 million rentable square feet.
Quarterly Distributions. On March 6, 1998, the Board of Directors of the
Company in its capacity as general partner of the Operating Partnership,
declared a distribution of $0.3425 per partnership unit, payable April 3, 1998
to partners of record as of March 18, 1998. In addition, the Company's Board of
Directors declared a distribution of $0.3425 per share of the Company's common
stock, par value $.01 per share (the "Common Stock"), payable April 3, 1998 to
stockholders and unitholders of record as of March 18, 1998.
Investment-Grade Credit Ratings. The Company recently received credit
ratings for its unsecured debt of Baa1 from Moody's Investors' Service, BBB from
Standard & Poor's Corporation and BBB+ from Duff & Phelps Credit Rating Co. As a
result of the receipt of the investment-grade credit ratings, the interest rate
on the Operating Partnership's $500 million unsecured revolving credit facility
("Credit Facility") was reduced by 20 basis points to LIBOR plus 90 basis
points.
Alliance with Trammell Crow Company. The Company has formed a strategic
alliance with Trammell Crow Company to develop and manage industrial properties
in targeted distribution markets nationwide. The alliance will focus on
multi-tenant freight forwarding facilities adjacent to major airports and
industrial submarkets of targeted metropolitan areas such as Chicago, Seattle
and Northern New Jersey.
RISK FACTORS
An investment in the Notes involves various material risks. Prospective
investors should carefully consider the following risk factors, in addition to
the other information set forth in this Prospectus, before making an investment
decision regarding the Notes offered hereby. Each of these matters could have
adverse consequences to the Operating Partnership or the Company. Such risks
include, among others:
- the need to renew leases or re-lease space upon lease expirations and to
pay renovation and re-leasing costs in connection therewith, the effect
of economic and other conditions on property cash flows and values, the
ability of tenants to make lease payments, the ability of a property to
generate revenue sufficient to meet operating expenses (including future
debt service), and the illiquidity of real estate investments which
could have an adverse effect on the Operating Partnership's and the
Company's financial condition, results of operations and cash flow and,
consequently, their ability to service debt, including the Notes;
- limited indenture provisions limiting the total indebtedness that the
Operating Partnership may incur and protecting noteholders in the event
of a change in control, reorganization, restructuring, merger or similar
transaction involving the Operating Partnership;
- the ability of the Board of Directors to change the Operating
Partnership's and the Company's growth and investment strategy and their
financing, distribution and operating policies without a vote of the
Company's stockholders and, with respect to certain matters, the
Noteholders;
- the possible failure of investments to perform in accordance with the
Operating Partnership's and the Company's expectations, inaccuracy of
estimates of costs of improvements to bring an acquired property up to
standards, competition for attractive investment opportunities and other
general risks associated with any real estate investment which could
have an adverse effect on the Operating Partnership's and the Company's
financial condition, results of operations and cash flow and,
consequently, their ability to service debt, including the Notes;
- although the Notes will be direct, senior obligations of the Operating
Partnership, the Notes will be effectively subordinated to the mortgages
and other secured indebtedness of the Operating Partnership and all
outstanding liabilities of the Operating Partnership's subsidiaries. In
addition, the Guarantees will be subordinated to all of the mortgages
and other secured indebtedness of each Guarantor, and all of the
outstanding liabilities of its respective subsidiaries; on a pro forma
basis giving effect to the Offering and the application of the net
proceeds therefrom, the total indebtedness of the Operating Partnership
and its subsidiaries as of March 31, 1998 would have been approximately
$980.0 million, of which $610.1 million would have been secured. As of
March 31, 1998, the Company had no outstanding indebtedness (excluding
the Company's guaranty of the Credit Facility) other than indebtedness
of the Operating Partnership and its subsidiaries. Subject to certain
limitations, the Operating Partnership, the Company and their
subsidiaries may incur additional indebtedness, including, but not
limited to, mortgage loans, borrowings under the Credit Facility and
other secured indebtedness;
3
<PAGE> 10
- the possibility of uninsured losses or losses in excess of insured
limits relating to certain occurrences, including fire, rental loss and
seismic activity which could have an adverse effect on the Operating
Partnership's and the Company's financial condition, results of
operations and cash flow and, consequently, their ability to service
debt, including the Notes;
- in connection with certain of the Operating Partnership's and the
Company's partnerships and joint ventures, the possibility that a
partner or co-venturer may (i) become bankrupt while the Operating
Partnership and the Company and any other remaining partners or joint
venturers remain liable for the liabilities of such partnerships or
joint ventures, (ii) have economic interests inconsistent with those of
the Operating Partnership and the Company or (iii) cause the sale or
refinancing of its interest at a disadvantageous time or on
disadvantageous terms, which could adversely affect the return realized
by the Operating Partnership and the Company on such investments;
- the inability to refinance outstanding indebtedness upon maturity or, in
the case of the REPS, upon exercise of the Mandatory Put, or refinance
such indebtedness on favorable terms, the risks of rising interest rates
in connection with the Operating Partnership's unsecured line of credit
and other variable-rate borrowings and the ability of the Company to
incur more debt without Noteholder approval, thereby increasing its debt
service obligations, which could adversely affect the Company's cash
flow and consequently its ability to satisfy its obligation under its
Guaranty; and
- conflicts of interest in connection with the operations of the Operating
Partnership and the Company including (i) the influence of certain
directors, officers and significant stockholders on the management and
operation of the Operating Partnership and the Company, and as
stockholders, on the outcome of matters submitted to a vote of the
stockholders, (ii) the potential failure to enforce the terms of
agreements, including for the indemnification by certain of the
Executive Officers and other participants in the Formation Transactions
for breaches or representations and warranties relating to the Formation
Transactions, each of which could result in the Operating Partnership
and the Company taking action which is not in the interest of all
holders of the Notes and (iii) the continued involvement of certain of
the Executive Officers and directors in other real estate activities and
investments, including 11 retail development projects in the U.S., a low
income housing apartment, a 75% interest in an office building and less
than 1% partnership interests in other office buildings and residential
developments, which could divert management's attention from the
day-to-day operations of the Operating Partnership and Company;
- possible conflicts of interest imposed by the fiduciary obligations of
the Company to the limited partners of the Operating Partnership, in its
capacity as the general partner of the Operating Partnership, the
requirement for the limited partners to approve certain amendments
affecting their rights and the ability of the limited partners to
approve certain transactions that affect all stockholders of the
Company, which could result in the Company taking action which is not in
the interest of all holders of the Notes;
- the potential liability of the Operating Partnership and the Company for
environmental matters and the costs of compliance with certain
government regulations which could have an adverse effect on the
Operating Partnership's and the Company's financial condition, results
of operations and cash flow and, consequently, their ability to service
debt, including the Notes;
- possible adverse consequences of a lack of control over the business of
AMB Investment Management and the uncertainty of AMB Investment
Management operations;
- the possibility that the Internal Revenue Service could successfully
assert a Federal income tax treatment for the REPS different from the
manner in which the Operating Partnership intends to treat the REPS; and
- the lack of an established trading market for the Notes.
4
<PAGE> 11
THE OFFERING
<TABLE>
<S> <C>
Securities Offered.........$ aggregate principal amount of % Notes
due 2008, $ aggregate principal amount of
% Notes due 2018 and $ aggregate
principal amount of % Reset Put Securities due
2015 -- Putable/Callable 2005.
</TABLE>
<TABLE>
<S> <C>
Maturity................... , 2008 with respect to the
2008 Notes, , 2018 with
respect to the 2018 Notes and , 2015 with
respect to the REPS. For persons holding the REPS (or
an interest therein) on , 2005 (the
"Coupon Reset Date") the effect of the operation of
the Call Option and the Mandatory Put will be that
such holders will be entitled to receive, and will be
required to accept, 100% of the principal amount of
such REPS (plus accrued interest) on the Coupon Reset
Date.
Interest Payment Dates.....Interest on the Notes will be payable semiannually on
each and , commencing
, 1998.
Ranking....................The Notes will be senior unsecured obligations of the
Operating Partnership and will rank equally with the
Operating Partnership's other unsecured and
unsubordinated indebtedness. However, the Notes are
effectively subordinated to mortgages and other
secured indebtedness of the Operating Partnership. See
"Risk Factors -- Ranking of the Notes."
</TABLE>
<TABLE>
<S> <C>
Guarantees.................The Notes will be fully and unconditionally
guaranteed, jointly and severally (the "Guarantees")
on an unsecured basis by the Guarantors (as defined
below) except as may be limited to the maximum amount
permitted under applicable federal or state law. The
obligations of each Guarantor under its Guaranty will
rank pari passu with all of its unsecured and
unsubordinated indebtedness and will be effectively
subordinated to all of its mortgages and other secured
indebtedness and all outstanding liabilities of its
subsidiaries. In addition, the Guarantees will be
effectively subordinated to all of the mortgages and
other secured indebtedness of the Guarantors. See
"Risk Factors -- Ranking of the Notes."
</TABLE>
<TABLE>
<S> <C>
Guarantors.................AMB Property Corporation, AMB Property II, L.P., Long
Gate LLC and each other Subsidiary of the Operating
Partnership, including any such future Subsidiary,
that guarantees the Operating Partnership's
obligations under any Credit Agreement.
</TABLE>
<TABLE>
<S> <C>
Optional Redemption of the
2008 Notes and the 2018
Notes....................The 2008 Notes and the 2018 Notes are redeemable at
any time at the option of the Operating Partnership,
in whole or in part, at a redemption price equal to
the greater of (i) 100% of the principal amount of the
2008 Notes and the 2018 Notes being redeemed and (ii)
the sum of the present values of the remaining
scheduled payments of principal and interest thereon
(exclusive of interest accrued to such redemption
date) discounted to such redemption date on a
semiannual basis (assuming a 360-day year consisting
of twelve 30-day months) at the Treasury Rate (as
defined) plus basis points, plus, in
either case, accrued and unpaid interest on the
principal amount being redeemed to such redemption
date. See "Description of Notes -- Redemption of the
2008 Notes and the 2018 Notes at the Option of the
Operating Partnership."
Call Option................The REPS may be called by the Callholder prior to
maturity, as described under "Description of
Notes -- Call Option and Mandatory Put with Respect to
the REPS."
</TABLE>
<TABLE>
<S> <C>
Mandatory Put..............The REPS will be subject to repayment by the Operating
Partnership prior to maturity if the Callholder elects
not to purchase the REPS pursuant to the Call Option
as described under "Description of Notes -- Call
Option and Mandatory Put with Respect to the REPS."
Taken together, the effect of the Call Option and the
Mandatory Put will be that the holders of the REPS
will be repaid 100% of the principal amount of the
REPS on the Coupon Reset Date.
</TABLE>
5
<PAGE> 12
<TABLE>
<S> <C>
Callholder.................Morgan Stanley & Co. International Limited.
</TABLE>
<TABLE>
<S> <C>
Use of Proceeds............The net proceeds to the Operating Partnership from the
sale of the Notes offered hereby will be used to repay
approximately $348.8 million of borrowings outstanding
under the Credit Facility incurred to fund property
acquisitions and for general purposes.
</TABLE>
<TABLE>
<S> <C>
Covenants..................The Indenture will restrict, among other things, the
Operating Partnership's ability to incur additional
indebtedness and to merge or consolidate with any
other person or sell, assign, transfer, lease, convey
or otherwise dispose of substantially all of the
assets of the Operating Partnership. See "Description
of Notes -- Certain Covenants."
</TABLE>
ORGANIZATION
The Company, the Operating Partnership and their subsidiaries were
organized in a manner to facilitate the Formation Transactions and the IPO. The
Company is the sole general partner of the Operating Partnership. The other
holders of Units in the Operating Partnership are limited partners. The
following diagram illustrates the structure of the Company, the Operating
Partnership and their subsidiaries:
[CHART]
- ---------------
(1) AMB Investment Management conducts its business through the Investment
Management Partnership, of which it is the sole general partner and owns the
entire capital interest. The executive officers own a profits interest in
the Investment Management Partnership relating to the allocation of a
portion of the incentive fees with respect to assets managed by AMB prior to
the IPO.
(2) Includes properties owned on a joint venture basis through certain limited
partnerships and limited liability companies in which the Operating
Partnership owns at least a 50% interest (none of which are or will be
guarantors of the Notes). See "Business and Properties -- Properties Held
Through Joint Ventures, Limited Liability Companies and Partnerships" for a
list of such entities.
(3) Comprised of AMB Property II, L.P. and Long Gate LLC which, for local law
purposes, own Properties in certain states. The ownership of such Properties
through such entities does not materially affect the Operating Partnership's
and the Company's overall ownership of the interests in the Properties.
6
<PAGE> 13
The principal executive offices of the Operating Partnership, AMB Property
Corporation, AMB Property II, L.P. and Long Gate LLC are located at 505
Montgomery Street, San Francisco, California 94111, and their telephone number
is (415) 394-9000. The Operating Partnership and the Company also maintain a
regional office in Boston, Massachusetts.
BUSINESS AND OPERATING STRATEGIES
The Company focuses its investment activities in industrial hub
distribution markets and retail trade areas throughout the U.S. where
opportunities exist to acquire and develop additional properties on an
advantageous basis. The Company believes that the industrial property sector is
well-positioned to benefit from strong market fundamentals and growth in
international trade, and further believes that the retail property sector will
benefit from limited new construction in "in-fill" locations and from projected
growth in personal income and retail sales levels (in-fill locations are those
typified by significant population densities and low availability of land
resulting in limited opportunities for new construction of competitive
properties). The Company seeks to capitalize on these current conditions in the
industrial and retail property sectors by implementing the following business
and operating strategies:
- Financing Strategy. The Company intends to operate with a Debt-to-Total
Market Capitalization Ratio generally of less than 45% and plans to
continue to structure its balance sheet in order to maintain an
investment grade debt rating. Upon consummation of the Offering, the
Operating Partnership's Debt-to-Total Market Capitalization Ratio as of
March 31, 1998 on a pro forma basis would have been approximately 31.2%
(29.9% on an historical basis).
- National Property Company. The Company believes that its national
strategy enables it to increase or decrease investments in certain
regions to take advantage of the relative strengths and attractive
investment opportunities in different real estate markets. Through its
presence in markets throughout the U.S., the Company has developed
expertise in leasing, expense management, tenant retention strategies
and property design and configuration.
- Two Complementary Property Types. Management believes that its dual
property strategy provides significant opportunities to allocate capital
and organizational resources and offers the Company an optimal
combination of growth, strong current income and stability through
market cycles.
- Select Market Focus. The Company focuses on acquiring, redeveloping and
operating properties in in-fill locations. As the strength of these
markets continues to grow and the demand for well-located properties
increases, the Company believes that it will benefit from the resulting
upward pressure on rents.
- Research-Driven Market Selection. The Company's decisions regarding the
deployment of capital are experience- and research-driven, with
investments based on thorough qualitative and quantitative research and
analysis of local markets. The Company employs a dedicated research
department using proprietary analyses, databases and systems.
- Property Management. The Company actively manages the Properties through
its experienced staff of regional managers, each of whom has broad
responsibilities for the Properties they manage. The Company typically
outsources property management to a select group of third-party local
managers with whom the Company has established strong relationships.
Management believes that industrial and retail property types do not
typically require on-site property managers and that by utilizing
third-party property managers, the Company is better able to service its
customers and more efficiently manage its costs.
- Disciplined Investment Process. The Company has established a
disciplined approach to the investment decision-making process through
operating divisions that are subject to the overall policy direction of
its Investment Committee. The Company has also established efficient and
effective proprietary systems and procedures to manage and track a high
volume of acquisition proposals and transactions.
- Renovation, Expansion and Development. Management believes that
value-added renovation and expansion of properties and development of
well-located, high-quality industrial properties and community shopping
centers should continue to provide the Company with attractive
opportunities for increased cash flow and a higher risk-adjusted rate of
return than may be obtained from the purchase of stabilized properties.
7
<PAGE> 14
SUMMARY FINANCIAL AND OTHER DATA
The following table sets forth summary financial and other data on an
historical basis for the Operating Partnership for the period from November 26,
1997 to December 31, 1997 and for the three months ended March 31, 1998 and for
the Properties contributed to the Operating Partnership in connection with the
Formation Transactions (the "AMB Contributed Properties") for the years ended
December 31, 1993, 1994, 1995, 1996, the period from January 1, 1997 to November
25, 1997 and the three months ended March 31, 1997, and on an as adjusted basis
for the Operating Partnership for the year ended December 31, 1997 (giving
effect to the Formation Transactions (as defined), the IPO and certain property
acquisitions and dispositions in 1997). Additionally, the table sets forth
summary financial and other data for the Operating Partnership for the year
ended December 31, 1997 and for the three months ended March 31, 1998 on a pro
forma basis (giving effect to the Formation Transactions, the IPO, certain
property acquisitions and dispositions in 1997, the property acquisitions in
1998 and the Offering and the application of the net proceeds therefrom, as if
such transactions had occurred on January 1, 1997). The historical financial
information contained in the tables should be read in conjunction with
"Management's Discussion and Analysis of Financial Condition and Results of
Operations," the Consolidated Financial Statements and accompanying Notes
thereto and the financial schedules included elsewhere in this Prospectus.
In the opinion of management, the as adjusted and pro forma condensed
financial information provides for all adjustments necessary to reflect the
adjustments and transactions described above. The as adjusted and pro forma
information is unaudited and is not necessarily indicative of the results that
would have occurred if the transactions and adjustments reflected therein had
been consummated in the period or on the date presented, or on any particular
date in the future, nor does it purport to represent the financial position,
results of operations or changes in cash flows for future periods.
8
<PAGE> 15
OPERATING PARTNERSHIP AND AMB CONTRIBUTED PROPERTIES
SUMMARY FINANCIAL AND OTHER DATA
(IN THOUSANDS EXCEPT UNIT DATA, PERCENTAGES AND NUMBER OF PROPERTIES)
<TABLE>
<CAPTION>
AS OF AND FOR THE YEARS ENDED DECEMBER 31,
-----------------------------------------------------------------------------------------------
OPERATING PARTNERSHIP
------------------------------------
HISTORICAL AS ADJUSTED PRO FORMA
AMB CONTRIBUTED PROPERTIES(1) (2) (3) (4)
-------------------------------------------------------- ---------- ----------- ---------
1993 1994 1995 1996 1997 1997 1997 1997
-------- -------- ---------- ---------- -------- ---------- ----------- ---------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
OPERATING DATA:
Total revenues........... $ 24,398 $ 51,682 $ 108,249 $ 167,953 $208,608 $ 27,110 $ 284,674 $325,293
Income from operations
before minority
interests.............. 6,871 13,753 32,519 54,865 58,068 9,291 103,903 107,345
Net income............... 6,871 13,194 32,531 54,400 57,184 9,174 102,606 103,274
Net income per unit(5):
Basic.................. $ 0.10 $ 1.16 $ 1.15
Diluted................ 0.10 1.16 1.15
Distributions per unit... 0.13 1.37 1.37
OTHER DATA:
EBITDA(6)................ $ 195,218 $225,556
Funds from
Operations(7).......... 147,409 153,900
FFO per diluted
unit(7)................ $ 1.66 $ 1.71
Cash flows provided
by(used in):
Operating activities... 131,621 138,112
Investing activities... (607,768) (842,337)
Financing activities... 553,199 571,614
Ratio of earnings to
fixed charges(8)....... 3.1x 2.5x
Book debt service
coverage ratio(9)...... 4.3x 3.4x
Cash debt service
coverage ratio(10)..... 3.8x 3.2x
BALANCE SHEET DATA:
Investments in real
estate at cost......... $323,230 $666,672 $1,018,681 $1,616,091 $2,442,999
Total assets............. 326,586 721,131 1,117,181 1,622,559 2,506,255
Secured debt(11)......... 100,496 201,959 254,067 522,634 535,652
Unsecured notes.......... -- -- -- -- --
Unsecured credit
facility............... -- -- -- 25,500 150,000
Partner's capital........ 208,043 490,111 837,199 1,027,601 1,717,398
PROPERTY DATA:
INDUSTRIAL PROPERTIES
Total rentable square
footage of properties
at end of period....... 5,638 13,364 21,598 29,609 37,329
Number of properties at
end of period.......... 12 28 44 60 95
Occupancy rate at end of
period................. 97.4% 96.9% 97.3% 97.2% 95.7%
RETAIL PROPERTIES
Total rentable square
footage of properties
at end of period....... 1,074 2,422 3,299 5,282 6,216
Number of properties at
end of period.......... 9 14 19 30 33
Occupancy rate at end of
period................. 96.5% 93.7% 92.4% 92.4% 96.1%
<CAPTION>
AS OF AND FOR THE
THREE MONTHS ENDED MARCH 31,
-------------------------------------
AMB OPERATING PARTNERSHIP
CONTRIBUTED -----------------------
PROPERTIES PRO FORMA
(1) HISTORICAL (4)
----------- ---------- ----------
1997 1998 1998
----------- ---------- ----------
<S> <C> <C> <C>
OPERATING DATA:
Total revenues........... $54,749 $ 75,785 $ 85,099
Income from operations
before minority
interests.............. 14,217 29,188 29,973
Net income............... 13,997 28,726 28,898
Net income per unit(5):
Basic.................. $ 0.32 $ 0.32
Diluted................ 0.32 0.32
Distributions per unit... 0.34 0.34
OTHER DATA:
EBITDA(6)................ $ 52,815 $ 60,028
Funds from
Operations(7).......... 40,295 42,341
FFO per diluted
unit(7)................ $ 0.45 $ 0.47
Cash flows provided
by(used in):
Operating activities... 34,820 36,906
Investing activities... (199,520) (49,646)
Financing activities... 153,316 (9,063)
Ratio of earnings to
fixed charges(8)....... 3.1x 2.6x
Book debt service
coverage ratio(9)...... 4.5x 3.7x
Cash debt service
coverage ratio(10)..... 3.8x 3.3x
BALANCE SHEET DATA:
Investments in real
estate at cost......... $2,755,882 $2,812,612
Total assets............. 2,798,190 2,856,120
Secured debt(11)......... 610,111 610,111
Unsecured notes.......... -- 350,000
Unsecured credit
facility............... 312,000 19,930
Partner's capital........ 1,741,601 1,741,601
PROPERTY DATA:
INDUSTRIAL PROPERTIES
Total rentable square
footage of properties
at end of period....... 43,964 45,269
Number of properties at
end of period.......... 118 122
Occupancy rate at end of
period................. 94.6% 94.6%
RETAIL PROPERTIES
Total rentable square
footage of properties
at end of period....... 6,849 6,849
Number of properties at
end of period.......... 37 37
Occupancy rate at end of
period................. 94.6% 94.6%
</TABLE>
- ---------------
(1) Represents the AMB Contributed Properties historical combined financial and
other data for the years ended December 31, 1993, 1994, 1995 and 1996, the
period from January 1, 1997 through November 25, 1997 and the three months
ended March 31, 1997.
(2) For the period from November 26, 1997 to December 31, 1997.
(3) As adjusted financial and other data have been prepared as if the Formation
Transactions, the IPO and certain property acquisitions and dispositions in
1997 had occurred on January 1, 1997.
9
<PAGE> 16
(4) Pro forma financial and other data have been prepared as if the Formation
Transactions, the IPO, certain property acquisitions and dispositions in
1997, the property acquisitions in 1998 and the Offering had occurred on
January 1, 1997.
(5) Historical, as adjusted and pro forma net income per basic unit for the
year ended December 31, 1997 equals the historical, as adjusted and pro
forma net income divided by 88,416,676, 88,416,678 and 89,523,120 units,
respectively. Historical and pro forma net income per basic unit for the
three months ended March 31, 1998 equals the historical and pro forma net
income divided by 88,428,969 and 89,523,120 units, respectively.
Historical, as adjusted and pro forma net income per diluted unit for the
year ended December 31, 1997 equals the historical, as adjusted and pro
forma net income divided by 88,698,719, 88,698,719 and 89,805,163 units,
respectively. Historical and pro forma net income per diluted unit for the
three months ended March 31, 1998 equals the historical and pro forma net
income divided by 88,839,192 units and 89,933,343 units, respectively.
(6) EBITDA is computed as income from operations before disposal of properties
and minority interests plus interest expense, income taxes, depreciation
and amortization. Management believes that in addition to cash flows and
net income, EBITDA is a useful financial performance measure for assessing
the operating performance of an equity REIT because, together with net
income and cash flows, EBITDA provides investors with an additional basis
to evaluate the ability of a REIT to incur and service debt and to fund
acquisitions and other capital expenditures.
(7) FFO, as defined by NAREIT, represents net income (loss) before minority
interests and extraordinary items, adjusted for depreciation on real
property and amortization of tenant improvement costs and lease
commissions, gains (losses) from the disposal of properties and FFO
attributable to minority interests in consolidated joint ventures whose
interests are not convertible into shares of Common Stock. The White Paper
on Funds from Operations approved by the Board of Governors of NAREIT in
March 1995 defines Funds from Operations as net income (loss) (computed in
accordance with GAAP), excluding gains (or losses) from debt restructuring
and sales of properties, plus real estate related depreciation and
amortization. Management considers FFO an appropriate measure of
performance of an equity REIT because it is predicated on cash flow
analyses. The Operating Partnership computes FFO in accordance with
standards established by the White Paper, which may differ from the
methodology for calculating FFO utilized by other REITs and, accordingly,
may not be comparable to such other REITs. FFO should not be considered as
an alternative to net income (determined in accordance with GAAP) as an
indicator of financial performance or to cash flow from operating
activities (determined in accordance with GAAP) as a measure of liquidity,
nor is it indicative of funds available to fund cash needs, including the
ability to make distributions.
<TABLE>
<CAPTION>
FOR THE THREE MONTHS
FOR THE YEAR ENDED ENDED
DECEMBER 31, 1997 MARCH 31, 1998
------------------------- ------------------------
AS ADJUSTED PRO FORMA HISTORICAL PRO FORMA
----------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Income from operations before minority interests............ $ 103,903 $ 107,345 $ 29,188 $ 29,973
Real estate related depreciation and amortization:
Depreciation and amortization........................... 45,886 52,402 11,786 13,812
Furniture, fixtures and equipment depreciation.......... (173) (173) (104) (104)
FFO attributable to minority interests...................... (2,207) (5,674) (575) (1,340)
---------- ---------- ---------- ----------
FFO..................................................... $ 147,409 $ 153,900 $ 40,295 $ 42,341
========== ========== ========== ==========
FFO per diluted unit........................................ $ 1.66 $ 1.71 $ 0.45 $ 0.47
========== ========== ========== ==========
Weighted average units outstanding (diluted)................ 88,698,719 89,805,163 88,839,192 89,933,343
========== ========== ========== ==========
</TABLE>
(8) The ratio of earnings to fixed charges is computed as income from
operations before minority interests plus fixed charges (excluding
capitalized interest) divided by fixed charges. Fixed charges consist of
interest costs (including amortization of debt premiums and discounts and
financing costs), whether capitalized or expensed, and the interest
component of rental expense.
(9) The book debt service coverage ratio is calculated as EBITDA divided by
book interest expense (including amortization of debt premiums and
discounts and financing costs).
(10) The cash debt service coverage ratio is calculated as EBITDA divided by
cash interest costs. Cash interest costs consist of book interest expense
(excluding amortization of debt premiums and discounts and financing costs)
plus capitalized interest.
(11) Secured debt as of December 31, 1997 and March 31, 1998 includes
unamortized debt premiums of approximately $18,286 and $17,542,
respectively. See Notes to Consolidated Financial Statements.
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<PAGE> 17
RISK FACTORS
An investment in the Notes involves various material risks. Prospective
investors should carefully consider the following risk factors in connection
with an investment in the Notes offered hereby.
GENERAL REAL ESTATE RISKS
Uncontrollable Factors Affecting Performance and Value
Real property investments are subject to varying degrees of risk. The
yields available from equity investments in real estate depend on the amount of
income earned and capital appreciation generated by the related properties as
well as the expenses incurred in connection therewith. If the Properties do not
generate income sufficient to meet operating expenses, including debt service
and capital expenditures, the ability to make payments of principal of and
interest on the Notes could be adversely affected. Income from, and the value
of, the Properties may be adversely affected by the general economic climate,
local conditions such as oversupply of industrial or retail space or a reduction
in demand for industrial or retail space in the area, the attractiveness of the
Properties to potential tenants, competition from other industrial and retail
properties, and the ability of the Company to provide adequate maintenance and
insurance and increased operating costs (including insurance premiums, utilities
and real estate taxes). In addition, revenues from properties and real estate
values are also affected by such factors as the cost of compliance with
regulations and the potential for liability under applicable laws, including
changes in tax laws, interest rate levels and the availability of financing. The
Company's income would be adversely affected if a significant number of tenants
were unable to pay rent or if industrial or retail and other space could not be
rented on favorable terms. Certain significant expenditures associated with an
investment in real estate (such as mortgage payments, real estate taxes and
maintenance costs) generally do not decline when circumstances cause a reduction
in income from the investment.
Concentration of Properties in California
As of March 31, 1998, the Properties located in California represented
approximately 24.0% of aggregate square footage and approximately 30.6% of
aggregate Annualized Base Rent. The Company's revenue from, and the value of its
Properties in, California may be affected by a number of factors, including the
local economic climate (which may be adversely impacted by business layoffs or
downsizing, industry slowdowns, changing demographics and other factors) and
local real estate conditions (such as oversupply of or reduced demand for
commercial properties). Therefore, the Company's performance and its ability to
make payments of principal of and interest on the Notes will likely be
dependent, in part, on economic conditions in California. Such Properties are
also subject to possible loss from seismic activity. See "-- Uninsured Losses
from Seismic Activity."
Concentration of Properties in Industrial and Retail Sectors
The Properties are and are likely to continue to be concentrated
predominantly in the industrial and retail commercial real estate sectors, which
as of March 31, 1998 represent 86.5% and 13.5%, respectively, of the Properties'
aggregate rentable square footage. Such concentration may expose the Company to
the risk of downturns in these sectors to a greater extent than if its portfolio
also included other property types.
Illiquidity of Real Estate Investments
Because real estate investments are relatively illiquid, the Operating
Partnership's ability to vary its portfolio promptly in response to economic or
other conditions will be limited. The limitations in the Code and related
regulations on a REIT holding property for sale may affect the Operating
Partnership's ability to sell properties without adversely affecting the
Operating Partnership's ability to make payments of principal of and interest on
the Notes. Any of the foregoing factors or events will impede the ability of the
Operating Partnership to respond to adverse changes in the performance of its
investments and could have an adverse effect on the Operating Partnership's
financial condition and results of operations and its ability to make payments
of principal of and interest on the Notes.
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<PAGE> 18
Renewal of Leases and Reletting of Space
The Operating Partnership will be subject to the risks that leases may not
be renewed, space may not be relet or the terms of renewal or reletting
(including the cost of required renovations) may be less favorable than current
lease terms. Leases on a total of approximately 42.5% of the leased square
footage as of March 31, 1998 in the Properties will expire on or prior to
December 31, 2000, with leases on 12.9% of the leased square footage in the
Properties expiring during the 12 months ending March 31, 1999. In addition,
numerous properties compete with the Properties in attracting tenants to lease
space, particularly with respect to retail properties. The number of competitive
commercial properties in a particular area could have a material adverse effect
on the Operating Partnership's ability to lease space in its Properties or
newly-acquired properties and on the rents charged. If the Operating Partnership
were unable to promptly relet or renew the leases for all or a substantial
portion of this space, if the rental rates upon such renewal or reletting were
significantly lower than expected or if its reserves for these purposes proved
inadequate, the Operating Partnership's cash flow and ability to make payments
of principal of and interest on the Notes could be adversely affected. See
"Business and Properties -- Industrial Properties -- Industrial Property Lease
Expirations -- Portfolio Total" and "-- Retail Properties -- Retail Property
Lease Expirations -- Portfolio Total."
Uninsured Loss
The Operating Partnership carries comprehensive liability, fire, extended
coverage and rental loss insurance covering all of its properties, with policy
specifications and insured limits which the Operating Partnership believes are
adequate and appropriate under the circumstances given relative risk of loss,
the cost of such coverage and industry practice. There are, however, certain
types and magnitudes of losses that are not generally insured because it is not
economically feasible to insure against such losses, such as losses due to riots
or acts of war, or may be insured subject to certain limitations including large
deductibles or co-payments, such as losses due to floods or seismic activity.
See "-- Uninsured Losses from Seismic Activity." Should an uninsured loss or a
loss in excess of insured limits occur with respect to one or more of its
properties, the Operating Partnership could lose its capital invested in such
properties, as well as the anticipated future revenue from such properties and,
in the case of debt which is with recourse to the Operating Partnership, the
Operating Partnership would remain obligated for any mortgage debt or other
financial obligations related to such properties.
Uninsured Losses from Seismic Activity
A number of both the Industrial and Retail Properties are located in areas
that are known to be subject to earthquake activity, including in California
where, as of March 31, 1998, 27 Industrial Properties aggregating 10.4 million
rentable square feet representing 20.4% of the Properties based on aggregate
square footage, and 11 Retail Properties, aggregating 1.8 million rentable
square feet representing 3.6% of the Properties based on aggregate square
footage, are located. The Operating Partnership carries replacement cost
earthquake insurance on all of its Properties located in areas historically
subject to seismic activity, subject to coverage limitations and deductibles
which the Operating Partnership believes are commercially reasonable. Such
insurance coverage also applies to the properties managed by AMB Investment
Management, with a single aggregate policy limit and deductible applicable to
such properties and the Operating Partnership's properties. Through an annual
analysis prepared by outside consultants, the Operating Partnership evaluates
its earthquake insurance coverage in light of current industry practice and
determines the appropriate amount of earthquake insurance to carry. No assurance
can be given, however, that material losses in excess of insurance proceeds will
not occur or that such insurance will continue to be available at commercially
reasonable rates.
Impact on Control Over and Liabilities With Respect to Properties Owned
Through Partnerships and Joint Ventures
The Operating Partnership has ownership interests in five industrial and
six retail joint ventures, limited liability companies or partnerships. The
Operating Partnership may make investments through such ventures in the future
and presently plans to do so with clients of AMB Investment Management, with
respect to certain investment opportunities, who may share certain approval
rights over major decisions. Under the
12
<PAGE> 19
agreements governing the joint ventures, the Operating Partnership and the joint
venture participant may be required to make additional capital contributions,
and subject to certain limitations, the joint ventures may incur additional
indebtedness. Such additional indebtedness would effectively be senior to the
Notes. Partnership or joint venture investments may, under certain
circumstances, involve risks such as the possibility that the Operating
Partnership's partners or co-venturers might become bankrupt (in which event the
Operating Partnership and any other remaining general partners or co-venturers
would generally remain liable for the liabilities of such partnership or joint
venture), that such partners or co-venturers might at any time have economic or
other business interests or goals which are inconsistent with the business
interests or goals of the Operating Partnership, or that such partners or
co-venturers may be in a position to take action contrary to the instructions or
the requests of the Operating Partnership or contrary to the policies or
objectives of the Operating Partnership or the Company, including the Company's
policy with respect to maintaining its qualification as a REIT. In addition,
agreements governing joint ventures and partnerships often contain restrictions
on the transfer of a joint venturer's or partner's interest or "buy-sell" or
similar provisions which may result in a purchase or sale of such an interest at
a disadvantageous time or on disadvantageous terms. The Operating Partnership
will, however, seek to maintain sufficient control of such partnerships or joint
ventures to permit the Operating Partnership's business objectives to be
achieved. There is no limitation under the organizational documents of either
the Operating Partnership or the Company as to the amount of available funds
that may be invested in partnerships or joint ventures. The occurrence of one or
more of the events described above could have an adverse effect on the Operating
Partnership's financial condition and results of operations, and its ability to
make payments of principal of and interest on the Notes.
Possible Inability to Consummate Acquisitions on Advantageous Terms
The Operating Partnership intends to continue to acquire industrial and
retail properties. Acquisitions of industrial and retail properties entail risks
that investments will fail to perform in accordance with expectations. Estimates
of the costs of improvements to bring an acquired property up to standards
established for the market position intended for that property may prove
inaccurate. In addition, there are general investment risks associated with any
new real estate investment. Further, the Operating Partnership expects that
there will be significant competition for attractive investment opportunities
from other major real estate investors with significant capital including both
publicly traded REITs and private institutional investment funds. The Operating
Partnership anticipates that future acquisitions will be financed through a
combination of borrowings under the Credit Facility, other forms of secured or
unsecured financing and proceeds from equity or debt offerings by the Company or
the Operating Partnership. No assurance can be given that the Operating
Partnership will be able to acquire additional properties. In addition, no
assurance can be given that any such acquisitions will be financed on terms
favorable to the Operating Partnership, or that such additional properties, if
any, will conform with management's expectations or investment criteria. Any one
of the foregoing events could have an adverse effect on the Company's financial
condition and results of operations, and its ability to make payments of
principal of and interest on the Notes.
Possible Inability to Complete Renovation and Development on Advantageous
Terms
The real estate development business, including the renovation and
rehabilitation of existing properties, involves significant risks in addition to
those involved in the ownership and operation of established industrial
buildings and community shopping centers, including the risks that financing may
not be available on favorable terms for development projects and construction
may not be completed on schedule or within budget, resulting in increased debt
service expense and construction costs and delays in leasing such properties and
generating cash flow. Substantial renovation and new development activities are
also subject to risks relating to the inability to obtain, or delays in
obtaining, all necessary zoning, land-use, building, occupancy, and other
required governmental permits and authorizations. Once completed, such new or
renovated properties may perform below anticipated levels, producing cash flow
below budgeted amounts. The occurrence of one or more of the foregoing in
connection with the Operating Partnership's renovation and development
activities could have an adverse effect on the Operating Partnership's financial
condition and results of operations, and its ability to make payments of
principal of and interest on the Notes. In addition, substantial renovation as
well as new development activities, regardless of whether or not they are
ultimately
13
<PAGE> 20
successful, typically require a substantial portion of management's time and
attention which could take management's time away from the day-to-day operations
of the Operating Partnership. The Operating Partnership anticipates that future
acquisitions will be financed through a combination of borrowings under the
Credit Facility, other forms of secured or unsecured financing and proceeds from
equity or debt offerings by the Company or the Operating Partnership. If such
activities are financed through construction loans, there is a risk that, upon
completion of construction, permanent financing may not be available or may be
available only on disadvantageous terms which could have an adverse effect on
the Operating Partnership's financial condition and results of operations, and
its ability to make payments of principal of and interest on the Notes.
LIMITED RESTRICTIONS ON TOTAL INDEBTEDNESS AND CHANGES OF CONTROL
Other than the covenants restricting the ability of the Operating
Partnership and its Subsidiaries to incur additional indebtedness discussed
under "Description of Notes -- Certain Covenants," the Indenture does not
contain provisions which would limit the total indebtedness that the Operating
Partnership may incur, or protect the holders of Notes in the event of a change
of control, reorganization, restructuring, merger or similar transaction
involving the Operating Partnership. Such transactions could adversely affect
the financial condition or results of operations of the Operating Partnership
and result in a downgrade of the credit rating of the Notes, a loss in value of
the Notes or an increase in the risk of default on payments of principal of or
interest on the Notes.
The Operating Partnership operates with a policy of incurring debt, either
directly or through its Subsidiaries, only if upon such incurrence the Company's
consolidated Debt-to-Total Market Capitalization Ratio would be approximately
45% or less. In addition, the aggregate amount of Indebtedness that the
Operating Partnership and the Company may incur under such policy varies
directly with the valuation of the Company's capital stock and the number of
shares of capital stock outstanding. Accordingly, the Operating Partnership and
the Company would be able to incur additional indebtedness as a result of
increases in the market price per share of the Company's common stock or other
outstanding classes of capital stock, and future issuance of shares of capital
stock. Notwithstanding the foregoing policy, the organizational documents of the
Company and the Operating Partnership do not contain any limitation on the
amount of indebtedness that may be incurred. Accordingly, the Board of Directors
could alter or eliminate this policy and would do so, for example, if it were
necessary for the Company to continue to qualify as a REIT. If this policy were
changed, the Operating Partnership could become more highly leveraged, resulting
in an increase in debt service that could adversely affect the Operating
Partnership's FFO and, consequently, the amount of cash available to the
Operating Partnership for payments of principal of and interest on the Notes and
could increase the risk of default on the Operating Partnership's indebtedness.
DEBT FINANCING
Debt Financing and Existing Debt Maturities
The Operating Partnership will be subject to risks normally associated with
debt financing, including the risk that its cash flow will be insufficient to
make required payments of principal of and interest on the Notes, the risk that
existing indebtedness on the Properties (which in all cases will not have been
fully amortized at maturity) will not be able to be refinanced or that the terms
of such refinancing will not be as favorable as the terms of existing
indebtedness. See "Business and Properties -- Debt Financing." As of March 31,
1998, the Operating Partnership had an aggregate of $610.1 million of secured
indebtedness with an average maturity of 7 years and a weighted average interest
rate of 8.01%, and $312.0 million of borrowing outstanding under its Credit
Facility with a maturity date of November 2000 and a weighted average interest
rate of 6.9%. See "Management's Discussion and Analysis of Financial Condition
and Results of Operations -- Liquidity and Capital Resources" and "Business and
Properties -- Debt Financing." If principal payments due at maturity cannot be
refinanced, extended or paid with proceeds of other capital transactions, such
as new equity capital, the Operating Partnership expects that its cash flow will
not be sufficient in all years to make payments of principal of and interest on
the Notes and to repay all such maturing debt. Furthermore, if prevailing
interest rates or other factors at the time of refinancing (such as the
reluctance of lenders to make commercial real
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<PAGE> 21
estate loans) resulted in higher interest rates upon refinancing, the interest
expense relating to such refinanced indebtedness would increase, which would
adversely affect the Operating Partnership's cash flow and its ability to make
payments of principal of and interest on the Notes. If a Property or Properties
are mortgaged to secure payment of indebtedness and the Operating Partnership is
unable to meet mortgage payments, the Property could be foreclosed upon or
otherwise transferred to the mortgagee with a consequent loss of income and
asset value to the Company which could have an adverse affect on the Operating
Partnership's financial condition and liquidity and its ability to make payments
of principal of and interest on the Notes.
Impact of Rising Interest Rates and Variable Rate Debt
As of March 31, 1998, the Operating Partnership had $312.0 million
outstanding under its $500 million Credit Facility. The Operating Partnership
may incur other variable rate indebtedness in the future. Increases in interest
rates on such indebtedness could increase the Operating Partnership's interest
expense, which would adversely affect its cash flow and ability to make payments
of principal of and interest on the Notes. Accordingly, the Operating
Partnership may in the future engage in transactions to further limit its
exposure to rising interest rates to the extent that is believes such to be
appropriate and cost effective. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations -- Liquidity and Capital
Resources."
Possible Impact of Defaults on Cross-Collateralized and Cross-Defaulted Debt
As of March 31, 1998, the Operating Partnership had 12 non-recourse secured
loans which are cross-collateralized by five pools consisting of 19 Properties.
As of March 31, 1998, there was $211.2 million outstanding on such loans.
Accordingly, if an event of default were to occur on any such loan, the
Operating Partnership would be required to repay the aggregate of all
indebtedness, together with applicable prepayment charges, in order to avoid
foreclosure on all such Properties within the applicable pool. Foreclosure on
such Properties, or the Operating Partnership's inability to refinance any such
loan on terms as favorable as existing terms, would negatively impact its
financial condition and results of operations. In addition, the Operating
Partnership's Credit Facility contains defaults in the event that other material
indebtedness of the Operating Partnership (including its non-recourse secured
and joint venture debt) is in default. Such cross-default provision may require
the Operating Partnership to repay or restructure the Credit Facility in
addition to any mortgage or other debt which is in default, which could have an
adverse effect on the Operating Partnership's financial condition and liquidity
and its ability to make payments of principal of and interest on the Notes.
RANKING OF THE NOTES
The Notes will be direct, senior unsecured obligations of the Operating
Partnership and will rank equally with all of the other unsecured and
unsubordinated indebtedness of the Operating Partnership from time to time
outstanding. However, the Notes are effectively subordinated to mortgages and
other secured indebtedness of the Operating Partnership, which encumber certain
assets of the Operating Partnership, and to all of the indebtedness of its
subsidiaries (approximately $610.1 million as of March 31, 1998 on a pro forma
basis). In addition, the Guarantees will be effectively subordinated to all of
the mortgages and other secured indebtedness of the respective Guarantors and
all of the outstanding liabilities of the Company's subsidiaries. As of March
31, 1998, on a pro forma basis giving effect to the Offering and the application
of the proceeds therefrom, the total outstanding indebtedness of the Operating
Partnership and its subsidiaries would have been approximately $980.0 million,
of which $610.1 million was secured. As of March 31, 1998, the Company had no
outstanding indebtedness (excluding the Company's guaranty of the Credit
Facility) other than that of the Operating Partnership and its subsidiaries.
Subject to certain limitations, each of the Operating Partnership and the
Company may incur additional indebtedness. Although the Board of Directors has
adopted a policy of limiting the Company's Debt-to-Total Market Capitalization
Ratio to approximately 45%, neither the Operating Partnership's nor the
Company's organizational documents limit the amount of indebtedness that each
may incur. In addition, the aggregate amount of indebtedness that the Operating
Partnership and the Company may incur under such policy varies directly with the
valuation of the Company's capital stock and the number of shares of capital
stock outstanding. Accordingly, the Operating Partnership
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<PAGE> 22
and the Company would be able to incur additional indebtedness as a result of
increases in the market price per share of the Company's common stock or other
outstanding classes of capital stock, and future issuance of shares of capital
stock. See "-- No Limitations on Indebtedness," "Management's Discussion and
Analysis of Financial Condition and Results of Operations -- Liquidity and
Capital Resources," "Description of Notes -- Certain Covenants -- Aggregate Debt
Test," "-- Debt Service Test" and "-- Secured Debt Test."
The obligation of any Guarantor under its guarantee of the Notes may be
subject to review under state or federal transfer laws in the event of a
Guarantor's bankruptcy or other financial difficulty. Under those laws, in a
lawsuit by an unpaid creditor or representative of creditors of a Guarantor,
such as a trustee in bankruptcy, if a court were to find that when the Guarantor
entered into its guarantee, it (a) received less than fair consideration or
reasonably equivalent value therefor, and (b) either (i) was insolvent, (ii) was
rendered insolvent, (iii) was engaged in a business or transaction for which its
remaining unencumbered assets constituted unreasonably small capital, or (iv)
intended to incur or believed that it would incur debts beyond its ability to
pay as such debts matured, the court could void such Guarantor's guarantee and
the Guarantor's obligations thereunder, and direct the return of any amounts
paid thereunder to the Guarantor or to a fund for the benefit of its creditors.
Moreover, regardless of the factors identified in the foregoing clauses (i)
through (iv), a court could void a Guarantor's guarantee and direct such
repayment if it found that such guarantee was entered into with actual intent to
hinder, delay or defraud the Guarantor's creditors. To the extent that a
Guarantor's obligation under its guarantee of the Notes exceeds the actual
benefit that it receives from the issuance of the Notes, such Guarantor may be
deemed not to have received fair consideration or reasonably equivalent value
for its guarantee. The measure of insolvency for purposes of the foregoing will
vary depending on the law of the jurisdiction being applied. Generally, however,
an entity would be considered insolvent if the sum of its debts (including
contingent or unliquidated debts) is greater than all of its property at a fair
valuation or if the present fair salable value of its assets is less than the
amount that will be required to pay its probable liability on its existing debts
as they become absolute and matured.
OPTIONAL REDEMPTION OF THE 2008 NOTES OR THE 2018 NOTES
The 2008 Notes and the 2018 Notes may each be redeemed in whole, or from
time to time in part, at the option of the Operating Partnership on any date as
provided in "Description of Notes -- Redemption of the 2008 Notes and the 2018
Notes at the Option of the Operating Partnership." The price at which the 2008
Notes and the 2018 Notes may be redeemed includes a redemption premium designed
to compensate the holders for loss of interest rate yield caused by such early
redemption. However, no assurance can be given that the redemption premium will
fully compensate investors for all costs and expenses (including decreased
yields on reinvestments) incurred as a result of the Operating Partnership's
exercise of its optional redemption of either the 2008 Notes or the 2018 Notes.
CONTINGENT OR UNKNOWN LIABILITIES
The AMB Predecessors have been in existence for varying lengths of time up
to 15 years. In the Formation Transactions, the Company acquired the assets of
certain entities previously managed by or affiliated with the AMB Predecessor
entities including CIF, VAF, AMB and WPF, and certain assets of the Individual
Account Investors, subject to all of the potential existing liabilities of such
predecessor entities. There can be no assurances that there are no current
liabilities and will not be any future liabilities arising from prior activities
that are unknown and therefore not disclosed in this Prospectus. Such
liabilities have been assumed by the Company as the surviving entity in the
various merger and contribution transactions that comprise the Formation
Transactions or as general partner of the Operating Partnership. Existing
liabilities for indebtedness generally were taken into account (directly or
indirectly) in connection with the allocation of the shares of Common Stock
and/or Units in the Formation Transactions, but no other liabilities were taken
into account for such purposes. The Company does not have recourse against CIF,
VAF, AMB or WPF or any of their respective stockholders or partners or against
the Individual Account Investors with respect to any unknown liabilities except
to the extent provided by the indemnity escrow entered into in connection with
the Formation Transactions. Unknown liabilities might include liabilities for
clean-up or remediation of undisclosed environmental conditions, claims of
tenants, vendors or other persons dealing with the entities prior to
16
<PAGE> 23
the Formation Transactions (that had not been asserted prior to the Formation
Transactions), accrued but unpaid liabilities incurred in the ordinary course of
business, and claims for indemnification by the officers and directors of CIF,
VAF and AMB and others indemnified by such entities, including clients of AMB.
Certain tenants may claim that the Formation Transactions give rise to a right
to purchase such premises occupied by such tenants. The Company does not believe
any such claims would be material. See "-- Government
Regulations -- Environmental Matters" below as to the possibility of undisclosed
environmental conditions potentially affecting the value of the Properties. The
existence of undisclosed material liabilities which are not covered by the
indemnity escrow could have an adverse effect on the Company's financial
condition and results of operations, and its ability to make payments of
principal of and interest on the Notes.
CONFLICTS OF INTEREST
Continued Involvement of Executive Officers in Other Real Estate Activities
and Investments
Certain Executive Officers own interests in certain real estate-related
businesses and investments which will continue following the Offering. Such
interests include minority ownership of Institutional Housing Partners, a
residential housing finance company (through AMB Institutional Housing
Partners); and ownership of AMB Development, Inc. and AMB Development L.P.,
developers which own property that management believes is not suitable for
ownership by the Company. Neither AMB Development, Inc. nor AMB Development L.P.
has initiated any new development projects since completion of the IPO, nor will
they initiate any new development projects following the Offering, nor will they
make any further investments in industrial or retail properties following the
Offering other than those currently under development. Such persons are also
owners of AMB Corporate Real Estate Advisors, Inc. ("AMBCREA"), which is
principally a real estate services company for corporate and professional
tenants of real estate. AMBCREA is in the process of winding down its business,
and it is presently anticipated that AMBCREA will cease operations by June 30,
1998. However, the continued involvement by the Executive Officers and the
Company's directors could divert management's attention from the day-to-day
operations of the Operating Partnership. Each person who was an Executive
Officer upon completion of the IPO entered into a non-competition agreement with
the Operating Partnership pursuant to which, among other things, such
individuals agreed not to engage in any activities, directly or indirectly, in
respect of commercial real estate, and agreed not make any investment in respect
of industrial or retail real estate, other than through ownership of not more
than 5% of the outstanding shares of a public company engaged in such activities
or through the existing investments referred to herein.
AMBCREA, AMB Institutional Housing Partners, AMB Development, Inc. and AMB
Development, L.P. continue to use the name "AMB" pursuant to royalty-free
license arrangements with the Company. In addition, until cessation of its
operations, AMBCREA will continue to use office space leased by AMBI, an
affiliate of the Executive Officers, for a fee equal to such affiliate's
allocated cost thereof. The Operating Partnership may continue to provide
certain administrative services to AMBCREA at arm's-length charges. See "Certain
Relationships and Related Transactions." Such activities could also, in the
future, subject to the unanimous approval of the disinterested directors,
involve acquisitions of property from such Executive Officers, additional leases
between such Executive Officers and the Operating Partnership, and/or other
related activities in which the interests pursued by such Executive Officers may
not be in the best interests of the holders of the Notes.
Conflicts of Interest in Connection with Properties Owned or Controlled by
Executive Officers and Directors
AMB Development L.P. owns interests in 11 retail development projects in
the U.S., each of which consists of a single free-standing Walgreens drugstore,
and, together with other entities controlled by nine of the Executive Officers,
a low income housing apartment building located in the San Francisco Bay Area.
In addition, Messrs. Abbey, Moghadam and Burke, each a founder, Executive
Officer and director of the Company, own less than 1% interests in two
partnerships which own office buildings in various markets; these interests have
negligible value. Luis A. Belmonte, an Executive Officer, owns less than a 10%
interest, representing an estimated value of $75,000, in a limited partnership
which owns an office building located in Oakland, California.
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In addition, several of the Executive Officers individually own: (i) less
than 1% interests in the stocks of certain publicly-traded REITs, including
mortgage REITs, and residential developers; (ii) certain interests in and rights
to developed and undeveloped real property located outside the United States;
(iii) interests in single-family homes and residential apartments in the San
Francisco Bay Area; (iv) certain passive interests, not believed to be material,
in real estate businesses in which such persons were previously employed; and
(v) certain other de minimis holdings in equity securities. Thomas W. Tusher, a
member of the Company's Board of Directors, is a limited partner in a
partnership in which Messrs. Abbey, Moghadam and Burke are general partners and
which owns a 75% interest in an office building. Mr. Tusher owns a 20% interest
in the partnership, valued as of March 31, 1998 at approximately $939,000.
Messrs. Abbey, Moghadam and Burke each have an approximately 26.7% interest in
the partnership, each valued as of March 31, 1998 at approximately $1,252,000.
The Operating Partnership believes that the properties and activities set
forth above generally do not directly compete with any of the Properties;
however, it is possible that a property in which an Executive Officer or the
Company's director, or an affiliate of such person, has an interest may compete
with the Operating Partnership in the future if the Operating Partnership were
to invest in a property similar and in close proximity to such property.
However, the continued involvement by the Operating Partnership's Executive
Officers in such properties could divert management's attention from the
day-to-day operations of the Operating Partnership. The Operating Partnership is
prohibited from acquiring any properties from the Executive Officers or their
affiliates without the approval of the Company's disinterested directors. See
"Policies With Respect to Certain Activities -- Conflict of Interest Policies."
Conflicts Relating to the Operating Partnership
The Company, as the general partner of the Operating Partnership, has
fiduciary obligations to the limited partners in the Operating Partnership, the
discharge of which may conflict with the interests of the Company's
stockholders. In addition, those persons holding Units, as limited partners,
will have the right to vote as a class on certain amendments to the Partnership
Agreement of the Operating Partnership (the "Partnership Agreement") and
individually to approve certain amendments that would adversely affect their
rights, which voting rights may be exercised in a manner that conflicts with the
interests of the Company, its stockholders and the holders of Notes. In
addition, under the terms of the Partnership Agreement, the holders of Units
(including Performance Units issuable to the Executive Officers) will have
certain approval rights with respect to certain transactions that affect all
holders of Notes but which may not be exercised in a manner which reflects the
interests of all holders of Notes. See "Description of Certain Provisions of the
Partnership Agreement of the Operating Partnership -- Removal of General
Partner; Transferability of the Company's Interests; Treatment of Units in
Significant Transactions."
Influence of Directors, Executive Officers and Significant Stockholders
The Company's three largest stockholders, Ameritech Pension Trust, the City
and County of San Francisco Employees' Retirement System and Southern Company
System Master Retirement Trust, beneficially own approximately 29.3% of the
outstanding Common Stock (assuming the exchange of all Units into shares of
Common Stock). In addition, the Executive Officers and directors own
approximately 5.0% of the Common Stock (assuming the exchange of all Units into
shares of Common Stock, before issuance of any Performance Units), and will have
influence on the management and operation of the Operating Partnership and the
Company and, as stockholders, on the outcome of any matters submitted to a vote
of the stockholders. Such influence might be exercised in a manner that is
inconsistent with the interests of other stockholders and the holders of Notes.
Although there is no understanding or arrangement for these directors, officers
and stockholders and their affiliates to act in concert, such parties would be
in a position to exercise significant influence over the Company's affairs and
those of the Operating Partnership should they choose to do so. See "Management"
and "Principal Stockholders."
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Failure to Enforce Terms of Certain Agreements
As holders of shares of outstanding Common Stock and, potentially,
Performance Units, certain of the Company's directors and certain of the
Executive Officers will have a conflict of interest with respect to their
obligations as directors and Executive Officers to vigorously enforce the terms
of the agreements relating to the Formation Transactions. The potential failure
to enforce the material terms of those agreements could result in a monetary
loss to the Company and the Operating Partnership, which loss could have a
material adverse effect on the Operating Partnership's and the Company's
financial condition or results of operations and the Operating Partnership's
ability to make payments of principal of and interest on the Notes.
Conflicts Relating to Use of Proceeds
The Operating Partnership intends to use the net proceeds from the sale of
the Notes offered hereby to repay indebtedness outstanding under the Credit
Facility and for general corporate purposes. Morgan Guaranty Trust Company of
New York, an affiliate of J.P. Morgan Securities Inc., one of the Underwriters,
is the agent and a lender under the Credit Facility. As a result of this
affiliation, J.P. Morgan Securities Inc. has an indirect interest in the
repayment of the amounts outstanding under the Credit Facility in addition to
its role as an Underwriter in the Offering. See "Use of Proceeds" and
"Underwriters."
AMB INVESTMENT MANAGEMENT
Adverse Consequences of Lack of Control Over the Business of AMB Investment
Management
To comply with the REIT asset tests that restrict ownership of shares of
other corporations, the Operating Partnership owns 100% of the non-voting
preferred stock of AMB Investment Management (representing approximately 95% of
its economic interest) and certain of the Company's Executive Officers own all
of the outstanding voting common stock of AMB Investment Management
(representing approximately 5% of its economic interest). This ownership
structure is necessary to permit the Company to share in the income of AMB
Investment Management while maintaining its status as a REIT. Although the
Company receives substantially all of the economic benefit of the business
carried on by AMB Investment Management through the Company's right to receive
dividends through the Operating Partnership, the Company is not able to elect
directors or officers of AMB Investment Management and, therefore, the Company
does not have the ability to influence the operation of AMB Investment
Management or require that AMB Investment Management's board of directors
declare and pay a cash dividend on the nonvoting stock of AMB Investment
Management held by the Operating Partnership. As a result, the board of
directors and management of AMB Investment Management might implement business
policies or decisions that would not have been implemented by persons controlled
by the Company and that are adverse to the interests of the Operating
Partnership or that lead to adverse financial results, which could adversely
impact the Operating Partnership's net operating income and cash flows and the
ability of the Operating Partnership to make payments of principal of and
interest on the Notes. In addition, AMB Investment Management will be subject to
tax on its income, reducing its cash available for distribution.
Uncertainty of AMB Investment Management Operations
Fees earned by AMB Investment Management are dependent upon various
factors, including factors beyond the control of the Company and the Operating
Partnership, affecting the ability to attract and retain investment management
clients and the overall returns achieved on managed assets. Failure of AMB
Investment Management to attract investment management clients or achieve
sufficient overall returns on managed assets would reduce its ability to make
distributions on the nonvoting preferred stock owned by the Operating
Partnership. Such failure would also limit co-investment opportunities to the
Operating Partnership and, as a result, the Operating Partnership's ability to
generate rental revenues from such co-investments and use the co-investment
program as a source to finance property acquisitions and leverage acquisition
opportunities.
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GOVERNMENT REGULATIONS
Many laws and governmental regulations are applicable to the Properties and
changes in these laws and regulations, or their interpretation by agencies and
the courts, occur frequently.
Costs of Compliance with Americans with Disabilities Act
Under the Americans with Disabilities Act of 1990 (the "ADA"), all places
of public accommodation are required to meet certain Federal requirements
related to access and use by disabled persons. Compliance with the ADA might
require removal of structural barriers to handicapped access in certain public
areas where such removal is "readily achievable." Noncompliance with the ADA
could result in the imposition of fines or an award of damages to private
litigants. The impact of application of the ADA to the Properties, including the
extent and timing of required renovations, is uncertain. If required changes
involve a greater amount of expenditures than the Operating Partnership
currently anticipates or if the changes must be made on a more accelerated
schedule than the Operating Partnership currently anticipates, its ability to
make payments of principal of and interest on the Notes could be adversely
affected.
Environmental Matters
Under Federal, state and local laws and regulations relating to the
protection of the environment ("Environmental Laws"), a current or previous
owner or operator of real estate may be liable for contamination resulting from
the presence or discharge of hazardous or toxic substances or petroleum products
at such property, and may be required to investigate and clean up such
contamination at such property or such contamination which has migrated from
such property. Such laws typically impose liability and clean-up responsibility
without regard to whether the owner or operator knew of or caused the presence
of the contaminants, and the liability under such laws has been interpreted to
be joint and several unless the harm is divisible and there is a reasonable
basis for allocation of responsibility. In addition, the owner or operator of a
site may be subject to claims by third parties based on personal injury,
property damage and/or other costs, including investigation and clean-up costs,
resulting from environmental contamination present at or emanating from a site.
Environmental Laws also govern the presence, maintenance and removal of
asbestos-containing building materials ("ACBM"). Such laws require that ACBM be
properly managed and maintained, that those who may come into contact with ACBM
be adequately apprised or trained and that special precautions, including
removal or other abatement, be undertaken in the event ACBM is disturbed during
renovation or demolition of a building. Such laws may impose fines and penalties
on building owners or operators for failure to comply with these requirements
and may allow third parties to seek recovery from owners or operators for
personal injury associated with exposure to asbestos fibers. Some of the
Properties may contain ACBM.
Some of the Properties are leased or have been leased, in part, to owners
and operators of dry cleaners that operate on-site dry cleaning plants, to
owners and operators of gas stations or to owners or operators of other
businesses that use, store or otherwise handle petroleum products or other
hazardous or toxic substances. Some of these Properties contain, or may have
contained, underground storage tanks for the storage of petroleum products and
other hazardous or toxic substances. These operations create a potential for the
release of petroleum products or other hazardous or toxic substances. Some of
the Properties are adjacent to or near other properties that have contained or
currently contain underground storage tanks used to store petroleum products or
other hazardous or toxic substances. In addition, certain of the Properties are
on, or are adjacent to or near other properties upon which others, including
former owners or tenants of the Properties, have engaged or may in the future
engage in activities that may release petroleum products or other hazardous or
toxic substances.
All of the Properties were subject to a Phase I or similar environmental
assessments by independent environmental consultants at the time of acquisition
or shortly after acquisition. Phase I assessments are intended to discover and
evaluate information regarding the environmental condition of the surveyed
property and surrounding properties. Phase I assessments generally include an
historical review, a public records review, an investigation of the surveyed
site and surrounding properties, and preparation and issuance of a
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written report, but do not include soil sampling or subsurface investigations
and typically do not include an asbestos survey. Some of the Operating
Partnership's environmental assessments of the Properties do not contain a
comprehensive review of the past uses of the Properties and/or the surrounding
properties.
None of the Operating Partnership's environmental assessments of the
Properties has revealed any environmental liability that the Operating
Partnership believes would have a material adverse effect on its financial
condition or results of operations taken as a whole, nor is it aware of any such
material environmental liability. Nonetheless, it is possible that the Operating
Partnership's assessments do not reveal all environmental liabilities or that
there are material environmental liabilities of which the Operating Partnership
is unaware. In addition, only certain of such assessments were updated for
purposes of the IPO, and less than 50% of the Properties have environmental
assessments which are more than two years old. Moreover, there can be no
assurance that (i) future laws, ordinances or regulations will not impose any
material environmental liability or (ii) the current environmental condition of
the Properties will not be affected by tenants, by the condition of land or
operations in the vicinity of the Properties (such as releases from underground
storage tanks), or by third parties unrelated to the Operating Partnership. If
the costs of compliance with the various environmental laws and regulations, now
existing or hereafter adopted, exceed the Operating Partnership's budgets for
such items, the Operating Partnership's ability to make payments of principal of
and interest on the Notes could be adversely affected.
Other Regulations
The Properties are also subject to various Federal, state and local
regulatory requirements such as state and local fire and life safety
requirements. Failure to comply with these requirements could result in the
imposition of fines by governmental authorities or awards of damages to private
litigants. The Operating Partnership believes that the Properties are currently
in substantial compliance with all such regulatory requirements. However, there
can be no assurance that these requirements will not be changed or that new
requirements will not be imposed which would require significant unanticipated
expenditures by the Operating Partnership, which expenditures could have an
adverse effect on the Operating Partnership's financial condition and results of
operations and its ability to make payments of principal of and interest on the
Notes.
UNITED STATES FEDERAL INCOME TAX RISK
The Operating Partnership intends to treat the REPS in the manner described
under the caption "Certain Federal Income Tax Considerations Relating To The
REPS -- Treatment of REPS." It is possible, however, that the Internal Revenue
Service (the "Service") could successfully assert an alternate tax treatment for
the REPS, in which event holders of REPS may be required (i) to use an accrual
method of tax accounting with respect to the REPS (regardless of their usual
method of tax accounting), (ii) to include amounts in taxable income in excess
of actual cash payments received with respect to the REPS and (iii) to recognize
ordinary income or loss rather than capital gain or loss upon the sale or other
taxable disposition of the REPS. See "Certain Federal Income Tax Considerations
Relating to the REPS -- Treatment of REPS."
ABSENCE OF MARKET FOR THE NOTES
The Notes will be new securities for which there is currently no market.
Although the Underwriters have informed the Operating Partnership that they
currently intend to make a market in the Notes, they are not obligated to do so
and any such market-making may be discontinued at any time without notice. If an
active market does not develop, the market price and liquidity of the Notes may
be materially and adversely affected. Neither the Company nor the Operating
Partnership intends to apply for listing of the Notes on any securities exchange
or to seek approval for quotation through any automated quotation system. There
can be no assurance that an active market for these securities will develop and
no assurance can be given as to the prices at which such securities might trade.
In particular, there can be no assurance that the market price for the Notes
will be at or above the purchase price of the Notes. The liquidity of, and
trading market for, the Notes may also be materially and adversely affected by
declines in the market for debt securities generally. Such a decline may
materially and adversely affect such liquidity and trading independent of the
financial performance of, and prospects for, the Operating Partnership.
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THE COMPANY AND THE OPERATING PARTNERSHIP
GENERAL
AMB Property, L.P. was organized in November 1997 and commenced operations
in connection with the completion of the IPO and the consummation of the
Formation Transactions in November 1997. AMB Property Corporation is one of the
largest publicly-traded real estate companies in the United States. The Company
owns 159 Properties, comprised of 122 Industrial Properties and 37 Retail
Properties located in 28 markets throughout the United States. The Industrial
Properties (comprising 427 buildings), principally warehouse distribution
properties, encompass approximately 45.3 million rentable square feet and, as of
March 31, 1998, were 94.6% leased to over 1,000 tenants. The Retail Properties,
principally grocer-anchored community shopping centers, encompass approximately
6.8 million rentable square feet and, as of the same date, were 94.6% leased to
over 900 tenants. See "Business and Properties."
The Operating Partnership conducts substantially all of the Company's
activities and owns substantially all of the economic interests in the
Properties. As of March 31, 1998, the Company owned an approximate 95.9% general
partner interest in the Operating Partnership, with the remaining 4.1% limited
partner interest owned by nonaffiliated investors. As the sole general partner
of the Operating Partnership, the Company has control over the management of the
Operating Partnership and over each of the 116 Properties (comprising
approximately 36.9 million rentable square feet) owned directly by the Operating
Partnership. The Operating Partnership owns 99% of the economic interests in the
remaining 43 Properties (comprising approximately 15.2 million rentable square
feet) through AMB Property II, L.P., a Delaware limited partnership, and Long
Gate LLC, a Delaware limited liability company, and the Company (through a
wholly owned subsidiary) owns a 1% interest.
The Operating Partnership is engaged in the business of acquiring and
operating industrial properties and community shopping centers in target markets
nationwide. The Operating Partnership and the Company are led by Mr. Moghadam,
its Chief Executive Officer and one of the three founders of the Company.
Messrs. Abbey and Burke, the other two founders, also play active roles in the
operations of the Operating Partnership and the Company as the Chairman of the
Operating Partnership's Investment Committee and the Chairman of the Company's
Board of Directors, respectively. The Operating Partnership's ten executive
officers have an average of 22 years of experience in the real estate industry
and have worked together for an average of eight years building the AMB real
estate business. The Operating Partnership and the Company employ 123
individuals, 99 of whom are located in the San Francisco headquarters and 24 in
the Boston office. The Company operates as a self-administered and self-managed
real estate company and expects that it has qualified and that it will continue
to qualify as a REIT for federal and state income tax purposes beginning with
the year ended December 31, 1997.
RECENT DEVELOPMENTS
Acquisitions. From April 1, 1998, to May 8, 1998, the Company acquired
operating properties with an aggregate purchase price of $56.7 million. The
properties acquired are comprised of four Industrial Properties representing 12
buildings and 1.3 million rentable square feet.
Quarterly Distributions. On March 6, 1998, the Board of Directors of the
Company, in its capacity as general partner of the Operating Partnership,
declared a distribution of $0.3425 per partnership unit, payable April 3, 1998
to partners of record on March 18, 1998. In addition, the Company's Board of
Directors declared a distribution of $0.3425 per share of the Common Stock,
payable April 3, 1998 to stockholders and unitholders of record on March 18,
1998.
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Investment-Grade Credit Rating. The Company recently received credit
ratings for its unsecured debt of Baa1 from Moody's Investors Service, BBB from
Standard & Poors Corporation and BBB+ from Duff & Phelps Credit Rating Co. As a
result of the receipt of the investment-grade credit ratings, the interest rate
on the Operating Partnership's unsecured revolving Credit Facility was reduced
by 20 basis points to LIBOR plus 90 basis points.
Each of the Company, the Operating Partnership and AMB Property II, L.P.
were formed in connection with the Formation Transactions in November, 1997.
Long Gate LLC was formed on July 18, 1995 and acquired by the Company in
connection with the Formation Transactions. The principal executive offices of
the Company, the Operating Partnership, AMB Property II, L.P. and Long Gate LLC
are located at 505 Montgomery Street, San Francisco, California 94111, and their
telephone number is (415) 394-9000. The Company also maintains a regional office
in Boston, Massachusetts.
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BUSINESS AND OPERATING STRATEGIES
The Operating Partnership focuses its investment activities in industrial
hub distribution markets and retail trade areas throughout the U.S. where
management believes opportunities exist to acquire and develop additional
properties on an advantageous basis. The Operating Partnership's operations are
conducted through its 123 employees, 99 of whom are located in its San Francisco
headquarters and 24 of whom are located in its Boston office. The Operating
Partnership is a full-service real estate company with in-house expertise in
acquisitions, development and redevelopment, asset management and leasing,
finance and accounting and market research. The Operating Partnership has
long-standing relationships with most of the real estate management firms across
the country which provide local property management and leasing services to the
Operating Partnership on a fee basis. See "-- Property Management."
NATIONAL PROPERTY COMPANY
The Operating Partnership owns 159 Properties located in 28 markets
throughout the U.S. The Operating Partnership believes that its national
strategy enables it to (i) increase or decrease investments in certain regions
to take advantage of the relative strengths in different real estate markets;
(ii) retain and accommodate tenants as they consolidate or expand, particularly
in its Industrial Properties; and (iii) build brand awareness as well as
customer loyalty through the delivery of consistent service and quality product.
Through its presence in markets throughout the U.S., the Operating Partnership
has also developed operating expertise in leasing, expense management, tenant
retention strategies and property design and configuration.
TWO COMPLEMENTARY PROPERTY TYPES
Management believes its strategy of owning and operating both industrial
properties and community shopping centers offers the Operating Partnership an
optimal combination of growth opportunities, strong current income and increased
stability through market cycles. The Operating Partnership has developed the
expertise, infrastructure and management information systems to acquire,
reposition, develop and operate these two property types. Management believes
that its dual property strategy enables the Operating Partnership to allocate
capital and organizational resources between property types according to
changing market conditions and its investment strategy.
SELECT MARKET FOCUS
The Operating Partnership intends to continue its strategy of investing in
industrial hub distribution markets and retail trade areas across the country to
capitalize on changes in the relative economic strength of these regions. The
Operating Partnership focuses on acquiring, redeveloping and operating
properties in in-fill locations which are characterized by limited new
construction opportunities. As the strength of these markets continues to grow
and the demand for well-located properties increases, the Operating Partnership
believes that it will benefit from an upward pressure on rents resulting from
the increased demand combined with the relative lack of new available space.
The Operating Partnership intends to continue to focus its industrial
property investment activities in six hub markets which dominate national
warehouse distribution activities: Atlanta, Chicago, Dallas/Fort Worth, Los
Angeles, Northern New Jersey and the San Francisco Bay Area. Among the nation's
53 major industrial markets tracked by CB Commercial/Torto Wheaton Research,
these six markets accounted for approximately (i) 36% of the warehouse property
inventory as of December 31, 1997 and (ii) for the three-year period ended
December 31, 1997, an average of 36% of industrial property net absorption. In
addition, such hub markets contain approximately 54% of the Industrial
Properties based on aggregate square footage. The Operating Partnership also
invests in selected regional distribution markets including Boston, Houston,
Miami, Minneapolis, San Diego, Seattle and Baltimore/Washington, D.C. The
Operating Partnership focuses on these established industrial markets because
management believes they offer large and broadly diversified tenant bases which
provide greater demand for properties over market cycles than secondary markets.
In-fill locations within these markets also typically have significant barriers
to new construction, including geographic or regulatory supply constraints, and
benefit from access to large labor supplies and well-developed
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transportation networks. See "Business and Properties -- Industrial
Properties -- Overview of Major Target Markets."
PROPERTY MANAGEMENT
The Operating Partnership actively manages its properties through its
experienced staff of 16 regional managers, each of whom specializes in the
management of industrial properties or community shopping centers in designated
markets. Regional, market and property-type focus provides regional managers
with extensive knowledge of real estate trends and supply and demand activity in
their markets as well as an effective network of local contacts who provide
sources for market data, leads for new tenants and property acquisitions, and
opportunities to enhance the value of the Properties. The Operating Partnership
typically outsources property management to a select group of third-party local
managers with whom the Operating Partnership has developed strong relationships.
The Operating Partnership's regional managers have broad responsibilities
that include implementing an annual business plan for each property, formulating
leasing strategies, establishing leasing terms and conditions, negotiating
leases, approving and monitoring leases and capital expenditures, planning and
implementing renovation, expansion and development, establishing annual
operating and capital budgets and effecting dispositions. The Operating
Partnership's regional managers utilize local leasing agents to identify
prospective tenants and document lease transactions. Third-party local property
service providers are engaged to oversee custodial property matters such as rent
collection, tenant requests, maintenance and repair, and supervision of cleaning
and security services. The Operating Partnership monitors the performance of its
properties on a daily basis through the use of its proprietary asset information
system. This management tool enables the Operating Partnership not only to
monitor the operating performance of a property (and the local property
manager), but also to review and communicate strategic initiatives to the local
property manager on a real-time basis and to compare the property's performance
to on-line budgets and objectives. The Operating Partnership also monitors the
tenant service performance of its service providers in order to ensure high
quality and uniform service to its tenants.
Management believes that its approach to property management and its
relationships with third-party property management companies enable the
Operating Partnership to more effectively manage fixed operating costs
associated with a national portfolio. By employing third-party local property
managers which management believes to be among the best in their respective
market, the Operating Partnership can enter and exit markets efficiently without
the administrative burden of retaining a large staff. Since the Operating
Partnership is the customer, rather than the competitor, of third-party
management firms, these firms are also a source of new acquisition opportunities
in the respective markets, thus providing the Operating Partnership with greater
access to transaction flow. Management believes this approach also gives the
Operating Partnership a competitive advantage in capitalizing on the increasing
trend among corporations to outsource their real estate service requirements to
property management companies.
From January 1, 1995 through March 31, 1998, the weighted average tenant
retention rate of the Properties managed by AMB, the Company's Predecessor, and
owned by the Operating Partnership upon consummation of the Formation
Transactions was approximately 72.9% for the Industrial Properties and
approximately 83.5% for the Retail Properties, based on aggregate square
footage. See "Business and Properties -- Historical Lease Renewals and Retention
Rates." Management believes that these tenant retention rates reflect the
success of the Operating Partnership's and the Company's operating and tenant
service-driven property management strategy.
DISCIPLINED INVESTMENT PROCESS
During its 14-year history prior to the completion of the Formation
Transactions and consummation of the IPO, AMB established a disciplined approach
to the investment process through operating divisions that are subject to the
overall policy direction of management's investment committee (the "Investment
Committee"). The stages in the investment process are highly integrated, with
Investment Committee review at critical points in the process.
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Approval of each investment is the responsibility of the Investment
Committee with sponsorship from both the acquisitions officer and regional
manager who will be responsible for managing the property. The initial
investment recommendation is thoroughly discussed, and approval is required in
order to proceed to contract and full due diligence. The approach to offer terms
and transaction structure is determined as part of the initial approval and is
the responsibility of the acquisitions officer. The regional manager is involved
in providing and verifying underwriting assumptions and developing the operating
strategy. After the due diligence review and before removing conditions to the
contract, a final Investment Committee recommendation is prepared by the
acquisition and asset management team. The Investment Committee conducts a
complete review of the information developed during the due diligence process
and either rejects or gives final approval.
AMB also established proprietary systems and procedures to manage and track
a high volume of acquisition proposals, transactions and important market data.
This includes an on-line open issues database that provides the Operating
Partnership with current information on the status of each transaction,
highlighting the issues that must be addressed prior to closing, and a database
that includes and compiles data on all transaction proposals and markets
reviewed by the Operating Partnership.
RENOVATION, EXPANSION AND DEVELOPMENT
The multidisciplinary background of the Operating Partnership's employees
provides it with the skills and experience to capitalize on strategic
renovation, expansion and development opportunities. Several of the Operating
Partnership's officers have extensive experience in real estate development,
both at AMB and with national development firms. The Operating Partnership
generally pursues development projects in joint ventures with local developers.
In this way, the Operating Partnership leverages the development skill, access
to opportunities and capital of such developers, transferring a significant
amount of the development risk to them and eliminating the need and expense of
an in-house development staff. See "Strategies for Growth -- Growth Through
Renovation, Expansion and Development."
FINANCING STRATEGY
In order to maintain financial flexibility and facilitate the rapid
deployment of capital over market cycles, the Operating Partnership intends to
operate with a Debt-to-Total Market Capitalization Ratio of less than 45%.
Additionally, the Operating Partnership intends to continue to structure its
balance sheet in order to maintain an investment grade rating on its senior
unsecured debt. The Operating Partnership also intends to keep the majority of
its assets unencumbered to help facilitate such rating. Upon consummation of the
Offering, the Company's consolidated Debt-to-Total Market Capitalization Ratio
as of March 31, 1998 on a pro forma basis would have been approximately 31.2%
(approximately 29.9% on an historical basis). See "Policies with Respect to
Certain Activities -- Financing Policies."
The Operating Partnership anticipates that future acquisitions will be
financed through a combination of borrowings under the Credit Facility, other
forms of secured or unsecured financing and proceeds from equity or debt
offerings by the Company or the Operating Partnership. Additionally, the
Operating Partnership's co-investment program will also serve as a source of
capital, particularly when more traditional sources of capital may not be
available on attractive terms. See "-- AMB Investment Management."
Borrowings under the Credit Facility bear interest at a rate equal to LIBOR
plus 90 to 120 basis points (currently LIBOR plus 90 basis points), depending
upon the Operating Partnership's debt rating at the time of such borrowings. The
Operating Partnership expects to continue to use the Credit Facility for
acquisitions and for general corporate purposes. As of March 31, 1998, $312.0
million was outstanding under the Credit Facility with $148.0 million of
availability. Of the $312.0 million outstanding at March 31, 1998, substantially
all of such borrowings were used to finance property acquisitions. See
"Management's Discussion of Financial Condition and Results of
Operations -- Liquidity and Capital Resources" and "Business and Properties --
Debt Financing."
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AMB INVESTMENT MANAGEMENT
AMB Investment Management provides real estate investment management
services on a fee basis to certain clients of AMB, the Company's predecessor,
which did not participate in the Formation Transactions. The Operating
Partnership presently intends to co-invest with clients of AMB Investment
Management, to the extent such clients newly commit investment capital, through
partnerships, limited liability companies and joint ventures. The Operating
Partnership uses a co-investment formula with each client whereby the Operating
Partnership will own at least a 20% interest in all ventures. As of March 31,
1998, the Operating Partnership had consummated one co-investment transaction.
See "Business and Properties -- Properties Held Through Joint Ventures, Limited
Liability Companies and Partnerships." AMB Investment Management is owned by the
Operating Partnership, which owns 100% of the non-voting preferred stock
(representing a 95% economic interest therein), and certain officers of AMB
Investment Management and the executive officers of the Company, who
collectively own 100% of the voting common stock (representing a 5% economic
interest therein).
27
<PAGE> 34
STRATEGIES FOR GROWTH
The Company intends to achieve its growth objectives of long-term
sustainable growth in FFO per share and maximization of long-term stockholder
value, principally by growth through (i) operations, resulting from improved
operating margins within the portfolio while maintaining above-average
occupancy, (ii) continued property acquisitions, including through the
co-investment program of AMB Investment Management and (iii) renovation,
expansion and development of selected properties.
GROWTH THROUGH OPERATIONS
As of March 31, 1998, the Industrial Properties owned as of such date were
94.6% leased and the Retail Properties owned as of such date were 94.6% leased.
The Operating Partnership will seek to improve operating margins by taking
advantage of the economies of owning, operating and growing a large-scale
national portfolio.
During the 12 months ended March 31, 1998, the Operating Partnership
increased average rental rates by 12.3% from the expiring rent for such space,
on 263 leases entered into or renewed during the 12 months ended March 31, 1998,
representing 5.5 million rentable square feet or 10.9% of the aggregate rentable
square footage of the Properties. During the 12 months ended March 31, 1999,
leases encompassing an aggregate of 10.3 million rentable square feet
(representing 20.3% of the Operating Partnership's aggregate rentable square
footage as of March 31, 1998) are subject to contractual rent increases
resulting in an average rent increase per rentable square foot of $1.28, or
5.9%. Based on recent experience and current market trends, management believes
it will have an opportunity to increase the average rental rate on Property
leases expiring during the nine months ended December 31, 1998 covering an
aggregate of 5.2 million rentable square feet. The Operating Partnership will
seek to reduce the potential volatility of the portfolio's FFO by managing lease
expirations so that they occur within individual properties and across the
entire portfolio in a staggered fashion, and by monitoring the credit and mix of
tenants, particularly those in the Retail Properties.
GROWTH THROUGH ACQUISITIONS
Since December 31, 1997, the Company has acquired 27 properties comprising
8.6 million square feet. The Operating Partnership believes its significant
acquisition experience and its extensive network of property acquisition sources
will continue to provide opportunities for external growth. Management believes
that there is a growing trend among large private institutional holders of real
estate assets to shift a portion of their direct investment in real estate
assets to more liquid securities such as common stock and units in
publicly-traded REITs. The Operating Partnership has relationships with a number
of the nation's leading pension funds and other institutional investors, many of
whom have large portfolios of industrial properties and community shopping
centers. Management believes that the Operating Partnership's relationship with
third-party local property managers also will create acquisition opportunities
as such managers market properties on behalf of unaffiliated sellers. The
Operating Partnership also will maintain relationships with institutional owners
of property portfolios managed by AMB Investment Management. The Operating
Partnership believes that through these relationships it will have opportunities
to acquire portfolios in exchange for equity interests in the Operating
Partnership, and will be well-positioned to facilitate such investors' shift
from private to public real estate ownership. See "Business and Operating
Strategies -- AMB Investment Management."
The structure of the Operating Partnership also provides sellers the
opportunity to contribute properties to the Operating Partnership on a
tax-deferred basis in exchange for Units. The Operating Partnership believes
that its ability to offer tax-deferred transactions to sellers will enhance its
attractiveness to owners and developers seeking to transfer properties on a
tax-deferred basis.
GROWTH THROUGH RENOVATION, EXPANSION AND DEVELOPMENT
Management believes that renovation and expansion of value-added properties
and development of well-located, high quality industrial properties and
community shopping centers will continue to provide the Operating Partnership
with attractive opportunities for increased cash flow and a higher rate of
return than may be obtained from the purchase of fully leased, renovated
properties. Value-added properties are typically
28
<PAGE> 35
characterized as properties with available space or near-term leasing exposure,
properties which are well-located but require redevelopment or renovation, and
occasionally undeveloped land acquired in connection with another property that
provides an opportunity for development. Such properties require significant
management attention and/or capital investment to maximize their return.
USE OF PROCEEDS
The net proceeds from the Offering are expected to be approximately $348.8
million, after deducting net Underwriters' discounts and commissions and
estimated offering expenses of approximately $1.2 million. The Operating
Partnership intends to use the net proceeds to repay approximately $348.8
million of borrowings outstanding under the Credit Facility, which was incurred
to fund property acquisitions. Pending application of the net proceeds, the
Operating Partnership may invest such portion of the net proceeds in
interest-bearing accounts and short-term, interest-bearing securities which are
consistent with the Company's qualification for taxation as a REIT. As of March
31, 1998, the weighted average interest rate on such borrowings expected to be
repaid with the net proceeds of the Offering was approximately 6.9% and the
maturity was approximately 2.6 years. All of such indebtedness was incurred
within the 12-month period ended March 31, 1998.
PRICE RANGE OF COMMON STOCK AND DISTRIBUTION HISTORY
The Common Stock began trading on the New York Stock Exchange (the "NYSE")
on November 21, 1997 under the symbol "AMB." On May 14, 1998, the last reported
sales price per share of the Common Stock on the NYSE was $23 1/2. As of May 14,
1998, there were approximately 171 holders of record of the Common Stock
(excluding beneficial owners whose shares are held in the name of Cede & Co.).
The following table sets forth the high and low closing sales prices per share
of the Common Stock reported on the NYSE for the period from November 21, 1997
to May 14, 1998 and the distributions paid by the Company with respect to such
period.
<TABLE>
<CAPTION>
YEAR HIGH LOW DISTRIBUTION
---- ---- --- ------------
<S> <C> <C> <C>
1997
Fourth Quarter (from November 21, 1997)............ $25 1/8 $22 1/4 $0.1340
1998
First Quarter...................................... $24 15/16 $23 3/8 $0.3425
Second Quarter (through May 14, 1998).............. $25 $22 9/16 --
</TABLE>
There is no market established for the trading of the Operating
Partnership's Units. As of May 14, 1998, there were 89,523,120 Units
outstanding, which were held by 23 holders of record. Subject to certain
conditions, holders of Units will have the right to require the Operating
Partnership to redeem part or all of their Units for cash, or the Company may
elect to exchange such Units for shares of Common Stock (on a one-for-one
basis). See "Description of Certain Provisions of the Partnership Agreement of
the Operating Partnerships -- Redemption/Exchange Rights."
On December 8, 1997, the Board of Directors of the Company, in its capacity
as sole general partner of the Operating Partnership, declared distributions of
$0.134 per Unit, payable December 29, 1997 to partners of record as of December
18, 1997. In addition, the Company's Board of Directors declared a pro rata
distribution of $0.134 per share of Common Stock, payable December 29, 1997 to
stockholders of record as of December 18, 1997. The distribution covered the
period from November 26, 1997 through December 31, 1997, and was based upon
$0.3425 per unit and per share of Common Stock, as applicable, for a full
quarter.
On March 6, 1998, the Board of Directors of the Company, in its capacity as
general partner of the Operating Partnership, declared a distribution of $0.3425
per Unit, payable April 3, 1998 to partners of record as of March 18, 1998. In
addition, the Company's Board of Directors declared a distribution of $0.3425
per share of the Common Stock, payable April 3, 1998 to stockholders of record
as of March 18, 1998.
29
<PAGE> 36
CAPITALIZATION
The following table sets forth the capitalization of the Operating
Partnership as of March 31, 1998 on an historical, a pre-Offering pro forma and
a pro forma basis. The pre-Offering pro forma information gives effect to the
property acquisitions occurring after March 31, 1998 and the pro forma
information gives effect to such acquisitions and the application of the net
proceeds from the Offering as described under the caption "Use of Proceeds." The
information set forth in the following table should be read in conjunction with
the historical consolidated financial statements and notes thereto, the
condensed consolidated pro forma financial information and "Management's
Discussion and Analysis of Financial Condition and Results of Operations --
Liquidity and Capital Resources" included elsewhere in this Prospectus.
<TABLE>
<CAPTION>
PRE-OFFERING
HISTORICAL PRO FORMA PRO FORMA
---------- ------------ -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Debt:
Credit facility...................................... $ 312,000 $ 368,730 $ 19,930
% Notes due 2008................................ -- -- 100,000
% Notes due 2018................................ -- -- 150,000
% REPS due 2015................................. -- -- 100,000
Secured debt(1)...................................... 610,111 610,111 610,111
---------- ---------- ----------
Total debt................................... 922,111 978,841 980,041
Minority interests..................................... 52,867 52,867 52,867
Partners' capital:
General partner(2)................................... 1,670,705 1,670,705 1,670,705
Limited partner(2)................................... 70,896 70,896 70,896
---------- ---------- ----------
Total partners' capital...................... 1,741,601 1,741,601 1,741,601
---------- ---------- ----------
Total capitalization......................... $2,716,579 $2,773,309 $2,774,509
========== ========== ==========
</TABLE>
- ---------------
(1) Includes unamortized debt premiums of $17,542.
(2) Does not give effect to 4,237,750 Performance Units which may be issued
subject to certain performance criteria. See "Description of Certain
Provisions of the Partnership Agreement of the Operating
Partnership -- Performance Units."
30
<PAGE> 37
SELECTED FINANCIAL AND OTHER DATA
OPERATING PARTNERSHIP AND AMB CONTRIBUTED PROPERTIES
The following table sets forth selected financial and other data on an
historical basis for the Operating Partnership for the period from November 26,
1997 to December 31, 1997 and for the three months ended March 31, 1998 and for
the AMB Contributed Properties for the years ended December 31, 1993, 1994, 1995
and 1996, the period from January 1, 1997 to November 25, 1997 and the three
months ended March 31, 1997, and on an as adjusted basis for the Operating
Partnership for the year ended December 31, 1997. Additionally, the table sets
forth selected financial and other data for the Operating Partnership for the
year ended December 31, 1997 and for the three months ended March 31, 1998 on a
pro forma basis (giving effect to the Formation Transactions (as defined) the
IPO, certain property acquisitions and dispositions in 1997, the 1998 property
acquisitions and the Offering and the application of the net proceeds therefrom,
as if such transactions had occurred on January 1, 1997). The historical
financial information contained in the tables should be read in conjunction with
"Management's Discussion and Analysis of Financial Condition and Results of
Operations," the Consolidated Financial Statements and accompanying Notes
thereto and the financial schedules included elsewhere in this Prospectus.
COMPANY AND PREDECESSOR
The following table sets forth selected financial and other data on an
historical basis for the Company and its Predecessor, AMB Institutional Realty
Advisors, Inc., a California corporation, for the years ended December 31, 1993,
1994, 1995, 1996 and 1997, and for the three months ended March 31, 1997 and
1998 and on an as adjusted basis for the Company for the year ended December 31,
1997 (giving effect to the Formation Transactions, the IPO and certain property
acquisitions and dispositions in 1997). Additionally, the table sets forth
selected financial and other data for the Company for the year ended December
31, 1997 and for the three months ended March 31, 1998 on a pro forma basis
(giving effect to the Formation Transactions, the IPO, certain property
acquisitions and dispositions in 1997, the property acquisitions in 1998 and the
Offering and the application of the net proceeds therefrom, as if such
transactions had occurred on January 1, 1997). For the four-year period ended
December 31, 1996 and the period from January 1, 1997 through November 25, 1997,
the Predecessor operated as an investment manager with revenues that consisted
primarily of fees earned in connection with real estate management services. The
historical financial information contained in the tables should be read in
conjunction with "Management's Discussion and Analysis of Financial Condition
and Results of Operations," the Consolidated Financial Statements and
accompanying Notes thereto and the financial schedules included elsewhere in
this Prospectus.
The historical results of the Company for 1997 include the results of
operations of the Company, including property operations for the period from
November 26, 1997 to December 31, 1997 and the results of the Company's
Predecessor, an investment manager, for the period from January 1, 1997 to
November 25, 1997.
In the opinion of management, the as adjusted and pro forma condensed
financial information provides for all adjustments necessary to reflect the
adjustments and transactions described above. The as adjusted and pro forma
information is unaudited and is not necessarily indicative of the results that
would have occurred if the transactions and adjustments reflected therein had
been consummated in the period or on the date presented, or on any particular
date in the future, nor does it purport to represent the financial position,
results of operations or changes in cash flows for future periods.
31
<PAGE> 38
OPERATING PARTNERSHIP AND AMB CONTRIBUTED PROPERTIES
SELECTED FINANCIAL AND OTHER DATA
(IN THOUSANDS EXCEPT UNIT DATA, PERCENTAGES AND NUMBER OF PROPERTIES)
<TABLE>
<CAPTION>
AS OF AND FOR THE YEARS ENDED DECEMBER 31,
-----------------------------------------------------------------------------------------------
OPERATING PARTNERSHIP
------------------------------------
HISTORICAL AS ADJUSTED PRO FORMA
AMB CONTRIBUTED PROPERTIES(1) (2) (3) (4)
-------------------------------------------------------- ---------- ----------- ---------
1993 1994 1995 1996 1997 1997 1997 1997
-------- -------- ---------- ---------- -------- ---------- ----------- ---------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
OPERATING DATA:
Total revenues.......... $ 24,398 $ 51,682 $ 108,249 $ 167,953 $208,608 $ 27,110 $ 284,674 $ 325,293
Income from operations
before minority
interests............. 6,871 13,753 32,519 54,865 58,068 9,291 103,903 107,345
Net income.............. 6,871 13,194 32,531 54,400 57,184 9,174 102,606 103,274
Net income per unit:(5)
Basic................. $ 0.10 $ 1.16 $ 1.15
Diluted............... 0.10 1.16 1.15
Distributions per
unit.................. 0.13 1.37 1.37
OTHER DATA:
EBITDA(6)............... $ 195,218 $ 225,556
Funds from
Operations(7)......... 147,409 153,900
FFO per diluted
unit(7)............... $ 1.66 $ 1.71
Cash flows provided
by(used in):
Operating
activities.......... 131,621 138,112
Investing
activities.......... (607,768) (842,337)
Financing
activities.......... 553,199 571,614
Ratio of earnings to
fixed charges(8)...... 3.1x 2.5x
Book debt service
coverage ratio(9)..... 4.3x 3.4x
Cash debt service
coverage ratio(10).... 3.8x 3.1x
BALANCE SHEET DATA:
Investments in real
estate at cost........ $323,230 $666,672 $1,018,681 $1,616,091 $2,442,999
Total assets............ 326,586 721,131 1,117,181 1,622,559 2,506,255
Secured debt(11)........ 100,496 201,959 254,067 522,634 535,652
Unsecured notes......... -- -- -- -- --
Unsecured credit
facility.............. -- -- -- 25,500 150,000
Partner's capital....... 208,043 490,111 837,199 1,027,601 1,717,398
PROPERTY DATA:
INDUSTRIAL PROPERTIES
Total rentable square
footage of properties
at end of period...... 5,638 13,364 21,598 29,609 37,329
Number of properties at
end of period......... 12 28 44 60 95
Occupancy rate at end of
period................ 97.4% 96.9% 97.3% 97.2% 95.7%
RETAIL PROPERTIES
Total rentable square
footage of properties
at end of period...... 1,074 2,422 3,299 5,282 6,216
Number of properties at
end of period......... 9 14 19 30 33
Occupancy rate at end of
period................ 96.5% 93.7% 92.4% 92.4% 96.1%
<CAPTION>
AS OF AND FOR THE
THREE MONTHS ENDED MARCH 31,
-------------------------------------
AMB OPERATING PARTNERSHIP
CONTRIBUTED -----------------------
PROPERTIES PRO FORMA
(1) HISTORICAL (4)
----------- ---------- ----------
1997 1998 1998
----------- ---------- ----------
<S> <C> <C> <C>
OPERATING DATA:
Total revenues.......... $ 54,749 $ 75,785 $ 85,099
Income from operations
before minority
interests............. 14,217 29,188 29,973
Net income.............. 13,997 28,726 28,898
Net income per unit:(5)
Basic................. $ 0.32 $ 0.32
Diluted............... 0.32 0.32
Distributions per
unit.................. 0.34 0.34
OTHER DATA:
EBITDA(6)............... $ 52,815 $ 60,028
Funds from
Operations(7)......... 40,295 42,341
FFO per diluted
unit(7)............... $ 0.45 $ 0.47
Cash flows provided
by(used in):
Operating
activities.......... 34,820 36,906
Investing
activities.......... (199,520) (49,646)
Financing
activities.......... 153,316 (9,063)
Ratio of earnings to
fixed charges(8)...... 3.1x 2.6x
Book debt service
coverage ratio(9)..... 4.5x 3.7x
Cash debt service
coverage ratio(10).... 3.8x 3.3x
BALANCE SHEET DATA:
Investments in real
estate at cost........ $2,755,882 $2,812,612
Total assets............ 2,798,190 2,856,120
Secured debt(11)........ 610,111 610,111
Unsecured notes......... -- 350,000
Unsecured credit
facility.............. 312,000 19,930
Partner's capital....... 1,741,601 1,741,601
PROPERTY DATA:
INDUSTRIAL PROPERTIES
Total rentable square
footage of properties
at end of period...... 43,964 45,269
Number of properties at
end of period......... 118 122
Occupancy rate at end of
period................ 94.6% 94.6%
RETAIL PROPERTIES
Total rentable square
footage of properties
at end of period...... 6,849 6,849
Number of properties at
end of period......... 37 37
Occupancy rate at end of
period................ 94.6% 94.6%
</TABLE>
- ---------------
(1) Represents the AMB Contributed Properties historical combined financial and
other data for the years ended December 31, 1993, 1994, 1995 and 1996, the
period from January 1, 1997 through November 25, 1997 and for the three
months ended March 31, 1997.
(2) For the period from November 26, 1997 to December 31, 1997.
32
<PAGE> 39
(3) As adjusted financial and other data have been prepared as if the Formation
Transactions, the IPO and certain property acquisitions and dispositions in
1997 had occurred on January 1, 1997.
(4) Pro forma financial and other data have been prepared as if the Formation
Transactions, the IPO, certain property acquisitions and dispositions in
1997, the property acquisitions in 1998 and the Offering had occurred on
January 1, 1997.
(5) Historical, as adjusted and pro forma net income per basic unit for the
year ended December 31, 1997 equals the historical, as adjusted and pro
forma net income divided by 88,416,676, 88,416,678 and 89,523,120 units,
respectively. Historical and pro forma net income per basic unit for the
three months ended March 31, 1998 equals the historical and pro forma net
income divided by 88,428,969 and 89,523,120 units respectively. Historical,
as adjusted and pro forma net income per diluted unit for the year ended
December 31, 1997 equal the historical, as adjusted and pro forma net
income divided by 88,698,719, 88,698,719 and 89,805,163 units,
respectively. Historical and pro forma net income per diluted unit for the
three months ended March 31, 1998 equals the historical and pro forma net
income divided by 88,839,192 units and 89,933,343 units, respectively.
(6) EBITDA is computed as income from operations before disposal of properties
and minority interests plus interest expense, income taxes, depreciation
and amortization. Management believes that in addition to cash flows and
net income, EBITDA is a useful financial performance measure for assessing
the operating performance of an equity REIT because, together with net
income and cash flows, EBITDA provides investors with an additional basis
to evaluate the ability of a REIT to incur and service debt and to fund
acquisitions and other capital expenditures.
(7) FFO, as defined by NAREIT, represents net income (loss) before minority
interests and extraordinary items, adjusted for depreciation on real
property and amortization of tenant improvement costs and lease
commissions, gains (losses) from the disposal of properties and FFO
attributable to minority interests in consolidated joint ventures whose
interests are not convertible into shares of Common Stock. The White Paper
on Funds from Operations approved by the Board of Governors of NAREIT in
March 1995 defines Funds from Operations as net income (loss) (computed in
accordance with GAAP), excluding gains (or losses) from debt restructuring
and sales of properties, plus real estate related depreciation and
amortization. Management considers FFO an appropriate measure of
performance of an equity REIT because it is predicated on cash flow
analyses. The Operating Partnership computes FFO in accordance with
standards established by the White Paper, which may differ from the
methodology for calculating FFO utilized by other REITs and, accordingly,
may not be comparable to such other REITs. FFO should not be considered as
an alternative to net income (determined in accordance with GAAP) as an
indicator of the financial performance or to cash flow from operating
activities (determined in accordance with GAAP) as a measure of liquidity,
nor is it indicative of funds available to fund cash needs, including the
ability to make distributions.
<TABLE>
<CAPTION>
FOR THE YEAR ENDED FOR THE THREE MONTHS ENDED
DECEMBER 31, 1997 MARCH 31, 1998
-------------------------- --------------------------
AS ADJUSTED PRO FORMA HISTORICAL PRO FORMA
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Income from operations before minority interests............ $ 103,903 $ 107,345 $ 29,188 $ 29,973
Real estate related depreciation and amortization:
Depreciation and amortization........................... 45,886 52,402 11,786 13,812
Furniture, fixtures and equipment depreciation.......... (173) (173) (104) (104)
FFO attributable to minority interests...................... (2,207) (5,674) (575) (1,340)
----------- ----------- ----------- -----------
FFO..................................................... $ 147,409 $ 153,900 $ 40,295 $ 42,341
=========== =========== =========== ===========
FFO per diluted unit........................................ $ 1.66 $ 1.71 $ 0.45 $ 0.47
=========== =========== =========== ===========
Weighted average units outstanding (diluted)................ 88,698,719 89,805,163 88,839,192 89,933,343
=========== =========== =========== ===========
</TABLE>
(8) The ratio of earnings to fixed charges is computed as income from
operations before minority interests plus fixed charges (excluding
capitalized interest) divided by fixed charges. Fixed charges consist of
interest costs (including amortization of debt premiums and financing
costs), whether capitalized or expensed, and the interest component of
rental expense.
(9) The book debt service coverage ratio is calculated as EBITDA divided by
book interest expense (including amortization of debt premiums and
discounts and financing costs).
(10) The cash debt service coverage ratio is calculated as EBITDA divided by
cash interest costs. Cash interest costs consist of book interest expense
(excluding amortization of debt premiums and discounts and financing costs)
plus capitalized interest.
(11) Secured debt as of December 31, 1997 and March 31, 1998 includes
unamortized debt premiums and discounts of approximately $18,286 and
$17,452, respectively. See Notes to Consolidated Financial Statements.
33
<PAGE> 40
COMPANY AND PREDECESSOR SELECTED FINANCIAL AND OTHER DATA
(IN THOUSANDS EXCEPT SHARE DATA, PERCENTAGES AND NUMBER OF PROPERTIES)
<TABLE>
<CAPTION>
AS OF AND FOR THE YEARS ENDED DECEMBER 31,
----------------------------------------------------------------------------
COMPANY
-------------------------------------
PREDECESSOR HISTORICAL AS ADJUSTED PRO FORMA
(1) (2) (3) (4)
------------------------------------ ---------- ----------- ----------
1993 1994 1995 1996 1997 1997 1997
------ ------- ------- ------- ---------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
OPERATING DATA:
Total revenues.............. $7,155 $12,865 $16,865 $23,991 $ 56,062 $ 284,674 $ 325,293
Income from operations
before minority
interests................. 798 2,925 3,296 7,140 18,885 103,903 107,345
Net income.................. 798 2,925 3,262 7,003 18,228 99,508 99,040
Net income per share(5):
Basic..................... $ 0.17 $ 0.59 $ 0.64 $ 1.38 $ 1.39 $ 1.15 $ 1.15
Diluted................... 0.17 0.59 0.64 1.38 1.38 1.15 1.15
Distributions per share:.... 0.13 1.37 1.37
OTHER DATA:
EBITDA(6)................... $ 195,218 $ 225,556
Funds from Operations(7).... 147,409 153,900
FFO per diluted share(7).... $ 1.66 $ 1.71
Cash flows provided by(used
in):
Operating activities...... 131,621 138,112
Investing activities...... (607,768) (842,337)
Financing activities...... 553,199 571,614
Ratio of earnings to fixed
charges(8)................ 3.1x 2.5x
Book debt service coverage
ratio(9).................. 4.3x 3.4x
Cash debt service coverage
ratio(10)................. 3.8x 3.1x
BALANCE SHEET DATA:
Investments in real estate
at cost................... $ -- $ -- $ -- $ -- $2,442,999
Total assets................ 2,739 4,092 4,948 7,085 2,506,255
Secured debt(11)............ -- -- -- -- 535,652
Unsecured notes............. -- -- -- -- --
Unsecured credit facility... -- -- -- -- 150,000
Stockholders' equity........ 2,480 3,848 4,241 6,300 1,668,030
<CAPTION>
AS OF AND FOR THE
THREE MONTHS ENDED
MARCH 31,
----------------------------------------
COMPANY
-----------------------
PREDECESSOR PRO FORMA
(1) HISTORICAL (4)
-------------- ---------- ----------
1997 1998 1998
-------------- ---------- ----------
<S> <C> <C> <C>
OPERATING DATA:
Total revenues.............. $5,112 $ 75,785 $ 85,099
Income from operations
before minority
interests................. 1,239 29,188 29,973
Net income.................. 1,239 27,906 27,713
Net income per share(5):
Basic..................... $ 0.24 $ 0.32 $ 0.32
Diluted................... 0.24 0.32 0.32
Distributions per share:.... 0.34 0.34
OTHER DATA:
EBITDA(6)................... $ 52,815 $ 60,028
Funds from Operations(7).... 40,295 42,341
FFO per diluted share(7).... $ 0.45 $ 0.47
Cash flows provided by(used
in):
Operating activities...... 34,820 36,906
Investing activities...... (199,520) (49,646)
Financing activities...... 153,316 (9,063)
Ratio of earnings to fixed
charges(8)................ 3.1x 2.6x
Book debt service coverage
ratio(9).................. 4.5x 3.7x
Cash debt service coverage
ratio(10)................. 3.8x 3.3x
BALANCE SHEET DATA:
Investments in real estate
at cost................... $2,755,882 $2,812,612
Total assets................ 2,798,190 2,856,120
Secured debt(11)............ 610,111 610,111
Unsecured notes............. -- 350,000
Unsecured credit facility... 312,000 19,930
Stockholders' equity........ 1,670,705 1,670,705
</TABLE>
- ---------------
(1) Represents the Predecessor's historical financial and other data for the
years ended December 31, 1993, 1994, 1995, 1996 and the three months ended
March 31, 1997. The Predecessor operated as an investment manager prior to
November 26, 1997.
(2) Represents the Predecessor's historical financial and other data for the
period January 1, 1997 through November 25, 1997 and the Company's
historical and other data for the period from November 26, 1997 to December
31, 1997.
(3) As adjusted financial and other data have been prepared as if the Formation
Transactions, the IPO and certain property acquisitions and dispositions in
1997 had occurred on January 1, 1997.
(4) Pro forma financial and other data have been prepared as if the Formation
Transactions, the IPO, certain property acquisitions and dispositions in
1997, the property acquisitions in 1998 and the Offering had occurred on
January 1, 1997.
(5) Historical, as adjusted and pro forma net income per basic share for the
year ended December 31, 1997 equals the historical, as adjusted and pro
forma net income divided by 13,140,218, 85,874,513 and 85,874,513 shares,
respectively. Historical and pro forma net income per basic share for the
three months ended March 31, 1998 equals the historical and pro forma net
income divided by 85,874,513 and 85,874,513 shares, respectively.
Historical, as adjusted and pro forma diluted net income per share for the
year ended December 31, 1997 equals the historical, as adjusted and pro
forma net income divided by 13,168,036, 86,156,556 and 86,156,556,
respectively. Historical and pro forma diluted net income per share for the
three months ended March 31, 1998 equals the historical and pro forma net
income divided by 88,284,736 and 86,284,736 shares, respectively.
(6) EBITDA is computed as income from operations before disposal of properties
and minority interests plus interest expense, income taxes, depreciation
and amortization. Management believes that in addition to cash flows and
net income, EBITDA is a useful financial performance measure for assessing
the operating performance of an equity REIT because, together with net
income and cash flows, EBITDA provides investors with an additional basis
to evaluate the ability of a REIT to incur and service debt and to fund
acquisitions and other capital expenditures.
(7) FFO, as defined by NAREIT, represents net income (loss) before minority
interests and extraordinary items, adjusted for depreciation on real
property and amortization of tenant improvement costs and lease
commissions, gains (losses) from the disposal of properties and FFO
attributable to minority interests in consolidated joint ventures whose
interests are not convertible into shares of Common Stock. The White Paper
on Funds from Operations approved by the Board of Governors of NAREIT in
March 1995 defines Funds from Operations as net income (loss) (computed in
accordance with GAAP), excluding gains (or losses) from debt restructuring
and sales of properties, plus real estate related depreciation and
amortization. Management considers FFO an appropriate measure of
performance of an equity REIT because it is predicated on cash flow
analyses. The Company computes FFO in accordance with standards established
by the White Paper, which may differ from the methodology for calculating
FFO utilized by other REITs and, accordingly, may not be comparable to such
other REITs. FFO should not be considered as an alternative to net income
(determined in accordance with GAAP) as an indicator of the Properties'
financial performance or to cash flow from operating activities (determined
in accordance with GAAP) as a measure of the Properties' liquidity, nor is
it indicative of funds available to fund the Properties' cash needs,
including its ability to make distributions.
34
<PAGE> 41
<TABLE>
<CAPTION>
FOR THE YEAR ENDED FOR THE THREE MONTHS ENDED
DECEMBER 31, 1997 MARCH 31, 1998
-------------------------- --------------------------
AS ADJUSTED PRO FORMA HISTORICAL PRO FORMA
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Income from operations before minority interests............ $ 103,903 $ 107,345 $ 29,188 $ 29,973
Real estate related depreciation and amortization:
Depreciation and amortization........................... 45,886 52,402 11,786 13,812
Furniture, fixtures and equipment depreciation.......... (173) (173) (104) (104)
FFO attributable to minority interests...................... (2,207) (5,674) (575) (1,340)
----------- ----------- ----------- -----------
FFO................................................. $ 147,409 $ 153,900 $ 40,295 $ 42,341
=========== =========== =========== ===========
FFO per diluted share and unit.............................. $ 1.66 $ 1.71 $ 0.45 $ 0.47
=========== =========== =========== ===========
Withheld average shares and units outstanding............... 88,698,719 89,805,163 88,839,192 89,933,343
=========== =========== =========== ===========
</TABLE>
(8) The ratio of earnings to fixed charges is computed as income from
operations before minority interests plus fixed charges (excluding
capitalized interest) divided by fixed charges. Fixed charges consist of
interest costs (including amortization of debt premiums and financing
costs), whether capitalized or expensed, and the interest component of
rental expense.
(9) The book debt service coverage ratio is calculated as EBITDA divided by
book interest expense (including amortization of debt premiums and
discounts and financing costs).
(10) The cash debt service coverage ratio is calculated as EBITDA divided by
cash interest costs. Cash interest costs consist of book interest expense
(excluding amortization of debt premiums and discounts and financing costs)
plus capitalized interest.
(11) Secured debt as of December 31, 1997 and March 31, 1998 includes
unamortized debt premiums and discounts of approximately $18,286 and
$17,452, respectively. See Notes to Consolidated Financial Statements.
35
<PAGE> 42
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis of the consolidated financial
condition and results of operations should be read in conjunction with the
"Notes to Consolidated Financial Statements" and "Selected Financial and Other
Data" of the Operating Partnership and the Company. Statements contained herein
which are not historical facts may be forward looking statements. Such
statements are subject to certain risks and uncertainties which could cause
actual results to differ materially from those projected. Readers are cautioned
not to place undue reliance on these forward-looking statements, which speak
only as of the date hereof.
GENERAL
The discussion below is presented as follows: (i) results of the Company
and its Predecessor for the years ended December 31, 1995, 1996 and 1997 and for
the three months ended March 31, 1997 and 1998, and (ii) results of the
Operating Partnership and the AMB Contributed Properties for the years ended
December 31, 1995, 1996 and 1997 and for the three months ended March 31, 1997
and 1998. Because the Operating Partnership commenced its operations in
connection with the consummation of the IPO on November 26, 1997 and had no
predecessor, the discussion of the Operating Partnership provides a comparison
to the AMB Contributed Properties in lieu of a discussion of the historical
operations of the Operating Partnership.
The historical results of the Company for the year ended December 31, 1997
include its results, including property operations, for the period from November
26, 1997 to December 31, 1997 and the results of the Company's Predecessor, an
investment manager, for the period from January 1, 1997 to November 25, 1997. As
an investment manager, the Predecessor's revenues consisted primarily of fees
earned in connection with real estate management services. Management's
discussion and analysis of the Company and Predecessor for the years ended
December 31, 1995, 1996 and 1997 and for the three months ended March 31, 1997
and 1998 is limited to investment management and other income and general and
administrative expenses, and excludes a discussion of rental revenues, operating
expenses, interest expense and depreciation and amortization because such
analysis is not comparable or meaningful given the differences in lines of
business between the Company's and the Predecessor's.
The historical results of the Operating Partnership for the year ended
December 31, 1997 include the results achieved by the Operating Partnership for
the period from November 26, 1997 (date of completion of Formation Transaction)
to December 31, 1997 and the results achieved by the AMB Contributed Properties
for the period from January 1, 1997 to November 25, 1997.
COMPANY AND PREDECESSOR RESULTS OF OPERATIONS
COMPANY AND PREDECESSOR -- THREE MONTHS ENDED MARCH 31, 1998 AND 1997
Rental revenues. Rental revenues, including straight-line rents, tenant
reimbursements and other property related income, totaled $74.6 million for the
three months ended March 31, 1998. The Predecessor's revenues consisted
primarily of fees earned in connection with real estate management services. As
such, no such rental revenues existed for the Predecessor for the three months
ended March 31, 1997.
Property operating expenses and real estate taxes. Property operating
expenses, including asset management costs and real estate taxes, totaled $20.3
million for the three months ended March 31, 1998. The Predecessor's expenses
consisted primarily of salaries and other general and administrative costs. As
such, no such property operating expenses existed during the three months ended
March 31, 1997.
General and administrative expenses. The Company's general and
administrative expenses were $2.7 million for the three months ended March 31,
1998, as compared to the Predecessor's investment management expenses of $3.9
million for the three months ended March 31, 1997. Investment management
expenses of the Predecessor consisted primarily of salaries and other general
and administrative expenses. The $1.2 million, or 31%, decrease in general and
administrative expenses is attributable to the change in the operations of the
Company, from an investment manager to a fully integrated real estate company,
and the
36
<PAGE> 43
formation of AMB Investment Management. In connection with the Formation
Transactions, AMB Investment Management assumed employment and other related
costs of certain employees who transferred from the Predecessor to AMB
Investment Management for the purpose of carrying on the investment management
business.
COMPANY AND PREDECESSOR -- YEARS ENDED DECEMBER 31, 1997 AND 1996
Investment management and other income. Investment management and other
income for the period from January 1, 1997 to November 25, 1997 was $29.0
million, which on an annualized basis represents a 34.1% increase over the year
ended December 31, 1996. The increase reflects the growth in the portfolio under
management. Investment management and other income for the period from November
26, 1997 to December 31, 1997 was $0.6 million.
General and administrative expenses. General and administrative expenses
for the period from January 1, 1997 to November 25, 1997 were $19.4 million,
which represents a 27.7% increase on an annualized basis over the year ended
December 31, 1996. The increase was attributable to an increase in staffing that
resulted from the growth in the portfolio under management.
PREDECESSOR -- YEARS ENDED DECEMBER 31, 1996 AND 1995
Investment management and other income. Investment management and other
income for the years ended December 31, 1996 and 1995 was $24.0 million and
$16.9 million, respectively, an increase of 42.0%. The increase from 1995 to
1996 was primarily due to management fees associated with a growing portfolio
and increased economies of scale from managing this larger portfolio.
General and administrative expenses. General and administrative expenses
for the years ended December 31, 1996 and 1995 were $16.9 million and $13.6
million, respectively, reflecting the increase in size of the portfolio under
management.
OPERATING PARTNERSHIP AND AMB CONTRIBUTED PROPERTIES RESULTS OF OPERATIONS
The historical results of operations of the Operating Partnerships and AMB
Contributed Properties for periods prior to November 26, 1997 include Properties
that were managed by the Predecessor and exclude the results of four properties
that were contributed to the Operating Partnership in the Formation Transactions
that were not previously managed by the Predecessor. In addition, the historical
results of operations include the results of Properties acquired after November
26, 1997, from the date of acquisition of such Properties to December 31, 1997.
The historical property financial data presented herein show significant
increases in revenues and expenses principally attributable to substantial
portfolio growth. As a result, the Operating Partnership does not believe the
year-to-year financial data are comparable. Therefore, the analysis below shows
(i) changes resulting from Properties that were held during the entire period
for both years being compared (the "Core Portfolio") and (ii) changes
attributable to acquisition and development activity. For comparison between the
three months ended March 31, 1997 and 1998, the Core Portfolio consists of 77
properties acquired prior to January 1, 1997, and for the comparison between the
years ended December 31, 1997 and 1996, the Core Portfolio consists of the 59
Properties acquired prior to January 1, 1996, and for the comparison between the
years ended December 31, 1996 and 1995, the Core Portfolio consists of the 42
Properties acquired prior to January 1, 1995. The Operating Partnership's future
financial condition and results of operations, including rental revenues, may be
impacted by the acquisition of additional properties. No assurance can be given
that the past trends of revenues, expenses or income of the Operating
Partnership will continue in the future at their historical rates, and any
variation therefrom may be material.
OPERATING PARTNERSHIP AND AMB CONTRIBUTED PROPERTIES -- THREE MONTHS ENDED
MARCH 31, 1998 AND 1997
Rental revenues. Rental revenues, including straight-line rents, tenant
reimbursement and other property related income, increased by $19.7 million, or
36%, for the three months ended March 31, 1998, to
37
<PAGE> 44
$74.6 million as compared to $54.9 million for the three months ended March 31,
1997. Approximately $3.1 million, or 16% of this increase, was attributable to
the Core Portfolio, with the remaining $16.6 million attributable to Properties
acquired in 1997 and 1998. The 6% growth in rental revenues in the Core
Portfolio resulted primarily from the incremental effect of rental rate
increases, changes in occupancy and reimbursement of expenses. In 1998, the
Company increased average contractual or base rental rates on the Properties by
16.4% on 52 new and renewing leases totaling 1.3 million rentable square feet
(representing 2.6% of the Properties' aggregate rentable square footage).
Property operating expenses and real estate taxes. Property operating
expenses, including asset management costs and real estate taxes, increased by
$0.9 million, or 4%, for the three months ended March 31, 1998, to $20.3 million
as compared to $19.4 million for the three months ended March 31, 1997. Core
Portfolio operating expenses decreased by approximately $3.1 million, while
operating expenses attributable to Properties acquired in 1998 and 1997
increased by $4.0 million. The change in Core Portfolio operating expenses and
real estate taxes relates to: (i) Core Portfolio real estate taxes and insurance
expense increased by approximately $0.2 million from 1997 to 1998, while (ii)
Core Portfolio other property operating expenses (excluding real estate taxes
and insurance) decreased by approximately $3.3 million from 1997 to 1998. The
large decrease in other property operating expenses is attributable to lower
asset management costs in 1998 as compared to 1997 that resulted from the change
in ownership structure.
Interest expense. Interest expense for the three months ended March 31,
1998 of $11.8 million remained flat as compared to $11.8 million interest
expense for the three months ended March 31, 1997. This was the result of an
increase in interest expense resulting from debt incurred to fund property
acquisition being offset by a decrease in interest expense resulting from the
amortization of debt premiums of $0.7 million in the three months ended March
31, 1998 and an increase in capitalized interest related to developments
in-process.
Depreciation and amortization expense. Depreciation and amortization
expense increased by $2.9 million, or 33%, for the three months ended March 31,
1998, to $11.8 million as compared to $8.9 million for the three months ended
March 31, 1997. This increase was attributable to substantial growth in the
number of properties owned by the Operating Partnership.
General, administrative and other expenses. General, administrative and
other expenses increased by $2.5 million for the three months ended March 31,
1998, to $2.7 million as compared to $0.2 million for the three months ended
March 31, 1997. This increase was attributable to the changes in operations
resulting primarily from the change in the character of the Operating
Partnership's business.
OPERATING PARTNERSHIP AND AMB CONTRIBUTED PROPERTIES -- YEARS ENDED DECEMBER
31, 1997 AND 1996
Rental revenues. Rental revenues, including tenant reimbursements and other
property related income, increased by $67.5 million, or 40.6%, for the year
ended December 31, 1997, to $233.9 million as compared to $166.4 million for the
year ended December 31, 1996. Approximately $8.8 million, or 13.0% of this
increase, was attributable to the Core Portfolio, with the remaining $58.7
million attributable to Properties acquired in 1996 and 1997. The 6.3% growth in
rental revenues in the Core Portfolio resulted primarily from the incremental
effect of rental rate increases and reimbursement of expenses. In 1997, the
Operating Partnerships increased average contractual or base rental rates on the
Properties by 12% on 393 new and renewing leases totaling 7.5 million rentable
square feet (representing 17.2% of the Properties' aggregate rentable square
footage).
Property operating expenses and real estate taxes. Property operating
expenses and real estate taxes increased by $25.6 million, or 46.3%, for the
year ended December 31, 1997, to $80.9 million as compared to $55.3 million for
the year ended December 31, 1996. Approximately $3.4 million of this increase
was attributable to the Core Portfolio, with the remaining $22.2 million
attributable to Properties acquired in 1997 and 1996. Core Portfolio real estate
taxes and insurance expense increased by approximately $1.4 million from 1996 to
1997. Core Portfolio other property operating expenses (excluding real estate
taxes and insurance) increased by $2.0 million from 1996 to 1997. The increases
in expenses are primarily due to increases in property tax assessment values and
incentive management fees expense.
38
<PAGE> 45
Interest expense. Interest expense increased by $21.6 million, or 80.3%,
for the year ended December 31, 1997, to $48.5 million as compared to $26.9
million for the year ended December 31, 1996. Interest expense related to the
Core Portfolio increased by $11.6 million due to the placement of debt on
certain properties, while financing related to properties acquired in 1997 and
1996 added $10.0 million to interest expense.
Depreciation and amortization expense. Depreciation and amortization
expense increased by $8.2 million, or 28.7%, for the year ended December 31,
1997, to $36.8 million as compared to $28.6 million for the year ended December
31, 1996. The increase was attributable to substantial growth in the number of
properties owned by the Operating Partnership. Depreciation and amortization
includes depreciation of capital and tenant improvements and amortization of
leasing commissions.
General, administrative and other expenses. General, administrative and
other expenses increased by $1.2 million or 150%, for the year ended December
31, 1997, to $2.0 million as compared to $0.8 million for the year ended
December 31, 1996. The increase was attributable to the changes in operations
resulting primarily from the change in the character of the Operating
Partnership's business.
Interest and other income. Interest and other income decreased by $0.1
million, or 7%, for the year ended December 31, 1997, to $1.4 million as
compared to $1.5 million for the year ended December 31, 1996. This decrease was
primarily due to lower average cash balances.
AMB CONTRIBUTED PROPERTIES -- YEARS ENDED DECEMBER 31, 1996 AND 1995
Rental revenues. Rental revenues, including tenant reimbursements and other
property related income, increased by $60.2 million, or 56.7%, for the year
ended December 31, 1996, to $166.4 million as compared to $106.2 million for the
year ended 1995. Approximately $7.5 million, or 12.5% of this increase, was
attributable to the Core Portfolio, with the remaining $52.7 million
attributable to Properties acquired in 1996 and 1995. The 8.6% growth in rental
income in the Core Portfolio resulted primarily from rental rate increases.
Property operating expenses and real estate taxes. Property operating
expenses and real estate taxes increased by $18.4 million, or 49.9%, for the
year ended December 31, 1996, to $55.3 million as compared to $36.9 million for
the year ended December 31, 1995. Approximately $1.6 million of this increase
was attributable to the Core Portfolio, with the remaining $16.8 million
attributable to Properties acquired in 1996 and 1995. The Core Portfolio had an
increase of approximately $1.0 million in real estate tax and insurance expense.
The other property operating expenses (excluding real estate taxes and
insurance) for the Core Portfolio increased by $0.6 million from 1995 to 1996.
The increases in expenses are primarily due to increases in property tax
assessment values and miscellaneous expenses.
Interest expense. Interest expense increased by $6.4 million, or 31.2%, for
the year ended December 31, 1996, to $26.9 million as compared to $20.5 million
for the year ended December 31, 1995. Interest expense related to the Core
Portfolio increased by $3.2 million, while financing related to Properties
acquired in 1996 and 1995 added $3.2 million to interest expense.
Depreciation and amortization expense. Depreciation and amortization
expense increased by $11.1 million, or 63.4%, for the year ended December 31,
1996, to $28.6 million as compared to $17.5 million for the year ended December
31, 1995. The increase was attributable to substantial growth in the number of
properties owned by the Company. Depreciation and amortization includes
depreciation of capital and tenant improvements and amortization of leasing
commissions.
General, administrative and other expenses. General, administrative and
other expenses remained unchanged at $0.8 million for the years ended December
31, 1996 and December 31, 1995. General, administrative and other expenses as a
percentage of total revenues was 0.5% for the year ended December 31, 1996 and
0.7% for the year ended December 31, 1995.
Interest and other income. Interest income decreased by $0.6 million, or
28.6%, for the year ended December 31, 1996, to $1.5 million as compared to $2.1
million for the year ended December 31, 1995. This decrease was primarily due to
lower average cash balances.
39
<PAGE> 46
LIQUIDITY AND CAPITAL RESOURCES
The Company and the Operating Partnership expect that their principal
sources of working capital and funding for acquisitions, development, expansion
and renovation of the Properties will include their unsecured credit facility,
permanent secured debt financing, proceeds from public and private unsecured
debt offerings, proceeds from public and private equity offerings (including
issuances of Units) and cash flows provided by operations. Management believes
that its sources of working capital and its ability to access private and public
debt and equity capital are adequate to continue to meet liquidity requirements
for the foreseeable future.
Capital Resources
The Operating Partnership has a $500.0 million unsecured revolving credit
agreement with Morgan Guaranty Trust Company of New York as agent, and a
syndicate of 12 other banks. The Credit Facility has a term of three years, and
is subject to a fee that accrues on the daily average undrawn funds, which
varies between 15 and 25 basis points of the undrawn funds based on the
Operating Partnership's credit rating. The Operating Partnership uses the Credit
Facility principally for acquisitions and for general working capital
requirements. Borrowings under the Credit Facility bear interest at LIBOR plus
90 to 120 basis points, depending on the Company's debt rating at the time of
such borrowings. As of March 31, 1998, the outstanding balance on the Credit
Facility was $312.0 million and bore interest at LIBOR plus 110 basis points
(6.79% as of such date). Monthly debt service payments on the Credit Facility
are interest only. The Credit Facility matures in November 2000. See Notes to
Consolidated Financial Statements. The total amount available under the Credit
Facility fluctuates based upon the borrowing base, as defined in the agreement
governing the Credit Facility. Currently, the maximum amount available is
approximately $460 million.
The Operating Partnership has received a senior unsecured debt ratings of
Baa1 from Moody's Investors Service, BBB from Standard & Poor's Corporation and
BBB+ from Duff & Phelps Credit Rating Co. As a result of these ratings, the
Operating Partnership's interest rate on borrowings under the Credit Facility
was reduced to LIBOR plus 90 basis points.
In connection with the recent property acquisitions and the Formation
Transactions, the Operating Partnership has assumed various mortgages and other
secured debt. As of March 31, 1998, the aggregate principal amount of such
secured debt was $592.6 million, excluding unamortized debt premiums of $17.5
million. The secured debt bears interest at rates varying from 7.01% to 10.39%
per annum (with a weighted average of 8.01%) and final maturity dates ranging
from 1998 to 2014.
As of March 31, 1998, the Operating Partnership's total outstanding debt
was approximately $922.1 million, including unamortized debt premiums of
approximately $17.5 million. See Notes to Consolidated Financial Statements. The
total amount of debt to be repaid in 1998 is approximately $53.7 million,
including normal principal amortization of approximately $5.6 million and $35.0
million of assumed secured debt, which was repaid in full subsequent to March
31, 1998.
In order to maintain financial flexibility and facilitate the rapid
deployment of capital through market cycles, the Company presently intends to
operate with a debt-to-total market capitalization ratio of less than 45%.
Additionally, the Operating Partnership intends to structure its balance sheet
in order to maintain an investment grade rating on its senior unsecured debt.
The Operating Partnership intends to keep the majority of its assets
unencumbered to facilitate such rating. As of March 31, 1998, the Operating
Partnership's debt-to-total market capitalization ratio was approximately 29.9%.
Liquidity
As of March 31, 1998, the Operating Partnership had approximately $28.6
million in cash and cash equivalents and $148.0 million of additional available
borrowings under the Credit Facility. The Operating Partnership intends to use
cash from operations, available borrowings under its Credit Facility and net
proceeds from the anticipated issuance of the Notes to fund acquisitions and
capital expenditures and to provide for general working capital requirements.
40
<PAGE> 47
On March 9, 1998, the Company and the Operating Partnership declared a
quarterly cash distribution of $0.3425 per common share and unit, payable April
3, 1998 to stockholders and unitholders of record on March 18, 1998.
The anticipated size of the Company and the Operating Partnership's
distributions, using only cash from operations, will not allow them to retire
all of their debt as it comes due. Therefore, the Company and the Operating
Partnership intends to also repay maturing debt with net proceeds from future
debt and/or equity financings. No assurance can be given, however, that future
financings will be available to the Company and the Operating Partnership or
that the terms of any such financings will be favorable from the Company's
perspective.
Capital Commitments
In addition to recurring capital expenditures and costs to renew or
re-tenant space, the Operating Partnership is currently in the process of
renovating, expanding or developing 10 projects at a total estimated cost of
$211.0 million. The Operating Partnership presently expects to fund these
expenditures with cash from operations, borrowings under the Credit Facility or
debt or equity issuances. Other than these capital items, the Company has no
material capital commitments. During the period from January 1, 1998 to March
31, 1998, the Operating Partnership acquired 56 industrial buildings and two
retail centers, aggregating 6.9 million rentable square feet for a total cost of
$272.1 million. The acquisitions were funded through borrowings under the Credit
Facility, cash, debt assumption of approximately $83.5 million, an investment
from a co-investment partner of approximately $37.0 million and the issuance of
Units with a value of approximately $25.8 million at the date of issuance. The
Operating Partnership expects that its funds from operations and availability
under its Credit Facility will be sufficient to meet expected capital
commitments for the next 12 months.
INFLATION
Substantially all of the industrial and retail leases require the tenant to
pay, as additional rent, a portion of any increases in real estate taxes and
operating expenses over a base amount. In addition, many of the industrial and
retail leases provide for fixed increases in base rent or indexed escalations
(based on the Consumer Price Index or other measures). Management believes that
inflationary increases in operating expenses will be offset, in part, by the
expense reimbursements and contractual rent increases described above.
Leases representing approximately 5.9% of the Operating Partnership's total
rentable square feet provide for rent increases based upon changes in the
Consumer Price Index. The remainder of the Operating Partnership's leases
provide for fixed rental payments, of which a majority include predetermined
rent increases at various points in time during the lease term.
YEAR 2000 COMPLIANCE
The Company's and the Operating Partnership's current financial systems
adequately provide for a four-digit year and management believes the year 2000
issue will not materially affect its business operations or financial condition.
Additionally, the Company and the Operating Partnership currently do not expect
that the year 2000 issue will materially affect their operations due to problems
encountered by their suppliers, customers and lenders.
FUNDS FROM OPERATIONS
Management believes that FFO, as defined by NAREIT, is an appropriate
measure of performance for an equity REIT. While FFO is a relevant and widely
used measure of operating performance of REITs, it does not represent cash flow
from operations or net income as defined by GAAP, and it should not be
considered as an alternative to those indicators in evaluating liquidity or
operating performance.
The following table reflects the calculation of the Operating Partnership's
FFO on an historical basis for the three months ended March 31, 1998, on an as
adjusted basis (giving effect to the completion of the Formation Transactions,
the IPO and certain 1997 property acquisitions and dispositions) for the year
ended
41
<PAGE> 48
December 31, 1997 and on a pro forma basis (giving effect to Formation
Transactions, the IPO, certain 1997 property acquisitions and dispositions, the
property acquisitions in 1998 and the Offering and the application of the net
proceeds therefrom, as if such transactions had occurred on January 1, 1997) for
the year ended December 31, 1997 and the three months ended March 31, 1998. FFO
is not presented for the Operating Partnership and the AMB Contributed
Properties on an historical basis for the year ended December 31, 1997 because
it is not comparable or meaningful due to the significant differences in capital
structures between the Operating Partnership and the prior owners of the AMB
contributed Properties.
<TABLE>
<CAPTION>
FOR THE YEAR ENDED FOR THE THREE MONTHS ENDED
DECEMBER 31, 1997 MARCH 31, 1998
-------------------------- --------------------------
AS ADJUSTED PRO FORMA HISTORICAL PRO FORMA
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Income from operations before minority
interests........................... $ 103,903 $ 107,345 $ 29,188 $ 29,973
Real estate related depreciation and
amortization:
Depreciation and amortization.... 45,886 52,402 11,786 13,812
Furniture, fixtures and equipment
depreciation................... (173) (173) (104) (104)
FFO attributable to minority
interests(1)(2)..................... (2,207) (5,674) (575) (1,340)
----------- ----------- ----------- -----------
FFO(1)................................ $ 147,409 $ 153,900 $ 40,295 $ 42,341
=========== =========== =========== ===========
FFO per diluted unit.................. $ 1.66 $ 1.71 $ 0.45 $ 0.47
=========== =========== =========== ===========
Weighted average units outstanding
(diluted)........................... 88,698,719 89,805,163 88,839,192 89,933,343
=========== =========== =========== ===========
Cash flows provided by (used in):
Operating activities............. 131,621 138,112 34,820 36,906
Investing activities............. (607,768) (842,337) (199,520) (49,646)
Financing activities............. 553,199 571,614 153,316 (9,063)
</TABLE>
- ---------------
(1) The White Paper defines Funds from Operations as net income (loss) (computed
in accordance with GAAP), excluding gains (or losses) from debt
restructuring and sales of properties, plus real estate related depreciation
and amortization. Management considers FFO an appropriate measure of
performance of an equity REIT because it is predicated on cash flow
analyses. The Company computes FFO in accordance with standards established
by the White Paper, which may differ from the methodology for calculating
FFO utilized by other REITs and, accordingly, may not be comparable to such
other REITs. FFO should not be considered as an alternative to net income
(determined in accordance with GAAP) as an indicator of the Properties'
financial performance or to cash flow from operating activities (determined
in accordance with GAAP) as a measure of the Properties' liquidity, nor is
it indicative of funds available to fund the Properties' cash needs,
including its ability to make distributions.
(2) Represents FFO attributable to minority interests in consolidated joint
ventures for the period presented, which has been computed as minority
interests' share of net income before disposal of properties plus minority
interests' share of real estate-related depreciation and amortization of the
consolidated joint ventures for such period. Such minority interests are not
convertible into shares of Common Stock.
42
<PAGE> 49
PROPERTY OPERATING INCOME
The following table sets forth property operating income for the Operating
Partnership's Industrial and Retail Properties for the year ended December 31,
1997 (giving effect to the Formation Transactions, the IPO and certain property
acquisitions and dispositions in 1997 as if such transactions occurred on
January 1, 1997) and on an historical basis for the three months ended March 31,
1998. Property operating income is computed as rental revenues less property
operating expenses, excluding depreciation and amortization, interest expense
and general and administrative expenses. Property operating income does not
represent net income or cash flow from operations determined in accordance with
GAAP.
<TABLE>
<CAPTION>
AS ADJUSTED FOR THE YEAR ENDED HISTORICAL FOR THE THREE MONTHS ENDED
DECEMBER 31, 1997 MARCH 31, 1998
------------------------------------ ---------------------------------------
INDUSTRIAL RETAIL TOTAL INDUSTRIAL RETAIL TOTAL
PROPERTIES PROPERTIES PROPERTIES PROPERTIES PROPERTIES PROPERTIES
---------- ---------- ---------- ----------- ----------- -----------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Rental revenues.............. $ 187,793 $ 94,872 $ 282,665 $ 48,665 $ 25,937 $ 74,602
Property operating
expenses................... (51,150) (30,328) (81,478) (12,609) (7,643) (20,252)
---------- -------- ---------- ---------- -------- ----------
Property operating
income................ $ 136,643 $ 64,544 $ 201,187 $ 36,056 $ 18,294 $ 54,350
========== ======== ========== ========== ======== ==========
</TABLE>
43
<PAGE> 50
BUSINESS AND PROPERTIES
As of March 31, 1998, the Operating Partnership owned 155 properties
aggregating 50.8 million rentable square feet and located in 28 markets
nationwide. The following table summarizes the diversification by region of the
Industrial and Retail Properties owned as of March 31, 1998:
INDUSTRIAL AND RETAIL PROPERTIES BY REGION
<TABLE>
<CAPTION>
INDUSTRIAL PROPERTIES RETAIL PROPERTIES TOTAL
------------------------------------------- ------------------------------ ----------
NUMBER NUMBER RENTABLE NUMBER RENTABLE NUMBER
OF OF SQUARE % OF OF SQUARE % OF OF
REGION PROPERTIES BUILDINGS FEET TOTAL PROPERTIES FEET TOTAL PROPERTIES
------ ---------- --------- ---------- ----- ---------- --------- ----- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Eastern.............. 27 68 8,729,347 19.9% 4 1,272,968 18.6% 31
Midwestern........... 28 92 11,199,515 25.5 4 710,833 10.4 32
Southern............. 30 114 11,262,975 25.6 12 1,957,051 28.6 42
Western.............. 33 141 12,772,141 29.0 17 2,907,986 42.4 50
--- --- ---------- ----- --- --------- ----- ---
Total................ 118 415 43,963,978 100.0% 37 6,848,838 100.0% 155
=== === ========== ===== === ========= ===== ===
<CAPTION>
TOTAL
------------------
RENTABLE
SQUARE % OF
REGION FEET TOTAL
------ ---------- -----
<S> <C> <C>
Eastern.............. 10,002,315 19.7%
Midwestern........... 11,910,348 23.4
Southern............. 13,220,026 26.0
Western.............. 15,680,127 30.9
---------- -----
Total................ 50,812,816 100.0%
========== =====
</TABLE>
INDUSTRIAL PROPERTIES
At March 31, 1998, the Operating Partnership owned 118 Industrial
Properties (comprising 415 buildings) aggregating approximately 44.0 million
rentable square feet, located in 23 markets nationwide. The Industrial
Properties accounted for $178.4 million of Annualized Base Rent, or 70% of the
Company's Annualized Base Rent for the Properties as of March 31, 1998. The
Industrial Properties were 94.6% leased to over 1,000 tenants as of the same
date, the largest of which accounted for no more than 1.3% of Annualized Base
Rent from the Industrial Properties. The historical weighted average tenant
retention rate for the Industrial Properties for the period beginning January 1,
1995 through March 31, 1998 was approximately 72.9%.
Property Characteristics. The Industrial Properties, which consist
primarily of warehouse distribution facilities suitable for single or multiple
tenants, are typically comprised of multiple buildings (an average of five) and
generally range between 300,000 and 600,000 rentable square feet, averaging
475,000 rentable square feet per Property. The following table identifies
characteristics of the typical industrial buildings:
INDUSTRIAL BUILDING PROFILE
<TABLE>
<CAPTION>
TYPICAL BUILDING RANGE
---------------- -----
<S> <C> <C>
Rentable square feet................... 100,000 70,000 - 150,000
Clear height........................... 24 ft. 18 - 32 ft.
Building depth......................... 200 ft. 150 - 300 ft.
Truck court depth...................... 110 ft. 90 - 130 ft.
Loading................................ Dock & Grade Dock or Dock & Grade
Parking spaces per 1,000 square feet... 1.0 0.5 - 2.0
Square footage per tenant.............. 35,000 5,000 - 100,000
Office finish.......................... 8% 3% - 15%
Site coverage.......................... 40% 35% - 55%
</TABLE>
Lease Terms. The Industrial Properties are typically subject to lease on a
"triple net basis," defined as leases in which tenants pay their proportionate
share of real estate taxes, insurance and operating costs, or subject to leases
on a "modified gross basis," defined as leases in which tenants pay expenses
over certain threshold levels. Lease terms typically range from three to ten
years, with an average of six years, excluding renewal options. The majority of
the industrial leases do not include renewal options.
Overview of Major Target Markets. The Properties are concentrated in
national hub distribution markets such as Atlanta, Chicago, Dallas/Fort Worth,
Los Angeles, Northern New Jersey and the San Francisco Bay Area because
management believes their strategic location, transportation network and
infrastructure, and
44
<PAGE> 51
large consumer and manufacturing base support strong demand for industrial
space. The six national hub markets listed above are the nation's largest
warehouse markets and, as of December 31, 1997, comprised 36% of the warehouse
inventory of the 53 industrial markets tracked by CB Commercial/Torto Wheaton
Research. As of December 31, 1997, the combined population of these markets was
approximately 37.2 million, and the amount of per capita warehouse space was 19%
above the average for such 53 industrial markets. As set forth in the table
below, these six markets contained five of the ten busiest cargo airports and
three of the ten busiest container ports.
10 LARGEST WAREHOUSE MARKETS
SQ. FT.
MARKET (000S)(1)
- ------------------------------------
*NORTHERN NEW JERSEY.....................................................371,087
*LOS ANGELES.............................................................360,561
*CHICAGO.................................................................344,968
*ATLANTA.................................................................286,206
*DALLAS/FORT WORTH.......................................................265,769
*SAN FRANCISCO BAY AREA..................................................258,578
PHILADELPHIA............................................................191,625
GREATER MIAMI...........................................................188,824
ORANGE COUNTY...........................................................186,793
St. Louis...............................................................156,666
10 BUSIEST AIR CARGO MARKETS
ANNUAL
MARKET TONNAGE(2)
- ------------------------------------
MEMPHIS...............................................................2,233,490
*LOS ANGELES...........................................................1,872,528
MIAMI.................................................................1,765,827
New York..............................................................1,661,400
*CHICAGO...............................................................1,407,589
Louisville............................................................1,345,318
*NEWARK................................................................1,048,954
*ATLANTA.................................................................864,474
Dayton..................................................................812,440
*DALLAS/FORT WORTH.......................................................810,621
10 BUSIEST PORTS BY CONTAINERIZED CARGO
ANNUAL
MARKET TONNAGE(3)
- ------------------------------------
*LONG BEACH/LOS ANGELES...............................................31,411,023
*NEW YORK/NEW JERSEY..................................................13,407,276
SEATTLE/TACOMA.......................................................11,941,371
Charleston............................................................6,858,062
*OAKLAND...............................................................6,767,463
HOUSTON...............................................................6,458,136
Hampton Roads.........................................................6,189,183
Savannah..............................................................5,505,551
MIAMI/PORT EVERGLADES.................................................5,356,102
New Orleans...........................................................5,009,960
Markets in which the Operating Partnership owns Industrial Properties are in
bold. "*" denotes each of the six national hub markets as characterized by the
Company.
- ---------------
(1) Table derived from data, as of December 31, 1997, obtained from CB
Commercial/Torto Wheaton Research.
(2) Table derived from preliminary data, as of December 1997, published by the
Airports Council International.
(3) Table derived from data, as of December 31, 1996, obtained from the U.S.
Bureau of the Census -- United States Foreign Trade.
Within these metropolitan areas, the Industrial Properties are concentrated
in in-fill locations (areas which are typified by high population densities and
low levels of available land that could be developed into competitive industrial
or retail properties) within established, relatively large submarkets (markets
within a metropolitan area in which the competitive environment for one or more
property types is largely dependent upon the supply of such property type in
such market rather than the supply of such property type in other portions of
such metropolitan area) which the Operating Partnership believes will provide a
higher rate of occupancy and rent growth. These in-fill locations are typically
near major ports or airports, have good access to freeways and rail lines, are
proximate to a diverse labor pool, and have limited land available for new
construction. There is broad demand for industrial space in these centrally
located submarkets due to a diverse mix of industries and types of industrial
uses, including warehouse distribution, light assembly and manufacturing. The
Operating Partnership generally avoids locations at the periphery of
metropolitan areas where there are fewer supply constraints. Similarly, small
metropolitan areas or cities without a heavy concentration of warehouse activity
typically have few, if any, supply-constrained locations.
45
<PAGE> 52
INDUSTRIAL PROPERTY SUMMARY
As of March 31, 1998, the 415 buildings comprising the Industrial
Properties were diversified across 23 markets nationwide. Only two of the
Industrial Properties represent individually more than 3.5% of the Annualized
Base Rent of the Industrial Properties as of such date. The average age of the
Industrial Properties is 12 years (since the time the property was built or
substantially renovated), which the Operating Partnership believes should result
in lower operating costs over the long term. Ownership of each Property is in
fee simple unless otherwise noted.
<TABLE>
<CAPTION>
PERCENTAGE
OF TOTAL
NUMBER RENTABLE
OF YEAR BUILT/ RENTABLE SQUARE PERCENTAGE
REGION/MARKET/PROPERTY LOCATION BUILDINGS RENOVATED(1) SQUARE FEET FEET LEASED
---------------------- ----------------- --------- ------------ ----------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
EASTERN
Baltimore/Washington, D.C.
Brightseat Road............... Landover 1 1990 121,785 0.3% 100.0%
Patuxent...................... Jessup 2 1981 147,383 0.3 100.0
Pennsy Drive.................. Landover 1 1998R 359,477 0.8 23.1
Preston Court................. Jessup 1 1988 178,880 0.4 100.0
Santa Barbara Court........... Elkridge 1 1978 166,820 0.4 100.0
Boston
Arsenal Street................ Watertown 1 1978 191,850 0.4 100.0
Bedford Street................ Middleborough 1 1982 40,018 0.1 100.0
Braintree Industrial.......... Braintree 8 1969 976,634 2.2 100.0
Bradlee Circle Office......... Braintree 1 1987 120,000 0.3 100.0
Brockton Industrial........... Brockton 1 1967 300,114 0.7 100.0
Cabot Business Park........... Mansfield 13 1970 1,102,429 2.5 83.7
Collins Street................ Attleboro 1 1979 152,730 0.3 100.0
Hampden Road.................. Mansfield 1 1977 204,117 0.5 100.0
Hartwell Avenue............... Lexington 1 1970 40,800 0.1 100.0
Locke Building................ Marlborough 1 1982 97,870 0.2 100.0
Stoughton Industrial.......... Stoughton 5 1984 632,675 1.4 100.0
United Drive.................. West Bridgewater 1 1986 315,000 0.7 100.0
Cincinnati (5)
Dixie Highway................. Florence 2 1990 209,680 0.5 100.0
Empire Drive.................. Florence 1 1989 199,440 0.5 100.0
Holton Drive.................. Florence 1 1994 268,525 0.6 100.0
Production Drive.............. Florence 1 1975 50,729 0.1 0.0
Northern New Jersey
Dock's Corner................. South Brunswick 1 1996 554,521 1.3 84.1
Dock's Corner II.............. South Brunswick 1 1981 212,335 0.5 100.0
Jamesburg..................... Dayton 3 1989 821,712 1.9 95.7
Two South Middlesex........... Monroe 1 1995 218,088 0.5 100.0
Philadelphia
Mid-Atlantic Business West Deptford 13 1979R 779,594 1.8 98.7
Center......................
Wilmington
Boulden....................... Wilmington 3 1986 266,141 0.6 100.0
--- ---------- -----
Eastern Region Total/Weighted 68 8,729,347 19.9% 92.7%
Average.......................
--- ---------- -----
<CAPTION>
ANNUALIZED
PERCENTAGE BASE RENT PER
ANNUALIZED OF NUMBER LEASED
BASE RENT(2) ANNUALIZED OF SQUARE
REGION/MARKET/PROPERTY (000S) BASE RENT LEASES FOOT(3)
---------------------- ------------ ---------- ------ -------------
<S> <C> <C> <C> <C>
EASTERN
Baltimore/Washington, D.C.
Brightseat Road............... $ 581 0.3% 2 $4.77
Patuxent...................... 654 0.4 8 4.44
Pennsy Drive.................. 353 0.2 1 4.25
Preston Court................. 748 0.4 3 4.18
Santa Barbara Court........... 616 0.3 2 3.69
Boston
Arsenal Street................ 1,438 0.8 1 7.50
Bedford Street................ 593 0.3 1 14.82
Braintree Industrial.......... 2,031 1.1 10 2.08
Bradlee Circle Office......... 1,148 0.6 1 9.57
Brockton Industrial........... 1,123 0.6 2 3.74
Cabot Business Park........... 4,863 2.7 18 5.27
Collins Street................ 468 0.3 1 3.06
Hampden Road.................. 816 0.5 1 4.00
Hartwell Avenue............... 204 0.1 1 5.00
Locke Building................ 333 0.2 1 3.40
Stoughton Industrial.......... 1,895 1.1 7 3.00
United Drive.................. 1,228 0.7 1 3.90
Cincinnati (5)
Dixie Highway................. 636 0.4 3 3.03
Empire Drive.................. 622 0.3 3 3.12
Holton Drive.................. 1,034 0.6 1 3.85
Production Drive.............. 0.0 0.0 0 0.0
Northern New Jersey
Dock's Corner................. 1,819 1.0 2 3.90
Dock's Corner II.............. 839 0.5 1 3.95
Jamesburg..................... 4,758 2.7 4 6.05
Two South Middlesex........... 856 0.5 2 3.93
Philadelphia
Mid-Atlantic Business 2,717 1.5 27 3.53
Center......................
Wilmington
Boulden....................... 1,062 0.6 5 3.99
-------- ----- ---
Eastern Region Total/Weighted $ 33,435 18.7% 109 $4.13
Average.......................
-------- ----- ---
</TABLE>
46
<PAGE> 53
<TABLE>
<CAPTION>
PERCENTAGE
OF TOTAL
NUMBER RENTABLE
OF YEAR BUILT/ RENTABLE SQUARE PERCENTAGE
REGION/MARKET/PROPERTY LOCATION BUILDINGS RENOVATED(1) SQUARE FEET FEET LEASED
---------------------- ----------------- --------- ------------ ----------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
MIDWESTERN
Chicago
Belden Avenue................. Addison 3 1991 346,233 0.8% 100.0%
Bensenville................... Bensenville 13 1994R 2,137,370 4.9 96.1
Chicago Industrial............ Bensenville 2 1974 184,360 0.4 59.3
Crossroads Industrial......... Bollingbrook 1 1990 260,890 0.6 100.0
Elk Grove Village Elk Grove Village 10 1980 693,459 1.6 81.5
Industrial..................
Executive Drive............... Addison 1 1987 75,020 0.2 89.0
Greenleaf..................... Elk Grove Village 1 1973 50,695 0.1 100.0
Itasca Industrial Portfolio... Itasca, Wood Dale 6 1996R 769,070 1.7 77.0
Lake Michigan Industrial Itasca, 2 1994 310,681 0.8 100.0
Portfolio(4)................ Bridgeview
Linder Skokie................. Skokie 1 1991R 484,370 1.1 60.3
Lisle Industrial.............. Lisle 1 1985R 360,000 0.8 100.0
Melrose Park.................. Melrose Park 1 1982 346,538 0.8 100.0
O'Hare Industrial Portfolio... Itasca, 15 1975 699,512 1.6 100.0
Naperville
Windsor Court................. Addison 1 1990 56,640 0.1 100.0
Columbus
Industrial Drive.............. Columbus 1 1991 228,433 0.5 100.0
Janitrol...................... Columbus 1 1989 240,000 0.5 86.7
Minneapolis
Braemar Business Center....... Minneapolis 2 1982 108,091 0.2 100.0
Corporate Square.............. Eagan 6 1992R 526,490 1.3 92.6
Edenvale Business Center...... Eden Prairie 1 1982 85,818 0.2 98.1
Mendota Heights (6)........... Mendota Heights 1 1998D 150,394 0.3 72.8
Minneapolis Distribution Minneapolis, 5 1997R 1,032,994 2.3 99.5
Portfolio................... Edina
Minneapolis Industrial Plymouth 4 1985R 514,546 1.2 100.0
Portfolio IV................
Minneapolis Industrial Brooklyn Center 6 1997 499,673 1.1 100.0
Portfolio V.................
Parkway Business Center....... New Hope 1 1982 43,660 0.1 100.0
Penn James Office/Warehouse... Bloomington 2 1974 215,606 0.5 100.0
Round Lake Business Center.... Arden Hills 1 1982 74,265 0.2 93.2
Shady Oak..................... Eden Prairie 1 1980R 104,243 0.2 100.0
Twin Cities................... New Hope, Mendota 2 1980 600,464 1.4 100.0
--- ---------- ----- ------
Midwestern Region Total/Weighted 92 11,199,515 25.5% 93.0%
Average.........................
--- ---------- ----- ------
SOUTHERN
Atlanta
Amwiler-Gwinnett Industrial Gwinnett County 9 1996 792,686 1.8% 100.0%
Portfolio...................
Atlanta South................. Clayton County 9 1994 624,135 1.4 96.2
Norcross/Brookhollow Gwinnett County 4 1996 322,399 0.7 96.7
Portfolio...................
Southfield.................... Gwinnett County 8 1990 780,623 1.8 85.1
Suwanee Creek Distribution Atlanta n/a 1998D n/a n/a n/a
Center(7)...................
Austin
Metric Center(4).............. Austin 6 1996 735,240 1.7 100.0
<CAPTION>
ANNUALIZED
PERCENTAGE BASE RENT PER
ANNUALIZED OF NUMBER LEASED
BASE RENT(2) ANNUALIZED OF SQUARE
REGION/MARKET/PROPERTY (000S) BASE RENT LEASES FOOT(3)
---------------------- ------------ ---------- ------ -------------
<S> <C> <C> <C> <C>
MIDWESTERN
Chicago
Belden Avenue................. $ 1,904 1.1% 7 $5.50
Bensenville................... 7,821 4.3 31 3.81
Chicago Industrial............ 475 0.3 3 4.35
Crossroads Industrial......... 1,043 0.5 4 4.00
Elk Grove Village 2,422 1.4 13 4.29
Industrial..................
Executive Drive............... 490 0.3 5 7.34
Greenleaf..................... 266 0.1 1 5.25
Itasca Industrial Portfolio... 1,941 1.1 10 3.28
Lake Michigan Industrial 1,090 0.6 3 3.51
Portfolio(4)................
Linder Skokie................. 807 0.5 6 2.76
Lisle Industrial.............. 756 0.4 1 2.10
Melrose Park.................. 1,057 0.6 1 3.05
O'Hare Industrial Portfolio... 3,154 1.7 16 4.51
Windsor Court................. 276 0.2 1 4.87
Columbus
Industrial Drive.............. 678 0.4 1 2.97
Janitrol...................... 684 0.4 1 3.29
Minneapolis
Braemar Business Center....... 623 0.3 18 5.76
Corporate Square.............. 1,765 1.0 21 3.62
Edenvale Business Center...... 340 0.2 11 4.04
Mendota Heights (6)........... 455 0.3 7 4.16
Minneapolis Distribution 3,798 2.1 25 3.70
Portfolio...................
Minneapolis Industrial 1,876 1.1 16 3.65
Portfolio IV................
Minneapolis Industrial 1,594 0.9 16 3.19
Portfolio V.................
Parkway Business Center....... 245 0.1 7 5.61
Penn James Office/Warehouse... 815 0.5 23 3.78
Round Lake Business Center.... 379 0.2 10 5.48
Shady Oak..................... 377 0.2 3 3.62
Twin Cities................... 1,944 1.1 8 3.24
----- --- -----
Midwestern Region Total/Weighted $ 39,075 21.9% 269 $3.75
Average.........................
----- --- -----
SOUTHERN
Atlanta
Amwiler-Gwinnett Industrial $ 2,974 1.7% 26 $3.75
Portfolio...................
Atlanta South................. 3,037 1.7 26 5.06
Norcross/Brookhollow 1,663 0.9 20 5.34
Portfolio...................
Southfield.................... 2,762 1.5 32 4.16
Suwanee Creek Distribution n/a n/a n/a n/a
Center(7)...................
Austin
Metric Center(4).............. 4,809 2.7 22 6.54
</TABLE>
47
<PAGE> 54
<TABLE>
<CAPTION>
PERCENTAGE
OF TOTAL
NUMBER RENTABLE
OF YEAR BUILT/ RENTABLE SQUARE PERCENTAGE
REGION/MARKET/PROPERTY LOCATION BUILDINGS RENOVATED(1) SQUARE FEET FEET LEASED
---------------------- ----------------- --------- ------------ ----------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Dallas/Fort Worth
DFW Air Cargo Facility(7)..... Dallas n/a 1998D n/a n/a n/a
Dallas Industrial Portfolio... Dallas, Arlington 18 1986 1,066,098 2.4 95.1
Lincoln Industrial Center..... Carrollton 1 1980 93,718 0.2 100.0
Lonestar...................... Dallas, Irving, 7 1993 911,375 2.1 96.7
Grand Prairie
McDaniel Drive................ Carrollton 1 1981 157,500 0.4 100.0
N. Glenville Avenue........... Richardson 1 1981 109,000 0.2 100.0
Pagemill & Dillworth.......... Dallas 2 1981 217,782 0.5 100.0
Shiloh Road................... Garland 1 1979 192,720 0.4 100.0
Valwood....................... Carrollton 2 1984 275,994 0.6 100.0
Valwood Parkway II............ Carrollton 2 1984 254,219 0.6 100.0
West Kiest.................... Dallas 1 1981 248,698 0.6 100.0
West North Carrier............ Grand Prairie 1 1993R 248,736 0.6 100.0
Houston
Houston Industrial Houston 5 1986 464,696 1.1 95.1
Portfolio...................
Memphis
Corporate Park................ Memphis 6 1987 658,322 1.4 100.0
Hickory Hill.................. Memphis 1 1979 200,000 0.5 100.0
Miami
Beacon Industrial Park........ Miami 8 1995 785,251 1.8 98.1
Blue Lagoon................... Miami 2 1994 325,611 0.6 100.0
Brittania Business Park....... Riviera Beach 2 1988 258,578 0.6 97.1
Orlando
Chancellor(4)................. Orlando 1 1996R 201,600 0.5 100.0
Chancellor Square............. Orlando 3 1982 141,778 0.3 67.3
Presidents Drive.............. Orlando 3 1979 378,379 0.9 62.9
Presidents Drive II........... Orlando 3 1984 302,400 0.7 100.0
Sand Lake Service Center...... Orlando 6 1972 400,591 0.9 82.2
Viscount...................... Orlando 1 1972 114,846 0.3 100.0
--- ---------- -----
Southern Region Total/Weighted 114 11,262,975 25.6% 95.2%
Average.........................
--- ---------- ----- ------
WESTERN
Los Angeles
Anaheim Industrial............ Anaheim 1 1980 161,500 0.4% 100.0%
Artesia Industrial Compton 27 1984 2,496,465 5.7 100.0
Portfolio...................
Commerce...................... Fontana 1 1990 254,414 0.6 0.0
East Walnut Drive............. City of Industry 1 1990 85,871 0.2 100.0
International Multifoods...... La Mirada 1 1995R 144,000 0.3 100.0
Jasmine Avenue................ Fontana 1 1990 410,428 0.9 100.0
L.A. County Industrial Carson, Norwalk 6 1980 818,191 1.9 100.0
Portfolio...................
Systematics................... Walnut 1 1981 66,387 0.2 100.0
Orange County
Northpointe Commerce.......... Fullerton 2 1992 119,445 0.3 100.0
Stadium Business Park......... Anaheim 9 1995R 282,492 0.6 97.3
<CAPTION>
ANNUALIZED
PERCENTAGE BASE RENT PER
ANNUALIZED OF NUMBER LEASED
BASE RENT(2) ANNUALIZED OF SQUARE
REGION/MARKET/PROPERTY (000S) BASE RENT LEASES FOOT(3)
---------------------- ------------ ---------- ------ -------------
<S> <C> <C> <C> <C>
Dallas/Fort Worth
DFW Air Cargo Facility(7)..... n/a n/a n/a n/a
Dallas Industrial Portfolio... 3,149 1.8 67 3.11
Lincoln Industrial Center..... 340 0.2 3 3.63
Lonestar...................... 3,049 1.7 11 3.46
McDaniel Drive................ 601 0.3 1 3.82
N. Glenville Avenue........... 414 0.2 1 3.80
Pagemill & Dillworth.......... 817 0.6 3 3.75
Shiloh Road................... 530 0.3 1 2.75
Valwood....................... 862 0.5 7 3.12
Valwood Parkway II............ 888 0.5 5 3.49
West Kiest.................... 601 0.3 1 2.42
West North Carrier............ 567 0.3 2 2.28
Houston
Houston Industrial 1,408 0.8 17 3.18
Portfolio...................
Memphis
Corporate Park................ 2,348 1.3 10 3.57
Hickory Hill.................. 561 0.3 1 2.81
Miami
Beacon Industrial Park........ 5,145 2.9 21 6.68
Blue Lagoon................... 2,311 1.4 14 7.10
Brittania Business Park....... 1,302 0.7 8 5.19
Orlando
Chancellor(4)................. 579 0.3 1 2.87
Chancellor Square............. 559 0.3 7 5.86
Presidents Drive.............. 921 0.5 9 3.87
Presidents Drive II........... 958 0.5 7 3.17
Sand Lake Service Center...... 1,576 0.9 36 4.78
Viscount...................... 365 0.2 8 3.17
-------- ----- ---
Southern Region Total/Weighted $ 45,096 25.3% 367 $4.20
Average.........................
-------- ----- --- -----
WESTERN
Los Angeles
Anaheim Industrial............ $ 588 0.3% 2 $3.64
Artesia Industrial 9,694 5.4 30 3.88
Portfolio...................
Commerce...................... 0 0.0 0 0.00
East Walnut Drive............. 343 0.2 1 3.99
International Multifoods...... 810 0.5 1 5.63
Jasmine Avenue................ 1,231 0.7 1 3.00
L.A. County Industrial 3,797 2.1 11 4.64
Portfolio...................
Systematics................... 489 0.3 1 7.37
Orange County
Northpointe Commerce.......... 801 0.4 2 6.71
Stadium Business Park......... 1,546 0.9 30 5.62
</TABLE>
48
<PAGE> 55
<TABLE>
<CAPTION>
PERCENTAGE
OF TOTAL
NUMBER RENTABLE
OF YEAR BUILT/ RENTABLE SQUARE PERCENTAGE
REGION/MARKET/PROPERTY LOCATION BUILDINGS RENOVATED(1) SQUARE FEET FEET LEASED
---------------------- ----------------- --------- ------------ ----------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Portland
Cascade Business Park......... Tigard 4 1995 159,411 0.4 89.4
Wilsonville................... Portland 1 1979 516,693 1.2 100.0
Sacramento
Hewlett Packard Roseville 1 1994 182,437 0.4 100.0
Distribution................
San Diego
Activity Distribution San Diego 4 1991 252,318 0.6 100.0
Center......................
San Francisco Bay Area
Acer Distribution Center...... San Jose 1 1974 196,643 0.4 100.0
Alvarado Business Center...... San Leandro 10 1986 695,070 1.5 98.3
Ardenwood Corporate Park...... Fremont 4 1986 295,657 0.7 100.0
Dowe Industrial............... Union City 2 1985R 326,080 0.7 100.0
Fairway Drive San Leandro 2 1997D 175,324 0.4 100.0
Industrial(4)(6)............
Laurelwood.................... Santa Clara 2 1981 155,500 0.4 66.6
Milmont Page.................. Fremont 3 1982 199,862 0.5 100.0
Moffett Business Center....... Sunnyvale 4 1994R 285,480 0.6 100.0
Moffett Park R&D Portfolio.... Sunnyvale 14 1994R 462,245 1.0 99.1
Pacific Business Center....... Fremont 2 1991 375,912 0.9 95.4
Silicon Valley R&D San Jose, 5 1978 287,228 0.7 100.0
Portfolio...................
Sunnyvale,
Milpitas
South Bay Industrial.......... Fremont 8 1990 1,011,781 2.3 100.0
Weigman Road.................. Hayward 1 1990 148,559 0.3 100.0
Yosemite Drive................ Milpitas 1 1983 169,195 0.4 100.0
Zanker/Charcot Industrial..... San Jose 5 1993R 301,064 0.7 97.2
Seattle
Harvest Business Park......... Kent 3 1986 191,841 0.4 100.0
Kent Centre................... Kent 4 1993 267,967 0.6 100.0
Kingsport Industrial Park..... Kent 7 1994R 951,056 2.2 99.9
Northwest Distribution Kent 3 1980 325,625 0.6 88.5
Center......................
--- ---------- -----
Western Region Total/Weighted 141 12,772,141 29.0 96.8
Average.........................
--- ---------- -----
TOTAL/WEIGHTED AVERAGE............ 415 43,963,978 100.0% 94.6%
=== ========== =====
<CAPTION>
ANNUALIZED
PERCENTAGE BASE RENT PER
ANNUALIZED OF NUMBER LEASED
BASE RENT(2) ANNUALIZED OF SQUARE
REGION/MARKET/PROPERTY (000S) BASE RENT LEASES FOOT(3)
---------------------- ------------ ---------- ------ -------------
<S> <C> <C> <C> <C>
Portland
Cascade Business Park......... 1,065 0.6 8 7.47
Wilsonville................... 1,550 0.9 1 3.00
Sacramento
Hewlett Packard 630 0.4 1 3.45
Distribution................
San Diego
Activity Distribution 1,366 0.8 15 5.41
Center......................
San Francisco Bay Area
Acer Distribution Center...... 1,038 0.6 2 5.28
Alvarado Business Center...... 3,673 2.1 33 5.38
Ardenwood Corporate Park...... 2,300 1.3 9 7.78
Dowe Industrial............... 1,132 0.6 4 3.47
Fairway Drive 797 0.4 2 4.55
Industrial(4)(6)............
Laurelwood.................... 487 0.3 1 4.71
Milmont Page.................. 1,157 0.6 10 5.79
Moffett Business Center....... 2,187 1.2 5 7.66
Moffett Park R&D Portfolio.... 4,990 2.8 33 10.89
Pacific Business Center....... 1,989 1.1 10 5.55
Silicon Valley R&D 2,376 1.3 9 8.27
Portfolio...................
South Bay Industrial.......... 5,376 3.0 30 5.31
Weigman Road.................. 581 0.3 2 3.91
Yosemite Drive................ 748 0.4 1 4.42
Zanker/Charcot Industrial..... 1,905 1.1 17 6.51
Seattle
Harvest Business Park......... 857 0.5 11 4.47
Kent Centre................... 1,179 0.7 16 4.40
Kingsport Industrial Park..... 3,042 1.7 18 3.20
Northwest Distribution 1,085 0.6 3 3.77
Center......................
-------- ----- ---
Western Region Total/Weighted 60,809 34.1 320 4.92
Average.........................
-------- ----- ---
TOTAL/WEIGHTED AVERAGE............ $178,415 100.0% 1,065 $4.29
======== ===== ===
</TABLE>
- ---------------
(1) Industrial Properties denoted with an "R," "E" or "D" indicate the date of
most recent renovation, expansion or development, respectively. All other
dates reference the year such Property was developed.
(2) Annualized Base Rent means the monthly contractual amount under existing
leases at March 31, 1998, multiplied by 12. This amount excludes expense
reimbursements and rental abatements.
(3) Calculated as total Annualized Base Rent divided by rentable square feet
leased as of March 31, 1998.
(4) The Company holds interests in these Properties through a joint venture
interest in a limited partnership or limited liability company. See
"-- Properties Held Through Joint Ventures, Limited Liability Companies and
Partnerships."
(5) The Properties included in the Cincinnati Consolidated Metropolitan
Statistical Area are located in Florence, Kentucky, and, accordingly, are
reflected in the Eastern region.
(6) This Property is being redeveloped. All calculations are based on rentable
square feet existing as of March 31, 1998.
(7) This Property consists of land held for future development.
49
<PAGE> 56
INDUSTRIAL PROPERTY TENANT INFORMATION
Largest Industrial Property Tenants. The following table lists tenants with
Annualized Base Rent representing at least 0.5% of total Annualized Base Rent as
of March 31, 1998 of the Industrial Properties owned as of such date. Eleven of
such tenants lease space in more than one of the Industrial Properties.
<TABLE>
<CAPTION>
PERCENTAGE OF
PERCENTAGE OF AGGREGATE
NUMBER AGGREGATE AGGREGATE ANNUALIZED ANNUALIZED
OF RENTABLE LEASED BASE RENT BASE
TENANT NAME(1) PROPERTIES SQUARE FEET SQUARE FEET(2) (000S) RENT(3)
-------------- ---------- ----------- -------------- ---------- -------------
<S> <C> <C> <C> <C> <C>
Wakefern Food Corporation............. 1 419,900 1.0% $ 2,314 1.3%
Bradlees Stores, Inc.................. 2 716,239 1.7 1,998 1.1
United States Postal Service.......... 2 433,359 1.0 1,969 1.1
Air Express International, Inc........ 2 272,235 0.7 1,896 1.1
Dell USA.............................. 1 290,400 0.7 1,724 1.0
Rite Aid.............................. 1 516,693 1.2 1,550 0.9
Sage Enterprises Inc.................. 2 199,877 0.5 1,459 0.8
Boston Edison Company................. 1 191,850 0.5 1,439 0.8
Home Depot USA Inc.................... 2 374,813 0.9 1,367 0.8
Acer America.......................... 2 241,643 0.6 1,318 0.7
General Electric Company.............. 4 318,055 0.8 1,311 0.7
Cosmair Inc........................... 1 303,843 0.7 1,291 0.7
Schmelbach-Lubeca AG.................. 2 339,104 0.8 1,265 0.7
Avery Dennison Corporation............ 1 410,428 1.0 1,231 0.7
United Liquors Ltd.................... 1 315,000 0.8 1,229 0.7
Unisource Worldwide, Inc.............. 4 279,167 0.7 1,178 0.7
Mylex Corporation..................... 1 133,182 0.3 1,173 0.7
Rolf C. Hagen (USA) Corp.............. 1 204,151 0.5 1,133 0.6
Harmonic Lightwaves................... 1 110,160 0.3 1,124 0.6
C & S Wholesale Grocers, Inc.......... 1 113,680 0.3 1,108 0.6
Ciba Vision Corporation............... 1 245,616 0.6 1,067 0.6
Dry Storage Corporation............... 1 346,538 0.8 1,057 0.6
Hexcel Corporation.................... 1 285,634 0.7 1,051 0.6
The Discovery Channel Store/Nature
Company............................. 1 268,525 0.6 1,034 0.6
Holman Distribution................... 1 371,440 0.9 1,011 0.6
Mitsubishi Warehouse Corporation...... 1 253,584 0.6 1,004 0.6
Hit or Miss........................... 1 328,540 0.8 946 0.5
ADAP, Inc............................. 1 249,851 0.6 927 0.5
Superior Coffee & Foods............... 1 201,011 0.5 926 0.5
Advo Systems, Inc..................... 1 173,660 0.4 905 0.5
Emery Air Freight Corporation......... 2 143,726 0.3 905 0.5
Pragmatech Inc........................ 1 102,157 0.2 873 0.5
Rollerblade, Inc...................... 1 278,840 0.7 872 0.5
Boise Cascade Corporation............. 1 260,143 0.6 864 0.5
Arrow Electronics..................... 1 227,500 0.5 860 0.5
Best Buy Company...................... 1 244,733 0.6 842 0.5
Logitech, Inc......................... 1 95,632 0.2 827 0.5
Sears, Roebuck and Co................. 2 169,653 0.4 821 0.5
Bridgestone/Firestone, Inc............ 1 296,800 0.7 819 0.5
Vidco International................... 1 146,460 0.4 817 0.5
HomeGoods Inc......................... 1 204,117 0.5 816 0.5
Belkin Components..................... 1 219,028 0.5 815 0.5
International Multifoods.............. 1 144,000 0.3 810 0.5
---------- ---- ------- ----
Total/Weighted Average (Industrial
Properties)......................... 11,440,967 27.4% $49,946 28.4%
========== ==== ======= ====
</TABLE>
- ---------------
(1) Tenant(s) may be a subsidiary of or an entity affiliated with the named
tenant.
(2) Computed as Aggregate Rentable Square Feet divided by the Aggregate Leased
Square Feet of the Industrial Properties.
(3) Computed as Annualized Base Rent divided by the Aggregate Annualized Base
Rent of the Industrial Properties.
(4) Computed as Aggregate Rentable Square Feet of such tenants divided by
Aggregate Leased Square Feet of the Properties or Annualized Base Rent of
such tenants divided by Aggregate Annualized Base Rent of the Properties, as
applicable.
50
<PAGE> 57
The 43 largest industrial tenants represent 27.4% of the Industrial
Properties' Annualized Base Rent as of March 31, 1998. Other companies that are
tenants in the Industrial Properties include International Business Machines,
Inc., Hewlett Packard Company, Federal Express Corporation, Lucent Technologies,
Inc. and a wide variety of other national, regional and local industrial
tenants. Leases of less than 25,000 rentable square feet represent 57% of the
Industrial Properties' total number of leases and 18.8% of the Industrial
Properties' Annualized Base Rent. Following is a list of certain tenants which
lease less than 25,000 rentable square feet of industrial space:
<TABLE>
<S> <C> <C>
Alabama Metal Industries, Type A Snowboard, Inc. W.R. Grace & Co.
Inc. Buckeye International, Inc. Creative Solutions
Argosy Industries, Inc. Creative Education Supplies Genuine Parts Company
City of San Leandro Farmer's Insurance Litho Technical Services
Custom Walls & Windows Inc. Le Gourmet Kitchens Plastek USA Inc.
Golden West Games New Golf Holding Co. Santa Cruz Motors
National Tree Corporation Quality Video Tokyo World Transport (USA) Inc.
Plummer's, Inc. The Sportsman's Guide Zebra Express Inc.
Supergraphics Inc.
</TABLE>
INDUSTRIAL PROPERTY LEASE EXPIRATIONS
The following table summarizes the lease expirations for the Industrial
Properties for leases in place as of March 31, 1998, without giving effect to
the exercise of renewal options or termination rights, if any, at or prior to
the scheduled expirations.
<TABLE>
<CAPTION>
ANNUALIZED PERCENTAGE
PERCENTAGE ANNUALIZED BASE RENT OF
OF TOTAL BASE RENT OF OF EXPIRING ANNUALIZED
NUMBER RENTABLE SQUARE RENTABLE EXPIRING LEASES PER BASE RENT
OF LEASES FOOTAGE OF SQUARE LEASES SQUARE OF EXPIRING
YEAR OF LEASE EXPIRATION EXPIRING(1) EXPIRING LEASES(1) FOOTAGE (000S)(1)(2) FOOT(3) LEASES
------------------------ ----------- ------------------ ---------- ------------ ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
1998(4)................. 190 4,771,454 11.5% $ 21,239 $4.45 11.5%
1999.................... 205 7,043,996 16.9 27,486 3.90 14.9
2000.................... 228 7,320,405 17.6 32,604 4.45 17.7
2001.................... 156 5,096,560 12.3 24,399 4.79 13.2
2002.................... 150 6,715,250 16.1 29,596 4.41 16.1
2003.................... 54 3,576,187 8.6 15,347 4.29 8.3
2004.................... 23 1,880,574 4.5 8,473 4.51 4.6
2005.................... 20 2,122,015 5.1 8,078 3.81 4.4
2006.................... 14 1,042,523 2.5 6,466 6.20 3.5
2007.................... 5 503,868 1.2 2,418 4.80 1.3
2008 and beyond......... 16 1,538,479 3.7 8,266 5.37 4.5
----- ---------- ----- -------- ------
Total/Weighted Average.... 1,061 41,611,311 100.0% $184,372 $4.43 100.0%
===== ========== ===== ======== ======
</TABLE>
- ---------------
(1) Includes executed leases that commence after March 31, 1998 and excludes
leases expiring prior to April 1, 1998.
(2) Based on rent at expiration.
(3) Calculated as Annualized Base Rent divided by the square footage of expiring
leases.
(4) Includes leases encompassing 318,985 square feet which are on a
month-to-month basis.
51
<PAGE> 58
RETAIL PROPERTIES
At March 31, 1998, the Operating Partnership owned 37 Retail Properties
aggregating approximately 6.8 million rentable square feet, 33 of which are
grocer-anchored. As of March 31, 1998, the Retail Properties were 94.6% leased
to over 900 tenants, the largest of which accounted for approximately 3.0% of
Annualized Base Rent from the Retail Properties as of such date. The Retail
Properties have an average age of five years since built, expanded or renovated.
The historical weighted average tenant retention rate for the Retail Properties
for the period beginning January 1, 1995 through March 31, 1998 was
approximately 83.5%, based on 0.8 million rentable square feet of expiring
leases.
The Retail Properties generally are located in supply-constrained trade
areas (those trade areas typified by significant population densities, a limited
number of existing retailers, such as grocers, and a low availability of land
which could be developed into competitive space for additional competitive
retailers) of 16 major metropolitan areas. The Operating Partnership's national
operating strategy for the community shopping center business is based on
detailed research regarding these target trade areas which typically have high
population densities and above-average income levels. The two graphs below
compare the population density and income levels surrounding the Operating
Partnership's retail centers to the national averages.
1997 MEDIAN HOUSEHOLD INCOME
AMB CENTERS VS. U.S.(1)
<TABLE>
<S> <C>
Within 3 miles of|AMB Retail
Center 50000
All MSAs 42000
Total U.S. 37000
</TABLE>
(1) Weighted by number of households.
(2) Derived from information compiled by Claritas Inc. The Operating Partnership
has been advised that the information comes from various government and
industry sources, but the Operating Partnership has not independently
verified the information.
(3) Derived from forecasted data obtained from Regional Financial Associates.
1997 AVERAGE POPULATION WITHIN
THREE-MILE RADIUS OF SHOPPING CENTER(1)
<TABLE>
<CAPTION>
Measurement Period
(Fiscal Year Covered) Population
<S> <C>
AMB Retail|Centers 110000
U.S. Shopping|Centers 71000
</TABLE>
(1) Derived from information compiled by Claritas Inc. The Operating Partnership
has been advised that the information comes from various government and
industry sources, but the Operating Partnership has not independently
verified the information.
(2) For all shopping centers greater than or equal to 50,000 square feet and
less than or equal to 400,000 square feet.
52
<PAGE> 59
Management believes that the characteristics of its trade areas tend to
result in centers with above-average retail sales. The graph below compares the
average sales of the Retail Properties' grocer anchors to the national average
for grocers.
AVERAGE 1997 GROCER ANCHOR SALES FOR
RETAIL PROPERTIES
AVERAGE 1996 RETAIL SALES CHART
(1) Includes sales per square foot for grocer anchors reporting a full year
of sales. Thirty-one of 37 centers are represented above. Of the six
centers not represented, (i) four do not have grocer anchors, (ii) one
center is currently under construction and (iii) the grocer-anchor
store at one center is not owned by the Operating Partnership and does
not report sales.
(2) All but nine of the 31 centers included report sales on a calendar year
basis.
(3) Derived from data published in the Progressive Grocer Annual Report,
April 1998.
53
<PAGE> 60
Property Characteristics. The Retail Properties generally contain between
80,000 and 350,000 rentable square feet. On average, 67% of the rentable square
feet for each of the Retail Properties is leased to one or more Anchor Tenants
(defined as all grocery stores, drugstores and any other retail tenant occupying
more than 10,000 rentable square feet). The following table identifies
characteristics of a typical Retail Property.
RETAIL PROPERTY PROFILE
<TABLE>
<CAPTION>
TYPICAL PROPERTY TYPICAL RANGE
---------------- -----------------
<S> <C> <C>
Rentable square feet......................... 190,000 80,000 - 350,000
Percentage leased by Anchor Tenants.......... 67% 60% - 85%
Number of tenants............................ 25 10 - 50
Parking spaces per 1,000 square feet......... 5.0 4.0 - 6.0
Square footage per Anchor Tenant............. 25,000 10,000 - 100,000
Average square footage per Non-Anchor
Tenant..................................... 1,500 750 - 5,000
</TABLE>
Lease Terms. The Retail Properties are typically leased on a triple net
basis, defined as leases in which tenants pay their proportionate share of real
estate taxes, insurance and operating costs. In addition, some leases, including
some Anchor Tenant leases, require tenants to pay percentage rents based on
gross retail sales above predetermined thresholds. Typical Anchor Tenant leases
also provide for payment of a percentage administrative fee in lieu of a
management fee (calculated as a percentage of common area maintenance) which
ranges between 5% and 15%. Lease terms typical for Anchor Tenants range from 10
to 20 years, with an average of 19 years, with renewal options for an additional
10 to 20 years at fixed rents. Tenant improvement allowances are standard and
the amounts vary by submarket. Typical Non-Anchor Tenants have lease terms
ranging between three and 10 years with an average of eight years and they
typically receive options for an additional five-year term at market rents.
54
<PAGE> 61
RETAIL PROPERTY SUMMARY
Anchor Tenants accounted for 67.4% of the aggregate square footage of the
Retail Properties as of March 31, 1998. Annualized Base Rent as of such date for
the Company's largest tenants was approximately $29.9 million, representing
approximately 39.3% of Annualized Base Rent for all Retail Properties.
Annualized Base Rent for the remaining retail tenants was approximately $46.3
million as of the same date, representing approximately 60.7% of the Annualized
Base Rent for all Retail Properties. The following table sets forth, on a
property-by-property basis, the rentable square footage leased to Anchor Tenants
and Non-Anchor Tenants as of March 31, 1998. Ownership of each Property is in
fee simple unless otherwise noted.
<TABLE>
<CAPTION>
LEASED
LEASED NON-
ANCHOR ANCHOR
RENTABLE RENTABLE AVAILABLE TOTAL
YEAR BUILT/ SQUARE SQUARE RENTABLE RENTABLE
REGION/MARKET/PROPERTY LOCATION RENOVATED(1) FEET FEET SQUARE FEET SQUARE FEET
---------------------- ---------------- ------------ ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
EASTERN
Albany
Latham Farms.................... Albany 1993 502,444 77,733 22,300 602,477
Baltimore
Long Gate Shopping Center....... Ellicott City 1996 390,288 14,467 0 404,755
Boston
Mazzeo Drive.................... Randolph 1993 88,420 0 0 88,420
Hartford
Corbins Corner Shopping
Center........................ Hartford 1988R 116,960 58,067 2,289 177,316
--------- --------- --------- ---------
Eastern Total/Weighted Average...................................... 1,098,112 150,267 24,589 1,272,968
MIDWESTERN
Chicago
Brentwood Commons............... Bensenville 1990R 61,621 40,508 0 102,129
Civic Center Plaza.............. Niles 1989 238,655 17,554 7,306 263,515
Riverview Plaza Shopping
Center........................ Chicago 1981 113,607 25,665 0 139,272
Minneapolis
Rockford Road Plaza............. Plymouth 1991 151,757 54,160 0 205,917
--------- --------- --------- ---------
Midwestern Total/Weighted Average................................... 565,640 137,887 7,306 710,833
SOUTHERN
Atlanta
Woodlawn Point Shopping
Center........................ Cobb County 1993 68,499 29,400 0 97,899
<CAPTION>
AVERAGE
ANNUALIZED NUMBER BASE RENT
PERCENTAGE BASE RENT OF PER SQUARE
REGION/MARKET/PROPERTY LEASED (000S)(2) LEASES FOOT(3) PRIMARY TENANTS(4)
---------------------- ---------- ---------- ------ ---------- ------------------
<S> <C> <C> <C> <C> <C>
EASTERN
Albany
Latham Farms.................... 96.3% $ 5,941 27 $10.24 Sam's Club
Wal-Mart Stores
Baltimore
Long Gate Shopping Center....... 100.0 4,639 12 11.46 Kohl's
Target
Boston
Mazzeo Drive.................... 100.0 690 1 7.80 Bob's Inc.
Hartford
Corbins Corner Shopping
Center........................ 98.7 3,111 23 17.77 Filene's Basement
Toys 'R Us
------- -----
Eastern Total/Weighted Average...... 98.1 14,381 63 11.52
MIDWESTERN
Chicago
Brentwood Commons............... 100.0 1,047 21 10.25 Dominick's
Super Trak
Civic Center Plaza.............. 97.2 2,471 13 9.64 Dominick's
Home Depot
Riverview Plaza Shopping
Center........................ 100.0 1,379 14 9.90 Dominick's
Toys 'R Us
Minneapolis
Rockford Road Plaza............. 100.0 2,202 30 10.69 PetsMart
Rainbow Foods
------- -----
Midwestern Total/Weighted Average... 99.0 7,099 78 10.09
SOUTHERN
Atlanta
Woodlawn Point Shopping
Center........................ 100.0 1,194 18 12.20 Publix
Zany Brainy
</TABLE>
55
<PAGE> 62
<TABLE>
<CAPTION>
LEASED
LEASED NON-
ANCHOR ANCHOR
RENTABLE RENTABLE AVAILABLE TOTAL
YEAR BUILT/ SQUARE SQUARE RENTABLE RENTABLE
REGION/MARKET/PROPERTY LOCATION RENOVATED(1) FEET FEET SQUARE FEET SQUARE FEET
---------------------- ---------------- ------------ ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Houston
Randall's Austin Parkway........ Sugarland 1993 90,650 21,025 0 111,675
Randall's Commons Memorial...... Houston 1993 75,689 31,002 3,504 110,195
Randall's Dairy Ashford......... Houston 1993 115,360 20,575 0 135,935
Randall's Woodway Collection.... Houston 1993 65,108 27,507 18,074 110,689
Wesleyan Plaza.................. Houston 1986R 216,870 116,521 22,859 356,250
Miami
Kendall Mall(6)................. Miami 1995R 194,550 89,505 15,527 299,582
Northridge Plaza(6)(7).......... Ft. Lauderdale 1998R 124,650 51,064 15,493 191,207
Palm Aire(6)(7)................. Pompano Beach 1997R 33,100 25,748 101,054 159,902
Shoppes at Lago Mar............. Miami 1995 42,323 31,693 9,092 83,108
Springs Gate(8)................. Coral Springs n/a n/a n/a n/a n/a
The Plaza at Delray(6).......... Delray Beach 1996R 216,883 50,438 33,288 300,609
--------- --------- --------- ---------
Southern Total/Weighted Average..................................... 1,243,682 494,478 218,891 1,957,051
WESTERN
Denver
Applewood Village Shopping
Center........................ Wheat Ridge 1994R 265,663 85,013 2,547 353,223
Arapahoe Village Shopping
Center........................ Boulder 1989R 85,530 73,707 0 159,237
Los Angeles
Granada Village................. Granada Hills 1996R 124,638 88,328 11,817 224,783
Manhattan Village Shopping
Center ....................... Manhattan Beach 1992R 225,791 188,467 9,692 423,950
Twin Oaks Shopping Center....... Agoura Hills 1996R 58,475 43,924 0 102,399
<CAPTION>
AVERAGE
ANNUALIZED NUMBER BASE RENT
PERCENTAGE BASE RENT OF PER SQUARE
REGION/MARKET/PROPERTY LEASED (000S)(2) LEASES FOOT(3) PRIMARY TENANTS(4)
---------------------- ---------- ---------- ------ ---------- ------------------
<S> <C> <C> <C> <C> <C>
Houston
Randall's Austin Parkway........ 100.0% $ 1,093 12 $ 9.79 Randall's
Sears Hardware
Randall's Commons Memorial...... 96.8 947 15 8.88 Randall's
Walgreen's
Randall's Dairy Ashford......... 100.0 1,283 12 9.44 Randall's
PetSmart
Randall's Woodway Collection.... 83.7 1,206 12 13.02 Randall's
Eckerd
Wesleyan Plaza.................. 93.6 3,760 46 11.28 Randall's
Bering's Home Center
Miami
Kendall Mall(6)................. 94.8 3,734 46 13.15 J.C. Penney Home
Store
Upton's
Northridge Plaza(6)(7).......... 91.9 1,362 21 7.75 Target
Publix
Palm Aire(6)(7)................. 36.8 436 15 7.41 Eckerd
Winn-Dixie
Shoppes at Lago Mar............. 89.1 879 17 11.88 Publix
Springs Gate(8)................. n/a n/a n/a n/a n/a
The Plaza at Delray(6).......... 88.9 3,249 35 12.15 Home Place
------- -----
Regal Cinema
Southern Total/Weighted Average..... 88.8 19,143 249 11.01
WESTERN
Denver
Applewood Village Shopping
Center........................ 99.3 2,865 41 8.17 Wal-Mart Stores
King Soopers
Arapahoe Village Shopping
Center........................ 100.0 1,840 25 11.56 Safeway
So-Fro Fabrics
Los Angeles
Granada Village................. 94.7 2,820 38 13.24 Hughes Market
TJ Maxx
Manhattan Village Shopping
Center ....................... 97.7 6,492 88 15.67 Macy's
Fry's Electronics
Twin Oaks Shopping Center....... 100.0 1,100 24 10.74 Ralph's
Rite Aid
</TABLE>
56
<PAGE> 63
<TABLE>
<CAPTION>
LEASED
LEASED NON-
ANCHOR ANCHOR
RENTABLE RENTABLE AVAILABLE TOTAL
YEAR BUILT/ SQUARE SQUARE RENTABLE RENTABLE
REGION/MARKET/PROPERTY LOCATION RENOVATED(1) FEET FEET SQUARE FEET SQUARE FEET
---------------------- ---------------- ------------ ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Reno
Southwest Pavilion(7)........... Reno 1997E 47,140 25,206 4,411 76,757
San Diego
La Jolla Village S.C............ La Jolla 1989R 67,238 95,142 2,572 164,952
Rancho San Diego Village S.C.... La Mesa 1994R 39,777 58,282 13,393 111,452
Santa Barbara
Five Points Shopping Center..... Santa Barbara 1996 97,189 47,295 0 144,484
San Francisco Bay Area
Bayhill Shopping Center......... San Bruno 1997R 59,221 57,775 5,045 122,041
Lakeshore Plaza Shopping
Center........................ San Francisco 1993 38,836 81,975 2,050 122,861
Pleasant Hill Shopping Center... Pleasant Hill 1990R 210,614 23,063 0 233,677
Silverado Plaza Shopping
Center........................ Napa 1994R 58,238 25,843 942 85,023
Ygnacio Plaza................... Walnut Creek 1990R 52,118 50,118 7,193 109,429
Seattle
Aurora Marketplace.............. Edmonds 1991 74,113 32,837 0 106,950
Eastgate Plaza.................. Bellevue 1995R 49,575 26,989 0 76,564
Totem Lake Malls................ Kirkland 1989R 154,223 75,629 60,352 290,204
--------- --------- --------- ---------
Western Region Total/Weighted Average............................... 1,708,379 1,079,593 120,014 2,907,986
--------- --------- --------- ---------
Total/Weighted Average.............................................. 4,615,813 1,862,225 370,800 6,848,838
========= ========= ========= =========
<CAPTION>
AVERAGE
ANNUALIZED NUMBER BASE RENT
PERCENTAGE BASE RENT OF PER SQUARE
REGION/MARKET/PROPERTY LEASED (000S)(2) LEASES FOOT(3) PRIMARY TENANTS(4)
---------------------- ---------- ---------- ------ ---------- ------------------
<S> <C> <C> <C> <C> <C>
Reno
Southwest Pavilion(7)........... 94.3% $ 731 14 $10.10 Scolari's Market
San Diego
La Jolla Village S.C............ 98.4 3,016 37 18.57 Whole Foods Market
Sav-on Drugs
Rancho San Diego Village S.C.... 88.0 1,247 41 12.72 Safeway
Santa Barbara
Five Points Shopping Center..... 100.0% 2,241 25 15.51 Lucky
Ross Stores
San Francisco Bay Area
Bayhill Shopping Center......... 95.9 1,282 27 10.96 Longs Drugs
Mollie Stone's Markets
Lakeshore Plaza Shopping
Center........................ 98.3 3,281 33 27.16 Ross Stores
UCSF
Pleasant Hill Shopping Center... 100.0 2,374 12 10.16 Toys 'R Us
Target
Silverado Plaza Shopping
Center........................ 98.9 823 17 9.79 Nob Hill Foods
Rite Aid
Ygnacio Plaza................... 93.4 1,352 24 13.22 Lucky
Rite Aid
Seattle
Aurora Marketplace.............. 100.0 1,495 18 13.98 Drug Emporium
Safeway
Eastgate Plaza.................. 100.0 944 15 12.33 Rite Aid
Albertson's
Totem Lake Malls................ 79.2% 1,763 36 7.67 Lamonts Apparel
Computer City
------- -----
Western Region Total/Weighted Averag 95.9 35,666 515 12.79
------- -----
Total/Weighted Average.............. 94.6% $76,289 905 $11.78
======= =====
</TABLE>
- ---------------
(1) Retail Properties denoted with an "R," "E" or "D" indicate the date of most
recent renovation, expansion or development, respectively. All other dates
reference the year such Property was developed.
(2) Annualized Base Rent means the monthly contractual amount under existing
leases at March 31, 1998, multiplied by 12. This amount excludes expense
reimbursements, rental abatements and percentage rents.
(3) Calculated as total Annualized Base Rent divided by rentable square feet
actually leased as of March 31, 1998.
(4) Primary tenants are defined as the two largest Anchor Tenants as measured by
rentable square footage.
(5) This Property includes 33 apartment units which were acquired as part of the
acquisition of the Property.
(6) The Operating Partnership holds interests in these Properties through a
joint venture interest in a limited partnership. See "-- Properties Held
Though Joint Ventures, Limited Liability Companies and Partnerships."
(7) This Property is being redeveloped. All calculations are based on rentable
square feet existing as of March 31, 1998.
(8) This Property consists of land held for future development.
57
<PAGE> 64
RETAIL PROPERTY TENANT INFORMATION
Largest Retail Property Tenants. The Company's 25 largest Retail Property
tenants by Annualized Base Rent are set forth in the table below. These tenants
have an average of approximately 15 years remaining on their lease terms, which
the Company believes should provide a balance to the typically shorter remaining
lease terms of the Industrial Property tenants.
<TABLE>
<CAPTION>
PERCENTAGE OF PERCENTAGE OF
AGGREGATE AGGREGATE
NUMBER AGGREGATE LEASED ANNUALIZED ANNUALIZED
OF RENTABLE SQUARE BASE RENT BASE
TENANT NAME(1)(2) CENTERS SQUARE FEET FEET(3) (000S) RENT(4)
----------------- ------- ----------- ------------- ---------- -------------
<S> <C> <C> <C> <C> <C>
Wal-Mart Stores, Inc. and Sam's Club...... 2 388,866 6.0% $ 2,891 3.8%
Randall's Food & Drugs, Inc............... 5 298,549 4.6 2,369 3.1
Safeway Stores, Inc....................... 4 187,334 2.9 1,860 2.5
Target Stores Corporation Dayton.......... 3 320,670 4.9 1,784 2.4
Home Place................................ 2 109,323 1.7 1,450 1.9
Omni ..................................... 3 175,229 2.7 1,430 1.9
Blockbuster Video, Inc. Viacom............ 10 58,785 0.9 1,247 1.7
Toys 'R Us, Inc........................... 3 135,332 2.1 1,247 1.7
Publix.................................... 5 199,764 3.1 1,180 1.5
Home Quarters............................. 1 101,783 1.6 1,167 1.5
J.C. Penney............................... 4 74,612 1.1 1,113 1.5
Tandy Corporation......................... 15 81,910 1.3 1,044 1.4
Dart...................................... 6 64,390 1.0 1,030 1.3
Gap, Inc.................................. 4 57,591 0.9 1,016 1.3
Home Depot................................ 1 116,095 1.8 1,015 1.3
Barnes & Noble Super Stores, Inc.......... 3 50,600 0.8 1,004 1.3
Great Atlantic............................ 1 86,889 1.3 949 1.2
PetsMart, Inc............................. 4 102,100 1.6 875 1.1
Hallmark.................................. 13 49,693 0.8 852 1.1
Hannaford Bros. Co........................ 1 63,664 1.0 828 1.1
TJX, Inc.................................. 4 117,200 1.8 769 1.0
Ross Stores, Inc.......................... 2 61,120 0.9 769 1.0
Randolph Bob's, Inc....................... 1 88,420 1.4 690 0.9
American Stores........................... 4 116,873 1.8 689 0.9
Fry's Electronics......................... 1 46,200 0.7 677 0.9
--------- ---- ------- ----
Total/Weighted Average............... 3,152,992 48.7% $29,945 39.3%
========= ==== ======= ====
</TABLE>
- ---------------
(1) Tenant(s) may be a subsidiary of or an entity affiliated with the named
tenant.
(2) Of the top 25 Retail Property tenants, six are grocers. Of the 37 Retail
Properties, 33 are grocer-anchored.
(3) Computed as Aggregate Rentable Square Feet divided by the Aggregate Leased
Square Feet of the Retail Properties.
(4) Computed as Annual Base Rent divided by the Aggregate Annualized Base Rent
of the Retail Properties.
(5) Computed as Aggregate Rentable Square Feet of such tenants divided by
Aggregate Leased Square Feet of the Properties or Annualized Base Rent of
such tenants divided by Aggregate Annualized Base Rent of the Properties, as
applicable.
58
<PAGE> 65
With over 900 tenants, the Retail Properties include other national
retailers as well as regional and local tenants, many of which are privately
held. Leases of less than 2,500 rentable square feet represent 58% of the Retail
Property leases and 20.5% of the Retail Properties' Annualized Base Rent.
Following is a list of certain tenants which lease less than 2,500 rentable
square feet of retail space:
Agoura Beauty Supply
Flower Basket
Islands Restaurants
King Dragon
Star of India
TCBY
Baskin Robbins, Inc.
Great Escapes Travel
Let Us Mail
Pavilion Cleaners
Santa Barbara Travel
State Farm Insurance
The Bowling Store
Domino's Pizza
Imagination Toys
Nail Xpress
Prestige Jewelers
Sears Driving School
Subway
Yum-Yum Donuts
RETAIL PROPERTY LEASE EXPIRATIONS
The following table sets forth a summary schedule of the Retail Property
lease expirations for leases in place as of March 31, 1998 without giving effect
to the exercise of renewal options or termination rights, if any, at or prior to
the scheduled expirations.
<TABLE>
<CAPTION>
ANNUALIZED PERCENTAGE OF ANNUALIZED
RENTABLE BASE RENT OF ANNUALIZED RENT OF
NUMBER OF SQUARE FOOTAGE PERCENTAGE OF EXPIRING BASE RENT OF EXPIRING
YEAR OF LEASE LEASES OF LEASES TOTAL RENTABLE LEASES(1)(2) EXPIRING LEASES PER
EXPIRATIONS EXPIRING(1) EXPIRING(1) Square Footage (000S) LEASES SQUARE FOOT(3)
- ---------------------- ----------- -------------- -------------- ------------ ------------- --------------
<S> <C> <C> <C> <C> <C> <C>
1998(4)............... 121 438,950 6.7% $ 4,759 5.7% $10.84
1999.................. 123 392,463 6.0 5,536 6.6 14.11
2000.................. 123 467,638 7.2 5,961 7.2 12.75
2001.................. 113 511,783 7.9 6,670 8.0 13.03
2002.................. 132 426,945 6.6 7,740 9.3 18.13
2003.................. 59 321,251 4.9 4,559 5.5 14.19
2004.................. 30 179,045 2.8 2,702 3.2 15.09
2005.................. 36 134,228 2.1 3,103 3.7 23.12
2006.................. 46 303,150 4.7 5,712 6.9 18.84
2007.................. 34 406,543 6.3 4,291 5.2 10.55
2008 and beyond....... 102 2,921,111 44.8 32,248 38.7 11.04
--- --------- ----- ------- ----- ------
Total/Weighted
Average............. 919 6,503,107 100.0% $83,281 100% $12.81
=== ========= ===== ======= ===== ======
</TABLE>
- ---------------
(1) Schedule includes executed leases that commence after March 31, 1998.
Schedule ignores leases expiring March 31, 1998.
(2) Calculated as monthly rent at expiration multiplied by 12.
(3) Rent per square foot is calculated by dividing the Annualized Base Rent of
expiring leases by the square footage expiring in any given year.
(4) Includes 43,699 square feet of month-to-month leases.
59
<PAGE> 66
HISTORICAL TENANT RETENTION RATES AND RENT INCREASES
The following table sets forth information relating to retention rates and
rent increases on renewal and re-tenanted space for the Properties for the
periods presented.
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-------------------------- THREE MONTHS ENDED TOTAL/WEIGHTED
1995 1996 1997 MARCH 31, 1998 AVERAGE
------ ------ ------ ------------------ --------------
<S> <C> <C> <C> <C> <C>
INDUSTRIAL PROPERTIES:
Retention rate................. 67.9% 79.2% 69.5% 77.3% 72.9%
Rental rate increases.......... 4.8% 4.7% 13.0% 14.8%
RETAIL PROPERTIES:
Retention rate................. 63.5% 88.4% 87.8% 87.2% 83.5%
Rental rate increases.......... 3.2% 5.4% 10.1% 22.0%
TOTAL PROPERTIES:
Retention rate................. 67.7% 79.8% 70.3% 78.1% 73.5%
Rental rate increases.......... 4.3% 5.0% 12.0% 16.4%
</TABLE>
RECURRING TENANT IMPROVEMENTS AND LEASING COMMISSIONS
The tables below summarize for Industrial Properties and Retail Properties,
separately, the recurring tenant improvements and leasing commissions for the
periods presented. The recurring tenant improvements and leasing commissions
represent costs incurred to lease space after the initial lease term of the
initial tenant, excluding costs incurred to relocate tenants as part of a
re-tenanting strategy. The tenant improvements and leasing commissions set forth
below are not necessarily indicative of future tenant improvements and leasing
commissions. See "Risk Factors -- General Real Estate Risks -- Possibility
Inability to Complete Renovation and Development on Advantageous Terms."
<TABLE>
<CAPTION>
YEARS ENDED
DECEMBER 31,
--------------------- THREE MONTHS ENDED WEIGHTED
1995 1996 1997 MARCH 31, 1998 AVERAGE
----- ----- ----- ------------------ --------
<S> <C> <C> <C> <C> <C>
INDUSTRIAL PROPERTIES:
Expenditures per renewed square foot
leased.................................... $0.91 $0.93 $1.05 $ 0.76 $0.93
Expenditures per re-tenanted square foot
leased.................................... 1.75 1.97 1.62 1.98 1.77
Aggregate weighted average per square foot
leased.................................... 1.32 1.29 1.30 0.98 1.26
RETAIL PROPERTIES:
Expenditures per renewed square foot
leased.................................... 5.53 4.72 4.25 1.82 3.96
Expenditures per re-tenanted square foot
leased.................................... 5.37 6.53 7.92 13.85 7.47
Aggregate weighted average per square foot
leased.................................... 5.46 5.61 6.41 3.25 5.59
</TABLE>
OCCUPANCY AND BASE RENT
The table below sets forth weighted average occupancy rates and base rent
based on square feet leased of the Industrial Properties and the Retail
Properties as of and for the periods presented.
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-------------------------- THREE MONTHS ENDED
1995 1996 1997 MARCH 31, 1998
------ ------ ------ ------------------
<S> <C> <C> <C> <C>
INDUSTRIAL PROPERTIES:
Occupancy rate at period end................ 97.3% 97.2% 95.7% 94.6%
Average base rent per square foot(1)........ $ 3.43 $ 3.81 $ 4.26 $ 4.29
RETAIL PROPERTIES:
Occupancy rate at period end................ 92.4% 92.4% 96.1% 94.6%
Average base rent per square foot(1)........ $10.46 $11.32 $11.98 $11.78
</TABLE>
- ---------------
(1) Average base rent per square foot represents the total contractual base
rental revenue for the period divided by the average square feet leased for
the period.
60
<PAGE> 67
RENOVATION, EXPANSION AND DEVELOPMENT PROJECTS IN PROGRESS
The following table sets forth the Properties owned by the Operating
Partnership which are currently undergoing renovation, expansion or new
development. No assurance can be given that any of such Properties will be
completed on schedule or within budgeted amounts. See "Risk Factors -- General
Real Estate Risks -- Possible Inability to Complete Renovation and Development
on Advantageous Terms."
<TABLE>
<CAPTION>
ESTIMATED ESTIMATED
ESTIMATED TOTAL SQUARE FEET
STABILIZATION INVESTMENT AT
PROPERTY NAME TYPE(1) DATE(2) (000S)(3) COMPLETION
------------- ----------- ------------- ---------- -----------
<S> <C> <C> <C> <C>
Industrial Properties:
Dock's Corner............................... Expansion Jul-98 $ 46,900 1,200,000
Fairway Drive Phase II...................... Development May-98 10,600 255,300
Fairway Drive Phase III..................... Development Sept-99 4,800 115,000
Mendota Heights............................. Development Dec-98 6,900 150,400
Pennsy Drive................................ Renovation Jan-99 10,000 359,500
DFW Air Cargo Facility...................... Development Dec-99 18,300 205,000
Suwanee Creek Distribution Center........... Development Feb-01 32,000 1,086,000
-------- ---------
Subtotal............................ 129,500 3,371,200
Retail Properties:
Palm Aire................................... Renovation Feb-99 11,500 144,300
Springs Gate................................ Development May-98 34,600 248,900
Northridge Plaza............................ Renovation Sept-00 35,400 259,400
-------- ---------
Subtotal............................ 81,500 652,600
-------- ---------
Total............................... $211,000 4,023,800
======== =========
</TABLE>
- ---------------
(1) Renovation with respect to a Property means capital improvements which have
totaled 20% or more of the total cost of such Property within a 24-month
period or which have resulted in material improvement of physical condition.
Expansion with respect to a Property means construction resulting in an
increase in the rentable square footage of an existing structure or the
development of additional buildings on a property on which existing
buildings are located. Development with respect to a Property means new
construction on a previously undeveloped location.
(2) Estimated stabilization date means management's estimate of when capital
improvements for repositioning, development and redevelopment programs will
have been completed and in effect for a sufficient period of time (but in no
case more than 12 months after shell completion) to achieve market occupancy
of at least 95%.
(3) Represents total estimated cost of renovation, expansion or development,
including initial acquisition costs. The estimates are based on the
Operating Partnership's current planning estimates and forecasts and
therefore subject to change.
PROPERTIES HELD THROUGH JOINT VENTURES, LIMITED LIABILITY COMPANIES AND
PARTNERSHIPS
As of March 31, 1998, the Operating Partnership held interests in 11 joint
ventures, limited liability companies and partnerships (collectively, the "Joint
Ventures") with certain unaffiliated third parties (the "Joint Venture
Participants"). Pursuant to the existing agreements with respect to each Joint
Venture, the Operating Partnership holds a greater than 50% interest in 10 of
the Joint Ventures and a 50% interest in the eleventh Joint Venture, but in
certain cases such agreements provide that the Operating Partnership is a
limited partner or that the Joint Venture Participant is principally responsible
for day-to-day management control of the Property (though in all such cases, the
Operating Partnership has approval rights with respect to significant decisions
involving the underlying properties). Under the agreements governing the Joint
Ventures, the Operating Partnership and the Joint Venture Participant may be
required to make additional capital contributions, and subject to certain
limitations, the Joint Ventures may incur additional debt. Such additional
indebtedness would effectively be senior to the Notes. See "Risk
Factors -- Ranking of the Notes." Such agreements also impose certain
restrictions on the transfer of the interest in the Joint Venture by the
Operating Partnership or the Joint Venture Participant, and provide certain
rights to the Operating Partnership and/or the Joint Venture Participant to sell
its interest to the Joint Venture or to the other venturer on terms specified in
the agreement. All of the Joint Ventures terminate in the year 2024 or later,
but
61
<PAGE> 68
may end earlier if a Joint Venture ceases to hold any interest in or have any
obligations relating to the property held by such Joint Venture. See "Risk
Factors -- Impact on Control Over and Liabilities with Respect to Properties
Owned Through Partnerships and Joint Ventures.
The following table sets forth certain information regarding the Joint
Ventures as of March 31, 1998:
<TABLE>
<CAPTION>
PERCENTAGE AND
FORM OF
BOOK VALUE OF COMPANY'S
GROSS BOOK CO-VENTURER'S COMPANY'S OWNERSHIP
PROPERTY VALUE(1) MORTGAGE DEBT INVESTMENT(2) INVESTMENT(3) INTEREST
-------- ---------- ------------- ------------- ------------- --------------
<S> <C> <C> <C> <C> <C>
INDUSTRIAL PROPERTIES:
Chancellor........... $ 6,390 $ (2,972) $ (613) $ 2,805 90% general partnership
interest
Fairway Drive........ 12,119 -- (313) 11,806 70% LLC interest
Nippon Express(4).... 6,257 -- (412) 5,845 50% limited partnership
interest
Metric Center........ 43,965 -- (5,421) 38,544 87.15% limited
partnership interest
Jamesburg/Corporate
Park/Hickory
Hill.............. 74,465 -- (37,119) 37,346 50.0005% general
partnership interest
-------- -------- -------- --------
Subtotal.......... 143,196 (2,972) (43,878) 96,346
RETAIL PROPERTIES:
Kendall Mall......... 35,794 (25,063) 358 11,089 50.0001% limited
partnership interest
Manhattan Village.... 83,307 -- (7,884) 75,423 90% LLC interest
Palm Aire............ 14,035 (5,623) (1,108) 7,304 50.0001% general
partnership interest
The Plaza at
Delray............ 35,127 (23,378) (355) 11,394 50.0001% limited
partnership interest
Springs Gate......... 11,693 -- -- 11,693 50.0001% limited
partnership interest
Northridge Plaza..... 11,011 -- -- 11,011 50.0001% limited
partnership interest
-------- -------- -------- --------
Subtotal.......... 190,967 (54,064) (8,989) 127,914
-------- -------- -------- --------
Total........ $334,163 $(57,036) $(52,867) $224,260
======== ======== ======== ========
</TABLE>
- ---------------
(1) Represents the book value of the Property owned by the respective joint
venture entity before accumulated depreciation.
(2) Represents the co-venturer's aggregate investment on a book value basis in
the respective joint venture property.
(3) Represents the Company's aggregate investment on a book value basis in the
respective joint venture property.
(4) Represents a building which is part of the Lake Michigan Industrial
Portfolio.
The Company accounts for all of the above investments on a consolidated
basis for financial reporting purposes because of its ability to exercise
control over significant aspects of the investment as well as its significant
economic interest in such investments. See Notes to the Consolidated Financial
Statements of the Company.
DEBT FINANCING
The Operating Partnership's financing policies and objectives are
determined by the Company's Board of Directors and may be altered without the
consent of the Company's stockholders. The organizational documents of the
Operating Partnership and the Company do not limit the amount of indebtedness
that either may incur. The Company presently intends to limit the Debt-to-Total
Market Capitalization Ratio to approximately 45%. As of March 31, 1998, on a pro
forma basis after giving effect to the Offering and the
62
<PAGE> 69
application of the net proceeds therefrom as described in "Use of Proceeds," the
Company's consolidated Debt-to-Total Market Capitalization Ratio as of March 31,
1998 on a pro forma basis would have been approximately 31.2% (29.9% on an
historical basis). The Operating Partnership believes that the Debt-to-Total
Market Capitalization Ratio is a useful indicator of a company's ability to
incur indebtedness and has gained acceptance as an indicator of leverage for
real estate companies. The Operating Partnership intends to utilize one or more
sources of capital for future acquisitions, including development and capital
improvements, which may include undistributed cash flow, borrowings under the
Credit Facility, issuance of debt or equity securities of either the Operating
Partnership or the Company, funds from its co-investment partners and other bank
and/or institutional borrowings. There can be no assurance, however, that the
Operating Partnership will be able to obtain capital for any such acquisitions,
developments or improvements on terms favorable to the Operating Partnership.
See "Strategies for Growth -- Growth Through Acquisition."
Unsecured Debt. The Operating Partnership is party to the Credit Facility
with aggregate availability of $500 million (subject to borrowing base
limitations). The Operating Partnership intends to use the Credit Facility
principally for acquisitions and for working capital purposes. Borrowings under
the Credit Facility bear interest at a floating rate equal to LIBOR plus 90 to
120 basis points (currently LIBOR plus 90 basis points), depending upon the
Operating Partnership's debt rating at the time of such borrowings. As of March
31, 1998, $312.0 million was outstanding under the Credit Facility, with $148.0
million of availability. Of the $312.0 million outstanding as of March 31, 1998,
substantially all of such borrowings were used to finance property acquisitions.
The Company's ability to borrow under the Credit Facility is subject to the
Operating Partnership's ongoing compliance with a number of financial and other
covenants. The Credit Facility requires that: (i) the Operating Partnership
maintain a ratio of unencumbered property value to unsecured indebtedness of at
least 2 to 1; (ii) the unencumbered properties generate sufficient net operating
income to maintain a debt service coverage ratio of at least 2 to 1; (iii) the
Operating Partnership maintain a total indebtedness to total asset value ratio
of not more than 0.5 to 1; (iv) the ratio of net operating cash flow to debt
service plus estimated capital expenditures and preferred dividends be at least
2 to 1; and (v) certain other customary covenants and performance requirements.
The Credit Facility, except under certain circumstances, limits the Operating
Partnership's ability to make distributions to no more than 95% of its annual
FFO.
Secured Debt. As of March 31, 1998, $73 million was outstanding under the
Secured Facility. Payments of interest only are due monthly at a fixed annual
interest rate of 7.53% with the principal due on December 12, 2008. The Secured
Facility, which is secured by six of the Properties, became an obligation of the
Company upon consummation of the Formation Transactions. Under the Secured
Facility, the Operating Partnership may substitute collateral, subject to
certain requirements with respect to the property offered as replacement
collateral. In addition to the Secured Facility, 53 of the Properties secure
mortgage indebtedness. The aggregate principal amount of such mortgage
indebtedness was $514 million, $444 million, $403 million and $254 million at
March 31, 1998 and December 31, 1997, 1996 and 1995, respectively. All secured
indebtedness bears interest at rates varying from 7.01% to 10.39% per annum
(with a weighted average of 8.01%) with final maturity dates ranging from 1998
to 2014.
63
<PAGE> 70
The following table sets forth scheduled principal payments of the
Operating Partnership's secured debt (excluding construction debt of $5.6
million as of March 31, 1998) for the Properties on an historical basis as of
March 31, 1998 for each of the years beginning with the year ending December 31,
1998. All of the Operating Partnership's mortgage debt is fixed-rate and has
generally been arranged by the Operating Partnership or its predecessors
directly with lenders such as Principal Financial Group, Northwestern Mutual
Life, Prudential Insurance and Nationwide Insurance.
<TABLE>
<CAPTION>
WEIGHTED
SCHEDULED PRINCIPAL TOTAL AVERAGE
PRINCIPAL DUE AT PRINCIPAL YEAR-END
AMORTIZATION MATURITY PAYMENTS INTEREST RATE
------------ --------- --------- -------------
YEAR (IN THOUSANDS)
<S> ---- <C> <C> <C> <C>
1998....................................... $ 5,648 48,055 53,703 7.96%
1999....................................... 7,398 3,567 10,965 7.94
2000....................................... 8,804 -- 8,804 7.93
2001....................................... 9,392 29,190 38,582 7.93
2002....................................... 9,260 54,415 63,675 7.88
2003....................................... 8,219 114,982 123,201 7.82
2004....................................... 6,435 36,085 42,520 7.71
2005....................................... 5,911 33,416 39,327 7.61
2006....................................... 4,441 103,922 108,363 7.70
2007....................................... 2,038 14,339 16,377 7.66
2008....................................... 1,603 77,783 79,386 8.25
2009....................................... 426 -- 426 8.25
2010....................................... 345 -- 345 8.25
2011....................................... 375 -- 375 8.25
2012....................................... 407 -- 407 8.25
2013....................................... 442 -- 442 8.25
2014....................................... 39 -- 39 0.00
------- -------- -------- ----
Total/Weighted Average.................. $71,183 $515,754 $586,937 6.71%
======= ======== ======== ====
</TABLE>
The following table sets forth scheduled maturities of the Operating
Partnership's secured debt (excluding construction debt of $5.6 million as of
March 31, 1998) on a property-by-property basis.
<TABLE>
<CAPTION>
NOTE BALANCE AT ANNUAL DEBT
INTEREST RATE AT MARCH 31, 1998 SERVICE
PROPERTY MARCH 31, 1998 (000S) (000S) MATURITY DATE
-------- ---------------- ---------------- ----------- -------------
<S> <C> <C> <C> <C>
INDUSTRIAL PROPERTIES:
Arsenal Street.......................... 10.20% $ 10,598 $ 1,438 04/01/98
Bedford Street.......................... 8.50 1,841 219 04/01/98
Braintree Industrial.................... 7.75 5,234 542 04/01/98
Braintree Office........................ 8.34 6,157 659 04/01/98
Collins Street.......................... 9.50 2,141 57 04/01/98
Collins Street.......................... 10.25 431 315 04/01/98
Hartwell Avenue/Braintree Industrial/
Stoughton Industrial(1).............. 7.87 6,305 849 04/01/98
Stoughton Industrial.................... 10.39 708 122 04/01/98
Stoughton Industrial.................... 8.25 610 81 04/01/98
United Drive............................ 9.50 953 113 04/01/98
Harvest Business Park................... 10.38 3,631 438 04/01/99
Edenvale Business Center................ 9.38 1,540 183 11/01/01
United Drive............................ 8.50 7,911 844 06/30/02
</TABLE>
64
<PAGE> 71
<TABLE>
<CAPTION>
NOTE BALANCE AT ANNUAL DEBT
INTEREST RATE AT MARCH 31, 1998 SERVICE
PROPERTY MARCH 31, 1998 (000S) (000S) MATURITY DATE
-------- ---------------- ---------------- ----------- -------------
<S> <C> <C> <C> <C>
OCP Portfolio(2)........................ 9.13 12,532 1,373 11/15/02
Chancellor.............................. 7.45 2,940 273 01/15/03
Blue Lagoon............................. 7.15 11,805 1,032 02/01/03
Kingsport Industrial Park............... 7.81 17,477 1,582 08/01/03
Moffett Business Center................. 7.20 12,757 1,123 12/15/03
Bensenville............................. 8.53 19,986 2,034 08/01/04
Bensenville............................. 8.53 6,680 678 08/01/04
Bensenville............................. 8.35 2,701 267 08/01/04
Bensenville............................. 8.35 7,061 691 08/01/04
Bensenville............................. 8.35 5,107 499 08/01/04
South Bay Industrial(3)................. 8.31 19,404 1,843 04/05/05
Lonestar................................ 8.23 17,000 1,399 08/01/05
Activity Distribution Center............ 7.27 5,317 478 01/01/06
Stadium Business Park................... 7.27 4,834 434 01/01/06
Hewlett Packard Distribution............ 7.27 3,384 304 01/01/06
Minneapolis Industrial Portfolio IV..... 7.27 8,218 739 01/01/06
Amwiler-Gwinnett Industrial Portfolio... 7.01 8,577 838 04/01/06
Pacific Business Center................. 8.59 9,820 1,003 08/01/06
Chicago Industrial...................... 8.59 3,242 331 08/01/06
Valwood................................. 8.59 4,004 409 08/01/06
West North Carrier...................... 8.59 3,242 331 08/01/06
Artesia Industrial Portfolio............ 7.29 54,100 3,944 11/15/06
Stoughton Industrial.................... 10.38 4,305 746 12/31/06
Amwiler-Gwinnett Industrial Portfolio... 7.68 5,608 514 01/01/07
Mendota Heights......................... 8.50 668 57 06/18/07
Ardenwood Corporate Park................ 7.84 9,950 883 09/01/07
Stoughton Industrial.................... 8.13 1,207 142 09/30/07
Brockton Industrial..................... 9.00 6,680 723 12/31/07
Minneapolis Industrial Portfolio V...... 8.88 7,279 1,053 12/01/08
Secured Facility-Industrial(4).......... 7.53 47,450 3,573 12/01/08
Stoughton Industrial.................... 8.25 2,384 329 03/31/09
Mazzeo.................................. 8.25 4,105 465 01/01/14
-------- -------
Subtotal/Weighted Average
(rate/number of years)............. 8.04 377,884 35,950 7.08
RETAIL PROPERTIES:
Lakeshore Plaza Shopping Center......... 7.68 13,567 1,867 11/10/98
Woodlawn Shopping Center................ 8.50 4,620 474 01/01/01
Kendall Mall............................ 7.65 24,641 2,169 11/15/01
Silverado Plaza Shopping Center......... 9.02 4,860 534 04/10/02
Arapahoe Village Shopping Center........ 7.81 10,760 1,002 08/01/02
The Plaza at Delray..................... 7.78 22,902 1,983 09/01/02
Brentwood Commons....................... 8.74 5,081 502 06/01/03
Granada Village......................... 8.74 14,588 1,441 06/01/03
Ygnacio Plaza........................... 8.74 7,783 769 06/01/03
La Jolla Village........................ 8.74 17,907 1,768 06/01/03
Latham Farms............................ 7.88 37,409 3,665 12/01/03
</TABLE>
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<PAGE> 72
<TABLE>
<CAPTION>
NOTE BALANCE AT ANNUAL DEBT
INTEREST RATE AT MARCH 31, 1998 SERVICE
PROPERTY MARCH 31, 1998 (000S) (000S) MATURITY DATE
-------- ---------------- ---------------- ----------- -------------
<S> <C> <C> <C> <C>
Civic Center Plaza...................... 7.27 13,555 1,216 02/01/06
Shoppes at Lago Mar..................... 7.50 5,831 532 04/01/06
Secured Facility-Retail(4).............. 7.53 25,550 1,924 12/12/08
Subtotal/Weighted Average
(rate/number of years)............. 7.96 209,054 19,846 5.5
-------- -------
Total/Weighted Average (rate/number
of years)....................... 8.01% $586,938 $55,796 6.5
======== =======
</TABLE>
- ---------------
(1) One loan is secured by three properties. These properties are Hartwell
Avenue, Braintree Industrial and Stoughton Industrial.
(2) OCP Portfolio has one loan secured by three properties. These properties are
Chancellor Square, Presidents Drive and Sand Lake Service Center.
(3) Comprised of three loans with identical terms that are not
cross-collateralized.
(4) The Secured Facility is cross-collateralized with the following Industrial
and Retail Properties: L.A. County Industrial Portfolio, Southfield, Corbins
Corner Shopping Center, Elk Grove Village Industrial, Pleasant Hill Shopping
Center and Milmont Page.
Construction Debt. The Operating Partnership also has a construction loan
agreement in the amount of $8 million to fund building improvements. The loan
matures three years from the date of the first loan draw, which occurred in July
1997. Borrowings under the construction loan bear interest at LIBOR plus 275
basis points, or the greater of the prime rate or the federal funds rate plus 50
basis points, at the borrower's option. The balance of the construction loan
outstanding at March 31, 1998 was $5.6 million.
INSURANCE
The Company and AMB Investment Management carry joint blanket coverage for
Properties owned by the Company (including the Operating Partnership) and
Properties managed by AMB Investment Management, with a single aggregate policy
limit and deductible. Management believes that its Properties are covered
adequately by commercial general liability insurance, including excess liability
coverage, and commercial "all risks" property insurance, including loss of rents
coverage, with commercially reasonable deductibles, limits and policy terms and
conditions customarily carried for similar properties. There are, however,
certain types of losses which may be uninsurable or not economically insurable,
such as losses due to loss of rents caused by strikes, nuclear events or acts of
war. Should an uninsured loss occur, the Company could lose both its invested
capital in and anticipated profits from the property.
The Company insures its properties for earthquake or earth movement. A
number of both the Industrial and Retail Properties are located in areas that
are known to be subject to earthquake activity. This is focused in California
where as of March 31, 1998, there are 27 Industrial Properties aggregating 10.4
million rentable square feet and 11 Retail Properties aggregating 1.8 million
square feet. Through an annual analysis prepared by outside consultants, the
Company determines appropriate limits of earthquake coverage to secure. Coverage
is on a replacement cost basis, subject to the maximum limit purchased which the
Company believes is adequate and appropriate given both exposure and cost
considerations. Therefore, no assurance can be given that material losses in
excess of insurance proceeds will not occur in the future. See "Risk Factors --
General Real Estate Risks -- Uninsured Losses from Seismic Activity."
The Company has insurance for loss in the event of damage to its properties
for earthquake activity, which consists of a sublimit of $10,000,000 per
occurrence for earthquake coverage provided as part of the "All Risk Property
Policy" with a primary insurer, with $90,000,000 per occurrence for losses in
excess of the $10,000,000 sublimit. The per occurrence deductible for this
coverage in California is 5% of the values applied separately to each building
subject to a minimum deductible of $100,000 (to the extent that such amount is
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<PAGE> 73
greater than 5% of the values at each location), and the deductible for
Properties outside of California is $25,000.
GOVERNMENT REGULATIONS
Many laws and governmental regulations are applicable to the Properties and
changes in these laws and regulations, or their interpretation by agencies and
the courts, occur frequently.
Costs of Compliance with Americans with Disabilities Act. Under the ADA,
all places of public accommodation are required to meet certain federal
requirements related to access and use by disabled persons. Compliance with the
ADA might require removal of structural barriers to handicapped access in
certain public areas where such removal is "readily achievable." Noncompliance
with the ADA could result in the imposition of fines or an award of damages to
private litigants.
Environmental Matters. Under Environmental Laws, a current or previous
owner or operator of real estate may be liable for contamination resulting from
the presence or discharge of hazardous or toxic substances or petroleum products
at such property, and may be required to investigate and clean-up such
contamination at such property or such contamination which has migrated from
such property. Such laws typically impose liability and clean-up responsibility
without regard to whether the owner or operator knew of or caused the presence
of the contaminants, and the liability under such laws has been interpreted to
be joint and several unless the harm is divisible and there is a reasonable
basis for allocation of responsibility. In addition, the owner or operator of a
site may be subject to claims by third parties based on personal injury,
property damage and/or other costs, including investigation and clean-up costs,
resulting from environmental contamination present at or emanating from a site.
Environmental Laws also govern the presence, maintenance and removal of
ACBM. Such laws require that ACBM be properly managed and maintained, that those
who may come into contact with ACBM be adequately apprised or trained and that
special precautions, including removal or other abatement, be undertaken in the
event ACBM is disturbed during renovation or demolition of a building. Such laws
may impose fines and penalties on building owners or operators for failure to
comply with these requirements and may allow third parties to seek recovery from
owners or operators for personal injury associated with exposure to asbestos
fibers. Some of the Properties may contain ACBM.
Some of the Properties are leased or have been leased, in part, to owners
and operators of dry cleaners that operate on-site dry cleaning plants, to
owners and operators of gas stations or to owners or operators of other
businesses that use, store or otherwise handle petroleum products or other
hazardous or toxic substances. Some of these Properties contain, or may have
contained, underground storage tanks for the storage of petroleum products and
other hazardous or toxic substances. These operations create a potential for the
release of petroleum products or other hazardous or toxic substances. Some of
the Properties are adjacent to or near other properties that have contained or
currently contain underground storage tanks used to store petroleum products or
other hazardous or toxic substances. In addition, certain of the Properties are
on or are adjacent to or near other properties upon which others, including
former owners or tenants of the Properties, have engaged or may in the future
engage in activities that may release petroleum products or other hazardous or
toxic substances.
All of the Properties were subject to a Phase I or similar environmental
assessments by independent environmental consultants at the time of acquisition
or shortly after acquisition. Phase I assessments are intended to discover and
evaluate information regarding the environmental condition of, the surveyed
property and surrounding properties. Phase I assessments generally include an
historical review, a public records review, an investigation of the surveyed
site and surrounding properties, and preparation and issuance of a written
report, but do not include soil sampling or subsurface investigations and
typically do not include an asbestos survey. Some of the Company's environmental
assessments of the Properties do not contain a comprehensive review of the past
uses of the Properties and/or the surrounding properties.
None of the environmental assessments of the Properties has revealed any
environmental liability that the Operating Partnership believes would have a
material adverse effect on the Operating Partnership's or the
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<PAGE> 74
Company's financial condition or results of operations taken as a whole, nor is
the Company aware of any such material environmental liability. Nonetheless, it
is possible that the Company's assessments do not reveal all environmental
liabilities or that there are material environmental liabilities of which the
Company is unaware. In addition, less than 50% of the Properties have
environmental assessments which are more than two years old. Moreover, there can
be no assurance that (i) future laws, ordinances or regulations will not impose
any material environmental liability or (ii) the current environmental condition
of the Properties will not be affected by tenants, by the condition of land or
operations in the vicinity of the Properties (such as releases from underground
storage tanks), or by third parties unrelated to the Company. If the costs of
compliance with the various environmental laws and regulations, now existing or
hereafter adopted, exceed the Company's budgets for such items, the Company's
ability to make payments of principal of and interest on the Notes could be
adversely affected.
Other Regulations. The Properties are also subject to various Federal,
state and local regulatory requirements such as state and local fire and life
safety requirements. Failure to comply with these requirements could result in
the imposition of fines by governmental authorities or awards of damages to
private litigants. The Company believes that the Properties are currently in
substantial compliance with all such regulatory requirements. However, there can
be no assurance that these requirements will not be changed or that new
requirements will not be imposed which would require significant unanticipated
expenditures by the Company, which expenditure could have an adverse effect on
the Company's results of operations and financial condition.
Risk of Property Tax Reassessment. Certain local real property tax
assessors may seek to reassess certain of the Properties as a result of the
Formation Transactions and the transfer of interests that occurred in connection
therewith. In jurisdictions such as California, where Proposition 13 limits the
assessor's ability to reassess real property so long as there is no change in
ownership, the assessed value could increase by as much as the full value of any
appreciation that has occurred during the AMB Predecessors' period of ownership.
Where appropriate, the Company would contest vigorously any such reassessment.
Subject to market conditions, current leases may permit the Company to pass
through to tenants a portion of the effect of any increases in real estate taxes
resulting from any such reassessment.
Except as described in this Prospectus, there are no other laws or
regulations which have a material effect on the Company's operations, other than
typical state and local laws affecting the development and operation of real
property, such as zoning laws. See "Description of Certain Provisions of the
Partnership Agreement of the Operating Partnership."
MANAGEMENT AND EMPLOYEES
The Company conducts substantially all of its operations through the
Operating Partnership. AMB Investment Management independently conducts third
party portfolio management activities and related operations. The Company
generally has full, exclusive and complete responsibility and discretion in the
management and control of the Operating Partnership.
The Company (primarily through the Operating Partnership and AMB Investment
Management) employs 123 persons, 99 of whom are located at the Company's
headquarters in San Francisco and 24 of whom are located in the Company's Boston
office.
LEGAL PROCEEDINGS
Neither the Company nor any of the Properties is subject to any material
litigation nor, to the Company's knowledge, is any material litigation
threatened against any of them, other than routine litigation arising in the
ordinary course of business, which is generally expected to be covered by
liability insurance, or to have an immaterial effect on financial results.
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<PAGE> 75
POLICIES WITH RESPECT TO CERTAIN ACTIVITIES
The following is a discussion of the policies with respect to investments,
financing and certain other activities of the Operating Partnership and the
Company. These policies and those set forth under "Certain Relationships and
Related Transactions -- Conflicts of Interest" have been determined by the Board
of Directors of the Company and may be amended or revised from time to time at
the discretion of the Board of Directors without notice to or a vote of the
stockholders of the Company or the limited partners of the Operating
Partnership, except that changes in certain policies with respect to conflicts
of interest must be consistent with legal requirements. Such legal requirements
include those arising from fiduciary principles under the Maryland General
Corporation Law ("MGCL"), including Section 2-419 thereof (which provides
procedures for approval of interested director transactions), and the Delaware
Revised Uniform Limited Partnership Act, and the judicial decisions under each
of such statutes. All references in the following discussion to the "Company"
include the Operating Partnership unless otherwise indicated.
INVESTMENT POLICIES
Investments in Real Estate or Interests in Real Estate. The Company
currently plans to continue to conduct substantially all of its investment
activities through the Operating Partnership. The Company's investment
objectives are to increase FFO per share and the value of the Properties, and to
acquire established income-producing industrial properties and community
shopping centers with FFO growth potential. Additionally, where prudent and
possible, the Company may develop new properties and seek to renovate or
reposition the existing Properties and any newly-acquired properties. The
Company's business is focused on industrial properties and community shopping
centers, but the Company may invest in other types of properties which represent
investment opportunities at the discretion of management. In addition, the
Company may invest in other property types in connection with industrial and
retail acquisition and development opportunities. Where appropriate, and subject
to REIT qualification rules, the Operating Partnership may sell or otherwise
dispose of certain of the Properties.
The Company expects to pursue its investment objectives through the direct
and indirect ownership of properties and ownership interests in other entities.
The Company focuses on properties in those markets where the Company currently
has operations and in new markets selectively targeted by management. However,
future investments, including the activities described below, will not be
limited to any geographic area or to a specified percentage of the Company's
assets.
The Company also may participate with other entities in property ownership
through joint ventures or other types of co-ownership. Equity investments may be
subject to existing mortgage financing and other indebtedness or such financing
or indebtedness may be incurred in connection with acquiring investments. Any
such financing or indebtedness will have priority over the Company's equity
interest in such property. See "Business and Operating Strategies -- AMB
Investment Management."
Investments in Real Estate Mortgages. While the Company emphasizes equity
real estate investments, it may, in its discretion, invest in mortgages, deeds
of trust and other similar interests. The Company does not presently intend to
invest significantly in mortgages or deeds of trust, but may acquire such
interests as a strategy for acquiring ownership of a property or the economic
equivalent thereof, subject to the investment restrictions applicable to REITs.
In addition, the Company may invest in mortgage-related securities and/or may
seek to issue securities representing interests in such mortgage-related
securities as a method of raising additional funds.
Securities of or Interests in Persons Primarily Engaged in Real Estate
Activities and Other Issuers. Subject to the gross income and asset tests
necessary for REIT qualification, the Company also may invest in securities of
entities engaged in real estate activities or securities of other issuers,
including for the purpose of exercising control over such entities. To date,
neither the Operating Partnership nor the Company has invested in any such
securities. In selecting such investments in the future, if any, the Operating
Partnership and the Company expect to consider the same factors used to identify
individual properties for investment -- companies with properties located in
in-fill locations -- as well as other factors which the Operating Partnership
and the Company may consider to be relevant, including, among others, historical
performance,
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<PAGE> 76
financial condition and management. The Company may acquire all or substantially
all of the securities or assets of other REITs or similar entities where such
investments would be consistent with the Company's investment policies. In any
event, the Company does not intend that its investments in securities will
require it or the Operating Partnership to register as an "investment company"
under the Investment Company Act of 1940, as amended.
FINANCING POLICIES
In addition to the limitations on indebtedness under the Credit Facility,
since the IPO, the Company has maintained and presently intends to continue to
maintain a Debt-to-Total Market Capitalization Ratio of approximately 45% or
less. This policy differs from conventional mortgage debt-to-equity ratios which
are asset-based ratios. The Company, however, may from time to time re-evaluate
this policy and decrease or increase such ratio in light of then current
economic conditions, relative costs to the Company of debt and equity capital,
market values of its properties, growth and acquisition opportunities and other
factors. There is no limit on the Debt-to-Total Market Capitalization Ratio
imposed by either the Articles of Incorporation or Bylaws or the Partnership
Agreement. To the extent the Board of Directors of the Company determines to
obtain additional capital, the Company may issue equity securities, or cause the
Operating Partnership to issue additional Units or debt securities, or retain
earnings (subject to provisions in the Code requiring distributions of taxable
income to maintain REIT status), or a combination of these methods. Pursuant to
the Partnership Agreement the net proceeds of all equity capital raised by the
Company will be contributed to the Operating Partnership in exchange for
additional general partner interests therein.
To the extent that the Board of Directors determines to obtain debt
financing in addition to the existing mortgage indebtedness and the Notes, the
Company intends to do so generally through mortgages on its properties and the
Credit Facility; however, the Company may also issue or cause the Operating
Partnership to issue additional debt securities in the future, including debt
which is pari passu with the Notes. Such indebtedness may be recourse,
non-recourse or cross-collateralized and may contain cross-default provisions.
The net proceeds of any debt securities issued by the Company will be lent to
the Operating Partnership on substantially the same terms and conditions as are
incurred by the Company. The Operating Partnership and Company do not have
policies limiting the number or amount of mortgages that may be placed on any
particular property, but mortgage financing instruments usually limit additional
indebtedness on such properties. The Operating Partnership is currently
negotiating for an increase in the aggregate amount available under the Credit
Facility, and may in the future seek to extend, expand, reduce or renew the
Credit Facility, or obtain new credit facilities or lines of credit, subject to
its general policy on debt capitalization, for the purpose of making
acquisitions or capital improvements or providing working capital or meeting the
taxable income distribution requirements for REITs under the Code.
LENDING POLICIES
The Company may consider offering purchase money financing in connection
with the sale of Properties where the provision of such financing will increase
the value received by the Company for the property sold. The Operating
Partnership also may make loans to joint ventures in which it may participate in
the future. The Company may also make loans to the Operating Partnership, AMB
Investment Management, and joint ventures and other entities in which it or the
Operating Partnership has an equity interest.
CONFLICT OF INTEREST POLICIES
Officers and Directors of the Company. Without the unanimous approval of
the disinterested directors, the Company and its subsidiaries will not (i)
acquire from or sell to any director, officer or employee of the Company, or any
entity in which a director, officer or employee of the Company owns more than a
1% interest, or acquire from or sell to any affiliate of any of the foregoing,
any assets or other property, (ii) make any loan to or borrow from any of the
foregoing persons or (iii) engage in any other material transaction with any of
the foregoing persons. Each transaction of the type described above will be in
all respects on such terms as are, at the time of the transaction and under the
circumstances then prevailing, fair and reasonable to the Company
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<PAGE> 77
and its subsidiaries in the opinion of the disinterested directors. For purposes
of this paragraph, "disinterested directors" means those Independent Directors
who do not have an interest in the transaction in question.
Policies Applicable to All Directors. Under Maryland law, each director is
obligated to offer to the Company any opportunity (with certain limited
exceptions) which comes to such director and which the Company could reasonably
be expected to have an interest in developing or acquiring. The Company has
adopted certain policies relating to such matters applicable to Independent
Directors actively engaged in industrial and retail real estate which generally
limit directly competitive activities by such directors. In addition, under
Maryland law, any contract or other transaction between a corporation and any
director or any other corporation, firm or other entity in which the director is
a director or has a material financial interest may be void or voidable.
However, the MGCL provides that any such contract or transaction will not be
void or voidable if (i) it is authorized, approved or ratified, after disclosure
of, or with knowledge of, the common directorship or interest, by the
affirmative vote of a majority of disinterested directors (even if the
disinterested directors constitute less than a quorum) or by the affirmative
vote of a majority of the votes cast by disinterested stockholders or (ii) it is
fair and reasonable to the corporation.
POLICIES WITH RESPECT TO OTHER ACTIVITIES
The Company may, but does not presently intend to, make investments other
than as previously described. The Company makes real property investments only
through the Company and the Operating Partnership, except to the extent
necessary to establish financing partnerships or similar vehicles established
substantially for the benefit of the Company or the Operating Partnership. The
Company has authority to offer its shares of Common Stock or other equity or
debt securities of the Operating Partnership in exchange for property and to
repurchase or otherwise reacquire its shares of Common Stock or any other
securities and may engage in such activities in the future. Similarly, the
Operating Partnership may offer additional Units or other equity interests in
the Operating Partnership that are exchangeable for shares of Common Stock or
Preferred Stock in exchange for property. The Operating Partnership also may
make loans to joint ventures in which it may participate in the future. Neither
the Company nor the Operating Partnership will engage in trading, underwriting
or the agency distribution or sale of securities of other issuers.
POLICIES WITH RESPECT TO INVESTMENT ADVISORY SERVICES
Uninvested commitments of clients of AMB Investment Management existing
upon consummation of the IPO and any additional amounts committed by these
clients and any amounts committed by investors which become clients of AMB
Investment Management will be invested only in properties in which the Company
also invests, on a co-investment basis. See "Business and Operating
Strategies -- AMB Investment Management." AMB Investment Management may also
take over management of assets already owned by existing or new clients and
manage such assets on a separate account basis. To the extent that transactions
arise between the Company and a client of AMB Investment Management, it is
anticipated that AMB Investment Management generally will not exercise
decision-making authority on behalf of the client, and the client will act
through its own representatives. Similarly, it is expected that the terms of
co-investment arrangements between the Company and clients of AMB Investment
Management will be negotiated on an arm's-length basis at the time the
applicable investment management agreement is entered into, with any subsequent
modifications thereto to be likewise entered into on the basis of arm's-length
negotiations with the client or another representative designated thereby at the
time of such negotiation.
OTHER POLICIES
The Company operates in a manner that does not subject it to regulation
under the Investment Company Act of 1940. The Board of Directors has the
authority, without stockholder approval, to issue additional shares of Common
Stock or other securities and to repurchase or otherwise reacquire shares of
Common Stock or any other securities in the open market or otherwise and may
engage in such activities in the future. The Company may, under certain
circumstances, purchase shares of Common Stock in the open market, if such
purchases are approved by the Board of Directors. The Board of Directors has no
present intention of causing the Company to repurchase any of the shares of
Common Stock, and any such action would be taken only in
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<PAGE> 78
conformity with applicable Federal and state laws and the requirements for
qualifying as a REIT under the Code and the Treasury Regulations. The Company
expects to issue shares of Common Stock to holders of Units upon exercise of
their exchange rights set forth in the Partnership Agreement. The Company may in
the future make loans to joint ventures in which it participates in order to
meet working capital or other capital needs. The Company has not engaged in
trading, underwriting or agency distribution or sale of securities of other
issuers other than the Operating Partnership, nor has the Company invested in
the securities of other issuers other than the Operating Partnership and AMB
Investment Management for the purposes of exercising control, and does not
intend to do so.
At all times, the Company intends to make investments in such a manner as
to be consistent with the requirements of the Code for the Company to qualify as
a REIT unless, because of changing circumstances or changes in the Code (or in
Treasury Regulations), the Board of Directors determines that it is no longer in
the best interests of the Company to qualify as a REIT and such determination is
approved by the affirmative vote of holders owning at least two-thirds of the
shares of the Company's capital stock outstanding and entitled to vote thereon.
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<PAGE> 79
MANAGEMENT
The Company's Board of Directors is comprised currently of the nine
directors named below. Directors of the Company are elected on an annual basis.
The collective background and experience of the directors provide the Company
with advice and guidance in a number of areas, including corporate governance,
strategic planning, capital markets and property acquisition and management.
The Company believes that an independent Board of Directors, whose
interests are aligned with those of the stockholders, is essential to the
creation of long-term stockholder value. Therefore, six of nine of the Company's
directors are not employed by, or otherwise affiliated with, the Company
("Independent Directors"). To demonstrate the alignment of their interests with
those of stockholders, the Independent Directors waived cash retainers and
instead received options to purchase shares of Common Stock at the initial
public offering price.
The following table lists the Executive Officers and directors of the
Company:
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
T. Robert Burke 55 Chairman of the Board of Directors
Hamid R. Moghadam 41 President, Chief Executive Officer and Director
Douglas D. Abbey 48 Chairman of the Investment Committee and Director
Daniel H. Case, III 40 Director
Robert H. Edelstein, Ph.D. 54 Director
Lynn M. Sedway 56 Director
Jeffrey L. Skelton, Ph.D. 48 Director
Thomas W. Tusher 57 Director
Caryl B. Welborn 47 Director
Luis A. Belmonte 57 Managing Director, Industrial Division
S. Davis Carniglia 47 Managing Director and Chief Financial Officer
John H. Diserens 44 Managing Director, Retail Division
Bruce H. Freedman 49 Managing Director, Industrial Division
David S. Fries 34 Managing Director and General Counsel
Jean Collier Hurley 58 Managing Director, Investor Relations and Corporate
Communications
Craig A. Severance 46 Managing Director, Acquisitions
</TABLE>
Set forth below are the biographies of such persons in the table above.
T. Robert Burke, one of the founders of AMB, is a Director of the Company
and has been the Chairman of the Board of AMB since 1994. He has 29 years of
experience in real estate and is a member of the Investment Committee. Mr. Burke
was on the board of directors of CIF and of VAF. He was formerly a senior real
estate partner with Morrison & Foerster LLP and, for two years, served as that
firm's Managing Partner for Operations. Mr. Burke graduated from Stanford
University and holds a J.D. degree from Stanford Law School. He is a member of
the Board of Directors of NAREIT, is on the Board of the Stanford Management
Company and is a Trustee of Stanford University. He is also a member of the
Urban Land Institute and is the former Chairman of the Board of Directors of the
Pension Real Estate Association.
Hamid R. Moghadam, one of the founders of AMB, is a Director of the Company
and is the President and Chief Executive Officer of the Company. Mr. Moghadam
has 16 years of experience in real estate acquisitions, dispositions, investment
analysis, finance and development, and is a member of the Investment Committee.
He was on the board of directors of CIF and of VAF. Mr. Moghadam holds
bachelor's and master's degrees in civil engineering and construction
management, respectively, from the Massachusetts Institute of Technology and an
M.B.A. degree from the Graduate School of Business at Stanford University. He is
a member of the board of directors of the National Realty Committee, a member of
the Young Presidents' Organization, has served on the Advisory Committee of the
Massachusetts Institute of Technology Center for Real Estate and is a Trustee of
the Bay Area Discovery Museum.
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Douglas D. Abbey, one of the founders of AMB, is a Director of the Company
and is Chairman of the Investment Committee and is responsible for directing the
economic research used to determine the Company's investment strategy, as well
as the market research for property acquisitions. Mr. Abbey has 23 years of
experience in asset management, acquisitions and real estate research. He is a
graduate of Amherst College and has a master's degree in city planning from the
University of California at Berkeley. He is the chair of the Urban Land
Institute's Commercial Retail Council and Research Committee, serves on the
Policy Advisory Board for the Center for Real Estate and Urban Economics at the
University of California at Berkeley, is on the Editorial Board for the Journal
of Real Estate Investment Trusts and is a Trustee of Golden Gate University.
Daniel H. Case, III is a Director of the Company and is President and Chief
Executive Officer of the Hambrecht & Quist Group. After joining Hambrecht &
Quist in 1981, he co-founded the business which became Hambrecht & Quist
Guaranty Finance in 1983. Mr. Case was named co-director of mergers and
acquisitions of Corporate Finance in 1986, and became a managing director and
head of Investment Banking in December 1987. In October 1991, he was elected to
the board of directors of Hambrecht & Quist. In April 1992, he was elected
President and Co-Chief Executive Officer. He became Chief Executive Officer in
October 1994. Mr. Case also serves as a director of Rational Software
Corporation, Electronic Arts, the Securities Industry Association, and the Bay
Area Council. Mr. Case was named as one of the "100 Global Leaders for Tomorrow"
by the World Economics Forum and one of the "Top 50 Innovators in Technology" by
Time Magazine. He has a bachelor's degree in economics and public policy from
Princeton University and studied management at the University of Oxford as a
Rhodes Scholar.
Robert H. Edelstein, Ph.D. is a Director of the Company and was an
independent director of CIF. He has been a director of TIS Mortgage Investment
Company, a NYSE-listed mortgage REIT, since 1988, and has been the Chairholder
of Professorship of Real Estate Development and Co-Chairman of the Fisher Center
for Real Estate and Urban Economics at the Haas School of Business, University
of California at Berkeley since 1985. Prior to joining the faculty at Berkeley
in 1985, Dr. Edelstein was a Professor of Finance at The Wharton School and
Director of the Real Estate Center for 15 years. He is active in research and
consulting in urban real estate economics, real estate finance, real estate
property taxation, environmental economics, energy economics, public finance and
urban financial problems. Dr. Edelstein received his bachelor's, master's and
Ph.D. degrees in economics, with specialization fields in statistics and
econometrics, from Harvard University. He is President of The American Real
Estate and Urban Economics Association, an ex officio member of Lambda Alpha
(honorary real estate association), the Urban Land Institute and The Society for
Real Estate Finance.
Lynn M. Sedway is a Director of the Company and was an independent director
of CIF. She is principal and founder of the Sedway Group, a 20-year old real
estate economics firm headquartered in San Francisco. Ms. Sedway is recognized
throughout the real estate investment industry as an expert in urban and real
estate economics. She currently directs and has ultimate responsibility for the
activities of her firm, including market analysis, property valuation,
development and redevelopment analysis, acquisition and disposition strategies,
and public policy issues. Ms. Sedway received her bachelor's degree in economics
at the University of Michigan and an M.B.A. degree from the University of
California at Berkeley, Graduate School of Business, where she is also a guest
lecturer. She is a trustee of the Urban Land Institute, the Policy Advisory
Board of the Fisher Center for Real Estate and Urban Economics, and the San
Francisco Chamber of Commerce. Ms. Sedway is a member of The International
Council of Shopping Centers and the American Society of Real Estate Counselors.
Jeffrey L. Skelton, Ph.D. is a Director of the Company and was an
independent director of VAF. He is President and Chief Executive Officer of
Symphony Asset Management, the asset management subsidiary of BARRA, Inc., a
financial software company. Prior to joining BARRA, Inc. in 1994, he was with
Wells Fargo Nikko Investment Advisors from January 1991 to December 1993, where
he served in a variety of capacities, including Chief Research Officer, Vice
Chairman, Co-Chief Investment Officer and Chief Executive of Wells Fargo Nikko
Investment Advisors Limited in London. Dr. Skelton has a Ph.D. in Mathematical
Economics and Finance and an M.B.A. degree from the University of Chicago, and
was an Assistant Professor of Finance
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<PAGE> 81
at the University of California at Berkeley, Graduate School of Business. He is
a frequent speaker in professional forums and is the author of a number of works
published in academic and professional journals.
Thomas W. Tusher is a Director of the Company and was an independent
director of VAF. He was President and Chief Operating Officer of Levi Strauss &
Co. from 1984 through 1996. Previously, he was President of Levi Strauss
International from 1976 to 1984. Mr. Tusher began his career at Levi Strauss in
1969. He was a director of the publicly-held Levi Strauss & Co. from 1978 to
1985, and was named a director of the privately-controlled Levi Strauss & Co. in
1989. Prior to joining Levi Strauss & Co., Mr. Tusher was with Colgate Palmolive
from 1965 to 1969. Mr. Tusher has a bachelor's degree from the University of
California at Berkeley and an M.B.A. degree from the Graduate School of Business
at Stanford University. He is a director of Cakebread Cellars, Dash America and
Pearl Izumi. He is a former director of Great Western Financial Corporation and
the San Francisco Chamber of Commerce. He is also Chairman Emeritus and a member
of the advisory board of the Walter A. Haas School of Business at the University
of California at Berkeley.
Caryl B. Welborn is a Director of the Company and was an independent
director of VAF. She is a commercial real estate attorney in San Francisco, and
prior to starting her own firm in 1995, she was a partner with Morrison &
Foerster LLP for 13 years. Ms. Welborn has a bachelor's degree from Stanford
University and a J.D. degree from the Law School at the University of California
at Los Angeles. She is a program chair and frequent lecturer on real estate
issues nationally, and has published numerous articles in professional
publications. Ms. Welborn is an officer and board member of the American College
of Real Estate Lawyers. She has held leadership positions in the American Bar
Association's Real Property, Probate and Trust Section. In addition, Ms. Welborn
has acted as an American Bar Association advisor regarding revision of the
Uniform Partnership Act.
Luis A. Belmonte is a Managing Director of the Company and co-head of the
Industrial Division. He specializes in industrial property development and
redevelopment, and is a member of the Investment Committee. He joined AMB in
1990 and has over 30 years of experience in development, redevelopment, finance,
construction, and management of commercial and industrial projects. He was a
partner with Lincoln Property Company, where he built a portfolio of 18 million
square feet of buildings. Mr. Belmonte received his bachelor's degree from the
University of Santa Clara. He is a member of the Urban Land Institute, an
associate member of the Society of Industrial Realtors, former President of the
San Francisco chapter of NAIOP, The Association for Commercial Real Estate, and
serves as Chairman of the California Commercial Council.
S. Davis Carniglia is a Managing Director and Chief Financial Officer of
the Company and is the Vice Chairman of the Investment Committee. He joined AMB
in 1992 and has 23 years of experience in real estate accounting, taxation,
forecasting and financing. Mr. Carniglia was formerly a tax and real estate
consulting partner with KPMG/Peat Marwick, where he was responsible for that
firm's San Francisco Bay Area real estate practice, and was an
appraisal/valuation partner. Mr. Carniglia has a bachelor's degree in economics
from Pomona College and a J.D. degree from Hastings College of Law. He is a
Certified Public Accountant, and a member of the State Bar of California,
Financial Executives Institute, Urban Land Institute, NAREIT and Bay Area
Mortgage Association.
John H. Diserens is a Managing Director and head of the Retail Division of
the Company and is a member of the Investment Committee. He has over 21 years of
experience in asset and property management for institutional investors. In his
eight years at AMB, he has been responsible for the asset management of all
properties, including over 40 community shopping centers. Prior to joining AMB,
Mr. Diserens was a Vice President and a divisional manager with Property
Management Systems, one of the nation's largest asset and property management
firms, responsible for a diversified portfolio in excess of 10 million square
feet. Mr. Diserens holds a bachelor's degree in economics and accounting from
Macquarie University of Sydney, Australia, and has completed the Executive
Program at the Graduate School of Business of Stanford University. He is a
member of the International Council of Shopping Centers, Association of Foreign
Investors in U.S. Real Estate, National Association of Real Estate Investment
Managers ("NAREIM"), Institute of Real Estate Management, and is on the board of
NAREIM.
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Bruce H. Freedman is a Managing Director and co-head of the Industrial
Division of the Company and is a member of the Investment Committee. He joined
AMB in 1995 and has over 28 years of experience in real estate finance and
investment. Before joining the Company, he served as a Principal and President
of Allmerica Realty Advisors from 1993 to 1995 and as Principal for Aldrich,
Eastman & Waltch (AEW) from 1986 to 1992. At Allmerica, he was responsible for
business operation and management of a $250 million equity real estate
portfolio, and at AEW he managed a team of 20 people which invested, managed and
accounted for over $1 billion of institutional client assets. Mr. Freedman is a
cum laude graduate of Babson College. He is a member of the Urban Land
Institute, Real Estate Finance Association and NAREIM, and holds the CRE
designation from the American Society of Real Estate Counselors.
David S. Fries is a Managing Director and General Counsel of the Company
and joined AMB in 1998. Prior to joining AMB, he was a real estate partner with
the international law firms of Orrick, Herrington & Sutcliffe LLP and Morrison &
Forester LLP, where he focused on the real estate, securities and financing
issues affecting REITs, the acquisition of large real estate portfolios and the
negotiation of complex joint venture arrangements. Mr. Fries holds a bachelor's
degree in political science from the University of Pennsylvania and a J.D.
degree from Stanford Law School. He is a member of the State Bar of California
and NAREIT and a past President of The Belden Club.
Jean Collier Hurley is a Managing Director responsible for Investor
Relations and Corporate Communications. Prior to joining AMB in 1990, Ms. Hurley
was a Vice President with Crocker National Bank where she provided financing for
major national and international corporations. Ms. Hurley holds a bachelor's
degree in business management and a master of science in marketing and design
from San Diego State University, and holds an M.B.A. degree in Finance from the
University of California at Berkeley, Graduate School of Business. Ms. Hurley
serves on the Editorial Board of the Pension Real Estate Association Quarterly,
and is a member of NAREIT and the National Investor Relations Institute.
Craig A. Severance is a Managing Director and a member of the Investment
Committee, and is responsible for property acquisitions and information
technology. He has managed the screening of all property submissions and has
developed the Company's proprietary property submissions database. Before
joining AMB in 1986, he was a Vice President with the investment real estate
group at Bank of America, where he represented domestic and foreign
institutional investors in major commercial property acquisitions. Mr. Severance
has a bachelor's degree in economics from Middlebury College, and holds an
M.B.A. degree from the Graduate School of Business at Stanford University. He is
a member of the International Council of Shopping Centers.
COMMITTEES OF THE BOARD OF DIRECTORS
Audit Committee. The Audit Committee consists of two Independent Directors,
Ms. Welborn, the Chairman, and Mr. Edelstein. The Audit Committee makes
recommendations concerning the engagement of independent public accountants,
reviews with the independent public accountants the plans and results of the
audit engagement, approves professional services provided by the independent
public accountants, reviews the independence of the independent public
accountants, considers the range of audit and non-audit fees and reviews the
adequacy of the Company's internal accounting controls.
Executive Committee. The Executive Committee consists of Mr. Case, the
Chairman, Messrs. Skelton, Moghadam and Burke and Ms. Sedway. The Executive
Committee has the authority within certain parameters to acquire, dispose of and
finance investments for the Company (including the issuance by the Operating
Partnership of additional Units or other equity interests) and approve the
execution of contracts and agreements, including those related to the borrowing
of money by the Company, and generally exercises all other powers of the Board
of Directors except as prohibited by law.
Compensation Committee. The Compensation Committee consists of three
Independent Directors, Mr. Tusher, the Chairman, Mr. Skelton and Ms. Sedway. The
Compensation Committee determines compensation for the Company's executive
officers, and reviews and makes recommendations concerning proposals by
management with respect to compensation, bonus, employment agreements and other
benefits and policies respecting such matters for the executive officers of the
Company.
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The Board of Directors does not have a nominating committee; rather, the
entire Board of Directors performs the function of such a committee.
COMPENSATION OF THE BOARD OF DIRECTORS
In lieu of cash compensation, each Independent Director receives, upon
initial election to the Board of Directors and upon each election thereafter,
options to purchase Common Stock, at an exercise price equal to the fair market
value at the date of grant (in the case of options granted upon consummation of
the IPO, at the price to the public in the IPO). All of such options will vest
immediately upon grant. The initial grant of such options upon initial election
will cover 20,000 shares of Common Stock, and each subsequent grant will cover
15,000 shares of Common Stock for each Independent Director. The initial grant
for each Independent Director appointed to serve immediately following the
consummation of the IPO covered 26,250 shares of Common Stock representing the
grant to each Independent Director with respect to their initial election to the
Board of Directors (expected to occur in 1998) plus an additional grant of
options to purchase 6,250 shares of Common Stock with respect to the period from
the date of the IPO through the date of their initial election, but such
Independent Directors will not be granted options upon re-election in 1998. In
addition, Independent Directors are paid $1,250 for each meeting in excess of
six meetings of the Board of Directors attended during each annual term and are
reimbursed for reasonable expenses incurred to attend director and committee
meetings. Officers of the Company who are directors are not paid any
compensation in respect of their service as directors.
EXECUTIVE COMPENSATION
The following table sets forth the estimated annual base salaries and other
compensation paid for the period of November 26, 1997 through December 31, 1997
to the Chief Executive Officer and certain of the Company's other executive
officers who, on an annualized basis, have a total annual salary and bonus in
excess of $100,000 (collectively, the "Named Executive Officers"). The Company
has entered into employment agreements with certain of its Executive Officers as
described below. See "Employment Agreements."
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
------------------------
ANNUAL COMPENSATION SECURITIES
------------------------------------------- UNDERLYING
OTHER ANNUAL RESTRICTED OPTIONS
1997 SALARY 1997 COMPENSATION STOCK GRANTED IN STOCK BONUS
NAME AND PRINCIPAL POSITION ($)(1) BONUS($)(2) ($) AWARD(S)(2) 1997(#)(4) (#)(2)
--------------------------- -------------- ----------- ------------ ----------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C>
T. Robert Burke
Chairman of the Board.............. 16,645 0 2,800 0 225,000 0
Hamid R. Moghadam
President and Chief Executive
Officer............................ 40,362 0 (3) 0 500,000 0
Douglas D. Abbey
Chairman of Investment Committee... 21,389 0 2,800 0 250,000 0
S. Davis Carniglia
Chief Financial Officer............ 21,389 0 2,800 0 130,000 0
Craig A. Severance
Managing Director, Acquisitions.... 21,389 0 2,800 0 130,000 0
John H. Diserens
Managing Director, Retail
Division........................... 21,389 0 2,800 0 130,000 0
</TABLE>
- ---------------
(1) Represents the actual amount of compensation paid from November 26, 1997
through December 31, 1997.
(2) The amount of any such bonus has been determined by the Compensation
Committee of the Board of Directors. Pursuant to the executive's employment
agreement, at the executive's option such executive may receive restricted
shares of common stock, or options to purchase common stock, in lieu of any
cash bonus, the number of such shares or options to be determined as set
forth in such employee's employment agreement. See "-- Employment
Agreements."
(3) The aggregate amount of the perquisites and other personal benefits,
securities or property for Mr. Moghadam is less than the lesser of either
$50,000 or 10% of his total salary and bonus paid in 1997.
(4) Options to purchase an aggregate of 3,111,250 shares of Common Stock (net of
forfeitures) have been granted to directors, executive officers and other
employees of the Company as of December 31, 1997. Such options vest pro rata
in annual installments over a four-year period. An additional 2,638,750
shares of Common Stock are reserved for issuance under the Stock Incentive
Plan.
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<PAGE> 84
OPTION GRANTS IN LAST FISCAL YEAR
The following table shows certain information relating to options to
purchase shares of Common Stock granted to the Named Executive Officers during
1997.
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS(1) POTENTIAL REALIZABLE VALUE
---------------------------------------------- AT ASSUMED ANNUAL RATES
PERCENT OF OF COMMON SHARE
NUMBER OF SHARES OF TOTAL OPTIONS PRICE APPRECIATION FOR
COMMON STOCK GRANTED TO OPTION TERM(2)(000S)
UNDERLYING OPTIONS EMPLOYEES IN EXERCISE EXPIRATION -------------------------------
NAME GRANTED(#) FISCAL YEAR(3) PRICE PER SHARE DATE 5% 10%
---- ------------------- --------------- --------------- ---------- -------------- --------------
<S> <C> <C> <C> <C> <C> <C>
T. Robert Burke...... 225,000 7.2% $21.00 11/25/07 $2,972 $ 7,531
Hamid R. Moghadam.... 500,000 16.0% 21.00 11/25/07 6,605 16,735
Douglas D. Abbey..... 250,000 8.0% 21.00 11/25/07 3,303 8,368
S. Davis Carniglia... 130,000 4.2% 21.00 11/25/07 1,717 4,351
Craig A. Severance... 130,000 4.2% 21.00 11/25/07 1,717 4,351
John H. Diserens..... 130,000 4.2% 21.00 11/25/07 1,717 4,351
</TABLE>
- ---------------
(1) All options granted in 1997 become exercisable in four equal installments
(rounded to the nearest whole share of Common Stock) beginning on the first
anniversary of the date of grant and have a term of not more than ten years.
The option exercise price is equal to the fair market value of the Common
Stock on the date of grant.
(2) In accordance with the rules of the SEC, these amounts are the hypothetical
gains or "option spreads" that would exist for the respective options based
on assumed rates or annual compound share price appreciation of 5% and 10%
from the date the options were granted over the full option term. No gain to
the optionee is possible without an increase in the price of Common Stock,
which would benefit all stockholders.
(3) The total number of shares of Common Stock underlying such options used in
such calculation are net of forfeitures.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION
VALUES
The following table sets forth certain information concerning exercised and
unexercised options held by the Named Executive Officers at December 31, 1997.
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING IN-THE-MONEY
UNEXERCISED OPTIONS AT OPTIONS AT
DECEMBER 31, 1997 DECEMBER 31, 1997
SHARES ACQUIRED ON VALUE --------------------------- ------------------------------
NAME EXERCISE (#) REALIZED($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE(1)
---- ------------------ ----------- ----------- ------------- ----------- ----------------
<S> <C> <C> <C> <C> <C> <C>
T. Robert Burke....... N/A N/A 0 225,000 0 $ 928,125
Hamid R. Moghadam..... N/A N/A 0 500,000 0 2,062,500
Douglas D. Abbey...... N/A N/A 0 250,000 0 1,031,250
S. Davis Carniglia.... N/A N/A 0 130,000 0 536,250
Craig A. Severance.... N/A N/A 0 130,000 0 536,250
John H. Diserens...... N/A N/A 0 130,000 0 536,250
</TABLE>
- ---------------
(1) Based on a price per share of Common Stock of $25.125, the last reported
sales price per share on the New York Stock Exchange on December 31, 1997.
EMPLOYMENT AGREEMENTS
Each of the persons who served as an Executive Officer at the time of the
IPO has entered into an employment agreement with the Company pursuant to which
each has agreed to devote their entire business time to the Company. The
employment agreements have an initial term of one year (three years in the case
of Mr. Moghadam) and are subject to automatic one-year extensions following the
expiration of the initial term. The employment agreements provide for annual
base compensation (in the amounts set forth in the Executive Compensation table
with respect to the Named Executive Officers identified therein) with the amount
of any bonus to be determined by the Compensation Committee, based on certain
performance targets, up to 150% of the applicable annual base compensation in
the case of Messrs. Burke, Abbey and Moghadam, and 100% of the applicable annual
base compensation in the case of Messrs. Carniglia, Diserens and Severance. The
performance targets to be used to determine executive bonuses for the calendar
year ending December 31, 1998 have not been finalized by the Compensation
Committee. However, such performance targets are
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<PAGE> 85
expected to include operating results and acquisition activity. The employ
agreements provide that the executive has the right to elect to receive
restricted stock or stock options in lieu of such executive's bonus. The number
of shares of restricted stock to be so issued will equal 125% of the amount of
the bonus, divided by the then current market price of the stock. The number of
options to purchase shares of Common Stock so granted will be determined based
on 150% of the amount of the bonus and the current market price of the Common
Stock, using the "Black-Scholes" option-pricing methodology. Such restricted
stock and options to purchase Common Stock will vest ratably over a three-year
period. The employment agreements also provide that the executive will receive
certain insurance benefits and be able to participate in the Company's employee
benefit plans, including the Stock Incentive Plan (as defined below), and that,
in the event of the executive's death, the executive's estate will receive
certain compensation payments. The executive also is entitled to receive
severance during the term of the employment agreement and for one year
thereafter in the event of a termination of the executive's employment resulting
from a disability, by the Company without "cause" or by the executive for "good
reason." "Cause" means (i) gross negligence or willful misconduct, (ii) an
uncured breach of any of the employee's material duties under the employment
agreement, (iii) fraud or other conduct against the material best interests of
the Company or (iv) a conviction of a felony if such conviction has a material
adverse effect on the Company. "Good reason" means (a) a substantial adverse
change in the nature or scope of the employee's responsibilities and authority
under the employment agreement or (b) an uncured breach by the Company of any of
its material obligations under the employment agreement. Severance benefits
include base compensation at the amounts provided in the employment agreement
and bonus based on the most recent amount paid, as well as certain continuing
insurance and other benefits.
Such employment agreements also contain a non-competition agreement
pursuant to which each executive agrees that he or she will not engage in any
activities, directly or indirectly, in respect of commercial real estate, and
will not make any investment in respect of industrial or retail real estate,
other than through ownership of not more than 5% of the outstanding shares of a
public company engaged in such activities and through existing investments as
described under the caption "Certain Relationships and Related Transactions."
Such restrictions apply during the term of the employment agreements and for a
one-year period thereafter.
STOCK INCENTIVE PLAN
The Company adopted the Stock Option and Incentive Plan (the "Stock
Incentive Plan") to (i) enable executive officers, employees and directors of
the Company, the Operating Partnership and the Investment Management Subsidiary
to participate in the ownership of the Company, (ii) attract and retain
executive officers, other key employees (those employees which from time-to-time
are recognized for exceptional contributions to the Company and its
subsidiaries, including the Operating Partnership) and directors of the Company,
the Operating Partnership and the Investment Management Subsidiary and (iii)
provide incentives to such persons to maximize the Company's performance and its
cash flow available for distribution. The Stock Incentive Plan provides for the
award to such officers and key employees (subject to the Ownership Limit, or
such other limit as provided in the Company's Articles of Incorporation or as
otherwise permitted by the Board of Directors) of a broad variety of stock-based
compensation alternatives such as non-qualified stock options, incentive stock
options, restricted stock and stock appreciation rights, and provides for the
grant to Independent Directors and directors of the Investment Management
Subsidiary of non-qualified stock options.
The Compensation Committee, which is comprised solely of Independent
Directors, has the authority to determine the terms of options and restricted
shares of common stock granted under the Stock Incentive Plan, including, among
other things, the individuals who shall receive such grants, the times when they
shall receive them, whether an incentive stock option or non-qualified option
shall be granted and the number of shares to be subject to each grant.
The Company has reserved 5,750,000 shares of Common Stock for issuance
under the Stock Incentive Plan and, as of April 30, 1998, had granted to certain
directors, officers and employees options to purchase 3,071,250 of such shares
of Common Stock (net of forfeitures). Such options will have a ten-year term and
vest pro rata in annual installments over a four-year period with respect to
initial grants. There is no limit on
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<PAGE> 86
the number of awards that may be granted to any one individual so long as the
(i) aggregate fair market value (determined at the time of grant) of shares with
respect to which an incentive stock option is first exercisable by an optionee
during any calendar year cannot exceed $100,000, (ii) grant does not violate the
Ownership Limit or cause the Company to fail to qualify as a REIT for Federal
income tax purposes and (iii) maximum number of shares of Common Stock for which
stock options and stock appreciation rights may be issued during any fiscal year
to any participant in the Stock Incentive Plan shall not exceed 1,000,000. See
"Description of Capital Stock -- Restrictions on Ownership and Transfer." The
Company plans to limit future grants under the Stock incentive Plan to the
Company's directors and officers and a limited number of other employees.
Restricted Stock. Restricted stock may be sold to participants at various
prices (but not below par value) and is subject to such restrictions as may be
determined by the Compensation Committee. Restricted stock typically may be
repurchased by the Company at the original price if certain conditions or
restrictions are removed or expire. Purchasers of restricted stock will have
voting rights and receive distributions prior to the time when the restrictions
lapse. To date the Company has granted 5,712 restricted shares of Common Stock.
The Company has no present plans to grant restricted shares of Common Stock
other than with respect to additional shares which may be issued to, and at the
option of, certain employees in lieu of annual cash bonus compensation.
Administration of the Stock Incentive Plan. The Stock Incentive Plan will
be administered by the Board of Directors and/or the Compensation Committee. No
person is eligible to serve on the Compensation Committee unless such person is
an independent Director. The Committee has complete discretion to determine
(subject to (i) the Ownership Limit contained in the Articles of Incorporation
of the Company and (ii) a limit against granting options or stock appreciation
rights for more than 1,000,000 shares to any person in any year) which eligible
individuals are to receive option or other stock grants, the number of shares
subject to each such grant, the status of any granted option as either an
incentive option or a non-qualified stock option under the Federal tax laws, the
exercise schedule to be in effect for the grant, the maximum term for which any
granted option is to remain outstanding and, subject to the specific terms of
the Stock Incentive Plan, any other terms of the grant.
Eligibility. All employees of the Company may, at the discretion of the
Compensation Committee, be granted incentive and non-qualified stock options to
purchase shares of Common Stock at an exercise price not less than 100% of the
fair market value of such shares on the grant date. Directors of the Company,
employees of the Operating Partnership, employees and directors of the
Investment Management Subsidiary, consultants and other persons who are not
regular salaried employees of the Company are not eligible to receive incentive
stock options, but are eligible to receive non-qualified stock options. In
addition, all employees and consultants of the Company, the Operating
Partnership and the Investment Management Subsidiary are eligible for awards of
restricted stock and grants of stock appreciation rights.
Purchase Price of Shares Subject to Options. The Price of the shares of
Common Stock subject to each option shall be set by the Compensation Committee;
provided, however, that the price per share of an option shall be not less than
100% of the fair market value of such shares on the date such option is granted;
provided, further, that, in the case of an incentive stock option, the price pre
share shall not be less than 110% of the fair market value of such shares on the
date such option is granted to an individual then owning (within the meaning of
Section 424(d) of the Code) more than 10% of the total combined voting power of
all classes of stock of the Company, any subsidiary or any parent corporation
("greater than 10% stockholders").
Non-Assignability. Options may be transferred only by will or by the laws
of descent and distribution. During a participant's lifetime, options are
exercisable only by the participant.
Terms and Exercisability of Options. Unless otherwise determined by the
Board of Directors or the Compensation Committee, all options granted under the
Stock Incentive Plan are subject to the following conditions: (i) options will
be exercisable in installments, on a cumulative basis, at the rate of
thirty-three and one-third percent (33 1/3%) each year beginning on the first
anniversary of the date of the grant of the option, until the options expire or
are terminated (other than options granted at the time of the IPO, which vest
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<PAGE> 87
ratably over four years) and (ii) following an optionee's termination of
employment, the optionee shall have the right to exercise any outstanding vested
options for a specified period.
To the extent the aggregate fair market value of stock with respect to
which "incentive stock options" (within the meaning of Section 422 of the Code,
but without regard to Section 422(d) of the Code) are exercisable for the first
time by an optionee during any calendar year exceeds $100,000, such options
shall be taxed as non-qualified stock options. The rule set forth in the
preceding sentence shall be applied by taking options into account in the order
in which they were granted. For this purpose, the fair market value of stock
shall be determined as of the time that the option with respect to such stock is
granted.
Options are exercisable in whole or in part by written notice to the
Company, specifying the number of shares being purchased and accompanied by
payment of the purchase price for such shares. The option price may be paid: (i)
in cash or by certified or cashier's check payable to the order of the Company,
(ii) by delivery of shares of Common Stock already owned by, and in the
possession of, the optionee or (iii) if authorized by the Board of Directors or
the Compensation Committee or if specified in the option agreement for the
option being exercised, by a recourse promissory note made by the optionee in
favor of the Company or through installment payments to the Company.
On the date the option price is to be paid, the optionee must make full
payment to the Company of all amounts that must be withheld by the Company for
Federal, state or local tax purposes.
Termination of Employment; Death or Permanent Disability. If an option
holder ceases to be employed by the Company for any reason other than the
optionee's death or permanent disability, such optionee's stock option shall
expire three months after the date of such cessation of employment unless by its
terms it expires sooner; provided, however, that during such period after
cessation of employment, such stock option may be exercised only to the extent
it was exercisable according to such option's terms on the date of cessation of
employment. If an optionee dies or becomes permanently disabled while the
optionee is employed by the Company, such optionee's option shall expire twelve
months after the date of such optionee's death or permanent disability unless by
its terms it expires sooner. During such period after death, such stock option
may, to the extent it remain unexercised upon the date of such death, be
exercised by the person or persons to whom the optionee's rights under such
stock option are transferred under the laws of descent an distribution.
Acceleration of Exercisability. In the event the Company is acquired by
merger, consolidation or asset sale, each outstanding option which is not to be
assumed by the successor corporation or replaced with a comparable option to
purchase shares of the capital stock of the successor corporation will, at the
election of the Board of Directors (or if so provided in an option or other
agreement with an optionee), automatically accelerate in full.
Adjustments. In the event any change is made to the Common Stock issuable
under the Stock Incentive Plan by reason of any recapitalization, stock
dividend, stock split, combination of shares, exchange of shares or other change
in corporate structure effected without the Company's receipt of consideration,
appropriate adjustment will be made to (i) the maximum number and class of
shares issuable under the Stock Incentive Plan and (ii) the number and/or class
of shares and price per share in effect under each outstanding option.
Amendments to the Stock Incentive Plan. The Board of Directors may at any
time suspend or terminate the Stock Incentive Plan. The Board of Directors or
Compensation Committee may also at any time amend or revise the terms of the
Stock Incentive Plan; provided that no such amendment or revision shall, unless
appropriate stockholder approval of such amendment or revision is obtained, (i)
increase the maximum number of shares which may be acquired pursuant to options
granted under the Stock Incentive Plan (except for adjustments as described in
the foregoing paragraph) or (ii) change the minimum purchase price required
under the Stock Incentive Plan.
Termination. The Stock Incentive Plan will terminate on December 31, 2007,
unless sooner terminated by the Board of Directors.
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Registration Statement on Form S-8. The shares of Common Stock underlying
options granted under the Stock Incentive Plan and restricted shares of Common
Stock are subject to an effective Registration Statement on Form S-8.
401(k) PLAN
Effective November 26, 1997, the Company established its Section 401(k)
Savings/Retirement Plan (the "401(k) Plan") to cover eligible employees of the
Company, the Operating Partnership and any designated affiliate. The 401(k) Plan
permits eligible employees of the Company to defer up to 10% of their annual
compensation, subject to certain limitations imposed by the Code. The employees'
elective deferrals are immediately vested and non-forfeitable upon contributions
to the 401(k) Plan. The Company currently makes matching contributions to the
401(k) Plan in an amount equal to 50% of the first 3.5% of annual compensation
deferred by each employee; however, it has reserved the right to make greater
matching contributions or discretionary profit sharing contributions in the
future. Participants vest immediately in the matching contributions by the
Company. Discretionary contributions are subject to three-year vesting whereby
100% vests after the third year. Employees of the Company are eligible to
participate in the 401(k) Plan if they meet certain requirements concerning
minimum period of credited service. The Company's contribution to the 401(k)
Plan for the period ended December 31, 1997 was $144,971. The 401(k) Plan
qualifies under Section 401 of the Code so that contributions by employees to
the 401(k) Plan, and income earned on plan contributions, are not taxable to
employees until withdrawn from the 401(k) Plan.
LIMITATION OF DIRECTORS' AND OFFICERS' LIABILITY
The Operating Partnership's officers and the Company's directors are
indemnified under Maryland law, the Company's Articles of Incorporation and the
Partnership Agreement against certain liabilities. The Articles of Incorporation
and Bylaws require the Company to indemnify its directors and officers to the
fullest extent permitted from time to time by the MGCL.
INDEMNIFICATION AGREEMENTS
The Company has entered into indemnification agreements with each of its
executive officers and directors. The indemnification agreements require, among
other matters, that the Company indemnify its executive officers and directors
to the fullest extent permitted by law and reimburse the executive officers and
directors for all related expenses as incurred, subject to return if it is
subsequently determined that indemnification is not permitted. Under the
agreements, the Company must also indemnify and reimburse all expenses as
incurred by executive officers and directors seeking to enforce their rights
under the indemnification agreements and may cover executive officers and
directors under the Company's directors' and officers' liability insurance.
Although the form of indemnification agreement offers substantially the same
scope of coverage afforded by law, it provides greater assurance to directors
and executive officers that indemnification will be available, because, as a
contract, it cannot be modified unilaterally in the future by the Board of
Directors or the stockholders to eliminate the rights it provides.
The Company's officers and directors are indemnified under the Maryland
General Corporation Law (the "MGCL"), the Articles of Incorporation and the
Partnership Agreement against certain liabilities. The Articles of Incorporation
and Bylaws require the Company to indemnify its directors and officers to the
fullest extent permitted from time to time by the MGCL.
The MGCL permits a corporation to indemnify its directors and officers and
certain other parties against judgments, penalties, fines, settlements and
reasonable expenses actually incurred by them in connection with any proceeding
to which they may be made a party by reason of their service in those or other
capacities unless it is established that (i) the act or omission of the director
of officer 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,
(ii) the director or officer actually received an improper personal benefit in
money, property or services or (iii) in the case of any criminal proceeding, the
director or officer had reasonable cause to believe that the act or omission was
unlawful. Indemnification may be made against judgments, penalties, fines,
settlements and reasonable
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<PAGE> 89
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 may not be made 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 to the director or
officer in which the director or officer was adjudged to be liable on the basis
that personal benefit was received. The termination of any proceeding by
conviction, or upon a plea of nolo contendere or its equivalent, or an entry of
any order of probation prior to judgment, creates a rebuttable presumption that
the director or officer did not meet the requisite standard of conduct required
for indemnification to be permitted.
The MGCL permits the articles of incorporation of a Maryland corporation to
include a provision limiting the liability of its directors and officers to the
corporation and its stockholders for money damages, subject to specified
restrictions, and the Articles of Incorporation of the Company contain this
provision. The MGCL does not, however, permit the liability of directors and
officers to the corporation or its stockholders to be limited to the extent that
(i) it is proved that the person actually received an improper personal benefit
in money, property or services, (ii) a judgment or other final adjudication is
entered in a proceeding based on a finding that the person's action, or failure
to act, was committed in bad faith or was the result of active and deliberate
dishonesty and was material to the cause of action adjudicated in the proceeding
or (iii) in the case of any criminal proceeding, the director had reasonable
cause to believe that the act or failure to act was unlawful. This provision
does not limit the ability of the Company or its stockholders to obtain other
relief, such as an injunction or recission.
The Partnership Agreement also provides for indemnification of the Company,
as general partner, and its officers and directors to the same extent
indemnification is provided to officers and directors of the Company in its
Articles of Incorporation, and limits the liability of the Company and its
officers and directors to the Operating Partnership and the partners of the
Operating Partnership to the same extent liability of officers and directors of
the Company to the Company and its stockholders is limited under the Articles of
Incorporation. See "Description of Certain Provisions of the Partnership
Agreement of the Operating Partnership -- Exculpation and Indemnification of the
Company."
Insofar as indemnification for liability arising under the Securities Act
may be permitted to directors, officers or persons controlling the Company
pursuant to the foregoing provisions, the Company has been informed that, in the
opinion of the SEC, such indemnification is against public policy as expressed
in the Securities Act and is therefore unenforceable.
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CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The Company and the Operating Partnership have engaged in the following
transactions and relationships with certain of the Executive Officers, directors
and persons who hold more than 5% of the outstanding shares of Common Stock.
FORMATION TRANSACTIONS
In connection with the Formation Transactions, CIF, VAF and the Company's
predecessor, AMB, effected a series of mergers pursuant to which such entities
merged into the Company with the institutional stockholders of CIF and VAF and
the Company's executive officers (the former stockholders of AMB), receiving an
aggregate of 4,746,624 shares of Common Stock, with a total value at the time of
the IPO of $99.7 million, and the right to receive in the Company's second year
of operation up to 4,241,803 limited partnership Units (the "Performance
Units"). The issuance of such Units is dependent upon the future trading price
of and dividends on the shares of Common Stock. See "Description of Certain
Provisions of the Partnership Agreement of the Operating
Partnership -- Performance Units." In addition, such executive officers received
the right to receive certain investment management fees earned by AMB Investment
Management, subject to certain limitations. Through March 31, 1998, no payments
have been made to the Company's executive officers in respect of the right to
receive such investment management fees.
In addition, certain Individual Account Investors, former investment
management clients of AMB including Ameritech Pension Trust, City and County of
San Francisco Employees' Retirement System and Southern Company System Master
Retirement Trust, contributed certain real property interests to the Company. In
exchange for such contribution of properties, Ameritech Pension Trust, City and
County of San Francisco Employees' Retirement System and Southern Company System
Master Retirement Trust received 12,441,580 shares of Common Stock, 6,772,640
shares of Common Stock and 8,032,415 shares of Common Stock, respectively, with
a total value at the time of the IPO of $626.7 million. See "Principal
Stockholders."
In connection with consummation of the Formation Transactions, the Company
assumed the $4.0 million revolving credit facility of AMB, of which
approximately $1.1 million was outstanding upon completion of the Formation
Transactions, relieving three of the Company's Executive Officers, Messrs.
Abbey, Moghadam and Burke, of their respective obligations with respect to the
partial guaranty of such indebtedness. The proceeds of such indebtedness were
used by AMB to acquire certain assets historically used in AMB's operations from
AMB Investment, Inc. ("AMBI"), an entity owned equally by Messrs. Abbey,
Moghadam and Burke. The Company also assumed a $791,925 note payable of AMBI to
WPF as consideration for the transfer to the Company of AMBI's general partner
interest in WPF (which the Company believed had a value equal to or greater than
the face amount of such note at the time such note payable was assumed).
OTHER RELATED TRANSACTIONS
During 1990, 1991, 1994, 1995 and 1996, Craig A. Severance, John H.
Diserens, S. Davis Carniglia, Jean C. Hurley and Bruce H. Freedman issued notes
to AMB in consideration of the acquisition of shares of AMB common stock in the
principal amounts of $189,472, $243,866, $132,237, $342,806 and $307,071,
respectively. The notes bore interest at an annual rate of prime plus 1.0%. The
principal amount of the notes and accrued interest thereon were repaid in full
by all stockholders prior to the IPO.
In January 1993, AMBI, AMB, AMB Corporate Real Estate Advisors, Inc.
("AMBCREA"), AMB Development L.P., AMB Development, Inc. and AMB Institutional
Housing Partners entered into an agreement for the purpose of the parties
thereto to work together to accomplish separate business purposes while sharing
certain support and other resources. Under the Intercompany Agreement, each
party to the agreement (each, an "AMB Intercompany Party") is permitted to use
the term "AMB" as a part of its name. Each AMB Intercompany Party also agreed,
among other things, to do business in a specified aspect of real estate and
finance; to use its best efforts to refer business opportunities outside of its
own line of business to other AMB Intercompany Parties; to provide intercompany
loans; and to utilize personnel of another AMB Intercompany Party for a fee. In
addition, under the Intercompany Agreement, AMBI agreed to: (i) provide common
business services, resources and support, including employees, benefits,
services contracts and
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financial management and reporting to each AMB Intercompany Party; (ii) purchase
all fixed assets and rent them to the AMB Intercompany Parties for a fee; (iii)
act as lessee for office space for each AMB Intercompany Party; (iv) employ all
employees of each AMB Intercompany Party, fix such employees' salaries, bonuses
and benefits, and charge such costs to the appropriate AMB Intercompany Party;
and (v) pay for the direct and indirect costs of operation of each AMB
Intercompany Party and charge each AMB Intercompany Party its allocated share.
The total amount paid to AMBI by AMB during the years ended December 31, 1994,
1995, 1996 and 1997 was $9,940,762, $13,564,178, $16,842,615 and $18,159,000,
respectively, which equaled the expenses incurred by AMBI allocable to AMB for
each such year.
As part of the Formation Transactions, the Company acquired AMBI's assets
(other than its leasehold interest for office space and certain office
equipment) and employed the employees utilized in its business, and all other
AMBI employees were transferred to AMBCREA. Accordingly, upon consummation of
the IPO, the Intercompany Agreement was modified so that it applies only to the
office space and certain office equipment leased by AMBI, which is used by the
Company, the Operating Partnership and AMB Investment Management, respectively,
for fees equal to an allocation of AMBI's cost thereof. AMBCREA, AMB
Institutional Housing Partners, AMB Development, Inc. and AMB Development L.P.
are continuing to use the name "AMB" pursuant to royalty-free license
arrangements with the Company. In addition, it is presently anticipated that
AMBCREA, which is in the process of winding down operations, will cease
operations by June 30, 1998. See "-- Conflicts of Interest."
CONFLICTS OF INTEREST
The Executive Officers and directors of the Company may be subject to a
number of conflicts of interest. Such potential conflicts, and the Company's
proposed methods of dealing with them, are described below. See also "Policies
with Respect to Certain Activities -- Conflict of Interest Policies."
Stockholders of AMB who became Executive Officers of the Company upon
consummation of the IPO own interests in certain real estate-related businesses
and investments. Such interests include minority ownership of Institutional
Housing Partners, a residential housing finance company (through AMB
Institutional Housing Partners); and ownership of AMB Development, Inc. and AMB
Development L.P., developers which own property that management believes is not
suitable for ownership by the Company. Neither AMB Development, Inc. nor AMB
Development L.P. will initiate any new development projects, nor will they make
any further investments in industrial or retail properties other than those
under development at November 26, 1997. Such persons are also owners of AMBCREA
which is principally a real estate services company for corporate and
professional tenants of real estate. AMBCREA is in the process of winding down
its business, and it is presently anticipated that AMBCREA will cease operations
by June 30, 1998. However, the continued involvement by the Company's Executive
Officers could divert management's attention from the day-to-day operations of
the Company. Each of the persons serving as an Executive Officer at the time of
the IPO has entered into a non-competition agreement with the Company pursuant
to which, among other things, they agreed not to engage in any activities,
directly or indirectly, in respect of commercial real estate, and agreed not
make any investment in respect of industrial or retail real estate, other than
through ownership of not more than 5% of the outstanding shares of a public
company engaged in such activities or through the existing investments referred
to herein.
AMB Development L.P. owns interests in 11 retail development projects in
the U.S., each of which consists of a single free-standing Walgreens drugstore,
and, together with other entities controlled by nine of the executive officers,
a low income housing apartment building located in the San Francisco Bay Area.
In addition, Messrs. Abbey, Moghadam and Burke, each a founder, Executive
Officer and director of the Company, own less than 1% interests in two
partnerships which own office buildings in various markets; these interests have
negligible value. Luis A. Belmonte, an Executive Officer of the Company, owns
less than a 10 interest, representing an estimated value of $75,000, in a
limited partnership which owns an office building located in Oakland,
California. David S. Fries, an Executive Officer of the Company, owns an
approximate 1% interest in a limited partnership that owns an apartment complex
in Orange County, California.
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In addition, several of the executive officers individually own: (i) less
than 1% interests in the stocks of certain publicly-traded REITs, including
mortgage REITs, and residential developers; (ii) certain interests in and rights
to developed and undeveloped real property located outside the United States;
(iii) interests in single-family homes and residential apartments in the San
Francisco Bay Area; (iv) certain passive interests, not believed to be material,
in real estate businesses in which such persons were previously employed; and
(v) certain other de minimis holdings in equity securities. Thomas W. Tusher, a
member of the Company's Board of Directors, is a limited partner in a
partnership in which Messrs. Abbey, Moghadam and Burke are general partners and
which owns a 75% interest in an office building. Mr. Tusher owns a 20% interest
in the partnership, valued as of March 31, 1998 at approximately $939,000.
Messrs. Abbey, Moghadam and Burke each have an approximately 26.7% interest in
the partnership, each valued as of March 31, 1998 at approximately $1,252,000.
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<PAGE> 93
PRINCIPAL STOCKHOLDERS
The following table sets forth certain information regarding the beneficial
ownership of shares of Common Stock as of April 30, 1998 by (i) each director,
(ii) each Named Executive Officer, (iii) all directors and Named Executive
Officers of the Company as a group and (iv) each person or entity which is the
beneficial owner of 5% or more of the outstanding shares of Common Stock. Except
as indicated below, all of such shares of Common Stock are owned directly, and
the indicated person or entity has sole voting and investment power. As of April
30, 1998, none of the Company's executive officers and directors or its 5%
stockholders owned any Units of the Operating Partnership.
<TABLE>
<CAPTION>
PERCENTAGE OF
OUTSTANDING SHARES
NUMBER OF SHARES OF OF COMMON
NAME AND ADDRESS OF BENEFICIAL OWNER(1) BENEFICIALLY OWNED(2) STOCK(2)
--------------------------------------- --------------------- ------------------
<S> <C> <C>
T. Robert Burke.................................. 877,289 1.0%
Hamid R. Moghadam................................ 1,396,477 1.6%
Douglas D. Abbey................................. 1,125,245 1.3%
S. Davis Carniglia............................... 224,377 *
Craig A. Severance............................... 327,964 *
John H. Diserens................................. 284,182 *
Daniel H. Case, III.............................. 0 0
Robert H. Edelstein, Ph.D........................ 952 *
Lynn M. Sedway................................... 3,152 *
Jeffrey L. Skelton, Ph.D......................... 952 *
Thomas W. Tusher................................. 25,952 *
Caryl B. Welborn................................. 7,952 *
Ameritech Pension Trust(3)....................... 12,441,580 14.5%
City and County of San Francisco Employees'
Retirement System(4)........................... 6,722,640 7.8%
Southern Company System Master Retirement
Trust(5)....................................... 6,032,415 7.0%
All directors and Named Executive Officers as a
group (12 persons)............................. 4,274,494 5.0%
</TABLE>
- ---------------
* Represents less than 1.0% of outstanding shares of Common Stock.
(1) Unless otherwise indicated, the address for each of the persons listed is
c/o AMB Property Corporation, 505 Montgomery Street, San Francisco,
California 94111.
(2) Excludes (i) options to purchase 1,522,500 shares of Common Stock granted to
Named Executive Officers and directors on November 26, 1997 and (ii)
3,781,459 Performance Units which are not exercisable or were not earned
within 60 days of the date of this filing. See "Description of Certain
Provisions of the Partnership Agreement of the Operating
Partnership -- Performance Units."
(3) Reflects shares held by State Street Bank and Trust Company, as trustee, the
voting and investment power with respect to which are held by Ameritech
Pension Trust. The address of Ameritech Pension Trust for this purpose is
225 W. Randolph, HQ13A, Chicago, Illinois 60606, Attn.: Director-Real
Estate.
(4) The address of the City and County of San Francisco Employees' Retirement
System is 1155 Market Street, San Francisco, California 94103.
(5) The address of Southern Company System Master Retirement Trust is 270
Peachtree Street N.W., Suite 1900 BIN 924, Atlanta, Georgia 30303.
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DESCRIPTION OF NOTES
The Notes will be direct senior unsecured obligations of the Operating
Partnership unconditionally guaranteed on an unsecured basis by the Guarantors.
The % Notes due 2008 (the "2008 Notes"), the % Notes due 2018 (the "2018
Notes") and the % Reset Put Securities (REPS(SM)) due 2015 --
Putable/Callable 2005 (the "REPS") each constitute a separate series of notes
and will be issued under an indenture (the "Indenture") among the Operating
Partnership, AMB Property Corporation, AMB Property II, L.P., Long Gate LLC and
State Street Bank and Trust Company of California, N.A., as Trustee (the
"Trustee"). The Indenture, as amended or supplemented from time to time, will be
subject to and governed by the Trust Indenture Act of 1939, as amended (the
"TIA"). The statements made under this heading relating to the Notes and the
Indenture are summaries of certain anticipated provisions thereof, do not
purport to be complete and are qualified in their entirety by reference to the
forms of Indenture and the Notes, which have been or will be included or
incorporated by reference as exhibits to the Registration Statement of which
this Prospectus is a part and are or will be available as described above under
"Available Information."
Capitalized terms used herein and not defined shall have the meanings
assigned to them in the Indenture. As used in this "Description of Notes," all
references to the "Operating Partnership" shall mean AMB Property, L.P.,
excluding, unless otherwise expressly stated or the context shall otherwise
require, its subsidiaries.
GENERAL
The 2008 Notes will be limited in aggregate principal amount to
$ , the 2018 Notes will be limited in aggregate principal amount to
$ and the REPS will be limited in aggregate principal amount to
$ . The Notes will be unsecured and unsubordinated obligations of the
Operating Partnership and will rank on a parity in right of payment with all
other unsecured and unsubordinated indebtedness of the Operating Partnership
outstanding from time to time.
The Indenture will not contain any provision that would limit the ability
of the Operating Partnership to incur indebtedness or that will afford Holders
of Notes protection in a highly leveraged or similar action involving the
Operating Partnership or in the event of a change of control of the Operating
Partnership, including a change in control of the Company, except as hereinafter
set forth under the captions "Certain Covenants -- Aggregate Debt Test,"
"-- Maintenance of Total Unencumbered Assets," "-- Debt Service Test" and
"-- Secured Debt Test." See "Risk Factors -- Incurrence of Indebtedness."
However, certain restrictions on ownership and transfers of the Company's Common
Stock and the Company's other equity securities designed to preserve its status
as a REIT may act to prevent or hinder a change of control.
Although the Operating Partnership owns a majority of its consolidated
assets itself, rather than through subsidiaries, a substantial portion of its
consolidated assets (amounting to approximately 27.1% of its total consolidated
assets at March 31, 1998) are held by AMB Property II, L.P., Long Gate LLC and
other subsidiaries. Accordingly, the cash flow of the Operating Partnership and
the consequent ability to service its debt, including the Notes, are partially
dependent on the earnings of such subsidiaries and the Notes will be effectively
subordinated to all existing and future indebtedness, guarantees and other
liabilities of such subsidiaries. On a pro forma basis as of March 31, 1998,
after giving effect to the offering of the Notes made hereby and the application
of the estimated net proceeds therefrom as if such transactions had occurred on
that date, the Operating Partnership's subsidiaries (including AMB Property II,
L.P. and Long Gate LLC) would have had total long-term liabilities (excluding
intercompany liabilities) of approximately $92.5 million (consisting entirely of
mortgage and secured indebtedness). See "Business and Properties -- Debt
Financing -- Secured and Mortgage Debt."
The Notes will be effectively subordinated to any secured indebtedness of
the Operating Partnership and its subsidiaries to the extent of any collateral
pledged as security therefor. As of March 31, 1998, after giving effect to the
offering of the Notes made hereby and the application of the estimated net
proceeds therefrom as if such transaction had occurred on that date, the
Operating Partnership (excluding its subsidiaries) would have had unsecured
senior indebtedness (including the Notes) aggregating approximately $369.9
million and
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mortgage and other secured indebtedness aggregating approximately $517.7
million. See "Use of Proceeds," "Risk Factors -- Ranking of the Notes" and
"-- Debt Financing" and "Capitalization." Although the covenants described
herein under the caption "-- Certain Covenants" will impose certain limitations
on the incurrence of additional indebtedness, the Operating Partnership and its
Subsidiaries will retain the ability to incur substantial additional secured and
unsecured indebtedness in the future.
DENOMINATIONS, MATURITY, INTEREST, REGISTRATION AND TRANSFER
2008 Notes and 2018 Notes
The 2008 Notes and the 2018 Notes will be issued only in fully registered
book-entry form without coupons, in denominations of $1,000 and integral
multiples thereof. The 2008 Notes will mature on , 2008 (the
"2008 Maturity Date") and the 2018 Notes will mature on , 2018
(the "2018 Maturity Date").
The 2008 Notes and the 2018 Notes may be redeemed, in whole or in part, at
the option of the Operating Partnership at any time. See "-- Redemption of the
2008 Notes and the 2018 Notes at the Option of the Operating Partnership." The
2008 Notes and the 2018 Notes are not subject to any sinking fund provisions.
Interest on the 2008 Notes will accrue at a rate of % per annum and
interest on the 2018 Notes will accrue at a rate of % per annum and, in
each case, will be payable semi-annually on and
commencing , 1998. Interest will accrue from the most recent date
to which interest has been paid or, if no interest has been paid, from the date
of original issuance. Interest will be computed on the basis of a 360-day year
of twelve 30-day months. Principal of (and premium, if any) and interest on the
2008 Notes and the 2018 Notes will be payable at the office or agency maintained
by the Operating Partnership for such purpose within the City and State of New
York; or at the option of the Operating Partnership, payment of interest may be
made by check mailed to the address of the Person entitled thereto as it appears
in the Note Register or by transfer of funds to such Person at an account
maintained within the United States. (See Sections 301, 302, 305, 306, 307 and
1002 of the form of Indenture.)
The REPS
The REPS will be issued only in fully registered book-entry form without
coupons, in denominations of $1,000 and integral multiples thereof. The REPS
will mature on , 2015 (the "Final REPS Maturity Date" and
together with the 2008 Maturity Date and the 2018 Maturity Date, the "Maturity
Dates"). However, holders of the REPS will be entitled to receive, and will be
required to accept, 100% of the principal amount thereof on the Coupon Reset
Date (as defined below) from either (i) the Callholder, if the Callholder
purchases the REPS pursuant to the Call Option, or (ii) the Operating
Partnership, by exercise of the Mandatory Put (as defined below) by the Trustee
for and on behalf of the holders of the REPS, if the Callholder does not
purchase the REPS pursuant to the Call Option. See "-- Call Option and Mandatory
Put with Respect to the REPS" below.
FOR PERSONS HOLDING THE REPS (OR AN INTEREST THEREIN) ON THE COUPON RESET
DATE, THE EFFECT OF THE OPERATION OF THE CALL OPTION OR THE MANDATORY PUT WILL
BE THAT SUCH HOLDERS WILL BE ENTITLED TO RECEIVE, AND WILL BE REQUIRED TO
ACCEPT, 100% OF THE PRINCIPAL AMOUNT OF SUCH REPS (PLUS ACCRUED INTEREST) ON THE
COUPON RESET DATE IN SATISFACTION OF THE OPERATING PARTNERSHIP'S OBLIGATIONS TO
THE HOLDERS OF THE REPS. INTEREST ACCRUED TO BUT EXCLUDING THE COUPON RESET DATE
WILL BE PAID BY THE OPERATING PARTNERSHIP ON SUCH DATE TO THE HOLDERS OF THE
REPS ON THE MOST RECENT RECORD DATE. THE REPS MAY BE REDEEMED ONLY IN CONNECTION
WITH A CALL OPTION OR A MANDATORY PUT. SEE "-- CALL OPTION AND MANDATORY PUT
WITH RESPECT TO THE REPS". THE REPS ARE NOT SUBJECT TO ANY SINKING FUND
PROVISIONS.
Interest on the REPS will accrue at the rate of % from and including
to but excluding , 2005 (the "Coupon Reset Date") and
will be payable semi-annually on and , commencing
, 1998. Interest will accrue from the most recent date to which
interest has been paid or, if no interest has been paid, from the date of
original issuance. Interest will be computed on the basis of a 360-day year of
twelve 30-day months. Principal of (and premium, if any) and
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<PAGE> 96
interest on the REPS will be payable at the office or agency maintained by the
Operating Partnership for such purpose within the City and State of New York; or
at the option of the Operating Partnership, payment of interest may be made by
check mailed to the address of the Person entitled thereto as it appears in the
Note Register or by transfer of funds to such Person at an account maintained
within the United States. (See Sections 301, 302, 305, 306, 307 and 1002 of the
form of Indenture.)
If the Callholder (as defined below) elects to purchase the REPS pursuant
to the Call Option (as defined below), the Calculation Agent (as defined below)
will reset the interest rate for the REPS effective on the Coupon Reset Date,
pursuant to the Coupon Reset Process described below. In such circumstance, (i)
the REPS will be purchased by the Callholder at 100% of the principal amount
thereof on the Coupon Reset Date, on the terms and subject to the conditions
described herein (interest accrued to but excluding the Coupon Reset Date will
be paid by the Operating Partnership on such date to the holders of the REPS on
the most recent Record Date), and (ii) from and including the Coupon Reset Date,
the REPS will bear interest at the rate determined by the Calculation Agent in
accordance with the procedure set forth under "-- Coupon Reset Process if REPS
are Called" below. The Trustee will exercise the Mandatory Put without the
consent of, or notice to, the holders of the REPS.
Neither the Operating Partnership nor the Trustee will be required (i) to
issue, register the transfer of or exchange Notes if such Notes may be among
those selected for redemption during a period beginning at the opening of
business 15 days before selection of Notes to be redeemed and ending at the
close of business on the day of the mailing of the relevant notice of
redemption; or (ii) to register the transfer of or exchange any Note, or portion
thereof, called for redemption, except the unredeemed portion of any Note being
redeemed in part. (See Section 305 of the form of Indenture.)
GUARANTEES
The Operating Partnership's obligations under the Notes will be jointly and
severally guaranteed (each, a "Guarantee" and collectively, the "Guarantees") by
the Company, AMB Property II, L.P., Long Gate LLC and each other Subsidiary of
the Operating Partnership that guarantees the Operating Partnership's
obligations under any Credit Agreement (each a "Guarantor" and collectively, the
"Guarantors"). The obligations of each Guarantor under its Guarantee will be
limited to the maximum amount permitted under applicable federal or state law.
For the purposes hereof, "Credit Agreement" shall mean the Credit Facility or
any similar revolving credit agreement entered into from time to time by the
Operating Partnership.
The Indenture provides that no Guarantor may consolidate with or merge with
or into (whether or not such Guarantor is the surviving person) another
corporation, person or entity whether or not affiliated with such Guarantor
unless (i) the person formed by or surviving any such consolidation or merger
(if other than such Guarantor) shall be a corporation, partnership, limited
liability company or other legal entity organized and existing under the laws of
the United States of America, any state thereof or the District of Columbia and
shall expressly assume all the obligations of such Guarantor pursuant to a
supplemental indenture in form and substance reasonably satisfactory to the
Trustee under the Notes and the Indenture, (ii) immediately after giving effect
to such transaction, no Default or Event of Default would exist and (iii) an
officers' certificate and legal opinion concerning such conditions shall be
delivered to the Trustee.
REDEMPTION OF THE 2008 NOTES AND THE 2018 NOTES AT THE OPTION OF THE OPERATING
PARTNERSHIP
The 2008 Notes and the 2018 Notes will be redeemable, in whole or from time
to time in part, at the option of the Operating Partnership on any date (a
"Redemption Date"), at a redemption price equal to the greater of (i) 100% of
the principal amount of the 2008 Notes and the 2018 Notes to be redeemed and
(ii) the sum of the present values of the remaining scheduled payments of
principal and interest thereon (exclusive of interest accrued to such Redemption
Date) discounted to such Redemption Date on a semiannual basis (assuming a
360-day year consisting of twelve 30-day months) at the Treasury Rate plus
basis points, plus, in either case, accrued and unpaid interest
on the principal amount being redeemed to such Redemption Date; provided that
installments of interest on 2008 Notes and the 2018 Notes which are due and
payable on an Interest Payment Date falling on or prior to the relevant
Redemption Date shall be payable to
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the holders of such of the 2008 Notes and the 2018 Notes registered as such at
the close of business on the relevant record date according to their terms and
the provisions of the Indenture.
"Treasury Rate" means, with respect to any Redemption Date, (i) the yield,
under the heading which represents the average for the immediately preceding
week, appearing in the most recently published statistical release designated
"H.15(519)" or any successor publication which is published weekly by the Board
of Governors of the Federal Reserve System and which establishes yields on
actively traded United States Treasury securities adjusted to constant maturity
under the caption "Treasury Constant Maturities," for the maturity corresponding
to the Comparable Treasury Issue (if no maturity is within three months before
or after the applicable Maturity Date, yields for the two published maturities
most closely corresponding to the Comparable Treasury Issue shall be determined
and the Treasury Rate shall be interpolated or extrapolated from such yields on
a straight line basis, rounding to the nearest month) or (ii) if such release
(or any successor release) is not published during the week preceding the
calculation date or does not contain such yields, the rate per annum equal to
the semi-annual equivalent yield to maturity of the Comparable Treasury Issue,
calculated using a price for the Comparable Treasury Issue (expressed as a
percentage of its principal amount) equal to the Comparable Treasury Price for
such Redemption Date. The Treasury Rate shall be calculated on the third
business day preceding the Redemption Date.
"Comparable Treasury Issue" means the United States Treasury security
selected by the Independent Investment Banker as having a maturity comparable to
the remaining term of the 2008 Notes and the 2018 Notes to be redeemed that
would be utilized, at the time of selection and in accordance with customary
financial practice, in pricing new issues of corporate debt securities of
comparable maturity to the remaining term of the 2008 Notes and the 2018 Notes.
"Independent Investment Banker" means Morgan Stanley & Co. Incorporated or,
if such firm is unwilling or unable to select the Comparable Treasury Issue, an
independent investment banking institution of national standing appointed by the
Trustee after consultation with the Operating Partnership.
"Comparable Treasury Price" means with respect to any Redemption Date (i)
the average of the two remaining Reference Treasury Dealer Quotations for such
Redemption Date, after excluding the highest and lowest such Reference Treasury
Dealer Quotations from the four selected, or (ii) if the Trustee obtains fewer
than four such Reference Treasury Dealer Quotations, the average of all such
quotations.
"Reference Treasury Dealer" means Morgan Stanley & Co. Incorporated,
Goldman, Sachs & Co., J.P. Morgan Securities Inc. and an additional Reference
Treasury Dealer appointed by the Trustee after consultation with the Operating
Partnership and their successors; provided, however, that if Morgan Stanley &
Co. Incorporated, Goldman, Sachs & Co., J.P. Morgan Securities Inc. or such
additional Reference Treasury Dealer and their successors shall cease to be a
primary U.S. Government securities dealer in New York City (a "Primary Treasury
Dealer"), the Operating Partnership will substitute therefor another Primary
Treasury Dealer.
"Reference Treasury Dealer Quotations" means, with respect to each
Reference Treasury Dealer and any Redemption Date, the average, as determined by
the Trustee, of the bid and asked prices for the Comparable Treasury Issue
(expressed in each case as a percentage of its principal amount) quoted in
writing to the Trustee by such Reference Treasury Dealer at 5:00 p.m., New York
time, on the third business day preceding such Redemption Date.
Notice of any redemption by the Operating Partnership will be mailed at
least 30 days but not more than 60 days before any Redemption Date to each
holder of 2008 Notes and the 2018 Notes to be redeemed. If less than all the
2008 Notes and the 2018 Notes are to be redeemed at the option of the Operating
Partnership, the Trustee shall select, in such manner as it shall deem fair and
appropriate, the 2008 Notes and the 2018 Notes to be redeemed in whole or in
part.
Unless the Operating Partnership defaults in payment of the redemption
price, on and after any Redemption Date interest will cease to accrue on the
Notes or portions thereof called for redemption.
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CALL OPTION AND MANDATORY PUT WITH RESPECT TO THE REPS
Call Option. Pursuant to the terms of the REPS, the Callholder, by giving
notice to the Trustee (the "Call Notice"), has the right to purchase the
aggregate principal amount of REPS, in whole but not in part (the "Call
Option"), on the Coupon Reset Date, at a price equal to 100% of the principal
amount thereof (the "Call Price") (interest accrued to but excluding the Coupon
Reset Date will be paid by the Operating Partnership on such date to the holders
of the REPS on the most recent Record Date). In order for the Callholder to
exercise the Call Option, the Call Notice is required to be given to the
Trustee, in writing, prior to 4:00 p.m., New York time, no later than 15
calendar days prior to the Coupon Reset Date for the REPS. The Call Notice may
be revoked by the Callholder at any time prior to 2:00 p.m., New York time, on
the Business Day prior to the Coupon Reset Date.
If the Callholder exercises its rights under the Call Option, unless
terminated in accordance with its terms, (i) not later than 2:00 p.m., New York
time, on the Business Day prior to the Coupon Reset Date, the Callholder will
deliver the Call Price in immediately available funds to the Trustee for payment
of the Call Price on the Coupon Reset Date, and (ii) the holders of REPS will be
required to deliver and will be deemed to have delivered the REPS to the
Callholder against payment therefor on the Coupon Reset Date through the
facilities of The Depository Trust Company, New York, New York ("DTC"). No
holder of any REPS or any interest therein will have any right or claim against
the Callholder as a result of the Callholder's decision whether or not to
exercise the Call Option or performance or nonperformance of its obligations
with respect thereto.
The Call Option provides for certain circumstances under which such Call
Option may be terminated. If the Call Option terminates or if the Callholder
fails to pay the Call Price to the Trustee at or prior to the required time, the
Trustee shall exercise the Mandatory Put described below. The Trustee shall
notify the holders that it is exercising the Put Option as required by the terms
of the Indenture, as supplemented.
Immediately following the original issuance of the REPS, the Callholder
will be Morgan Stanley & Co. International Limited. Thereafter, the Callholder
may, from time to time, assign all of (but not less than all) its rights under
the Call Option to a substitute Callholder, in each case without notice to or
consent of the holders of the REPS.
Mandatory Put. If the Call Option is not exercised or if the Call Option
otherwise terminates, the Trustee will be obligated to exercise the right of the
holders of the REPS to require the Operating Partnership to purchase the
aggregate principal amount of REPS in whole but not in part (the "Mandatory
Put"), on the Coupon Reset Date at a price equal to 100% of the principal amount
thereof (the "Put Price"), plus accrued but unpaid interest to but excluding
such Coupon Reset Date, in each case, to be paid by the Operating Partnership to
the holders on the Coupon Reset Date. If the Trustee exercises the Mandatory
Put, then the Operating Partnership shall deliver the Put Price in immediately
available funds to the Trustee by no later than 10:00 a.m., New York time, on
the Coupon Reset Date, and the holders of the REPS will be required to deliver
and will be deemed to have delivered the REPS to the Operating Partnership
against payment therefor on the Coupon Reset Date through the facilities of DTC.
By its purchase of REPS, each holder irrevocably agrees that the Trustee shall
exercise the Mandatory Put relating to such REPS for or on behalf of such REPS
as provided herein. No holder of any REPS or any interest therein has the right
to consent or object to the exercise of the Trustee's duties under the Mandatory
Put.
The transactions described above will be executed on the Coupon Reset Date
through DTC in accordance with the procedures of DTC, and the accounts of
participants will be debited and credited and the REPS delivered by book-entry
as necessary to effect the purchases and sales thereof. For further information
with respect to transfers and settlement through DTC, see "Global Notes."
Notice to Holders by Trustee. In anticipation of the exercise of the Call
Option or the Mandatory Put on the Coupon Reset Date, the Trustee will notify
the Holders of the REPS, not less than 30 days nor more than 60 days prior to
the Coupon Reset Date, that all REPS shall be delivered on the Coupon Reset Date
through the facilities of DTC against payment of the Call Price by the
Callholder under the Call Option or payment of
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the Put Price by the Operating Partnership under the Mandatory Put. The Trustee
will notify the holders of the REPS once it is determined whether the Call Price
or the Put Price shall be delivered.
COUPON RESET PROCESS IF REPS ARE CALLED
The following discussion describes the steps to be taken in order to
determine the interest rate to be paid on the REPS on and after the Coupon Reset
Date in the event the Call Option has been exercised with respect to the REPS.
Under the REPS and pursuant to a Calculation Agency Agreement, Morgan
Stanley & Co. Incorporated has been appointed the calculation agent for the REPS
(in such capacity as calculation agent, the "Calculation Agent"). If the
Callholder exercises the Call Option, then the following steps (the "Coupon
Reset Process") will be taken in order to determine the interest rate to be paid
on the REPS from and including such Coupon Reset Date to but excluding the Final
REPS Maturity Date. The Operating Partnership and the Calculation Agent will use
reasonable efforts to cause the actions contemplated below to be completed in as
timely a manner as possible.
(a) No later than five Business Days prior to the Coupon Reset Date,
the Operating Partnership will provide the Calculation Agent with (i) a
list (the "Dealer List"), containing the names and addresses of three
dealers, one of whom shall be Morgan Stanley & Co. Incorporated, from whom
the Operating Partnership desires the Calculation Agent to obtain Bids (as
defined below) for the purchase of the REPS and (ii) such other material as
may reasonably be requested by the Calculation Agent to facilitate a
successful Coupon Reset Process.
(b) Within one Business Day following receipt by the Calculation Agent
of the Dealer List, the Calculation Agent will provide to each dealer
("Dealer") on the Dealer List (i) a copy of this Prospectus, (ii) a copy of
the form of REPS and (iii) a written request that each Dealer submit a Bid
to the Calculation Agent by 12:00 noon, New York time, on the third
Business Day prior to the Coupon Reset Date (the "Bid Date"). The time on
the Bid Date upon which Bids will be requested may be changed by the
Calculation Agent to as late as 3:00 p.m., New York time. "Bid" means an
irrevocable written offer given by a Dealer for the purchase of all of the
REPS, settling on the Coupon Reset Date, and shall be quoted by such Dealer
as a stated yield to maturity on the REPS ("Yield to Maturity"). Each
Dealer shall also be provided with (i) the name of the Operating
Partnership, (ii) an estimate of the Purchase Price (which shall be stated
as a U.S. dollar amount and be calculated by the Calculation Agent in
accordance with paragraph (c) below), (iii) the principal amount and
maturity of the REPS and (iv) the method by which interest will be
calculated on the REPS.
(c) The purchase price to be paid by any Dealer for the REPS in
connection with the Coupon Reset Process after the exercise of the Call
Option (the "Purchase Price") shall be equal to (i) the principal amount of
the REPS, plus (ii) a premium (the "Notes Premium") which shall be equal to
the excess, if any, on the Coupon Reset Date of (A) the discounted present
value to the Coupon Reset Date of a bond with a maturity of 2015
which has an interest rate of %, semi-annual interest payments on each
and , commencing 2005, and a
principal amount equal to the principal amount of the REPS, and assuming a
discount rate equal to the Call Option Treasury Rate over (B) such
principal amount of REPS. The "Call Option Treasury Rate" means the per
annum rate equal to the offer side yield to maturity of the current
on-the-run 10-year United States Treasury Security per Telerate page 500,
or any successor page, at 11:00 a.m., New York time, on the Bid Date (or
such other time or date that may be agreed upon by the Operating
Partnership and the Calculation Agent) or, if such rate does not appear on
Telerate page 500, or any successor page, at such time, the rates on GovPX
End-of-Day Pricing at 3:00 p.m., New York time, on the Bid Date (or such
other date that may be agreed upon by the Operating Partnership and the
Calculation Agent).
(d) The Calculation Agent will provide written notice to the Operating
Partnership by 12:30 p.m., New York time (or within 30 minutes of such
later time at which the last Bid is received by the Calculation Agent, but
in no event later than 3:30 p.m.), on the Bid Date, setting forth (i) the
names of each of the Dealers from whom the Calculation Agent received Bids
on the Bid Date, (ii) the Bid
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submitted by each such Dealer and (iii) the Purchase Price as determined
pursuant to paragraph (c) above. Except as provided below, the Calculation
Agent will thereafter select from the Bids received the Bid with the lowest
Yield to Maturity (the "Selected Bid"); provided, however, that (i) if the
Calculation Agent has not received a timely Bid from a Dealer on or before
the Bid Date, the Selected Bid shall be the lowest of all Bids received by
such time, (ii) if any two or more of the lowest Bids submitted are
equivalent, the Operating Partnership shall in its sole discretion select
any of such equivalent Bids (and such selected Bid shall be the Selected
Bid) and (iii) Morgan Stanley & Co. Incorporated will have the right to
match the Bid with the lowest Yield to Maturity, in which case Morgan
Stanley & Co. Incorporated's Bid shall be the Selected Bid. The Calculation
Agent will set the Coupon Reset Rate equal to the interest rate that will
amortize the Notes Premium fully over the term of the REPS at the Yield to
Maturity indicated by the Selected Bid. The Calculation Agent will notify
the Dealer that submitted the Selected Bid by 4:00 p.m., New York time, on
the Bid Date.
(e) Immediately after calculating the Coupon Reset Rate for the REPS,
the Calculation Agent will provide written notice to the Operating
Partnership and the Trustee, setting forth the Coupon Reset Rate. At the
request of the holders of the REPS, the Calculation Agent will provide such
holders the Coupon Reset Rate. The Operating Partnership shall thereafter
establish the Coupon Reset Rate as the new interest rate on the REPS,
effective from and including the Coupon Reset Date by delivery to the
Trustee on or before the Coupon Reset Date of an officers' certificate.
(f) The Callholder will sell the REPS to the Dealer that made the
Selected Bid at the Purchase Price, such sale to be settled on the Coupon
Reset Date in immediately available funds.
If the Calculation Agent determines that (i) at any time prior to the sale
of the REPS on the Bid Date, an Event of Default has occurred and is continuing
under Sections 501 (1),(2),(3),(4) or (5) of the Indenture (in such event
termination is at the Callholder's option) or under Sections 501 (6) or (7) of
the Indenture (in such event, termination is automatic), (ii) a Market
Disruption Event (as defined below) has occurred and is continuing following the
exercise of the Call Option, (iii) the Callholder fails to deliver the Call
Notice to the Trustee prior to 4:00 p.m., New York time, on the fifteenth
calendar day prior to the Coupon Reset Date or revokes the Call Notice, (iv) the
Callholder fails to pay the Call Price by 2:00 p.m., New York time, on the
Business Day prior to the Coupon Reset Date, (v) a defeasance (as defined below)
or a covenant defeasance (as defined below) has occurred and (vi) two or more of
the Dealers have failed to provide Bids in a timely manner substantially as
provided above, such Call Option will be automatically revoked, and the Trustee
will exercise the Put Option on behalf of the holders. "Market Disruption Event"
shall mean any of the following if such events occur and are continuing on any
day from and including the date of the Call Notice to and including the Bid Date
in the judgment of the Calculation Agent: (i) a suspension or material
limitation in trading in securities generally on the NYSE or the establishment
of minimum prices on such exchange; (ii) a general moratorium on commercial
banking activities declared by either federal or New York State authorities;
(iii) any material adverse change in the existing financial, political or
economic conditions in the United States of America; (iv) an outbreak or
escalation of major hostilities involving the United States of America or the
declaration of a national emergency or war by the United States; or (v) any
material disruption of the U.S. government securities market, U.S. corporate
bond market or U.S. federal wire system; provided, in each case that in the
judgment of the Calculation Agent the effect of the foregoing makes it
impractical to conduct the Coupon Reset Process. If the Call Option is revoked,
the Operating Partnership will reacquire the Call Option from the Callholder.
The Calculation Agency Agreement provides that the Calculation Agent may
resign at any time, such resignation to be effective ten Business Days after the
delivery to the Operating Partnership and the Trustee of notice of such
resignation. In such case, the Operating Partnership may appoint a successor
Calculation Agent for the REPS.
The Calculation Agent, in its individual capacity, may buy, sell, hold and
deal in the REPS and may exercise any vote or join in any action which any
holder of the REPS may be entitled to exercise or take as if it were not the
Calculation Agent. The Calculation Agent, in its individual capacity, may also
engage in any transaction with the Operating Partnership as if it were not the
Calculation Agent.
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MERGER, CONSOLIDATION OR SALE
The Indenture provides that the Operating Partnership will not, in any
transaction or series of related transactions, consolidate with, or sell, lease,
assign, transfer or otherwise convey all or substantially all of its assets to,
or merge with or into, any other Person unless (i) either the Operating
Partnership shall be the continuing person, or the successor (if other than the
Operating Partnership) formed by or resulting from any such consolidation or
merger or which shall have received the transfer of such assets shall be a
corporation, partnership, limited liability company or other legal entity
organized and existing under the laws of the United States of America, any state
thereof or the District of Columbia and shall expressly assume, by supplemental
indenture delivered to the Trustee, the due and punctual payment of the
principal of (and premium, if any) and interest on all of the outstanding Notes
issued under the Indenture and the due and punctual performance and observance
of all of the other covenants and conditions contained in the Notes and the
Indenture; (ii) immediately after giving effect to such transaction and treating
any Debt (including Acquired Debt) which becomes an obligation of the Operating
Partnership or any of its Affiliates as a result thereof as having been incurred
by the Operating Partnership or such Affiliate at the time of such transaction,
no Event of Default under the Indenture, and no event which, after notice or the
lapse of time or both, would become such an Event of Default, shall have
occurred and be continuing; and (iii) an officers' certificate and legal opinion
concerning such conditions shall be delivered to the Trustee. If the Operating
Partnership is not the surviving legal entity, then, for purposes of clause (ii)
of the preceding sentence, the successor shall be deemed to be the "Operating
Partnership" referred to in such clause (ii). (See Sections 801 and 803 of the
form of Indenture).
Upon any such merger, consolidation, sale, assignment, transfer, lease or
conveyance in which the Operating Partnership is not the continuing legal
entity, the successor entity formed by such consolidation or into which the
Operating Partnership is merged or to which such sale, assignment, transfer,
lease or other conveyance is made shall succeed to, and be substituted for, and
may exercise every right and power of, the Operating Partnership under the
Indenture with the same effect as if such successor entity had been named as the
Operating Partnership therein and thereafter the Operating Partnership shall be
released (except in the case of a lease) from its obligations under the
Indenture and the Notes.
CERTAIN COVENANTS
The Indenture contains the following covenants:
Aggregate Debt Test. The Operating Partnership will not, and will not
permit any of its Subsidiaries to, incur any Debt (including, without
limitation, Acquired Debt) if, immediately after giving effect to the incurrence
of such Debt and the application of the proceeds therefrom on a pro forma basis,
the aggregate principal amount of all outstanding Debt of the Operating
Partnership and its Subsidiaries (determined on a consolidated basis in
accordance with generally accepted accounting principles) is greater than 60% of
the sum of (without duplication) (i) the Total Assets of the Operating
Partnership and its Subsidiaries as of the last day of the then most recently
ended fiscal quarter and (ii) the aggregate purchase price of any real estate
assets or mortgages receivable acquired, and the aggregate amount of any
securities offering proceeds received (to the extent such proceeds were not used
to acquire real estate assets or mortgages receivable or used to reduce Debt),
by the Operating Partnership or any of its Subsidiaries since the end of such
fiscal quarter, including the proceeds obtained from the incurrence of such
additional Debt, determined on a consolidated basis in accordance with generally
accepted accounting principles.
Debt Service Test. The Operating Partnership will not, and will not permit
any of its Subsidiaries to, incur any Debt (including, without limitation,
Acquired Debt) if the ratio of Consolidated Income Available for Debt Service to
the Annual Debt Service Charge for the period consisting of the four consecutive
fiscal quarters most recently ended prior to the date on which such additional
Debt is to be incurred shall have been less than 1.5:1 on a pro forma basis
after giving effect to the incurrence of such Debt and the application of the
proceeds therefrom, and calculated on the assumption that (i) such Debt and any
other Debt (including, without limitation, Acquired Debt) incurred by the
Operating Partnership or any of its Subsidiaries since the first day of such
four-quarter period had been incurred, and the application of the proceeds
therefrom (including to repay or retire other Debt) had occurred, on the first
day of such period, (ii) the repayment or
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retirement of any other Debt of the Operating Partnership or any of its
Subsidiaries since the first day of such four-quarter period had occurred on the
first day of such period (except that, in making such computation, the amount of
Debt under any revolving credit facility, line of credit or similar facility
shall be computed based upon the average daily balance of such Debt during such
period) and (iii) in the case of any acquisition or disposition by the Operating
Partnership or any of its Subsidiaries of any asset or group of assets, in any
such case with a fair market value (determined in good faith by the Operating
Partnership's General Partner's Board of Directors) in excess of $1 million,
since the first day of such four-quarter period, whether by merger, stock
purchase or sale or asset purchase or sale or otherwise, such acquisition or
disposition had occurred as of the first day of such period with the appropriate
adjustments with respect to such acquisition or disposition being included in
such pro forma calculation. If the Debt giving rise to the need to make the
foregoing calculation or any other Debt incurred after the first day of the
relevant four-quarter period bears interest at a floating rate then, for
purposes of calculating the Annual Debt Service Charge, the interest rate on
such Debt shall be computed on a pro forma basis by applying the average daily
rate which would have been in effect during the entire such four-quarter period
to the greater of the amount of such Debt outstanding at the end of such period
or the average amount of such Debt outstanding during such period.
Secured Debt Test. The Operating Partnership will not, and will not permit
any of its Subsidiaries to, incur any Debt (including, without limitation,
Acquired Debt) secured by any Lien on any property or assets of the Operating
Partnership or any of its Subsidiaries, whether owned on the date of the
Indenture or thereafter acquired, if, immediately after giving effect to the
incurrence of such Debt and the application of the proceeds therefrom on a pro
forma basis, the aggregate principal amount (determined on a consolidated basis
in accordance with generally accepted accounting principles) of all outstanding
Debt of the Operating Partnership and its Subsidiaries which is secured by any
Lien on any property or assets of the Operating Partnership or any of its
Subsidiaries is greater than 40% of the sum of (without duplication) (i) the
Total Assets of the Operating Partnership and its Subsidiaries as of the last
day of the then most recently ended fiscal quarter and (ii) the aggregate
purchase price of any real estate assets or mortgages receivable acquired, and
the aggregate amount of any securities offering proceeds received (to the extent
such proceeds were not used to acquire real estate assets or mortgages
receivable or used to reduce Debt), by the Operating Partnership or any of its
Subsidiaries since the end of such fiscal quarter, including the proceeds
obtained from the incurrence of such additional Debt, determined on a
consolidated basis in accordance with generally accepted accounting principles.
For purposes of the foregoing provisions regarding the limitation on the
incurrence of Debt, Debt shall be deemed to be "incurred" by the Operating
Partnership or a Subsidiary whenever the Operating Partnership or a Subsidiary
shall create, assume, guarantee or otherwise become liable in respect thereof.
Maintenance of Total Unencumbered Assets. The Operating Partnership will
not have at any time Total Unencumbered Assets of less than 150% of the
aggregate principal amount of all outstanding Unsecured Debt of the Operating
Partnership and its Subsidiaries, determined on a consolidated basis in
accordance with generally accepted accounting principles.
Existence. Except as permitted under the provisions of the Indenture
described under the caption in "-- Merger, Consolidation or Sale" the Operating
Partnership will do or cause to be done all things necessary to preserve and
keep in full force and effect its existence as a Delaware limited partnership,
rights (charter and statutory) and franchises; provided, however, that the
Operating Partnership will not be required to preserve any right or franchise if
its General Partner's Board of Directors determines that the preservation
thereof is no longer desirable in the conduct of its business and that the loss
thereof is not disadvantageous in any material respect to the Holders of the
Notes outstanding under the Indenture.
Maintenance of Properties. The Operating Partnership will cause all of its
properties used or useful in the conduct of its business or the business of any
Subsidiaries to be maintained and kept in good condition, repair and working
order and supplied with all necessary equipment and will cause to be made all
necessary repairs, renewals, replacements, betterments and improvements thereof,
all as in the judgment of the Operating Partnership may be necessary so that the
business carried on in connection therewith may be properly and advantageously
conducted at all times.
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Insurance. The Indenture requires the Operating Partnership to, and to
cause each of its Subsidiaries to, keep in force upon all of its properties and
operations policies of insurance carried with responsible companies in such
amounts and covering all such risks as shall be customary in the industry in
accordance with prevailing market conditions and availability.
Payment of Taxes and Other Claims. The Operating Partnership will pay or
discharge or cause to be paid or discharged, before the same shall become
delinquent, (i) all taxes, assessments and governmental charges levied or
imposed upon it or any Subsidiary or upon the income, profits or property of the
Operating Partnership or any Subsidiary, and (ii) all lawful claims for labor,
materials and supplies which, if unpaid, might by law become a lien upon the
property of the Operating Partnership or any Subsidiary, provided, however, that
the Operating Partnership will not be required to pay or discharge or cause to
be paid or discharged any such tax, assessment, charge or claim whose amount,
applicability or validity is being contested in good faith by appropriate
proceedings.
Additional Guarantees. The Indenture provides that (i) the Operating
Partnership will not permit any of its Subsidiaries that is not a Guarantor to
guarantee or secure through the granting of Liens, the payment of any Debt of
the Operating Partnership or any Guarantor and (ii) the Operating Partnership
will not and will not permit any of its Subsidiaries to pledge any intercompany
notes representing obligations of any of its Subsidiaries, to secure the payment
of any debt of the Operating Partnership or any Guarantor, in each case unless
such Subsidiary, the Operating Partnership and the Trustee execute and deliver a
supplemental indenture evidencing such Subsidiary's Guarantee (providing for the
unconditional Guarantee by such Subsidiary, on a senior basis, of the Notes).
Provision of Financial Information. The Operating Partnership will file
with the Trustee copies of annual reports, quarterly reports and other documents
(the "Financial Reports") which the Operating Partnership files with the
Commission or would be required to file with the Commission pursuant to Section
13 or 15(d) of the Exchange Act if the Operating Partnership were subject to
such Sections; provided, however, that if the Operating Partnership is not
subject to such Sections, it may in lieu of filing Financial Reports of the
Operating Partnership with the Trustee, file Financial Reports of the Company if
they would be materially the same as those that would have been filed by the
Operating Partnership with the Commission pursuant to Sections 13 or 15(d) of
the Exchange Act.
DEFINITIONS
As used herein,
"Acquired Debt" means Debt of a Person (i) existing at the time such Person
is merged or consolidated with or into, or becomes a Subsidiary of, the
Operating Partnership or (ii) assumed by the Operating Partnership or any of its
Subsidiaries in connection with the acquisition of assets from such Person.
Acquired Debt shall be deemed to be incurred on the date the acquired Person is
merged or consolidated with or into, or becomes a Subsidiary of, the Operating
Partnership or the date of the related acquisition, as the case may be.
"Annual Debt Service Charge" means, for any period, the interest expense of
the Operating Partnership and its Subsidiaries for such period (including,
without duplication, (i) all amortization of debt discount and premiums, (ii)
all accrued interest, (iii) all capitalized interest, and (iv) the interest
component of capitalized lease obligations), determined on a consolidated basis
in accordance with generally accepted accounting principles.
"Consolidated Income Available for Debt Service" for any period means
Consolidated Net Income of the Operating Partnership and its Subsidiaries for
such period, plus amounts which have been deducted and minus amounts which have
been added for (without duplication) (i) interest expense on Debt, (ii)
provision for taxes based on income, (iii) amortization of debt discount,
premium and deferred financing costs, (iv) provisions for gains and losses on
sales or other dispositions of properties and other investments, (v) property
depreciation and amortization, (vi) the effect of any non-cash items, and (vii)
amortization of deferred charges, all determined on a consolidated basis in
accordance with generally accepted accounting principles.
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"Consolidated Net Income" for any period means the amount of net income (or
loss) of the Operating Partnership and its Subsidiaries for such period,
excluding (without duplication) (i) extraordinary items and (ii) the portion of
net income (but not losses) of the Operating Partnership and its Subsidiaries
allocable to minority interests in unconsolidated Persons to the extent that
cash dividends or distributions have not actually been received by the Operating
Partnership or one of Subsidiaries, all determined on a consolidated basis in
accordance with generally accepted accounting principles.
"Debt" means, with respect to any Person, any indebtedness of such Person,
whether or not contingent, in respect of (i) borrowed money or evidenced by
bonds, notes, debentures or similar instruments, (ii) indebtedness secured by
any Lien on any property or asset owned by such Person, but only to the extent
of the lesser of (x) the amount of indebtedness so secured and (y) the fair
market value (determined in good faith by the board of directors of such Person
or, in the case of the Operating Partnership or a Subsidiary, by the Operating
Partnership's General Partner's Board of Directors) of the property subject to
such Lien, (iii) reimbursement obligations, contingent or otherwise, in
connection with any letters of credit actually issued or amounts representing
the balance deferred and unpaid of the purchase price of any property except any
such balance that constitutes an accrued expense or trade payable, or (iv) any
lease of property by such Person as lessee which is required to be reflected on
such Person's balance sheet as a capitalized lease in accordance with generally
accepted accounting principles, and also includes, to the extent not otherwise
included, any obligation of such Person to be liable for, or to pay, as obligor,
guarantor or otherwise (other than for purposes of collection in the ordinary
course of business), Debt of the types referred to above of another Person (it
being understood that Debt shall be deemed to be incurred by such Person
whenever such person shall create, assume, guarantee or otherwise become liable
in respect thereof).
"Lien" means any mortgage, deed of trust, lien, charge, pledge, security
interest, security agreement, or other encumbrance of any kind.
"Subsidiary" means (i) a corporation, partnership, joint venture, limited
liability company or other Person the majority of the shares, if any, of the
non-voting capital stock or other equivalent ownership interests of which
(except directors' qualifying shares) are at the time directly or indirectly
owned by the Operating Partnership and/or any other Subsidiary or Subsidiaries,
and the majority of the shares of the voting capital stock or other equivalent
ownership interests of which (except directors' qualifying shares) are at the
time directly or indirectly owned by the Operating Partnership, any other
Subsidiary or Subsidiaries, and (ii) any other Person the accounts of which are
consolidated with the accounts of the Operating Partnership.
"Total Assets" means the sum of (without duplication) (i) Undepreciated
Real Estate Assets and (ii) all other assets (excluding accounts receivable and
intangibles) of the Operating Partnership and its Subsidiaries, all determined
on a consolidated basis in accordance with generally accepted accounting
principles.
"Total Unencumbered Assets" means the sum of (without duplication) (i)
those Undepreciated Real Estate Assets which are not subject to a Lien securing
Debt and (ii) all other assets (excluding accounts receivable and intangibles)
of the Operating Partnership and its Subsidiaries not subject to a Lien securing
Debt, all determined on a consolidated basis in accordance with generally
accepted accounting principles.
"Undepreciated Real Estate Assets" means, as of any date, the cost
(original cost plus capital improvements) of real estate assets of the Operating
Partnership and its Subsidiaries on such date, before depreciation and
amortization, all determined on a consolidated basis in accordance with
generally accepted accounting principles.
"Unsecured Debt" means Debt of the Operating Partnership or any of its
Subsidiaries which is not secured by a Lien on any property or assets of the
Operating Partnership or any of its Subsidiaries.
EVENTS OF DEFAULT, NOTICE AND WAIVER
The Indenture provides that the following events are "Events of Default"
with respect to any series of the Notes issued thereunder: (i) default for 30
days in the payment of any interest on any Note of such series; (ii) default in
the payment of any principal of (or premium, if any, on) any Note of such series
at its Maturity
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Date; (iii) default in the performance or breach of any other covenant or
warranty of the Operating Partnership contained in the Indenture, continued for
60 days after written notice as provided in the Indenture; (iv) (a) default by
the Operating Partnership or any Subsidiary of the Operating Partnership in the
payment (whether at stated maturity, upon acceleration, upon required prepayment
or otherwise), beyond any period of grace provided therefor, of any principal of
or interest on any bond, note, debenture or other evidence of indebtedness, or
(b) any other breach or default (or other event or condition) shall occur under
any agreement, indenture or instrument relating to any such bond, note,
debenture or other evidence of indebtedness beyond any cure period provided
therefor, if as a result thereof the holder or holders of any such bond, note,
debenture or other evidence of indebtedness (or a person on behalf of such
holder or holders) has the immediate right to cause (upon the giving of notice
if required) any such bond, note, debenture or other evidence of indebtedness to
become or be declared due and payable, or required to be prepaid, redeemed,
purchased or defeased (or an offer of prepayment, redemption, purchase or
defeasance be made), prior to its stated maturity (other than by a scheduled
mandatory prepayment), which in the aggregate under (a) and (b) have a principal
amount equal or greater than $20,000,000; (v) the entry by a court of competent
jurisdiction of one or more judgments, orders or decrees against the Operating
Partnership or any Significant Subsidiary (as defined below) in an aggregate
amount (excluding amounts fully covered by insurance) in excess of $20,000,000
and such judgments, orders or decrees remain undischarged, unstayed or
unsatisfied in an aggregate amount (excluding amounts fully covered by
insurance) in excess of $20,000,000 for a period of 30 consecutive days; and
(vi) certain events of bankruptcy, insolvency or reorganization with respect to
the Operating Partnership or of any General Partner or any Significant
Subsidiary. (See Section 501 of the form of Indenture.) The term "Significant
Subsidiary" means any Subsidiary which is a significant subsidiary (as defined
in Regulation S-X promulgated under the Securities Act as in effect on January
1, 1998) of the Operating Partnership.
If an Event of Default under the Indenture with respect to a series of
Notes occurs and is continuing, then in every such case the Trustee or the
Holders of not less than 25% in principal amount of the outstanding Notes of
such series may declare the principal amount of all of the Notes of such series
to be due and payable immediately by written notice thereof to the Operating
Partnership (and to the Trustee if given by the Holders). However, at any time
after such a declaration of acceleration with respect to the Notes of such
series has been made, the Holders of not less than a majority in principal
amount of outstanding Notes of such series may rescind and annul such
declaration and its consequences if (i) the Operating Partnership shall have
deposited with the Trustee all required payments of the principal of (and
premium, if any) and interest, if any, on the Notes of such series (other than
amounts which have become due and payable as a result of such acceleration),
plus certain fees, expenses, disbursements and advances of the Trustee and (ii)
all Events of Default (other than the nonpayment of accelerated principal (or
specified portion thereof), premium, if any, and interest) with respect to the
Notes of such series have been cured or waived as provided in the Indenture.
(See Section 502 of the form of Indenture.) The Indenture will also provide that
the Holders of not less than a majority in principal amount of the outstanding
Notes of a series may waive any past default with respect to such Notes and its
consequences, except a default (x) in the payment of the principal of (or
premium, if any) or interest, if any, on any Note of such series or (y) in
respect of a covenant or provision contained in the Indenture that cannot be
modified or amended without the consent of the Holder of each Outstanding Note
of such series affected thereby. (See Section 513 of the form of Indenture.)
The Indenture requires the Trustee to give notice to the Holders of Notes
of a series issued thereunder within 90 days of a default with respect to such
Notes under the Indenture known to the Trustee, unless such default shall have
been cured or waived; provided, however, that the Trustee may withhold notice to
the Holders of any Notes of such series of any default (except a default in the
payment of the principal of (or premium, if any) or interest, if any, on any
Note of such series) if a Responsible Officer of such Trustee determines such
withholding to be in the interest of such Holders. (See Section 601 of the form
of Indenture.)
The Indenture provides that no Holder of Notes of any series may institute
any proceeding, judicial or otherwise, with respect to the Indenture or for any
remedy thereunder, except in the case of the failure of the Trustee, for 60
days, to act after it has received a written request to institute proceedings in
respect of an Event of Default from the Holders of not less than 25% in
principal amount of the Outstanding Notes of such series,
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as well as an offer of reasonable indemnity. (See Section 507 of the form of
Indenture.) This provision will not prevent, however, any Holder of Notes from
instituting suit for the enforcement of payment of the principal of (and
premium, if any) and interest, if any, on such Notes held by that Holder at the
respective due dates thereof. (See Section 508 of the form of Indenture.) The
Indenture provides that, subject to provisions of the Indenture relating to its
duties in case of default, the Trustee is under no obligation to exercise any of
its rights or powers under the Indenture at the request or direction of any
Holders of any Notes of any series then Outstanding under the Indenture, unless
the Holders of Notes of any such series shall have offered to the Trustee
thereunder reasonable security or indemnity. (See Section 602 of the form of
Indenture.) The Holders of not less than a majority in principal amount of the
Outstanding Notes of any series shall have the right to direct the time, method
and place of conducting any proceeding for any remedy available to the Trustee,
or of exercising any trust or power conferred upon the Trustee with respect to
such series. However, the Trustee may refuse to follow any direction which is in
conflict with any law or the Indenture, which may involve the Trustee in
personal liability or which may be unduly prejudicial to the Holders of Notes of
such series not joining therein. (See Section 512 of the form of Indenture.)
Within 120 days after the close of each fiscal year, the Operating
Partnership must deliver to the Trustee a certificate, signed by one of several
specified officers of the General Partner of the Operating Partnership, stating
whether or not such officer has knowledge of any noncompliance under the
Indenture and, if so, specifying such noncompliance and the nature and status
thereof. (See Section 1014 of the form of Indenture.) Further, upon any request
by the Operating Partnership to take any action under the Indenture, the
Operating Partnership will furnish to the Trustee (a) an Officers' Certificate
stating that all conditions precedent, if any, provided for in the Indenture
relating to the proposed action have been complied with, and (b) an opinion of
counsel stating that in the opinion of such counsel all such conditions
precedent, if any, have been complied with.
MODIFICATION OF THE INDENTURE
Modifications and amendments of the Indenture may be made only with the
consent of the Holders of not less than a majority in principal amount of all
Outstanding Notes which are affected by such modification or amendment;
provided, however, that no such modification or amendment may, without the
consent of the Holder of each such Note affected thereby, (i) change the
Maturity Date of the principal (or premium, if any) of, or any installment of
interest, if any, any such Note, (ii) reduce the principal amount of, or the
rate or amount of interest on, or any amount of premium payable on any such Note
that would be due and payable upon declaration of acceleration of the maturity
thereof or would be provable in bankruptcy, or adversely affect any right of the
Holder of any such Note to repayment of such Note at such Holder's option, (iii)
change the Place of Payment, or the coin or currency, for payment of principal
of (or premium, if any) or interest, if any, on any such Note, (iv) impair the
right to institute suit for the enforcement of any payment on or with respect to
any such Note, (v) reduce the percentage in principal amount of Outstanding
Notes necessary to modify or amend the Indenture, to waive compliance with
certain provisions thereof or certain defaults and consequences thereunder or to
reduce the quorum or voting requirements set forth in the Indenture, or (vi)
modify any of the foregoing provisions or any of the provisions relating to the
waiver of certain past defaults or certain covenants, except to increase the
required percentage to effect such action or to provide that certain other
provisions may not be modified or waived without the consent of the Holder of
such Note. (See Section 902 of the form of Indenture.)
The Indenture provides that the Holders of not less than a majority in
principal amount of Outstanding Notes have the right to waive compliance by the
Operating Partnership with certain covenants in the Indenture, including those
described in the section of this Prospectus captioned "Description of Notes --
Certain Covenants." (See Section 1013 of the form of Indenture.)
Modifications and amendments of the Indenture may be made by the Operating
Partnership and the Trustee without the consent of any Holder of Notes issued
thereunder for any of the following purposes: (i) to evidence the succession of
another Person to the Operating Partnership as obligor under the Indenture; (ii)
to add to the covenants of the Operating Partnership for the benefit of the
Holders of the Notes or to surrender any right or power conferred upon the
Operating Partnership in the Indenture; (iii) to add Events of Default
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for the benefit of the Holders of the Notes; (iv) to add or change any
provisions of the Indenture to facilitate the issuance of the Notes in
uncertificated form, provided that such action shall not adversely affect the
interests of the Holders of Notes in any material respect; (v) to secure the
Notes; (vi) to provide for the acceptance of appointment by a successor Trustee
or to facilitate the administration of the trusts under the Indenture by more
than one Trustee; (vii) to cure any ambiguity, defect or inconsistency in the
Indenture or to add or change any other provisions with respect to matters or
questions arising thereunder, provided that such action shall not adversely
affect the interests of Holders of Outstanding Notes in any material respect; or
(viii) to supplement any of the provisions of the Indenture to the extent
necessary to permit or facilitate defeasance, covenant defeasance and discharge
of any Notes, provided that such action shall not adversely affect the interests
of the Holders of the Notes in any material respect. (See Section 901 of the
form of Indenture.)
The Indenture provides that in determining whether the Holders of the
requisite principal amount of Outstanding Notes of a series have given any
request, demand, authorization, direction, notice, consent or waiver thereunder
or whether a quorum is present at a meeting of Holders of the Notes of a series,
Notes of each series owned by the Operating Partnership or any other obligor
upon such Notes or any Affiliate of the Operating Partnership or of such other
obligor shall be disregarded. (See Section 101 of the form of Indenture.)
The Indenture contains provisions for convening meetings of the Holders of
Notes of a series. (See Section 1301 of the form of Indenture.) A meeting may be
called at any time by the Trustee and also, upon request, by the Operating
Partnership or the Holders of at least 25% in principal amount of the
Outstanding Notes of such series, in any such case upon notice given as provided
in the Indenture. (See Section 1302 of the form of Indenture.) Except for any
consent that must be given by the Holder of each Note affected by certain
modifications and amendments of the Indenture, any resolution presented at a
meeting or adjourned meeting duly reconvened at which a quorum is present may be
adopted by the affirmative vote of the Holders of a majority in principal amount
of the Outstanding Notes of such series; provided, however, that, except as
referred to above, any resolution with respect to any request, demand,
authorization, direction, notice, consent, waiver or other action that may be
made, given or taken by the Holders of a specified percentage, which is less or
more than a majority, in principal amount of the Outstanding Notes of such
series may be adopted at a meeting or adjourned meeting duly reconvened at which
a quorum is present by the affirmative vote of the Holders of such specified
percentage in principal amount of the Outstanding Notes of such series. Any
resolution passed or decision taken at any meeting of Holders of Notes of any
series duly held in accordance with the Indenture will be binding on all Holders
of Notes of such series. The quorum at any meeting called to adopt a resolution,
and at any reconvened meeting, will be Persons holding or representing a
majority in principal amount of the Outstanding Notes of any series; provided,
however, that if any action is to be taken at such meeting with respect to a
consent or waiver which may be given by the Holders of not less than a specified
percentage, which is less or more than a majority, in principal amount of the
Outstanding Notes of such series, the Persons holding or representing such
specified percentage in principal amount of the Outstanding Notes of such series
will constitute a quorum. (See Section 1304 of the form of Indenture.)
Notwithstanding the provisions described above, the Indenture provides that
if any action is to be taken at a meeting of Holders of Notes of any series with
respect to any request, demand, authorization, direction, notice, consent,
waiver or other action that the Indenture expressly provides may be made, given
or taken by the Holders of a specified percentage in principal amount of all
Outstanding Notes of such series affected thereby: (i) there shall be no minimum
quorum requirement for such meeting and (ii) the principal amount of the
Outstanding Notes of such series that are entitled to vote in favor of such
request, demand, authorization, direction, notice, consent, waiver or other
action shall be taken into account in determining whether such request, demand,
authorization, direction, notice, consent, waiver or other action has been made,
given or taken under the Indenture. (See Section 1304 of the form of Indenture.)
DISCHARGE, DEFEASANCE AND COVENANT DEFEASANCE
Upon request of the Operating Partnership the Indenture shall cease to be
of further effect with respect to the Notes of a series (except as to certain
limited provisions of the Indenture which shall survive) when either
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(i) all Notes of such series have been delivered to the Trustee for cancellation
(subject to certain exceptions) or (ii) all Notes of such series have become due
and payable or will become due and payable within one year (or, if redeemable,
are scheduled for redemption within one year) and the Operating Partnership has
irrevocably deposited with the Trustee, in trust, funds in an amount sufficient
to pay the entire indebtedness on the Notes of such series in respect of
principal (and premium, if any) and interest to the date of such deposit (if
such Notes have become due and payable) or to the stated maturity or redemption
date, as the case may be.
The Indenture provides that the Operating Partnership may elect either (i)
to defease and be discharged from any and all obligations with respect to a
series of Notes (except, among other things, for the obligations to register the
transfer or exchange of such Notes, to replace temporary or mutilated,
destroyed, lost or stolen Notes of such series, to maintain an office or agency
in respect of the Notes of such series and to hold moneys for payment in trust)
("defeasance") (see Section 1202 of the form of Indenture) or (ii) to be
released from its obligations with respect to the Notes of such series under the
applicable covenants described above under the caption "Certain Covenants"
(except that the Operating Partnership shall remain subject to the covenant to
preserve and keep in full force and effect its existence, except as permitted
under the provisions described under "Merger, Consolidation or Sale") and its
obligations with respect to any other covenants applicable to the Notes of such
series, and any omission to comply with such obligations shall not constitute a
default or an Event of Default with respect to the Notes ("covenant defeasance")
(see Section 1203 of the form of Indenture), in either case upon the irrevocable
deposit by the Operating Partnership with the Trustee, in trust, of the amount
payable at the applicable Maturity Date or, if applicable, upon redemption, or
Government Obligations (as defined below), or both, applicable to the Notes of
such series which through the scheduled payment of principal and interest in
accordance with their terms will provide money in an amount sufficient to pay
the principal of (and premium, if any) and interest on such Notes, on the
scheduled due dates therefor or the applicable redemption date, as the case may
be.
Such a trust may only be established if, among other things, (i) the
Operating Partnership has delivered to the Trustee a legal opinion to the effect
that the Holders of the Notes will not recognize income, gain or loss for U.S.
federal income tax purposes as a result of such defeasance or covenant
defeasance and will be subject to U.S. federal income tax on the same amounts,
in the same manner and at the same times as would have been the case if such
defeasance or covenant defeasance had not occurred, and such legal opinion, in
the case of defeasance, must refer to and be based upon a ruling of the Internal
Revenue Service or a change in applicable United States federal income tax law
occurring after the date of the Indenture; (ii) if the cash and Government
Obligations deposited are sufficient to pay the outstanding Notes of such
series, provided such Notes are redeemed on a particular redemption date, the
Operating Partnership shall have given the Trustee irrevocable instructions to
redeem the Notes of such series on such date; and (iii) no Event of Default or
event which with notice or lapse of time or both would become an Event of
Default with respect to the Notes shall have occurred and shall be continuing on
the date of, or, solely in the case of Events of Default described in clause
(vi) of the first paragraph under the caption "-- Events of Default, Notice and
Waiver" above, during the period ending on the 91st day after the date of, such
deposit into trust. (See Section 1204 of the form of Indenture.)
"Government Obligations" means securities which are (i) direct obligations
of the United States of America, for the payment of which its full faith and
credit is pledged, or (ii) obligations of a Person controlled or supervised by
and acting as an agency or instrumentality of the United States of America, the
payment of which is unconditionally guaranteed as a full faith and credit
obligation by the United States of America, which, in either case, are not
callable or redeemable at the option of the issuer thereof, and shall also
include a depository receipt issued by a bank or trust company as custodian with
respect to any such Government Obligation or a specific payment of interest on
or principal of any such Government Obligation held by such custodian for the
account of the holder of a depository receipt, provided that (except as required
by law) such custodian is not authorized to make any deduction from the amount
payable to the holder of such depository receipt from any amount received by the
custodian in respect of the Government Obligation or the specific payment of
interest on or principal of the Government Obligation evidenced by such
depository receipt. (See Section 101 of the form of Indenture.)
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In the event the Operating Partnership effects covenant defeasance with
respect to the Notes of any series and such Notes are declared due and payable
because of the occurrence of any Event of Default (other than an Event of
Default with respect to any covenant as to which there has been covenant
defeasance), the amount of monies and Government Obligations deposited with the
Trustee to effect such covenant defeasance may not be sufficient to pay amounts
due on such Notes at the time of their Maturity Date or at the time of the
acceleration resulting from such Event of Default. In any such event, the
Operating Partnership would remain liable to make payment of such amounts due at
the time of acceleration.
GLOBAL NOTES
The Notes of each series will be issued in the form of one or more fully
registered book-entry Notes of such series (each, a "Global Note") that will be
deposited with, or on behalf of DTC. Global Notes will be issued in fully
registered form.
The Operating Partnership anticipates that the Global Notes will be
deposited with, or on behalf of DTC, and that such Global Note will be
registered in the name of Cede & Co., DTC's nominee. The Operating Partnership
further anticipates that the following provisions will apply to the depository
arrangements with respect to the Global Notes.
So long as DTC or its nominee is the registered owner of the Global Notes,
DTC or its nominee, as the case may be, will be considered the sole Holder of
the Notes represented by such Global Note for all purposes under the Indenture.
Except as described below, owners of beneficial interests in the Global Notes
will not be entitled to have Notes represented by such Global Note registered in
their names, will not receive or be entitled to receive physical delivery of
Notes in certificated form and will not be considered the owners or Holders
thereof under the Indenture. The laws of some states require that certain
purchasers of securities take physical delivery of such securities in
certificated form; accordingly, such laws may limit the transferability of
beneficial interests in the Global Notes.
The Global Notes will be exchangeable for certificated Notes only if (i)
DTC notifies the Operating Partnership that it is unwilling or unable to
continue as depository or DTC ceases to be a clearing agency registered under
the Exchange Act (if so required by applicable law or regulation) and, in either
case, a successor depository is not appointed by the Operating Partnership
within 90 days after the Operating Partnership receives such notice or becomes
aware of such ineligibility, (ii) the Operating Partnership in its sole
discretion determines that the Global Notes shall be exchangeable for
certificated Notes or (iii) there shall have occurred and be continuing an Event
of Default with respect to Notes of any series under the Indenture and
beneficial owners representing a majority in aggregate principal amount of the
Notes of such series represented by a Global Note advise DTC to cease acting as
depository. Upon any such exchange, owners of a beneficial interest in such
Global Note will be entitled to physical delivery of individual Notes of such
series in certificated form of like tenor, terms and rank, equal in principal
amount to such beneficial interest, and to have such Notes in certificated form
registered in the names of the beneficial owners, which names are expected to be
provided by DTC's relevant Participants (as identified by DTC) to the Trustee.
Notes so issued in certificated form will be issued in denominations of $1,000
or any integral multiple thereof, and will be issued in registered form only,
without coupons.
The following is based on information furnished to the Operating
Partnership by DTC:
DTC will act as securities depository for the Notes. The Notes will be
issued as fully registered securities registered in the name of Cede & Co.
(DTC's partnership nominee). One fully registered Note certificate will be
issued with respect to each $200 million (or such other amount as shall be
permitted by DTC from time to time) of principal amount of the Notes, and an
additional certificate will be issued with respect to any remaining principal
amount.
DTC is a limited purpose trust company organized under the New York Banking
Law, a "banking organization" within the meaning of the New York Banking Law, a
member of the Federal Reserve System, a "clearing corporation" within the
meaning of the New York Uniform Commercial Code, and a "clearing agency"
registered pursuant to the provisions of Section 17A of the Exchange Act. DTC
holds securities that
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its participants ("Participants") deposit with DTC. DTC also facilitates the
settlement among Participants of securities transactions, such as transfers and
pledges, in deposited securities through electronic computerized book-entry
changes in Participants' accounts, thereby eliminating the need for physical
movement of securities certificates. Direct Participants include securities
brokers and dealers, banks, trust companies, clearing corporations and certain
other organizations ("Direct Participants"). DTC is owned by a number of its
Direct Participants and by the New York Stock Exchange, Inc., the American Stock
Exchange, Inc. and the National Association of Securities Dealers, Inc. Access
to the DTC system is also available to others, such as securities brokers and
dealers, and banks and trust companies that clear through or maintain a
custodial relationship with a Direct Participant, either directly or indirectly
("Indirect Participants"). The rules applicable to DTC and its Participants are
on file with the Commission.
Purchases of Notes under the DTC system must be made by or through Direct
Participants, which will receive a credit for the Notes on DTC's records. The
ownership interest of each actual purchaser of each Note ("Beneficial Owner") is
in turn recorded on the Direct and Indirect Participants' records. A Beneficial
Owner does not receive written confirmation from DTC of its purchase, but is
expected to receive a written confirmation providing details of the transaction,
as well as periodic statements of its holdings, from the Direct or Indirect
Participant through which such Beneficial Owner entered into the transaction.
Transfers of ownership interests in Notes are accomplished by entries made on
the books of Direct and Indirect Participants acting on behalf of Beneficial
Owners. Beneficial Owners do not receive certificates representing their
ownership interests in Notes, except under the circumstances described above.
To facilitate subsequent transfers, the Notes are registered in the name of
DTC's nominee, Cede & Co. The deposit of the Notes with DTC and their
registration in the name of Cede & Co. will effect no change in beneficial
ownership. DTC has no knowledge of the actual Beneficial Owners of the Notes;
DTC records reflect only the identity of the Direct Participants to whose
accounts Notes are credited, which may or may not be the Beneficial Owners. The
Participants remain responsible for keeping account of their holdings on behalf
of their customers.
Delivery of notices and other communications by DTC to Direct Participants,
by Direct Participants to Indirect Participants, and by Direct Participants and
Indirect Participants to Beneficial Owners are governed by arrangements among
them, subject to any statutory or regulatory requirements as may be in effect
from time to time.
Neither DTC nor Cede & Co. consents or votes with respect to the Notes.
Under its usual procedures, DTC mails a proxy (an "Omnibus Proxy") to the issuer
as soon as possible after the record date. The Omnibus Proxy assigns Cede &
Co.'s consenting or voting rights to those Direct Participants to whose accounts
the Notes are credited on the record date (identified on a list attached to the
Omnibus Proxy).
Principal payments, premium payments, if any, and interest payments, if
any, on the Notes will be made to DTC. DTC's practice is to credit Direct
Participants' accounts on the payment date in accordance with their respective
holdings as shown on DTC's records unless DTC has reason to believe that it will
not receive payment on the payment date. Payments by Direct and Indirect
Participants to Beneficial Owners are governed by standing instructions and
customary practices, as is the case with securities held for the accounts of
customers in bearer form or registered in "street name" and are the
responsibility of such Direct and Indirect Participants and not of DTC, the
Trustee or the Operating Partnership, subject to any statutory or regulatory
requirements as may be in effect from time to time. Payment of principal (and
premium, if any) and interest, if any, to DTC is the responsibility of the
Operating Partnership or the Trustee, disbursement of such payments to Direct
Participants is the responsibility of DTC, and disbursement of such payments to
the Beneficial Owners is the responsibility of Direct and Indirect Participants.
If applicable, redemption notices shall be sent to Cede & Co. If less than
all of the Notes of any series represented by the Global Notes are being
redeemed, DTC's practice is to determine by lot the amount of the interest of
each Direct Participant in such issue to be redeemed.
DTC may discontinue providing its services as securities depository with
respect to the Notes of any series at any time by giving reasonable notice to
the Operating Partnership or the Trustee. Under such
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circumstances, in the event that a successor securities depository is not
appointed, Note certificates are required to be printed and delivered as
described above.
The Operating Partnership may decide to discontinue use of the system of
book-entry transfers through DTC (or a successor securities depository). In that
event, Note certificates will be printed and delivered as described above.
None of the Operating Partnership, the Underwriters, the Trustee or any
applicable paying agent will have any responsibility or liability for any aspect
of the records relating to or payments made on account of beneficial interests
in the Global Notes, or for maintaining, supervising or reviewing any records
relating to such beneficial interest.
Notices or demands to or upon the Operating Partnership in respect of the
Notes and the Indenture may be served and, in the event that Notes are issued in
definitive certificated form, Notes may be surrendered for payment, registration
of transfer or exchange, at the office or agency of the Operating Partnership
maintained for such purpose in the Borough of Manhattan, The City of New York,
which shall initially be the office of State Street Bank and Trust Company, an
affiliate of the Trustee, which on the date of this Prospectus is located at 61
Broadway, 15th Floor, New York, New York.
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CERTAIN FEDERAL INCOME TAX CONSIDERATIONS RELATING TO THE REPS
The following is a summary of certain United States Federal income tax
considerations relating to the purchase, ownership and disposition of the REPS
by an initial holder of the REPS who purchases the REPS on the date of original
issuance. This summary is based upon current provisions of the Internal Revenue
Code of 1986, as amended (the "Code"), existing and proposed Treasury
regulations promulgated thereunder and current administrative rulings and court
decisions currently in effect, all of which are subject to change, possibly with
retroactive effect. The discussion does not deal with all Federal tax
considerations applicable to all categories of investors (including insurance
companies, tax-exempt organizations, financial institutions or broker-dealers,
foreign corporations, foreign partnerships and persons who are not citizens or
residents of the United States), some of which may be subject to special rules.
In addition, this summary is limited to holders who will hold the REPS as
"capital assets" (generally, property held for investment) within the meaning of
Section 1221 of the Code. This summary only addresses the United States Federal
income tax considerations of the REPS until the Coupon Reset Date.
Investors are urged to consult their own tax advisors to determine the
Federal, state, local, foreign, and other tax consequences relating to the
purchase, ownership and disposition of the REPS.
Prospective investors should note that no rulings have been or are expected
to be sought from the IRS with respect to any of the Federal income tax
considerations discussed below, and no assurance can be given that the IRS will
not take contrary positions.
TREATMENT OF REPS
The United States Federal income tax treatment of debt obligations such as
the REPS is not entirely certain. Because the REPS are subject to a mandatory
put or call on the Coupon Reset Date, the Operating Partnership intends to treat
the REPS as maturing on the Coupon Reset Date for United States Federal income
tax purposes and as being reissued on the Coupon Reset Date should the
Callholder sell the REPS pursuant to the Coupon Reset Process. Based on such
treatment, stated interest on the REPS generally will be taxable to a holder as
ordinary income at the time it is paid or accrued in accordance with the
holder's regular method of tax accounting.
Under the foregoing treatment, upon the sale, exchange, redemption, or
other disposition of the REPS, a holder will generally recognize taxable gain or
loss equal to the difference between the amount realized by such holder on such
sale, exchange, redemption, or other disposition (except to the extent that such
amount realized represents accrued and unpaid interest that such holder has not
included in gross income previously) and such holder's adjusted tax basis in the
REPS. Pursuant to the Taxpayer Relief Act of 1997, in the case of an individual
holder, any capital gain recognized on the sale, exchange, redemption, or other
disposition of the REPS will generally be subject to United States Federal
income tax at a stated maximum rate of (i) 20%, if the holder's holding period
in the REPS was more than 18 months at the time of such sale, exchange,
redemption, or other disposition; (ii) 28%, if the holder's holding period in
the REPS was more than one year, but not more than 18 months, at the time of
such sale, exchange, redemption, or other disposition; and (iii) 39.6%, if the
holder's holding period in the REPS was not more than one year at the time of
such sale, exchange, redemption, or other disposition. Any capital loss
recognized by a holder on the sale, exchange, redemption, or other disposition
of the REPS will generally be long-term capital loss or short-term capital loss
depending on whether the holder held the REPS for more than one year. The
deductibility of capital losses is subject to limitations.
There can be no assurance, however, that the IRS will agree with the
Operating Partnership's treatment of the REPS, and it is possible that the
Service could assert another treatment. For instance, it is possible that the
IRS could seek to treat the REPS as maturing on the Final REPS Maturity Date and
to treat the issue price of the REPS as including the value of the Call Option.
Because of the Coupon Reset Process, if the REPS were treated as maturing on the
Final REPS Maturity Date, Treasury regulations relating to contingent payment
debt obligations would appear to be applicable. The effect of such Treasury
regulations would be to (i) require holders, regardless of their usual method of
accounting, to use an accrual method with respect to the REPS; (ii) result in
the possibility that holders would be required to accrue income in excess of
actual
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cash payments received; and (iii) generally result in ordinary rather than
capital treatment of any gain or loss on the sale, exchange, redemption, or
other disposition of the REPS.
BACKUP WITHHOLDING
The Operating Partnership will report to holders of REPS and the IRS the
amount of interest paid during each calendar year and the amount of tax
withheld, if any. Under the backup withholding rules, a holder of REPS may be
subject to backup withholding at the rate of 31% with respect to payments made
on the REPS as well as proceeds from the disposition of REPS unless such holder
(i) is a corporation or comes within certain other exempt categories and, when
required, demonstrates this fact, or (ii) provides a taxpayer identification
number, certifies as to no loss of exemption from backup withholding, and
otherwise complies with applicable requirements of the backup withholding rules.
A holder that does not provide the Operating Partnership with his correct
taxpayer identification number may also be subject to penalties imposed by the
IRS. Any amount paid as backup withholding will be creditable against the
holder's income tax liability.
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DESCRIPTION OF CERTAIN PROVISIONS OF THE
PARTNERSHIP AGREEMENT OF THE OPERATING PARTNERSHIP
Substantially all of the Company's assets are held, and all of its
operations are conducted, by or through the Operating Partnership. The Company
is the sole general partner of the Operating Partnership and owns a 95.9%
interest therein. The right and power to manage the Operating Partnership is
vested exclusively in the Company, as sole general partner. The interest in the
Operating Partnership allocated to the Company is designated as a general
partner interest. Except with respect to distributions of cash and allocations
of income and loss, and except as otherwise noted herein and elsewhere in this
Prospectus, the description herein of Units is applicable also to Performance
Units, and holders of Performance Units are treated as limited partners. The
following summary of the Amended and Restated Agreement of Limited Partnership
of the Operating Partnership (the "Partnership Agreement") and the descriptions
of certain provisions set forth elsewhere in this Prospectus are qualified in
their entirety by reference to the Partnership Agreement, which is filed as an
exhibit to the Registration Statement of which this Prospectus is a part.
GENERAL
Holders of Units hold limited partnership interests in the Operating
Partnership, and all holders of partnership interests (including the Company in
its capacity as general partner) are entitled to share in cash distributions
from, and in the profits and losses of, the Operating Partnership. The number of
GP Units held by the Company is equal to the total number of shares of Common
Stock outstanding. Accordingly, the distributions paid by the Company per share
outstanding are expected to be equal to the distributions per Unit paid on the
outstanding Units. The Units have not been registered pursuant to Federal or
state securities laws, and they will not be listed on the NYSE or any other
exchange or quoted on any national market system. However, the shares of Common
Stock that may be issued by the Company upon redemption of the Units may be sold
in registered transactions, or transactions exempt from registration under the
Securities Act. The limited partners of the Operating Partnership have the
rights to which limited partners are entitled under the Partnership Agreement
and the Partnership Act. The Partnership Agreement imposes certain restrictions
on the transfer of Units, as described below.
PURPOSE, BUSINESS AND MANAGEMENT
The Operating Partnership is organized as a Delaware limited partnership
pursuant to the terms of the Partnership Agreement. The Company is the sole
general partner of the Operating Partnership and conducts substantially all of
its business through the Operating Partnership, except for investment advisory
services (which are conducted through AMB Investment Management). The Operating
Partnership owns 100% of the non-voting preferred stock of AMB Investment
Management (representing 95% of its economic interest) and certain of the
Company's Executive Officers own all of the outstanding voting common stock of
AMB Investment Management (representing 5% of its economic interest).
The primary purpose of the Operating Partnership is, in general, to
acquire, purchase, own, operate, manage, develop, redevelop, invest in, finance,
refinance, sell, lease and otherwise deal with industrial and retail properties
and assets related thereto, and interests therein. The Operating Partnership is
authorized to conduct any business that may be lawfully conducted by a limited
partnership formed under the Partnership Act, except that the Partnership
Agreement requires the business of the Operating Partnership to be conducted in
such a manner that will permit the Company to be classified as a REIT under
Section 856 of the Code, unless the Company ceases to qualify as a REIT for
reasons other than the conduct of the business of the Operating Partnership.
Subject to the foregoing limitation, the Operating Partnership may enter into
partnerships, joint ventures or similar arrangements and may own interests
directly or indirectly in any other entity.
The Company, as the general partner of the Operating Partnership, has the
exclusive power and authority to conduct the business of the Operating
Partnership, subject to the consent of the limited partners in certain limited
circumstances (as discussed below) and except as expressly limited in the
Partnership Agreement.
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The Company has the right to make all decisions and take all actions with
respect to the Operating Partnership's acquisition and operation of the
Properties and all other assets and businesses of or related to the Partnership.
No limited partner may take part in the conduct or control of the business or
affairs of the Operating Partnership by virtue of being a holder of Units. In
particular, each limited partner expressly acknowledged in the Partnership
Agreement that the Company, as general partner, is acting on behalf of the
Operating Partnership's limited partners and the Company's stockholders
collectively, and is under no obligation to consider the tax consequences to
limited partners when making decisions for the benefit of the Operating
Partnership. The Company intends to make decisions in its capacity as general
partner of the Operating Partnership so as to maximize the profitability of the
Company and the Operating Partnership as a whole, independent of the tax effects
on the limited partners. The Company and the Operating Partnership have no
liability to a limited partner as a result of any liabilities or damages
incurred or suffered by, or benefits not derived by, a limited partner as a
result of an action or inaction of the Company as general partner of the
Operating Partnership as long as the Company acted in good faith. Limited
partners have no right or authority to act for or to bind the Operating
Partnership.
Investors who received Units in connection with the Formation Transactions,
as limited partners of the Operating Partnership, have no authority to transact
business for, or participate in the management activities or decisions of, the
Operating Partnership, except as provided in the Partnership Agreement or as
required by applicable law.
ENGAGING IN OTHER BUSINESSES; CONFLICTS OF INTEREST
The Company may not conduct any business other than in connection with the
ownership, acquisition and disposition of Operating Partnership interests as a
general partner and the management of the business of the Operating Partnership,
its operation as a public reporting company with a class (or classes) of
securities registered under the Exchange Act, its operation as a REIT and such
activities as are incidental to such activities (including, without limitation,
ownership of any interest in AMB Property Holding Corporation, AMB Investment
Management or a title holding, management or finance subsidiary organized as a
partnership, limited liability company or corporation) title holding, without
the consent of the holders of a majority of the limited partnership interests.
Except as may otherwise be agreed to in writing, each limited partner, and its
affiliates, is free to engage in any business or activity, even if such business
or activity competes with or is enhanced by the business of the Operating
Partnership. The Partnership Agreement does not prevent another person or entity
that acquires control of the Company in the future from conducting other
businesses or owning other assets, even though such businesses or assets may be
ones that it would be in the best interests of the limited partners for the
Operating Partnership to own. The Company, in the exercise of its power and
authority under the Partnership Agreement, may contract and otherwise deal with
or otherwise obligate the Operating Partnership to entities in which the Company
or any one or more of the officers, directors or stockholders of the Company may
have an ownership or other financial interest, whether direct or indirect.
REIMBURSEMENT OF THE COMPANY; TRANSACTIONS WITH THE COMPANY AND ITS AFFILIATES
The Company does not receive any compensation for its services as general
partner of the Operating Partnership. The Company, however, as a partner in the
Operating Partnership, has the same right to allocations and distributions as
other partners of the Operating Partnership. In addition, the Operating
Partnership reimburses the Company for all expenses it incurs relating to its
activities as general partner, its continued existence and qualification as a
REIT and all other liabilities incurred by the Company in connection with the
pursuit of its business and affairs. The Company may retain such persons or
entities as it shall determine (including itself, any entity in which the
Company has an interest, or any entity with which it is affiliated) to provide
services to or on behalf of the Operating Partnership. The Company is entitled
to reimbursement from the Operating Partnership for its out of pocket expenses
(other than amounts paid or payable to the Company or any entity in which the
Company has an interest or with which it is affiliated) incurred in connection
with Operating Partnership business. Such expenses include those incurred in
connection with the administration and activities of the Operating Partnership,
such as the maintenance of the
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Operating Partnership books and records, management of the Operating Partnership
property and assets, and preparation of information regarding the Operating
Partnership provided to the partners in the preparation of their individual tax
returns. Except as expressly permitted by the Partnership Agreement, however,
affiliates of the Company will not engage in any transactions with the Operating
Partnership except on terms that are fair and reasonable and no less favorable
to the Operating Partnership than would be obtained from an unaffiliated third
party.
EXCULPATION AND INDEMNIFICATION OF THE COMPANY
The Partnership Agreement generally provides that the Company, as general
partner of the Operating Partnership, will incur no liability to the Operating
Partnership or any limited partner for losses sustained, liabilities incurred,
or benefits not derived as a result of errors in judgment or for any mistakes of
fact or law or for anything which it may do or refrain from doing in connection
with the business and affairs of the Operating Partnership if the Company
carried out its duties in good faith. The Company's liability in any event is
limited to its interest in the Operating Partnership. Without limiting the
foregoing, the Company has no liability for the loss of any limited partner's
capital. In addition, the Company is not responsible for any misconduct,
negligent act or omission of any consultant, contractor or agent of the
Operating Partnership or of the Company and has no obligation other than to use
good faith in the selection of all such contractors, consultants and agents. The
Company may consult with counsel, accountants, appraisers, management
consultants, investment bankers, and other consultants and advisors selected by
it. An opinion by any such consultant on a matter which the Company believes to
be within such consultant's professional or expert competence is deemed to be
complete protection as to any action taken or omitted to be taken by the Company
based on such opinion and in good faith.
The Partnership Agreement also requires the Operating Partnership to
indemnify the Company, the directors and officers of the Company, and such other
persons as the Company may from time to time designate against any loss or
damage, including reasonable legal fees and court costs incurred by such person
by reason of anything it may do or refrain from doing for or on behalf of the
Operating Partnership or in connection with its business or affairs unless it is
established that: (i) the act or omission of the indemnified person was material
to the matter giving rise to the proceeding and either was committed in bad
faith or was the result of active and deliberate dishonesty; (ii) the
indemnified person actually received an improper personal benefit in money,
property or services; or (iii) in the case of any criminal proceeding, the
indemnified person had reasonable cause to believe that the act or omission was
unlawful. Any such indemnification claims must be satisfied solely out of the
assets of the Operating Partnership.
SALES OF ASSETS; LIQUIDATION
Under the Partnership Agreement, the Company, as general partner, generally
has the exclusive authority to determine whether, when and on what terms the
assets of the Operating Partnership (including the Properties) will be sold.
However, the Company has agreed, in connection with the contribution of
Properties from taxable Investors in the Formation Transactions (with an
estimated aggregate value of approximately $54.2 million), not to dispose of
such assets in a taxable sale or exchange prior to November 26, 2001 (the fourth
anniversary of the consummation of the Formation Transactions) and, thereafter,
to use commercially reasonable efforts to minimize the adverse tax consequences
of any such sale. The Company may enter into similar or other agreements in
connection with other acquisitions of properties for Units.
A merger of the Operating Partnership with another entity generally
requires an affirmative vote of the holders of a majority of the outstanding
percentage interest (including that held directly or indirectly by the Company),
subject to certain consent rights of holders of Units as described below under
"Amendment of the Partnership Agreement." A dissolution or liquidation of the
Operating Partnership, including a sale or disposition of all or substantially
all of the Operating Partnership's assets and properties, also requires the
consent of a majority of all Units held by limited partners, including
Performance Units.
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CAPITAL CONTRIBUTION
The Partnership Agreement provides that if the Operating Partnership
requires additional funds at any time or from time to time in excess of funds
available to the Operating Partnership from borrowings or capital contributions,
the Company may borrow such funds from a financial institution or other lender
or through public or private debt offerings and lend such funds to the Operating
Partnership on the same terms and conditions as are applicable to the Company's
borrowing of such funds. As an alternative to borrowing funds required by the
Operating Partnership, the Company may contribute the amount of such required
funds as an additional capital contribution to the Operating Partnership. If the
Company so contributes additional capital to the Operating Partnership, the
Company's partnership interest in the Operating Partnership will be increased on
a proportionate basis. Conversely, the partnership interests of the limited
partners will be decreased on a proportionate basis in the event of additional
capital contributions by the Company. See "Policies With Respect to Certain
Activities -- Financing Policies."
REMOVAL OF THE GENERAL PARTNER; TRANSFERABILITY OF THE COMPANY'S INTERESTS;
TREATMENT OF UNITS IN SIGNIFICANT TRANSACTIONS
The general partner may not be removed by the limited partners, with or
without cause, other than with the consent of the general partner. The
Partnership Agreement provides that the Company may not voluntarily withdraw
from the Operating Partnership, without the consent of the limited partners.
However, except as set forth below, the Company may transfer or assign its
general partner interest in connection with a merger, consolidation or sale of
substantially all the assets of the Company without limited partner consent.
Neither the Company nor the Operating Partnership may engage in any merger,
consolidation or other combination with or into another person, or effect any
reclassification, recapitalization or change of its outstanding equity
interests, and the Company may not sell all or substantially all of its assets
(each a "Termination Transaction") unless in connection with the Termination
Transaction all holders of Units either will receive, or will have the right to
elect to receive, for each Unit an amount of cash, securities or other property
equal to the product of the number of shares of Common Stock into which each
Unit is then exchangeable and the greatest amount of cash, securities or other
property paid to the holder of one Share in consideration of one Share pursuant
to the Termination Transaction. If, in connection with the Termination
Transaction, a purchase, tender or exchange offer shall have been made to and
accepted by the holders of the outstanding shares of Common Stock, each holder
of Units will receive, or will have the right to elect to receive, the greatest
amount of cash, securities or other property which such holder would have
received had it exercised its right to redemption and received shares of Common
Stock in exchange for its Units immediately prior to the expiration of such
purchase, tender or exchange offer and had thereupon accepted such purchase,
tender or exchange offer. Performance Units issued or to be issued will also
have the benefit of such provisions, irrespective of the capital account then
applicable thereto.
A Termination Transaction may also occur if the following conditions are
met: (i) substantially all of the assets directly or indirectly owned by the
surviving entity are held directly or indirectly by the Operating Partnership or
another limited partnership or limited liability company which is the survivor
of a merger, consolidation or combination of assets with the Operating
Partnership (in each case, the "Surviving Partnership"); (ii) the holders of
Units, including the holders of Performance Units issued or to be issued, own a
percentage interest of the Surviving Partnership based on the relative fair
market value of the net assets of the Operating Partnership and the other net
assets of the Surviving Partnership immediately prior to the consummation of
such transaction; (iii) the rights, preferences and privileges of such holders
in the Surviving Partnership, including the holders of Performance Units issued
or to be issued, are at least as favorable as those in effect immediately prior
to the consummation of such transaction and as those applicable to any other
limited partners or non-managing members of the Surviving Partnership (except,
as to Performance Units, for such differences with Units regarding liquidation,
redemption or exchange as are described herein); and (iv) such rights of the
limited partners, including the holders of Performance Units issued or to be
issued, include at least one of the following: (a) the right to redeem their
interests in the Surviving Partnership for the consideration available to such
persons pursuant to the preceding paragraph; or (b) the right to redeem their
Units for cash on terms equivalent to those in effect immediately prior to the
consummation of such
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transaction, or, if the ultimate controlling person of the Surviving Partnership
has publicly traded common equity securities, such common equity securities,
with an exchange ratio based on the relative fair market value of such
securities and the Common Stock. For purposes of this paragraph, the
determination of relative fair market values and rights, preferences and
privileges of the limited partners shall be reasonably determined by the
Company's Board of Directors as of the time of the Termination Transaction and,
to the extent applicable, the values shall be no less favorable to the holders
of Units than the relative values reflected in the terms of the Termination
Transaction.
In addition, in the event of a Termination Transaction, the arrangements
with respect to Performance Units and Performance Shares will be equitably
adjusted to reflect the terms of the transaction, including, to the extent that
the shares are exchanged for consideration other than publicly traded common
equity, the transfer or release of remaining Performance Shares, and resulting
issuance of any Performance Units, as of the consummation of the Termination
Transaction or set forth in the applicable Supplement.
REDEMPTION/EXCHANGE RIGHTS
Holders of Units will have the right, commencing on the first anniversary
of becoming a limited partner of the Operating Partnership, to require the
Operating Partnership to redeem part or all of their Units for cash (based upon
the fair market value of an equivalent number of shares of Common Stock at the
time of such redemption) or the Company may elect to exchange such Units for
shares of Common Stock (on a one-for-one basis, subject to adjustment in the
event of stock splits, stock dividends, issuance of certain rights, certain
extraordinary distributions and similar events). The Company presently
anticipates that it will elect to issue shares of Common Stock in exchange for
Units in connection with each such redemption request, rather than having the
Operating Partnership pay cash. With each such redemption or exchange, the
Company's percentage ownership interest in the Operating Partnership will
increase. This redemption/exchange right may be exercised by limited partners
from time to time, in whole or in part, subject to the limitations that such
right may not be exercised at any time to the extent such exercise would result
in any person actually or constructively owning shares of Common Stock in excess
of the Ownership Limit or such other amount as permitted by the Board of
Directors, as applicable, assuming common stock was issued in such exchange.
Holders of Performance Units also have limited redemption/exchange rights, as
discussed under the caption "-- Performance Units" below.
PERFORMANCE UNITS
Notwithstanding the foregoing discussion of distributions and allocations
of income or loss of the Operating Partnership, depending on the trading price
of the Common Stock after November 26, 1998 (the first anniversary of the IPO),
certain of the Executive Officers, in their capacity as limited partners of the
Operating Partnership, may receive Performance Units on each of February 26, May
26, August 26 and November 26, 1999. The Performance Units are similar to Units
in many respects, including (i) the right to share in operating distributions,
and allocations of operating income and loss, of the Operating Partnership on a
pro rata basis with Units; and (ii) certain redemption and exchange rights,
including limited rights to cause the Operating Partnership to redeem such
Performance Units for cash or, at the Company's option, to exchange such units
for shares of Common Stock. Any such redemption rights, however, will be
dependent upon an increase in the value of the assets of the Operating
Partnership (in some cases measured by reference to the trading price of the
shares of Common Stock) subsequent to the issuance of such Performance Units.
Without such an increase, the holders of Performance Units will not be entitled
to receive any proceeds upon the liquidation of the Operating Partnership or the
redemption of their Performance Units.
If any Performance Units are issued to such Executive Officers, in their
capacity as limited partners of the Operating Partnership, an equal number of GP
Units allocable to the Company and Units allocable to Performance Investors who
are limited partners in the Operating Partnership will be transferred to the
Operating Partnership. In addition, if any of the Company's GP Units are
transferred to the Operating Partnership as a result of the issuance of
Performance Units, an equal number of Performance Shares will be transferred by
Company stockholders to the Company from the applicable Performance Investors.
Accordingly, no Company stockholder or limited partner in the Operating
Partnership (other than Performance
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Investors, to the extent of their obligations to transfer Performance Shares to
the Company or the Operating Partnership, as applicable) will be diluted as a
result of the issuance of Performance Units to the executive officers.
REGISTRATION RIGHTS
The Company granted to investors receiving Units in connection with the
Formation Transactions certain registration rights (collectively, the
"Registration Rights") with respect to the shares of Common Stock issuable upon
exchange of Units or otherwise (the "Registrable Shares"). The Company has
agreed to file and generally keep continuously effective beginning one year
after the completion of the IPO a registration statement covering the issuance
of shares of Common Stock upon exchange of Units and the resale thereof.
Pursuant to the terms and conditions of such Registration Rights, prior to the
date upon which shares of Common Stock issued as of the date of the consummation
of the IPO would be eligible for resale under Rule 144(k) under the Securities
Act, as such rule may be amended from time to time (or any similar rule or
regulation hereafter adopted by the SEC), each Investor will be limited to
resales of Registrable Shares to the number of Registrable Shares which
otherwise would be eligible for resale by such Investor pursuant to Rule 144,
assuming such Registrable Shares were issued as of the date of the consummation
of the IPO. The shelf registration statement will also cover Shares issuable
upon exchange of Performance Units. The Company may also agree to provide the
Registration Rights or other registration rights to any other person who may
become an owner of Units, provided such person provides the Company with
satisfactory undertakings. The Company will bear expenses incident to its
registration obligations upon exercise of the Registration Rights, including the
payment of Federal securities law and state Blue Sky registration fees, except
that it will not bear any underwriting discounts or commissions or transfer
taxes relating to registration of Registrable Shares.
DUTIES AND CONFLICTS
Except as otherwise set forth in "Policies with Respect to Certain
Activities -- Conflicts of Interest Policies" and "Management -- Employment
Agreements," any limited partner of the Operating Partnership may engage in
other business activities outside the Operating Partnership, including business
activities that directly compete with the Operating Partnership.
MEETINGS; VOTING
Meetings of the limited partners may be called by the Company, on its own
motion, or upon written request of limited partners owning at least 25% of the
then outstanding Units. Limited partners may vote either in person or by proxy
at meetings. Any action that is required or permitted to be taken by the limited
partners may be taken either at a meeting of the limited partners or without a
meeting if consents in writing setting forth the action so taken are signed by
limited partners owning not less than the minimum number of Units that would be
necessary to authorize or take such action at a meeting of the limited partners
at which all limited partners entitled to vote on such action were present. On
matters for which limited partners are entitled to vote, each limited partner
has a vote equal to the number of Units the limited partner holds. A transferee
of Units who has not been admitted as a substituted limited partner with respect
to such Units will have no voting rights with respect to such Units, even if
such transferee holds other Units as to which it has been admitted as a limited
partner. The Partnership Agreement does not provide for annual meetings of the
limited partners, and the Company does not anticipate calling such meetings.
AMENDMENT OF THE PARTNERSHIP AGREEMENT
Amendments to the Partnership Agreement may be proposed by the Company or
by limited partners owning at least 25% of the then outstanding Units.
Generally, the Partnership Agreement may be amended with the approval of the
Company, as general partner, and partners (including the Company) holding a
majority of the percentage interest of the partnership. Certain provisions
regarding, among other things, the rights and duties of the Company as general
partner (e.g., restrictions on the Company's power to conduct businesses other
than as denoted herein) or the dissolution of the Operating Partnership, may not
be amended
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without the approval of a majority of the percentage interests of the
partnership. Notwithstanding the foregoing, the Company, as general partner, has
the power, without the consent of the limited partners, to amend the Partnership
Agreement as may be required to, among other things, (i) add to the obligations
of the Company as general partner or surrender any right or power granted to the
Company as general partner, (ii) reflect the admission, substitution,
termination or withdrawal of partners in accordance with the terms of the
Partnership Agreement, (iii) establish the rights, powers, duties and
preferences of any additional partnership interests issued in accordance with
the terms of the Partnership Agreement, (iv) reflect a change of an
inconsequential nature that does not materially adversely affect any limited
partner, or cure any ambiguity, correct or supplement any provisions of the
Partnership Agreement not inconsistent with law or with other provisions of the
Partnership Agreement, or make other changes concerning matters under the
Partnership Agreement that are not otherwise inconsistent with the Partnership
Agreement or applicable law or (v) satisfy any requirements of Federal, state or
local law.
Certain amendments, including amendments effected directly or indirectly
through a merger or sale of assets of the Operating Partnership or otherwise,
that would, among other things, (i) convert a limited partner's interest into a
general partner's interest, (ii) modify the limited liability of a limited
partner, (iii) alter the interest of a partner in profits or losses, or the
rights to receive any distributions (except as permitted under the Partnership
Agreement with respect to the admission of new partners or the issuance of
additional Units, either of which actions will have the effect of changing the
percentage interests of the partners and thus altering their interests in
profits, losses and distributions) or (iv) alter the limited partner's
redemption right, must be approved by the Company and each limited partner that
would be adversely affected by such amendment. Such protections apply to both
holders of Units and holders of Performance Units. In addition, no amendment may
be effected, directly or indirectly, through a merger or sale of assets of the
Operating Partnership or otherwise, which would adversely affect the rights of
former stockholders of AMBIRA to receive Performance Units as described herein.
BOOKS AND REPORTS
The Operating Partnership's books and records are maintained at the
principal office of the Operating Partnership, which is located at 505
Montgomery Street, San Francisco, California 94111. All elections and options
available to the Operating Partnership for Federal or state income tax purposes
may be taken or rejected by the Operating Partnership in the sole discretion of
the Company. The limited partners have the right, subject to certain
limitations, to receive copies of the most recent SEC filings by the Company,
the Operating Partnership's Federal, state and local income tax returns, a list
of limited partners, the Partnership Agreement, the partnership certificate and
all amendments thereto and certain information about the capital contributions
of the partners. The Company may keep confidential from the limited partners any
information that the Company believes to be in the nature of trade secrets or
other information the disclosure of which the Company in good faith believes is
not in the best interests of the Operating Partnership or which the Operating
Partnership is required by law or by agreements with unaffiliated third parties
to keep confidential.
The Company will use reasonable efforts to furnish to each limited partner,
within 90 days after the close of each taxable year, the tax information
reasonably required by the limited partners for Federal and state income tax
reporting purposes.
TERM
The Operating Partnership will continue in full force and effect for
approximately 99 years or until sooner dissolved pursuant to the terms of the
Partnership Agreement.
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CERTAIN PROVISIONS OF MARYLAND LAW AND OF
THE COMPANY'S ARTICLES OF INCORPORATION AND BYLAWS
The following paragraphs summarize certain provisions of the MGCL and the
Company's Articles of Incorporation and Bylaws. Such paragraphs do not, however,
purport to be complete and are subject to and qualified in their entirety by
reference to the MGCL and the Articles of Incorporation and Bylaws.
BOARD OF DIRECTORS
The Articles of Incorporation provide that the number of directors of the
Company shall be established by the Bylaws but shall not be less than the
minimum number required by the MGCL, which in the case of the Company is three.
The Bylaws currently provide that the Board of Directors consist of not fewer
than five nor more than 13 members which are elected to a one-year term at each
annual meeting of the Company's stockholders. Any vacancy (except for a vacancy
caused by removal) will be filled by a majority of the entire Board of
Directors. The Bylaws provide that a majority of the Board must be "Independent
Directors." An "Independent Director" is a director who is not an employee,
officer or affiliate of the Company or a subsidiary or division thereof, or a
relative of a principal executive officer, or who is not an individual member of
an organization acting as advisor, consultant or legal counsel, receiving
compensation on a continuing basis from the Company in addition to director's
fees.
REMOVAL OF DIRECTORS
While the Articles of Incorporation and the MGCL empower the stockholders
to fill vacancies in the Board of Directors that are caused by the removal of a
director, the Articles of Incorporation preclude stockholders from removing
incumbent directors except upon a substantial affirmative vote. Specifically,
the Articles of Incorporation provide that a director may be removed only for
cause and only by the affirmative vote of at least two-thirds of the votes
entitled to be cast in the election of directors. Under the MGCL, the term
"cause" is not defined and is, therefore, subject to Maryland common law and to
judicial interpretation and review in the context of the unique facts and
circumstances of any particular situation. This provision, when coupled with the
provision in the Bylaws authorizing the Board of Directors to fill vacant
directorships, precludes stockholders from removing incumbent directors except
upon a substantial affirmative vote and filling the vacancies created by such
removal with their own nominees.
OPT OUT OF BUSINESS COMBINATIONS AND CONTROL SHARE ACQUISITION STATUTES
The Company has elected in its Bylaws not to be governed by the "control
share acquisition" provisions of the MGCL (Sections 3-701 through 3-709), and
the Board of Directors has adopted, by irrevocable resolution of the Board of
Directors, not to be governed by the "business combination" provision of the
MGCL (Section 3-602), each of which could have the effect of delaying or
preventing a change of control of the Company. The Bylaws provide that the
Company cannot at a future date determine to be governed by either such
provision without the approval of a majority of the outstanding shares entitled
to vote. In addition, such irrevocable resolution adopted by the Board of
Directors may only be changed by the approval of a majority of the outstanding
shares entitled to vote.
AMENDMENT TO THE ARTICLES OF INCORPORATION AND BYLAWS
The Articles of Incorporation may not be amended without the affirmative
vote of at least two-thirds of the shares of capital stock outstanding and
entitled to vote thereon voting together as a single class. Other than
provisions of the Bylaws (i) opting out of the control share acquisition
statute, (ii) requiring approval by the Independent Directors of transactions
involving executive officers, directors or any limited partners of the Operating
Partnership and their affiliates and (iii) those governing amendment of the
Bylaws, each of which may be amended only with the approval of a majority of the
shares of capital stock entitled to vote, the Bylaws may be amended by the vote
of a majority of the Board of Directors or the shares of the Company's capital
stock entitled to vote thereon.
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MEETINGS OF STOCKHOLDERS
The Bylaws provide for annual meetings of stockholders to elect the Board
of Directors and transact such other business as may properly be brought before
the meeting. Special meetings of stockholders may be called by the President,
the Board of Directors, the Chairman of the Board and/or at the request in
writing of the holders of 50% or more of the outstanding stock of the Company
entitled to vote.
The MGCL provides that any action required or permitted to be taken at a
meeting of stockholders may be taken without a meeting by unanimous written
consent, if such consent sets forth such action and is signed by each
stockholder entitled to vote on the matter and a written waiver of any right to
dissent is signed by each stockholder entitled to notice of the meeting but not
entitled to vote at it.
ADVANCE NOTICE OF DIRECTOR NOMINATIONS AND NEW BUSINESS
The Bylaws provide that (i) with respect to an annual meeting of
stockholders, nominations of persons for election to the Board of Directors and
the proposal of business to be considered by stockholders may be made only (a)
pursuant to the Company's notice of the meeting, (b) by or at the direction of
the Board of Directors or (c) by a stockholder who is entitled to vote at the
meeting and has complied with the advance notice procedures set forth in the
Bylaws, and (ii) with respect to special meetings of stockholders, only the
business specified in the Company's notice of meeting may be brought before the
meeting of stockholders.
The provisions in the Articles of Incorporation on amendments to the
Articles of Incorporation and the advance notice provisions of the Bylaws could
have the effect of discouraging a takeover or other transaction in which holders
of some, or a majority, of the shares of Common Stock might receive a premium
for their shares of Common Stock over the then prevailing market price or which
such holders might believe to be otherwise in their best interests.
DISSOLUTION OF THE COMPANY
Under the MGCL, the Company may be dissolved by (i) the affirmative vote of
a majority of the entire Board of Directors declaring such dissolution to be
advisable and directing that the proposed dissolution be submitted for
consideration at any annual or special meeting of stockholders and (ii) upon
proper notice, stockholder approval by the affirmative vote of the holders of
two-thirds of the total number of shares of capital stock outstanding and
entitled to vote thereon voting as a single class.
LIMITATION OF DIRECTORS' AND OFFICERS' LIABILITY
The Company's officers and directors are indemnified under the MGCL, the
Articles of Incorporation and the Partnership Agreement against certain
liabilities. The Articles of Incorporation and Bylaws require the Company to
indemnify its directors and officers to the fullest extent permitted from time
to time by the MGCL.
The MGCL permits a corporation to indemnify its directors and officers and
certain other parties against judgments, penalties, fines, settlements and
reasonable expenses actually incurred by them in connection with any proceeding
to which they may be made a party by reason of their service in those or other
capacities unless it is established that (i) the act or omission of the director
or officer 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,
(ii) the director or officer actually received an improper personal benefit in
money, property or services or (iii) in the case of any criminal proceeding, the
director or officer had reasonable cause to believe that the act or omission was
unlawful. Indemnification may be made against 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 may not be made 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 to
the director or officer in which the director or officer was adjudged to be
liable on the basis that personal benefit was received. The termination of any
proceeding by conviction, or upon a plea of nolo contendere or its
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equivalent, or an entry of any order of probation prior to judgment, creates a
rebuttable presumption that the director or officer did not meet the requisite
standard of conduct required for indemnification to be permitted.
The MGCL permits the articles of incorporation of a Maryland corporation to
include a provision limiting the liability of its directors and officers to the
corporation and its stockholders for money damages, subject to specified
restrictions, and the Articles of Incorporation of the Company contain this
provision. The MGCL does not, however, permit the liability of directors and
officers to the corporation or its stockholders to be limited to the extent that
(i) it is proved that the person actually received an improper personal benefit
in money, property or services, (ii) a judgment or other final adjudication is
entered in a proceeding based on a finding that the person's action, or failure
to act, was committed in bad faith or was the result of active and deliberate
dishonesty and was material to the cause of action adjudicated in the proceeding
or (iii) in the case of any criminal proceeding, the director had reasonable
cause to believe that the act or failure to act was unlawful. This provision
does not limit the ability of the Company or its stockholders to obtain other
relief, such as an injunction or rescission.
The Partnership Agreement also provides for indemnification of the Company,
as general partner, and its officers and directors to the same extent
indemnification is provided to officers and directors of the Company in its
Articles of Incorporation, and limits the liability of the Company and its
officers and directors to the Operating Partnership and the partners of the
Operating Partnership to the same extent liability of officers and directors of
the Company to the Company and its stockholders is limited under the Articles of
Incorporation. See "Description of Certain Provisions of the Partnership
Agreement of the Operating Partnership -- Exculpation and Indemnification of the
Company."
Insofar as indemnification for liability arising under the Securities Act
may be permitted to directors, officers or persons controlling the Company
pursuant to the foregoing provisions, the Company has been informed that in the
opinion of the SEC, such indemnification is against public policy as expressed
in the Securities Act and is therefore unenforceable.
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DESCRIPTION OF CAPITAL STOCK
The following summary of the terms of the Company's capital stock does not
purport to be complete and is subject to and qualified in its entirety by
reference to the Articles of Incorporation and Bylaws, copies of which are filed
as exhibits to the Registration Statement of which this Prospectus is a part.
See "Additional Information."
GENERAL
Under the Articles of Incorporation, as amended (the "Articles of
Incorporation"), the authorized capital stock of the Company consists of
500,000,000 shares of common stock, par value $.01 per share ("Common Stock"),
and 100,000,000 shares of preferred stock, par value $.01 per share ("Preferred
Stock"). As of December 31, 1997, no shares of Preferred Stock and 85,874,513
shares of Common Stock were issued and outstanding.
COMMON STOCK
Each outstanding share of Common Stock entitles the holder to one vote on
all matters presented to stockholders for a vote, including the election of
directors, and, except as otherwise required by law and except as provided in
any resolution adopted by the Board of Directors with respect to any other class
or series of stock establishing the designation, powers, preferences and
relative, participating, optional or other special rights and powers of such
series, the holders of such shares possess the exclusive voting power, subject
to the provisions of the Company's Articles of Incorporation regarding the
ownership of shares of Common Stock in excess of the Ownership Limit or such
other limit as provided in the Company's Articles of Incorporation or as
otherwise permitted by the Board of Directors. Holders of shares of Common Stock
do not have any conversion, exchange, sinking fund, redemption or appraisal
rights or any preemptive rights to subscribe for any securities of the Company
or cumulative voting rights in the election of directors. All shares of Common
Stock that are issued and outstanding are duly authorized, fully paid and
nonassessable. Subject to the preferential rights of any other shares or series
of stock and to the provisions of the Articles of Incorporation regarding
ownership of shares of Common Stock in excess of the Ownership Limit, or such
other limit as provided in the Company's Articles of Incorporation or as
otherwise permitted by the Board of Directors, distributions may be paid to the
holders of shares of Common Stock if and when authorized and declared by the
Board of Directors of the Company out of funds legally available therefor. The
Company intends to continue to make quarterly distributions on outstanding
shares of Common Stock.
Under the MGCL, stockholders are generally not liable for the Company's
debts or obligations. If the Company is liquidated, subject to the right of any
holders of Preferred Stock to receive preferential distributions, each
outstanding share of Common Stock will be entitled to participate pro rata in
the assets remaining after payment of, or adequate provision for, all known
debts and liabilities of the Company, including debts and liabilities arising
out of its status as general partner of the Operating Partnership.
Subject to the provisions of the Articles of Incorporation regarding the
ownership of shares of Common Stock in excess of the Ownership Limit, or such
other limit as provided in the Company's Articles of Incorporation or as
otherwise permitted by the Board of Directors described below, all shares of
Common Stock have equal distribution, liquidation and voting rights, and have no
preference or exchange rights.
Under the MGCL, 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 unless a lesser
percentage (but not less than a majority of all of the votes entitled to be cast
on the matter) is set forth in the corporation's charter. Under the MGCL, the
term "substantially all of the Company's assets" is not defined and is,
therefore, subject to Maryland common law and to judicial interpretation and
review in the context of the unique facts and circumstances of any particular
transaction. The Articles of Incorporation do not provide for a lesser
percentage in any such situation.
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The Articles of Incorporation authorize the Board of Directors to
reclassify any unissued shares of Common Stock into other classes or series of
classes of stock and to establish the number of shares in each class or series
and to set the preferences, conversion and other rights, voting powers,
restrictions, limitations and restrictions on ownership, limitations as to
dividends or other distributions, qualifications and terms or conditions of
redemption for each such class or series.
PREFERRED STOCK
Preferred Stock may be issued from time to time, in one or more classes or
series, as authorized by the Board of Directors. No Preferred Stock is currently
issued or outstanding. Prior to the issuance of shares of each class or series,
the Board of Directors is required by the MGCL and the Company's Articles of
Incorporation to fix for each class or series the terms, preferences, conversion
or other rights, voting powers, restrictions, limitations as to distributions,
qualifications and terms or conditions of redemption, as permitted by Maryland
law. Because the Board of Directors has the power to establish the preferences,
powers and rights of each class or series of Preferred Stock, it may afford the
holders of any class or series of Preferred Stock preferences, powers and
rights, voting or otherwise, senior to the rights of holders of shares of Common
Stock. The issuance of Preferred Stock could have the effect of delaying or
preventing a change of control of the Company that might involve a premium price
for holders of shares of Common Stock or otherwise be in their best interest.
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UNDERWRITERS
Under the terms and subject to the conditions in the Underwriting Agreement
dated the date hereof (the "Underwriting Agreement"), the Underwriters named
below have severally agreed to purchase, and the Operating Partnership has
agreed to sell to them, severally, the respective principal amount of Notes set
forth opposite their respective names below:
<TABLE>
<CAPTION>
PRINCIPAL PRINCIPAL PRINCIPAL
AMOUNT AMOUNT AMOUNT
OF 2008 NOTES OF 2018 NOTES OF REPS
NAME ------------- ------------- ------------
<S> <C> <C> <C>
Morgan Stanley & Co. Incorporated....
Goldman, Sachs & Co..................
J.P. Morgan Securities Inc...........
------------ ------------ ------------
Total...................... $ $ $
============ ============ ============
</TABLE>
The Underwriting Agreement provides that the obligations of the several
Underwriters to pay for and accept delivery of the Notes are subject to the
approval of certain legal matters by their counsel and to certain other
conditions. The Underwriters are obligated to take and pay for all of the Notes
offered hereby if any are taken.
The Underwriters propose to offer part of the Notes directly to the public
at the public offering price set forth on the cover page of this Prospectus and
part to certain dealers at a price that represents a concession not in excess of
% of the principal amount in the case of the 2008 Notes, % of the
principal amount in the case of the 2018 Notes and % of the principal
amount in the case of the REPS. Any Underwriter may allow, and any such dealer
may reallow, a concession to certain other dealers not in excess of % of
the principal amount in the case of the 2008 Notes, % of the principal
amount in the case of the 2018 Notes and % of the principal amount in the
case of the REPS. After the initial offering of the Notes, the offering price
and other selling terms may from time to time be varied by the Underwriters.
The Operating Partnership and the Company have agreed to indemnify the
several Underwriters against certain liabilities, including liabilities under
the Securities Act, or to contribute to payments the Underwriters may be
required to make in respect of such liabilities.
Neither the Operating Partnership nor the Company intends to apply for
listing of the Notes on a national securities exchange, but have been advised by
the Underwriters that they presently intend to make a market in the Notes as
permitted by applicable laws and regulations. The Underwriters are not
obligated, however, to make a market in the Notes and any such market making may
be discontinued at any time at the sole discretion of the any Underwriter.
Accordingly, no assurance can be given as the liquidity of, or trading market
for, the Notes.
In order to facilitate the Offering, the Underwriters may engage in
transactions that stabilize, maintain or otherwise affect the price of the
Notes. Specifically, the Underwriters may stabilize the price of the Notes and
the Underwriters may bid for, and purchase, the Notes in the open market.
Finally, the underwriting syndicate may reclaim selling concessions allowed to
an Underwriter or a dealer for distributing the Notes in the Offering, if the
syndicate repurchases previously distributed Notes in transactions to cover
syndicate short positions, in stabilization transactions or otherwise. Any of
these activities may stabilize or maintain the market price of the Notes above
independent market levels. The Underwriters are not required to engage in these
activities, and may end any of these activities at any time.
The Operating Partnership intends to use the net proceeds from the sale of
the Notes offered hereby to repay indebtedness outstanding under the Credit
Facility and for general purposes. Morgan Guaranty Trust Company of New York, an
affiliate of J.P. Morgan Securities Inc., one of the Underwriters, is the agent
and a lender under the Credit Facility. As the Company expects that in excess of
10% of the net proceeds will be used to repay indebtedness under the Credit
Facility, the Offering is being made in compliance with the requirements of Rule
2710(c)(8) of the Conduct Rules of the National Association of Securities
Dealers, Inc. See "Use of Proceeds."
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LEGAL MATTERS
Certain legal matters in connection with the Offering will be passed upon
for the Operating Partnership by Latham & Watkins, Los Angeles, California.
Certain legal matters will be passed upon for the Underwriters by Gibson, Dunn &
Crutcher LLP, Los Angeles, California. Certain legal matters relating to
Maryland law, including the validity of the issuance of the Notes offered
hereby, will be passed upon for the Company, as general partner of the Operating
Partnership, by Ballard Spahr Andrews & Ingersoll, Baltimore, Maryland. In
addition, the description of Federal income tax consequences contained in this
Prospectus under the caption "Certain Federal Income Tax Considerations Relating
To The REPS" is, to the extent that it constitutes matters of law, summaries of
legal matters or legal conclusions, the opinion of Latham & Watkins, tax counsel
to the Operating Partnership.
EXPERTS
The financial statements and schedules included in this Prospectus, to the
extent and for the periods indicated in their reports thereto, have been audited
by Arthur Andersen LLP, independent public accountants, and are included herein
in reliance upon the authority of said firm as experts in auditing and
accounting in giving said reports.
AVAILABLE INFORMATION
The Company is, and upon consummation of the Offering the Operating
Partnership and each of the other Guarantors will be, subject to the
informational requirements of the Exchange Act and, in accordance therewith,
files reports, proxy statements and other information with the Securities and
Exchange Commission (the "Commission"). Such reports, proxy statements and other
information can be inspected and copied at the public reference facilities
maintained by the Commission at Judiciary Plaza, 450 Fifth Street, N.W.,
Washington, D.C. 20549, and at the following regional offices of the Commission:
Seven World Trade Center, Suite 1300, New York, New York 10048 and Citicorp
Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661-2511.
Copies of such materials can be obtained by mail from the Public Reference
Section of the Commission, at Judiciary Plaza, 450 Fifth Street, N.W.,
Washington, D.C. 20549, at prescribed rates. The Commission maintains a World
Wide Web site on the Internet at http://www.sec.gov that contains reports, proxy
statements and other information regarding registrants that file electronically
with the Commission. In addition, reports, proxy statements and other
information concerning the Company can be inspected at the New York Stock
Exchange, Inc., 20 Broad Street, New York, New York 10005.
This Prospectus constitutes a part of a Registration Statement on Form S-11
(together with amendments and exhibits thereto, the "Registration Statement")
filed by the Registrants with the Commission under the Securities Act. The
Prospectus omits certain of the information contained in the Registration
Statement, and reference is hereby made to the Registration Statement for
further information with respect to the Registrants and the securities offered
hereby. Any statements contained herein concerning the provisions of any
document filed as an exhibit to the Registration Statement or otherwise filed
with the Commission are not necessarily complete, and in each instance reference
is made to the copy of such document so filed. Each such statement is qualified
in its entirety by such reference.
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GLOSSARY
"ACBM" means asbestos-containing building materials.
"ADA" means the Americans with Disabilities Act of 1990.
"affiliate" has the meaning given to it in the Securities Act.
"AMB" means AMB Institutional Realty Advisors, Inc., a California
corporation.
"AMB Intercompany Party" means a party to the Intercompany Agreement.
"AMB Predecessors" means collectively, AMB and certain real estate
investment funds, trusts, corporations and partnerships that prior to the IPO
owned the Properties, as identified in Note 1, Organization and Basis of
Presentation to the historical financial statements of the AMB Contributed
Properties, including CIF, VAF, WPF and the Individual Account Investors.
"AMB Property Corporation" means AMB Property Corporation, a Maryland
corporation with its principal office at 505 Montgomery Street, San Francisco,
California 94111.
"AMBCREA" means AMB Corporate Real Estate Advisors, Inc., a California
corporation.
"AMBI" means AMB Investments, Inc., a California corporation.
"AMB Investment Management" means AMB Investment Management Corporation, a
Maryland corporation, of which the Company owns 100% of the non-voting preferred
stock (representing 95% of its economic value) and the executive officers owns
100% of the outstanding voting common stock (representing 5% of its economic
value) with its operations conducted through the Investment Management
Partnership and which, through the Investment Management Partnership, provides
the real estate advisory services to the Company and to certain of AMB's clients
which did not participate in the Formation Transactions.
"Anchor Tenants" means retail tenants occupying more than 10,000 rentable
square feet and all grocery stores and drugstores.
"Annualized Base Rent" means the monthly contractual rent under existing
leases at March 31, 1998, multiplied by 12. This amount excludes expense
reimbursements and rental abatements for industrial and retail properties as
well as percentage rents for retail properties.
"Articles of Incorporation" means the Articles of Incorporation of the
Company.
"Bylaws" means the bylaws of the Company.
"CIF" means AMB Current Income Fund, Inc., a Maryland corporation.
"Code" means the Internal Revenue Code of 1986.
"Common Stock" means shares of common stock of the Company.
"Company" means AMB Property Corporation and its subsidiaries, including
AMB Property, L.P., and with respect to the period prior to the IPO, the AMB
Predecessors.
"Credit Agreement" means the Credit Facility, any successor agreement
thereto, and any other credit agreement under which the Operating Partnership is
an obligor.
"Credit Facility" means the Operating Partnership's unsecured $500 million
credit facility among the Operating Partnership, MGT and a syndicate of 12 other
banks.
"Debt-to-Total Market Capitalization Ratio" means the ratio calculated
based on the Company's total consolidated debt and its pro rata share of
unconsolidated debt as a percentage of the market value of outstanding shares of
Common Stock and Units (not owned by the Company) plus the Company's total
consolidated debt and its pro rata share of unconsolidated debt.
"Eastern region" means the Eastern region of the United States as defined
by the National Council of Real Estate Investment Fiduciaries which includes the
states of Connecticut, Delaware, Kentucky, Maine,
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Maryland, Massachusetts, New Hampshire, New Jersey, New York, North Carolina,
Pennsylvania, Rhode Island, South Carolina, Vermont, West Virginia and the
District of Columbia.
"Environmental Laws" means the Federal, state and local laws and
regulations relating to the protection of the environment.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Executive Officer" means officers of the Operating Partnership and the
Company named in the table under the caption "Management."
"expense reimbursements" means each tenant's share of taxes, insurance and
operating expenses to be reimbursed to the Company.
"FASB" means the Financial Accounting Standards Board.
"Formation Transactions" means certain transactions in which the Company,
the Operating Partnership and AMB Investment Management engaged in to enable the
Company to continue and grow the real estate operations of the AMB Predecessors,
to facilitate the IPO, to enable the Company to qualify as a REIT for Federal
income tax purposes commencing with its taxable year ended December 31, 1997 and
to preserve certain tax advantages for the existing owners of the Properties.
"forward-looking statements" means statements relating to, without
limitation, future economic performance, plans and objectives of management for
future operations and projections of revenue and other financial items, which
can be identified by the use of forward-looking terminology such as "may,"
"will," "should," "expect," "anticipate," "estimate" or "continue" or the
negative thereof or other variations thereon or comparable terminology.
"Funds from Operations" or "FFO" means income (loss) from operations before
disposal of real estate properties, minority interests and extraordinary items
plus depreciation and amortization, excluding depreciation of furniture,
fixtures and equipment less FFO attributable to minority interests in
consolidated joint ventures which are not convertible into shares of Common
Stock.
"GAAP" means generally accepted accounting principles.
"GP Units" means units of the Operating Partnership representing the
general partnership interest therein, with generally identical rights to
distributions as the Units.
"Holders" means holders of the Notes.
"Independent Director" means a director who is not an employee, officer or
affiliate of the Company or a subsidiary or division thereof, or a relative of
an Executive Officer, or who is not an individual member of an organization
acting as advisor, consultant or legal counsel, receiving compensation on a
continuing basis from the Company in addition to director's fees.
"Individual Account Investors" means certain individual account investors,
each of which has assets under management with AMB pursuant to an investment
advisory agreement.
"Industrial Properties" means the industrial properties comprised
principally of warehouse distribution facilities which are owned by the Company.
"in-fill" means those markets which are typified by significant population
densities and low availability of land which could be developed into competitive
industrial or retail properties, as applicable. Such properties allow for a more
precise analysis of their trade areas and competition than properties located in
areas which are undergoing substantial real estate development.
"Intercompany Agreement" means that certain agreement dated January 1,
1993, as amended, entered into by and among AMBI, AMB, AMBCREA, AMB Properties,
AMB Development, Inc., AMB Institutional Housing Partners and other related or
commonly controlled business entities as may become parties thereto from to
time.
123
<PAGE> 130
"Investment Committee" means that certain management committee which
reviews and approves each investment of the Company and the Operating
Partnership.
"Investment Management Partnership" means AMB Investment Management Limited
Partnership, a Maryland limited partnership, of which AMB Investment Management
is the sole general partner and owns the entire capital interests, and through
which the operations of AMB Investment Management are conducted.
"IPO" means the initial public offering of the Company's common stock.
"IRS" means the United States Internal Revenue Service.
"Joint Ventures" means the joint ventures, limited liability companies and
partnerships with certain third parties.
"MGCL" means Maryland General Corporation Law.
"MGT" means Morgan Guaranty Trust Company of New York.
"Midwestern region," means the Midwestern region of the United States as
defined by the National Council of Real Estate Investment Fiduciaries which
includes the states of Illinois, Iowa, Indiana, Kansas, Michigan, Minnesota,
Missouri, Nebraska, North Dakota, Ohio, South Dakota and Wisconsin.
"Named Executive Officers" means the Company's Chief Executive Officer and
the four other most highly compensated executive officers.
"NAIOP" means the National Association of Industrial and Office Parks.
"NAREIM" means the National Association of Real Estate Investment Managers.
"NAREIT" means the National Association of Real Estate Investment Trusts.
"Noteholder" means the Person in whose name a Note is registered.
"NYSE" means the New York Stock Exchange.
"Offering" means the offering of the Notes made hereby.
"Operating Partnership" means AMB Property, L.P., a Delaware limited
partnership of which the Company is the general partner.
"Ownership Limit" means the Company generally will prohibit ownership,
directly or by virtue of the constructive ownership provisions of the Code, by
any single stockholder of more than 9.8% of the issued and outstanding shares of
Common Stock (subject to certain exceptions) and generally will prohibit
ownership, directly or by virtue of the constructive ownership provisions of the
Code, by any single stockholder of more than 9.8% of the issued and outstanding
shares of any class or series of the Company's Preferred Stock.
"Partnership Act" means the Delaware Uniform Limited Partnership Act.
"Partnership Agreement" means the partnership agreement of the Operating
Partnership.
"percentage rents" means the rents calculated as a percentage of a tenant's
gross sales above predetermined thresholds.
Performance Investors" means those investors which, immediately prior to
the IPO, owned assets (either directly or through CIF, VAF or WPF) which were
subject to advisory agreements with AMB and included an incentive fee provision
or, in the case of WPF, a "catch up adjustment."
"Performance Shares" means the specified portion of the Shares issuable in
the Formation Transactions to Performance Investors.
"Performance Units" means units of the Operating Partnership issued to
certain officers and employees of the Operating Partnership.
124
<PAGE> 131
"Preferred Stock" means preferred shares of beneficial interest, $0.01 par
value per share, which the Articles of Incorporation of the Company authorize
the Board of Directors to cause the Company to issue, in series, and to
establish the preferences, rights and other terms of any series so issued.
"Properties" means the Industrial Properties and the Retail Properties.
"Prospectus" means the prospectus to be used in connection with the
Offering of the Notes.
"Registrable Shares" means the Shares issuable upon exchange of Units or
otherwise, the holder of which has certain registration rights with respect to
those Shares.
"Registration Rights" means certain registration rights with respect to the
Shares issuable upon exchange of Units or otherwise granted to investors who
received Units in connection with the Formation Transactions.
"REIT" means a real estate investment trust under the Code.
"REPS" means the % Reset Put Securities (REPS(SM)) due
2015 -- Putable/Callable 2005.
"restricted securities" has the meaning given to it in Rule 144 under the
Securities Act.
"Retail Properties" means the retail properties comprised principally of
community shopping centers which are owned by the Company.
"Rule 144" means the rule adopted by the SEC that permits holders of
restricted securities as well as affiliates of an issuer of the securities,
pursuant to certain conditions and subject to certain restrictions, to sell
their securities publicly without registration under the Securities Act.
"San Francisco Bay Area" means the area comprised of the nine counties in
immediate proximity to the San Francisco Bay.
"SEC" or "Commission" means the Securities and Exchange Commission.
"Section 401(k) Plan" means the Company's Section 401(k) savings/retirement
plan.
"Secured Facility" means a 12-year non-recourse secured financing facility
due December 12, 2008 which is secured by six Properties.
"Securities Act" means the Securities Act of 1933, as amended.
"Southern region" means the Southern region of the United States as defined
by the National Council of Real Estate Investment Fiduciaries which includes the
states of Alabama, Arkansas, Florida, Georgia, Louisiana, Mississippi, Oklahoma,
Tennessee and Texas.
"stabilization" means when capital improvements for repositioning,
development and redevelopment programs have been completed and in effect for a
sufficient period of time (but in no case more than 12 months after shell
completion) to achieve market occupancy of at least 95%.
"Stock Incentive Plan" means the Stock Option and Incentive Plan
established by the Company.
"Subsidiaries" means the subsidiaries of AMB Property Corporation and AMB
Property, L.P.
"Termination Transaction" means, with respect to the Company, any merger,
consolidation or other combination with or into another person, a sale of all or
substantially all of its assets or any reclassification, recapitalization or
change of its outstanding equity interests, unless in connection with such
transaction, all holders of Units either will receive, or will have the right to
elect to receive, for each Unit an amount of cash, securities or other property
equal to the product of the number of Shares into which each Unit is then
exchangeable and the greatest amount of cash, securities or other property paid
to the holder of one Share in consideration of one Share pursuant to such
transaction.
"Transferee" means an assignee, legatee, distributee or other transferee of
all or any portion of a partner's interest in the Operating Partnership.
125
<PAGE> 132
"Treasury Regulations" means the IRS regulations.
"Underwriters" means those underwriters named herein for whom Morgan
Stanley & Co. Incorporated, Goldman, Sachs & Co. and J.P. Morgan Securities Inc.
are acting as representatives.
"Underwriting Agreement" means that certain underwriting agreement pursuant
to which the Underwriters have severally agreed to purchase, and the Company has
agreed to sell to them, severally, the aggregate principal amount of the Notes
as set forth on the table under the caption "Underwriters" herein.
"Units" means units of the Operating Partnership.
"VAF" means AMB Value Added Fund, Inc., a Maryland corporation.
"Western region" means the Western region of the United States as defined
by the National Council of Real Estate Investment Fiduciaries which includes the
states of Alaska, Arizona, California, Colorado, Hawaii, Montana, Nevada, New
Mexico, Oregon, Utah, Washington and Wyoming.
"White Paper" means the White Paper on Funds from Operations approved by
the Board of Governors of the NAREIT in March 1995.
"WPF" means AMB Western Properties Fund-I, a California limited
partnership.
126
<PAGE> 133
INDEX TO FINANCIAL INFORMATION
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
PRO FORMA FINANCIAL INFORMATION (UNAUDITED)
AMB PROPERTY, L.P.
-- Pro forma condensed consolidated balance sheet as of
March 31, 1998......................................... F-5
-- Notes to pro forma condensed consolidated balance
sheet.................................................. F-6
-- Pro forma condensed consolidated statement of
operations for the three months ended March 31, 1998... F-7
-- Notes to pro forma condensed consolidated statement of
operations............................................. F-8
-- Pro forma condensed consolidated statement of
operations for the year ended December 31, 1997........ F-10
-- Notes to pro forma condensed consolidated statement of
operations............................................. F-11
HISTORICAL FINANCIAL INFORMATION
AMB PROPERTY, L.P. -- March 31, 1998
-- Consolidated balance sheets as of December 31, 1997 and
March 31, 1998 (unaudited)............................. F-16
-- Consolidated statements of operations for the three
months ended March 31, 1998 (unaudited)................ F-17
-- Consolidated statements of cash flows for the three
months ended March 31, 1998 (unaudited)................ F-18
-- Consolidated statements of partners' capital for the
three months ended March 31, 1998 (unaudited).......... F-19
-- Notes to consolidated financial statements
(unaudited)............................................ F-20
AMB PROPERTY, L.P. -- December 31, 1997
-- Report of independent public accountants............... F-23
-- Consolidated balance sheet as of December 31, 1997..... F-24
-- Consolidated statement of operations for the period
from inception (November 26, 1997) to December 31,
1997................................................... F-25
-- Consolidated statement of cash flows for the period
from inception (November 26, 1997) to December 31,
1997................................................... F-26
-- Consolidated statement of partners' capital for the
period from inception (November 26, 1997) to December
31, 1997............................................... F-27
-- Notes to consolidated financial statements............. F-28
AMB PROPERTY CORPORATION -- March 31, 1998
-- Consolidated balance sheets as of December 31, 1997 and
March 31, 1998......................................... F-42
-- Consolidated statements of operations for the three
months ended March 31, 1997 and 1998 (unaudited)....... F-43
-- Consolidated statements of cash flows for the three
months ended March 31, 1997 and 1998 (unaudited)....... F-44
-- Consolidated statements of stockholders' equity for the
three months ended March 31, 1998 (unaudited).......... F-45
-- Notes to consolidated financial statements
(unaudited)............................................ F-46
</TABLE>
F-1
<PAGE> 134
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
AMB PROPERTY CORPORATION -- December 31, 1996 and 1997
-- Report of independent public accountants............... F-51
-- Consolidated balance sheets as of December 31, 1996 and
1997................................................... F-52
-- Consolidated statements of operations for the years
ended December 31, 1995, 1996 and 1997................. F-53
-- Consolidated statements of cash flows for the years
ended December 31, 1995, 1996 and 1997................. F-54
-- Consolidated statements of stockholders' equity for the
years ended December 31, 1995, 1996 and 1997........... F-55
-- Notes to consolidated financial statements............. F-56
AMB PROPERTY CORPORATION -- December 31, 1995, 1996 and
1997
-- Report of independent public accountants............... F-71
-- Combined balance sheets as of December 31, 1995 and
1996 and September 30, 1997 (unaudited)................ F-72
-- Combined statements of operations for the years ended
December 31, 1994, 1995 and 1996, the nine months ended
September 30, 1996 (unaudited) and the period from
January 1, 1997 to November 25, 1997(unaudited)........ F-73
-- Combined statements of owners' equity for the years
ended December 31, 1994, 1995 and 1996 and the nine
months ended September 30, 1997 (unaudited)............ F-74
-- Combined statements of cash flows for the years ended
December 31, 1994, 1995 and 1996, the nine months ended
September 30, 1996 (unaudited) and the period from
January 1, 1997 to November 25, 1997(unaudited)........ F-75
-- Notes to combined financial statements................. F-76
Boston Industrial Portfolio
-- Report of independent public accountants............... F-82
-- Statements of revenues and certain expenses for the
year ended December 31, 1997 and for the period from
January 1, 1998 to March 27, 1998 (unaudited).......... F-83
-- Notes to combined statement of revenues and certain
expenses............................................... F-84
The Jamesburg Property
-- Report of independent public accountants............... F-86
-- Statements of revenues and certain expenses for the
year ended December 31, 1997 and for the period from
January 1, 1998 to March 20, 1998 (unaudited).......... F-87
-- Notes to statement of revenues and certain expenses.... F-88
Orlando Central Park
-- Report of independent public accountants............... F-89
-- Statements of revenues and certain expenses for the
year ended December 31, 1997 and for the period from
January 1, 1998 to March 24, 1998 (unaudited).......... F-90
-- Notes to statement of revenues and certain expenses.... F-91
</TABLE>
F-2
<PAGE> 135
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Totem Lake Malls
-- Report of independent public accountants............... F-92
-- Statements of revenues and certain expenses for the
year ended December 31, 1997 and for the period from
January 1, 1998 to March 6, 1998 (unaudited)........... F-93
-- Notes to statements of revenues and certain expenses... F-94
Cabot Industrial Portfolio
-- Report of independent public accountants............... F-95
-- Combined statements of revenues and certain expenses
for the year ended December 31, 1996 and the period
from January 1, 1997 to December 30, 1997
(unaudited)............................................ F-96
-- Notes to combined statements of revenue and certain
expenses............................................... F-97
Cabot Business Park
-- Report of independent public accountants............... F-99
-- Statements of revenues and certain expenses for the
year ended December 31, 1996 and the period from
January 1, 1997 to September 15, 1997 (unaudited)...... F-100
-- Notes to statements of revenues and certain expenses... F-101
Manhattan Village Shopping Center
-- Report of independent public accountants............... F-102
-- Statements of revenues and certain expenses for the
year ended December 31, 1996 and for the period from
January 1, 1997 to August 19, 1997 (unaudited)......... F-103
-- Notes to statement of revenues and certain expenses.... F-104
Weslayan Plaza
-- Report of independent public accountants............... F-105
-- Statements of revenues and certain expenses for the
year ended December 31, 1996 and for the period from
January 1, 1997 to September 30, 1997 (unaudited)...... F-106
-- Notes to statement of revenues and certain expenses.... F-107
Silicon Valley R&D Portfolio
-- Report of independent public accountants............... F-108
-- Statements of revenues and certain expenses for the
year ended December 31, 1996 and for the period from
January 1, 1997 to November 25, 1997 (unaudited)....... F-109
-- Notes to statements of revenues and certain expenses... F-110
</TABLE>
F-3
<PAGE> 136
AMB PROPERTY, L.P.
PRO FORMA FINANCIAL INFORMATION (UNAUDITED)
BACKGROUND
The accompanying unaudited pro forma condensed consolidated balance sheet
as of March 31, 1998 has been prepared to reflect: (i) the acquisition of
properties subsequent to March 31, 1998, (ii) the Offering and (iii) certain
other adjustments as if such transactions and adjustments had occurred on March
31, 1998. The accompanying unaudited pro forma condensed consolidated statements
of operations for the year ended December 31, 1997 and the three months ended
March 31, 1998 have been prepared to reflect: (i) the incremental effect of the
acquisition of properties during 1998 and 1997, (ii) the incremental effect of
the disposition or partial disposition of properties during 1997, (iii) the IPO
and Formation Transactions, (iv) pro forma debt adjustments resulting from the
Offering and (v) certain other adjustments as if such transactions and
adjustments had occurred on January 1, 1997.
These unaudited pro forma condensed consolidated statements should be read
in connection with the historical combined financial statements and notes
thereto of the AMB Contributed Properties and the consolidated financial
statements and notes thereto of AMB Property, L.P. included elsewhere in this
Prospectus. In the opinion of management, the pro forma condensed consolidated
financial information provides for all adjustments necessary to reflect the
effects of the IPO and Formation Transactions, the Offering, property
acquisitions and dispositions and certain other transactions.
The pro forma information is unaudited and is not necessarily indicative of
the consolidated results that would have occurred if the transactions and
adjustments reflected therein had been consummated in the period or on the date
presented, or on any particular date in the future, nor does it purport to
represent the financial position, results of operations or changes in cash flows
for future periods.
F-4
<PAGE> 137
AMB PROPERTY, L.P.
PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
AS OF MARCH 31, 1998
(UNAUDITED, IN THOUSANDS)
<TABLE>
<CAPTION>
OPERATING PROPERTY PRE-OFFERING
PARTNERSHIP(1) ACQUISITIONS(2) PRO FORMA OFFERING(3) PRO FORMA
-------------- ---------------- ------------ ------------ -----------
<S> <C> <C> <C> <C> <C>
ASSETS
Investments in real estate,
net............................ $2,740,048 $ 56,730 $2,796,778 $ -- $2,796,778
Cash and cash equivalents........ 28,584 -- 28,584 -- 28,584
Other assets..................... 29,558 -- 29,558 1,200 30,758
---------- -------- ---------- --------- ----------
Total assets........... $2,798,190 $ 56,730 $2,854,920 $ 1,200 $2,856,120
========== ======== ========== ========= ==========
LIABILITIES AND PARTNERS' CAPITAL
Secured debt..................... $ 610,111 $ -- $ 610,111 $ -- $ 610,111
Credit facility.................. 312,000 56,730 368,730 (348,800) 19,930
Unsecured notes.................. -- -- -- 350,000 350,000
Other liabilities................ 81,611 -- 81,611 -- 81,611
---------- -------- ---------- --------- ----------
Total liabilities...... 1,003,722 56,730 1,060,452 1,200 1,061,652
---------- -------- ---------- --------- ----------
Minority interests............... 52,867 -- 52,867 -- 52,867
---------- -------- ---------- --------- ----------
Partners' capital
Limited partners............... 70,896 -- 70,896 -- 70,896
General partner................ 1,670,705 -- 1,670,705 -- 1,670,705
---------- -------- ---------- --------- ----------
Total capital.......... 1,741,601 -- 1,741,601 -- 1,741,601
---------- -------- ---------- --------- ----------
Total liabilities and
partners' capital.... $2,798,190 $ 56,730 $2,854,920 $ 1,200 $2,856,120
========== ======== ========== ========= ==========
</TABLE>
F-5
<PAGE> 138
AMB PROPERTY, L.P.
NOTES TO PRO FORMA
CONDENSED CONSOLIDATED BALANCE SHEET
AS OF MARCH 31, 1998
(UNAUDITED, DOLLARS IN THOUSANDS, EXCEPT UNIT DATA)
1. Reflects the historical consolidated balance sheet of AMB Property, L.P.
as of March 31, 1998. See the historical consolidated financial statements and
notes thereto of AMB Property, L.P. included elsewhere in this Prospectus.
2. Reflects property acquisitions subsequent to March 31, 1998 for an
estimated total purchase price of approximately $56,730, including estimated
acquisition costs. The Operating Partnership has funded these acquisitions
through borrowings under its Credit Facility. The 1998 property acquisitions
include the following properties:
<TABLE>
<CAPTION>
PROPERTY NAME ACQUISITION PRICE
------------- -----------------
<S> <C>
Houston Service Center........................ $ 15,620
Meadowridge/Greenwood......................... 33,050
Northwest Business Center..................... 8,060
-----------
$ 56,730
===========
</TABLE>
For purposes of property disclosures included elsewhere in this Prospectus,
Meadowridge/Greenwood is comprised of Meadowridge Business Park and Greenwood
Place.
3. Reflects the effect of the Offering, including (i) the issuance of
Unsecured Notes in the amount of $350,000, resulting in net proceeds of
approximately $348,800 after payment of approximately $3,650 of financing costs
and receipt of $2,450 of call option premium and (ii) the repayment of
borrowings under the Credit Facility of approximately $348,800 using the net
proceeds of the Offering.
F-6
<PAGE> 139
AMB PROPERTY, L.P.
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 1998
(UNAUDITED, DOLLARS IN THOUSANDS, EXCEPT UNIT DATA)
<TABLE>
<CAPTION>
OPERATING 1998 PROPERTY
PARTNERSHIP(1) ACQUISITIONS(2) OFFERING(3) PRO FORMA
-------------- --------------- -------------- -----------
<S> <C> <C> <C> <C>
REVENUES
Rental revenue........................... $ 74,602 $ 9,314 $ -- $ 83,916
Interest and other income................ 1,183 -- -- 1,183
----------- ------- ------- -----------
Total revenues................. 75,785 9,314 -- 85,099
----------- ------- ------- -----------
OPERATING EXPENSES
Real estate taxes and property operating
expenses............................... 20,252 2,101 -- 22,353
Interest expense......................... 11,841 -- 4,402 16,243
Depreciation and amortization............ 11,786 2,026 -- 13,812
General, administrative and other........ 2,718 -- -- 2,718
----------- ------- ------- -----------
Total operating expenses....... 46,597 4,127 4,402 55,126
----------- ------- ------- -----------
Income from operations before minority
interests.............................. 29,188 5,187 (4,402) 29,973
Minority interests' share of net
income................................. (462) (613) -- (1,075)
----------- ------- ------- -----------
Net income..................... $ 28,726 $ 4,574 $(4,402) $ 28,898
=========== ======= ======= ===========
Net income per unit
Basic.................................. $ 0.32 $ 0.32
=========== ===========
Diluted................................ $ 0.32 $ 0.32
=========== ===========
Weighted average units outstanding
Basic.................................. 88,428,969 89,523,120
=========== ===========
Diluted................................ 88,839,192 89,933,343
=========== ===========
</TABLE>
F-7
<PAGE> 140
AMB PROPERTY, L.P.
NOTES TO PRO FORMA
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 1998
(UNAUDITED, DOLLARS IN THOUSANDS, EXCEPT UNIT DATA)
1. Reflects the historical consolidated operations of AMB Property, L.P.
for the three months ended March 31, 1998. See the historical consolidated
financial statements and notes thereto of AMB Property, L.P. included elsewhere
in this Prospectus.
2. Reflects the incremental effects of properties acquired subsequent to
December 31, 1997 based on the operations of such properties for periods prior
to acquisition by the Operating Partnership. Below is a summary of the
incremental effect of such properties:
<TABLE>
<CAPTION>
BOSTON ORLANDO TOTEM
INDUSTRIAL JAMESBURG CENTRAL LAKE OTHER
PORTFOLIO PROPERTY PARK MALLS PROPERTIES TOTAL
---------- --------- ------- ----- ---------- -------
<S> <C> <C> <C> <C> <C> <C>
Rental and other revenues............. $2,853 $1,466 $ 804 $ 758 $3,433 $ 9,314
Real estate taxes and property
operating expenses.................. (108) (543) (260) (277) (913) (2,101)
------ ------ ----- ----- ------ -------
Pro forma effect...................... $2,745 $ 923 $ 544 $ 481 $2,520 $ 7,213
====== ====== ===== ===== ====== =======
</TABLE>
Two of the acquisitions described above, Jamesburg Property and Corporate
Park Industrial, which is included in Other Properties, represent a joint
venture with a client of AMB Investment Management in which the Operating
Partnership owns a controlling 50.0005% interest. The joint venture acquisitions
are accounted for on a consolidated basis and, accordingly, a minority interest
of $612 has been reflected relative to these acquisitions.
See the statements of revenues and certain expenses of Boston Industrial
Portfolio, Jamesburg Property, Orlando Central Park and Totem Lake Malls
included elsewhere in this Prospectus.
The following table sets forth the incremental revenues and certain
expenses for periods prior to acquisition for the "Other Properties" acquired in
1998, but not included in the statements of revenues and certain expenses of the
Boston Industrial Portfolio, Jamesburg Property, Orlando Central Park and Totem
Lake Malls included elsewhere in this Prospectus.
<TABLE>
<CAPTION>
REAL ESTATE
TAXES AND
PROPERTY REVENUES IN
RENTAL OPERATING EXCESS OF
PROPERTY ACQUIRED REVENUES EXPENSES CERTAIN EXPENSES
----------------- -------- ----------- ----------------
<S> <C> <C> <C>
Wilsonville....................... $ 167 $ (41) $ 126
Atlanta South Phase III........... 116 (30) 86
Mansfield Industrial Portfolio.... 71 (2) 69
Corporate Park Industrial......... 757 (130) 627
Cascade........................... 44 (11) 33
Northridge........................ 108 (43) 65
Minneapolis Industrial
Portfolio....................... 592 (230) 362
Houston Service Center............ 534 (188) 346
Meadowridge Business Park......... 800 (180) 620
Northwest Business Center......... 244 (58) 186
------- ------- ------
$ 3,433 $ (913) $2,520
======= ======= ======
</TABLE>
Also reflects estimated depreciation and amortization of the 1998 property
acquisitions based on estimated useful lives of 40 years.
F-8
<PAGE> 141
AMB PROPERTY, L.P.
NOTES TO PRO FORMA
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS (CONTINUED)
FOR THE THREE MONTHS ENDED MARCH 31, 1998
(UNAUDITED, DOLLARS IN THOUSANDS, EXCEPT UNIT DATA)
3. Reflects an adjustment to derive pro forma interest expense, which has
been based upon the pro forma debt balances as of March 31, 1998. The
calculation of pro forma interest expense is as follows:
<TABLE>
<S> <C>
Secured debt, pro forma balance of $592,569 (before premium
of $17,542), assumed interest rate of 7.8%................ $11,485
Credit Facility, pro forma balance of $19,930, assumed
interest rate of 6.55%.................................... 326
Unsecured Notes, pro forma balance of $350,000, assumed
weighted average interest rate of 6.98%................... 6,108
Amortization of debt premium, actual amounts amortized
during the period......................................... (744)
Amortization of deferred financing costs, $4,175 balance, 3
to 15 year terms.......................................... 169
Amortization of call option premium, pro forma balance of
$2,450, 7 year term....................................... (88)
Unused Credit Facility fees, unused pro forma balance of
$480,070, fee of 0.20%.................................... 240
Capitalized interest, actual amounts capitalized during the
period.................................................... (1,253)
-------
Pro forma interest expense.................................. $16,243
=======
</TABLE>
The net change in interest expense is the result of the repayment of
borrowings on the Credit Facility of approximately $348,800 with the net
proceeds from the Offering and the assumption of approximately $48,600 in
secured debt in connection with the 1998 property acquisitions.
4. The pro forma taxable income of the Operating Partnership for the twelve
months ended March 31, 1998 is approximately $106,975 which is based upon pro
forma income from operations before minority interest of approximately $109,011
plus book depreciation and amortization of approximately $52,408 less other
book/tax differences of approximately $6.935 and less tax depreciation and
amortization of approximately $47,509.
The pro forma net income of AMB Property Corporation for the three months
ended March 31, 1998 is $27,713 which is equal to the pro forma net income of
the Operating Partnership of $28,898 less income allocable to the limited
partners in the Operating Partnership of $1,185.
F-9
<PAGE> 142
AMB PROPERTY, L.P.
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1997
(UNAUDITED, DOLLARS IN THOUSANDS, EXCEPT UNIT DATA)
<TABLE>
<CAPTION>
AMB IPO AND
OPERATING CONTRIBUTED 1997 PROPERTY 1997 PROPERTY FORMATION 1997 AS
PARTNERSHIP(1) PROPERTIES(2) ACQUISITIONS(3) DISPOSITIONS(4) TRANSACTIONS(5) ADJUSTED
-------------- ------------- --------------- --------------- --------------- -----------
<S> <C> <C> <C> <C> <C> <C>
REVENUES
Rental revenue............ $ 26,465 $207,391 $47,554 ($1,200) $ 2,455 $ 282,665
Interest and other
income.................. 645 1,217 176 -- (29) 2,009
----------- -------- ------- ------- -------- -----------
Total revenues.... 27,110 208,608 47,730 (1,200) 2,426 284,674
----------- -------- ------- ------- -------- -----------
OPERATING EXPENSES
Real estate taxes and
property operating
expenses................ 8,899 72,452 10,815 (363) (10,325) 81,478
Interest expense.......... 3,528 45,009 -- (75) (3,033) 45,429
Depreciation and
amortization............ 4,195 32,616 -- (157) 9,232 45,886
General, administrative
and other............... 1,197 823 -- -- 5,958 7,978
----------- -------- ------- ------- -------- -----------
Total operating
expenses........ 17,819 150,900 10,815 (595) 1,832 180,771
----------- -------- ------- ------- -------- -----------
Income from operations
before disposal of real
estate and minority
interests............... 9,291 57,708 36,915 (605) 594 103,903
Gain on disposal of real
estate.................. -- 360 -- (360) -- --
----------- -------- ------- ------- -------- -----------
Income from operations
before minority
interests............... 9,291 58,068 36,915 (965) 594 103,903
Minority interests' share
of net income........... (117) (884) (296) -- -- (1,297)
----------- -------- ------- ------- -------- -----------
Net income................ $ 9,174 $ 57,184 $36,619 ($ 965) $ 594 $ 102,606
=========== ======== ======= ======= ======== ===========
Net income per unit
Basic................... $ 0.10 $ 1.16
=========== ===========
Diluted................. $ 0.10 $ 1.16
=========== ===========
Weighted average units
outstanding
Basic................... 88,416,676 88,416,676
=========== ===========
Diluted................. 88,698,719 88,698,719
=========== ===========
<CAPTION>
1998 PROPERTY OFFERING
ACQUISITIONS(6) (7) PRO FORMA
--------------- ----------- -----------
<S> <C> <C> <C>
REVENUES
Rental revenue............ $40,619 $ -- $ 323,284
Interest and other
income.................. -- -- 2,009
------- -------- -----------
Total revenues.... 40,619 -- 325,293
------- -------- -----------
OPERATING EXPENSES
Real estate taxes and
property operating
expenses................ 10,281 -- 91,759
Interest expense.......... -- 20,380 65,809
Depreciation and
amortization............ 6,516 -- 52,402
General, administrative
and other............... -- -- 7,978
------- -------- -----------
Total operating
expenses........ 16,797 20,380 217,948
------- -------- -----------
Income from operations
before disposal of real
estate and minority
interests............... 23,822 (20,380) 107,345
Gain on disposal of real
estate.................. -- -- --
------- -------- -----------
Income from operations
before minority
interests............... 23,822 (20,380) 107,345
Minority interests' share
of net income........... (2,774) -- (4,071)
------- -------- -----------
Net income................ $21,048 ($20,380) $ 103,274(8)
======= ======== ===========
Net income per unit
Basic................... $ 1.15
===========
Diluted................. $ 1.15
===========
Weighted average units
outstanding
Basic................... 89,523,120
===========
Diluted................. 89,805,163
===========
</TABLE>
F-10
<PAGE> 143
AMB PROPERTY, L.P.
NOTES TO PRO FORMA
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1997
(UNAUDITED, DOLLARS IN THOUSANDS, EXCEPT UNIT DATA)
1. Reflects the historical consolidated operations of AMB Property, L.P.
for the period from November 26, 1997 to December 31, 1997. See the historical
consolidated financial statements and notes thereto of AMB Property, L.P.
included elsewhere in this Prospectus.
2. Reflects the historical combined operations of the AMB Contributed
Properties for the period from January 1, 1997 to November 25, 1997. See the
historical combined financial statements and notes thereto of the AMB
Contributed Properties included elsewhere in this Prospectus.
3. Reflects the incremental effects of properties acquired during the year
ended December 31, 1997 based on the historical operations of such properties
for periods prior to acquisition by the Operating Partnership or the owners of
the AMB Contributed Properties. Below is a summary of the incremental effect of
such properties:
<TABLE>
<CAPTION>
SILICON VALLEY
CABOT INDUSTRIAL CABOT MANHATTAN WESLAYAN R&D OTHER
PORTFOLIO BUSINESS PARK VILLAGE PLAZA PORTFOLIO PROPERTIES TOTAL
---------------- ------------- --------- -------- -------------- ---------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Rental revenues.......... $22,995 $4,734 $ 5,467 $3,259 $2,958 $ 8,317 $ 47,730
Real estate taxes and
property operating
expenses............... (4,775) (895) (1,928) (990) (311) (1,916) (10,815)
------- ------ ------- ------ ------ ------- --------
Pro forma effect......... $18,220 $3,839 $ 3,539 $2,269 $2,647 $ 6,401 $ 36,915
======= ====== ======= ====== ====== ======= ========
</TABLE>
One of the acquisitions included in Other Properties above, Manhattan
Village, represents the acquisition of a property and the formation of several
joint ventures that own the property, in which the Operating Partnership owns a
90% interest. The joint venture is accounted for on a consolidated basis, and
accordingly, a 10% minority interest has been reflected relative to this
acquisition.
See the statements of revenues and certain expenses of Cabot Industrial
Portfolio, Cabot Business Park, Manhattan Village, Weslayan Plaza and Silicon
Valley R&D Portfolio included elsewhere in this Prospectus.
F-11
<PAGE> 144
AMB PROPERTY, L.P.
NOTES TO PRO FORMA
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS (CONTINUED)
FOR THE YEAR ENDED DECEMBER 31, 1997
(UNAUDITED, DOLLARS IN THOUSANDS, EXCEPT UNIT DATA)
The following table sets forth the incremental revenues and certain
expenses for periods prior to acquisition for the "Other Properties" acquired in
1997. See "Business and Properties."
<TABLE>
<CAPTION>
REAL ESTATE
TAXES AND
PROPERTY REVENUES IN
RENTAL OPERATING EXCESS OF
PROPERTY ACQUIRED REVENUES EXPENSES CERTAIN EXPENSES
----------------- -------- ----------- ----------------
<S> <C> <C> <C>
Shady Oak.............................. $ 326 $ (70) $ 256
Metric Center.......................... 635 (50) 585
Southfield............................. 171 (40) 131
Atlanta South Phase II................. 109 (57) 52
O'Hare Industrial Portfolio
(Ardmore)............................ 265 (74) 191
Windsor Court.......................... 151 (53) 98
Beacon Building 8...................... 765 (180) 585
Greenleaf.............................. 177 (74) 103
Boulden................................ 1,070 (269) 801
Mid-Atlantic Business Center........... 1,713 (414) 1,299
Brittania Business Park................ 1,058 (212) 846
Rockford Road.......................... 64 (6) 58
Patuxent............................... 509 (113) 396
Executive.............................. 588 (175) 413
Acer Distribution...................... 716 (129) 587
------- ------- -------
$ 8,317 $ 1,916 $ 6,401
======= ======= =======
</TABLE>
4. Reflects the incremental effects of the disposition or partial
disposition of properties during 1997, based upon the historical operations of
such properties. See Note 7 to the historical combined financial statements of
the AMB Contributed Properties included elsewhere in this Prospectus.
5. Reflects the effects of the application of purchase accounting as a
result of the IPO and Formation Transactions, resulting in pro forma expense
adjustments as follows: (i) an increase in depreciation expense of $9,232, (ii)
the reclassification of certain property-related expenses from general and
administrative expense to property operating expense (due to the internalization
of management) of approximately $5,196 and (iii) a net increase in general,
administrative and other expenses of $5,958, after reclassification of
property-related expenses. Such changes are based upon actual expenses incurred
during 1997 adjusted for (a) the estimated changes in costs due to operating as
a public entity including investor relations, accounting and legal fees and
other costs related to the internalization of management and (b) certain
reclassifications to reflect the Company's new organizational structure as a
result of the IPO. Estimated depreciation and amortization has been based upon
asset lives of 5 to 40 years.
Also reflects the elimination of advisory fees charged by AMB to the owners
of the AMB Contributed Properties of $15,521 (excluding approximately $2,027 in
real estate acquisition fees paid to AMB which have been accounted for as
acquisition costs by the owners of the AMB Contributed Properties and
accordingly capitalized as investments in real estate).
F-12
<PAGE> 145
AMB PROPERTY, L.P.
NOTES TO PRO FORMA
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS (CONTINUED)
FOR THE YEAR ENDED DECEMBER 31, 1997
(UNAUDITED, DOLLARS IN THOUSANDS, EXCEPT UNIT DATA)
Also reflects an adjustment to historical interest expense to derive 1997
as adjusted interest expense, which has been based upon the Operating
Partnership's debt balances as of December 31, 1997. The calculation of 1997 as
adjusted interest expense is as follows:
<TABLE>
<S> <C>
Secured debt, balance of $517,366 (before premium of
$18,286),
assumed interest rate of 7.82%............................ $40,458
Credit Facility, balance of $150,000, assumed interest rate
of 6.90%.................................................. 10,350
Amortization of debt premium, $18,286 balance, 8 year
term...................................................... (2,924)
Amortization of financing costs, $900 balance, 3 year
term...................................................... 300
Unused Credit Facility fees, unused balance of $350,000, fee
of 0.20%.................................................. 700
Capitalized interest, average historical construction in
process of $48,303, overall weighted average interest rate
of 7.5%................................................... (3,455)
-------
1997 as adjusted interest expense........................... $45,429
=======
</TABLE>
Also reflects an adjustment to record rental revenues on a straight-line
basis for the Properties from January 1, 1997, the assumed date of acquisition
by the Operating Partnership. Rental income has not been included for any
properties for periods prior to completion of their construction and
availability for occupancy. The pro forma straight-line rent adjustment for the
year ended December 31, 1997 is calculated as the difference between (i) pro
forma straight-line rental revenues of $5,447 and (ii) historical straight-line
rental revenues of $2,992.
Also reflects an adjustment to (i) eliminate excess interest income of the
properties of $1,304 and (ii) reflect the incremental effect of establishing the
Operating Partnership's investment in AMB Investment Management, the income from
which is included in interest and other income. The pro forma operations of AMB
Investment Management and the Operating Partnership's share of AMB Investment
Management's net income based upon its 95% economic interest are as follows:
<TABLE>
<S> <C>
Advisory revenues........................................... $ 5,487
General and administrative expenses......................... (4,465)
Depreciation and amortization............................... (72)
-------
Income before income taxes.................................. 950
Income taxes (at assumed effective tax rate of 40%)......... (380)
-------
Income before minority interest............................. 570
Minority interest........................................... (17)
-------
Net income.................................................. $ 553
-------
Operating Partnership's share of net income................. $ 525
=======
</TABLE>
Advisory revenues consist of actual fees earned by AMB for the period from
January 1, 1997 to November 25, 1997 from the assets that are managed by AMB
Investment Management and the actual results of AMB Investment Management for
the period from November 26, 1997 to December 31, 1997.
General and administrative expenses consist of direct costs and indirect
costs allocated to AMB Investment Management by the Operating Partnership. Such
indirect costs have been allocated based upon the percentage of total assets
managed by AMB Investment Management.
In addition to its share of AMB Investment Management's net income, the
Operating Partnership received an acquisition fee for acquisition services
provided to AMB Investment Management in 1997. The pro forma fee for 1997
amounts to $750.
F-13
<PAGE> 146
AMB PROPERTY, L.P.
NOTES TO PRO FORMA
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS (CONTINUED)
FOR THE YEAR ENDED DECEMBER 31, 1997
(UNAUDITED, DOLLARS IN THOUSANDS, EXCEPT UNIT DATA)
6. Reflects the incremental effects of properties acquired subsequent to
December 31, 1997 based on the operations of such properties for periods prior
to acquisition by the Operating Partnership. Below is a summary of the
incremental effect of such properties:
<TABLE>
<CAPTION>
BOSTON ORLANDO
INDUSTRIAL JAMESBURG CENTRAL TOTEM LAKE OTHER
PORTFOLIO PROPERTY PARK MALLS PROPERTIES TOTAL
---------- --------- ------- ---------- ---------- -------
<S> <C> <C> <C> <C> <C> <C>
Rental and other revenues............ $10,403 $ 6,774 $ 3,249 $ 2,822 $17,371 $40,619
Real estate taxes and property
operating expenses................. (802) (2,510) (1,069) (1,293) (4,607) (10,281)
------- ------- ------- ------- ------- -------
Pro forma effect..................... $ 9,601 $ 4,264 $ 2,180 $ 1,529 $12,764 $30,338
======= ======= ======= ======= ======= =======
</TABLE>
Two of the acquisitions described above, Jamesburg Property and Corporate
Park Industrial (which is included in Other Properties), represent joint
ventures with a client of AMB Investment Management in which the Operating
Partnership owns a controlling 50.0005% interest. The joint venture acquisitions
are accounted for on a consolidated basis and, accordingly, a minority interest
of $2,747 has been reflected relative to these acquisitions.
See the statements of revenues and certain expenses of Boston Industrial
Portfolio, Jamesburg Property, Orlando Central Park and Totem Lake Malls
included elsewhere in this Prospectus.
The following table sets forth the incremental revenues and certain
expenses for periods prior to acquisition for the "Other Properties" acquired in
1998.
<TABLE>
<CAPTION>
REAL ESTATE
TAXES AND
PROPERTY REVENUES IN
RENTAL OPERATING EXCESS OF
PROPERTY ACQUIRED REVENUES EXPENSES CERTAIN EXPENSES
----------------- -------- ----------- ----------------
<S> <C> <C> <C>
Wilsonville....................... $ 2,026 $ (500) $ 1,526
Atlanta South Phase III........... 773 (200) 573
Mansfield Industrial Portfolio.... 343 (12) 331
Corporate Park Industrial......... 3,241 (572) 2,669
Cascade........................... 1,065 (259) 806
Northridge........................ 1,332 (534) 798
Minneapolis Industrial
Portfolio....................... 2,468 (881) 1,587
Houston Service Center............ 2,072 (729) 1,343
Meadowridge Business Park......... 3,104 (699) 2,405
Northwest Business Center......... 947 (221) 726
------- ------- -------
$17,371 $(4,607) $12,764
======= ======= =======
</TABLE>
Also reflects estimated depreciation and amortization of the 1998 property
acquisitions based on estimated useful lives of 40 years.
F-14
<PAGE> 147
AMB PROPERTY, L.P.
NOTES TO PRO FORMA
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS (CONTINUED)
FOR THE YEAR ENDED DECEMBER 31, 1997
(UNAUDITED, DOLLARS IN THOUSANDS, EXCEPT UNIT DATA)
7. Reflects an adjustment to derive pro forma interest expense, which has
been based upon the pro forma debt balances as of March 31, 1998. The
calculation of pro forma interest expense is as follows:
<TABLE>
<S> <C>
Secured debt, pro forma balance of $592,569 (before premium
of $17,542), assumed interest rate of 7.8%................ $45,940
Credit Facility, pro forma balance of $19,930, assumed
interest rate of 6.55%.................................... 1,305
Unsecured Notes, pro forma balance of $350,000, assumed
weighted average interest rate of 6.98%................... 24,430
Amortization of deferred financing costs, $4,175 balance, 3
to 15 year terms.......................................... 636
Amortization of debt premium, $17,542 balance, 8 year
term...................................................... (2,924)
Amortization of call option premium, pro forma balance of
$2,450, 7 year term....................................... (350)
Unused Credit Facility fees, unused pro forma balance of
$480,070, fee of 0.20%.................................... 960
Capitalized interest, average historical construction in
process of $54,803, overall weighted average assumed
interest rate of 7.5%..................................... (4,188)
-------
Pro forma interest expense.................................. $65,809
=======
</TABLE>
The net change in interest expense is the result of the repayment of
borrowings on the Credit Facility of approximately $348,800 with the net
proceeds from the Offering and the assumption of approximately $48,600 in
secured debt in connection with the property acquisitions in 1998.
8. The pro forma taxable income of the Operating Partnership for the year
ended December 31, 1997 is approximately $103,160 which is based upon pro forma
income from operations before minority interest of approximately $105,918 plus
book depreciation and amortization of approximately $51,705 less other book/tax
differences of approximately $6,954 and less tax depreciation and amortization
of approximately $47,509.
The pro forma net income of AMB Property Corporation for the year ended
December 31, 1997 is $99,040, which equals to the Operating Partnership pro
forma net income of $103,274 less income allocable to the limited partners in
the Operating Partnership of $4,234.
F-15
<PAGE> 148
AMB PROPERTY, L.P.
CONSOLIDATED BALANCE SHEETS
AS OF DECEMBER 31, 1997 AND MARCH 31, 1998
(UNAUDITED, IN THOUSANDS, EXCEPT UNIT AMOUNTS)
ASSETS
<TABLE>
<CAPTION>
DECEMBER 31, MARCH 31,
1997 1998
------------ ----------
<S> <C> <C>
Investments in real estate:
Land and improvements..................................... $ 550,635 $ 618,956
Buildings and improvements................................ 1,822,516 2,045,834
Construction in progress.................................. 69,848 91,092
---------- ----------
Total investments in real estate.................. 2,442,999 2,755,882
Accumulated depreciation and amortization................. (4,153) (15,834)
---------- ----------
Net investments in real estate.................... 2,438,846 2,740,048
Cash and cash equivalents................................... 39,968 28,584
Other assets................................................ 27,441 29,558
---------- ----------
Total assets...................................... $2,506,255 $2,798,190
========== ==========
LIABILITIES AND PARTNERS' CAPITAL
Debt:
Secured debt.............................................. 535,652 610,111
Unsecured credit facility................................. 150,000 312,000
---------- ----------
Total debt........................................ 685,652 922,111
Other liabilities........................................... 49,350 81,611
Payable to affiliates....................................... 38,071 --
---------- ----------
Total liabilities................................. 773,073 1,003,722
Commitments and contingencies............................... -- --
Minority interests.......................................... 15,784 52,867
Partners' capital:
General Partner, 85,874,513 units outstanding............. 1,668,030 1,670,705
Limited partners, 2,542,163 and 3,648,607 units
outstanding, respectively.............................. 49,368 70,896
---------- ----------
Total partners' capital........................... 1,717,398 1,741,601
---------- ----------
Total liabilities and partners' capital........... $2,506,255 $2,798,190
========== ==========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-16
<PAGE> 149
AMB PROPERTY, L.P.
CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 1998
(UNAUDITED, IN THOUSANDS, EXCEPT UNIT AMOUNTS)
<TABLE>
<S> <C>
REVENUES
Rental revenues........................................... $ 74,602
Other income.............................................. 1,183
-----------
Total revenues.................................... 75,785
-----------
OPERATING EXPENSES
Property operating expenses............................... 10,004
Real estate taxes......................................... 10,248
Interest.................................................. 11,841
Depreciation and amortization............................. 11,786
General and administrative................................ 2,718
-----------
Total operating expenses.......................... 46,597
-----------
Income from operations before minority
interests......................................... 29,188
-----------
Minority interests' share of net income................... (462)
-----------
Net income........................................ $ 28,726
===========
Income Available to Unitholders Attributable to:
General Partner........................................... $ 27,906
Limited Partners.......................................... 820
-----------
$ 28,726
===========
INCOME PER UNIT
Basic..................................................... $ 0.32
===========
Diluted................................................... $ 0.32
===========
WEIGHTED AVERAGE UNITS OUTSTANDING
Basic..................................................... 88,428,969
===========
Diluted................................................... 88,839,192
===========
DISTRIBUTIONS DECLARED PER UNIT............................. $ 0.34
===========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-17
<PAGE> 150
AMB PROPERTY, L.P.
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31, 1998
(UNAUDITED, IN THOUSANDS)
<TABLE>
<S> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income.................................................. $ 28,726
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization............................. 11,786
Straight-line rents....................................... (2,825)
Amortization of debt premiums and financing costs......... (669)
Minority interests' share of net income................... 462
Equity in income of AMB Investment Management............. (126)
Changes in assets and liabilities:
Other assets.............................................. (4,512)
Other liabilities......................................... 1,978
---------
Net cash provided by operating activities......... 34,820
CASH FLOWS FROM INVESTING ACTIVITIES
Cash paid for property acquisitions......................... (149,874)
Additions to land and building improvements................. (3,648)
Additions to tenant improvements and leasing costs.......... (2,862)
Additions to construction in progress....................... (5,065)
Reduction of payable to affiliates in connection with
Formation Transactions.................................... (38,071)
---------
Net cash used in investing activities............. (199,520)
CASH FLOWS FROM FINANCING ACTIVITIES
Borrowings on unsecured credit facility..................... 162,000
Borrowings on secured debt.................................. 1,118
Payments on secured debt.................................... (9,429)
Distributions to minority interests......................... (373)
---------
Net cash provided by (used in) financing
activities........................................ 153,316
Net decrease in cash and cash equivalents................... (11,384)
Cash and cash equivalents at beginning of period............ 39,968
---------
Cash and cash equivalents at end of period.................. $ 28,584
=========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash paid during the period for:
Interest.................................................. $ 13,457
Property acquisitions:
Acquisitions of properties................................ $ 296,143
Assumption of secured debt................................ (83,515)
Minority interests contribution........................... (36,993)
Limited partner units issued.............................. (25,761)
---------
Cash paid for property acquisitions....................... $ 149,874
=========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-18
<PAGE> 151
AMB PROPERTY, L.P.
CONSOLIDATED STATEMENT OF PARTNERS' CAPITAL
FOR THE THREE MONTHS ENDED MARCH 31, 1998
(UNAUDITED, IN THOUSANDS, EXCEPT UNIT AMOUNTS)
<TABLE>
<CAPTION>
GENERAL PARTNER LIMITED PARTNERS
------------------------ --------------------
UNITS AMOUNT UNITS AMOUNT TOTAL
---------- ---------- --------- ------- ----------
<S> <C> <C> <C> <C> <C>
DECEMBER 31, 1997............... 85,874,513 $1,668,030 2,542,163 $49,368 $1,717,398
Contributions................. -- -- 1,106,444 25,760 25,760
Net income.................... -- 27,906 -- 820 28,726
Reallocation.................. -- 4,181 -- (4,181) --
Distributions................. -- (29,412) -- (871) (30,283)
---------- ---------- --------- ------- ----------
MARCH 31, 1998.................. 85,874,513 $1,670,705 3,648,607 $70,896 $1,741,601
========== ========== ========= ======= ==========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-19
<PAGE> 152
AMB PROPERTY, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED, IN THOUSANDS, EXCEPT SHARE, UNIT, SQUARE FEET AND PERCENTAGE DATA)
1. ORGANIZATION AND FORMATION
AMB Property Corporation, a Maryland corporation (the "Company"), commenced
operations as a fully integrated real estate company effective with the
completion of its initial public offering (the "IPO") on November 26, 1997. The
Company will elect to be taxed as a real estate investment trust ("REIT") under
Sections 856 through 860 of the Internal Revenue Code of 1986 (the "Code"), as
amended. The Company, through its controlling interest in its subsidiary AMB
Property, L.P., a Delaware limited partnership (the "Operating Partnership"), is
engaged in the ownership, operation, management, acquisition, renovation,
expansion and development of industrial properties and community shopping
centers in target markets nationwide.
The Company and the Operating Partnership were formed shortly before
consummation of the IPO. AMB Institutional Realty Advisors, Inc., a California
corporation and registered investment advisor (the "Predecessor") formed AMB
Property Corporation, a wholly owned subsidiary, and merged with and into the
Company (the "Merger") in exchange for 4,746,616 shares of the Company's Common
Stock. In addition, the Company and the Operating Partnership acquired, through
a series of mergers and other transactions, 31.8 million rentable square feet of
industrial property and 6.3 million rentable square feet of retail property in
exchange for 65,022,185 shares of the Company's Common Stock, 2,542,163 limited
partnership interests ("LP Units") in the Operating Partnership, the assumption
of debt and, to a limited extent, cash. The net assets of the Predecessor and
the properties acquired with Common Stock were contributed to the Operating
Partnership for 69,768,801 Units. The purchase method of accounting was applied
to the acquisition of the properties. Collectively, the Merger and the other
formation transactions described above are referred to as the "Formation
Transactions."
On November 26, 1997, the Company completed its IPO of 16,100,000 shares of
Common Stock, $0.01 par value per share (the "Common Stock") for $21.00 per
share, resulting in gross offering proceeds of approximately $338,100. Net of
underwriters' commission and offering costs aggregating $38,068, the Company
received approximately $300,032 in proceeds from the IPO. The net proceeds of
the IPO were contributed to the Operating Partnership for 16,100,000 units and
were used by the Operating Partnership to repay indebtedness, to purchase
interests from certain investors who elected not to receive shares or units in
connection with the Formation Transactions, to fund property acquisitions, and
for general corporate working capital requirements.
As of March 31, 1998, the Company owned an approximate 95.9% general
partner interest in the Operating Partnership. The remaining 4.1% limited
partner interest is owned by nonaffiliated investors. For local law purposes,
properties in certain states are owned through limited partnerships and limited
liability companies owned 99% by the Operating Partnership and 1% by a wholly
owned subsidiary of the Company. The ownership of such properties through such
entities does not materially affect the Company's overall ownership of the
interests in the properties. As the sole general partner of the Operating
Partnership, the Company has the full, exclusive and complete responsibility and
discretion in the day-to-day management and control of the Operating
Partnership.
In connection with the Formation Transactions, the Operating Partnership
formed AMB Investment Management Corporation, a Maryland corporation ("AMB
Investment Management"). The Operating Partnership purchased 100% of AMB
Investment Management's non-voting preferred stock (representing a 95% economic
interest therein). Certain executive officers of the Company collectively
purchased 100% of the AMB Investment Management's voting common stock
(representing a 5% economic interest therein). The Operating Partnership
accounts for its investment in AMB Investment Management using the equity method
of accounting. AMB Investment Management was formed to succeed to the
Predecessor's investment management business of providing real estate investment
management services on a fee basis to clients.
F-20
<PAGE> 153
AMB PROPERTY, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED, IN THOUSANDS, EXCEPT SHARE, UNIT, SQUARE FEET AND PERCENTAGE DATA)
As of March 31, 1998, the Operating Partnership owned 155 Properties,
consisting of 118 industrial properties (the "Industrial Properties") and 37
retail properties (the "Retail Properties") located in 28 markets throughout the
United States. The Industrial Properties (comprising 415 buildings), principally
warehouse distribution properties, encompass approximately 44.0 million rentable
square feet and, as of March 31, 1998, were 94.6% leased to over 1,000 tenants.
The Retail Properties (comprising 37 centers), principally grocer-anchored
community shopping centers, encompass approximately 6.8 million rentable square
feet and, as of the same date, were 94.6% leased to over 900 tenants. The
Industrial Properties and the Retail Properties collectively are referred to as
the "Properties."
2. INTERIM FINANCIAL STATEMENTS
The consolidated financial statements included herein have been prepared
pursuant to the rules and regulations of the Securities and Exchange Commission.
Accordingly, certain information and note disclosures normally included in the
annual financial statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted. The consolidated financial
statements for prior periods have been reclassified to conform to current
classifications with no effect on results of operations. In the opinion of
management, the accompanying unaudited consolidated financial statements contain
all adjustments, of a normal recurring nature, necessary for a fair presentation
of the company's consolidated financial position and results of operations for
the interim periods.
The interim results for the three months ended March 31, 1998 are not
necessarily indicative of the results expected for the entire year. These
financial statements should be read in conjunction with the financial statements
and the notes thereto of AMB Property, L.P. included elsewhere in this
Prospectus.
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
3. DEBT
In connection with the Formation Transactions, the Operating Partnership
assumed certain secured debt with an aggregate principal value of $517,031 and a
fair value of $535,613. The difference between the principal value and the fair
value was recorded as a debt premium. The debt premium is being amortized into
interest expense over the term of the related debt instruments using the
effective interest method. As of March 31, 1998, the unamortized debt premium
was $17,542. As of March 31, 1998, debt, excluding unamortized debt premiums,
consists of the following:
<TABLE>
<S> <C>
Secured debt, varying interest rates from 7.01% to 10.39%,
due November 1998 to January 2014......................... $592,569
Unsecured credit facility, variable interest at LIBOR plus
110 basis points, (6.79% at March 31, 1998) due November
2000...................................................... 312,000
--------
Total Debt........................................ $904,569
========
</TABLE>
Secured debt generally requires monthly principal and interest payments.
The secured debt is secured by deeds of trust on certain Properties. All of the
secured debt bears interest at fixed rates, except for one loan of $5,623 which
bears a variable interest rate at LIBOR plus 275 basis points, or 8.44% at March
31, 1998, or prime plus 50 basis points at the borrower's option. The secured
debt has various financial and non-financial covenants. Additionally, certain of
the secured debt is cross-collateralized. The weighted-average fixed interest
rate on secured debt at March 31, 1998, was 8.01%.
F-21
<PAGE> 154
AMB PROPERTY, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED, IN THOUSANDS, EXCEPT SHARE, UNIT, SQUARE FEET AND PERCENTAGE DATA)
The Operating Partnership has a $500,000 unsecured revolving credit
agreement (the "Credit Facility") with Morgan Guaranty Trust Company of New York
as agent, and a syndicate of twelve other banks. The Credit Facility has a term
of three years, and is subject to a fee that accrues on the daily average
undrawn funds, which varies between 15 and 25 basis points of the undrawn funds
based on the Company's credit rating. The Credit Facility has various financial
and non-financial covenants.
Interest capitalized related to construction projects for the three months
ended March 31, 1998, was $1,253.
The scheduled maturities of the secured debt as of March 31, 1998 are as
follows:
<TABLE>
<S> <C>
1998...................................................... $ 53,712
1999...................................................... 10,965
2000...................................................... 14,427
2001...................................................... 38,582
2002...................................................... 63,675
Thereafter................................................ 411,208
--------
$592,569
========
</TABLE>
The 1998 maturities included $35,000 of secured debt that was assumed in
connection with certain property acquisitions, and which was repaid in full
subsequent to March 31, 1998.
4. MINORITY INTERESTS
Minority interests represent interests held by certain third parties in 11
real estate joint ventures that are consolidated for financial reporting
purposes. Such investments are consolidated because (i) the Operating
Partnership owns a majority interest, or (ii) the Operating Partnership holds
significant control over the entity through a 50% or greater ownership interest
combined with the ability to control all major operating decisions such as
approval of budgets, selection of property managers and changes in financing.
5. PARTNERS' CAPITAL
On March 9, 1998, the Operating Partnership declared a quarterly cash
distribution of $0.3425 per unit, payable on April 3, 1998, to unitholders of
record as of March 18, 1998.
6. INCOME PER UNIT
For purposes of calculating diluted income per unit for the three months
ended March 31, 1998, no adjustment to net income was necessary, as the
Operating Partnership's only dilutive securities outstanding for such period
were stock options issued under its stock incentive plan. The effect of the
stock options was to increase weighted average units outstanding by 410,223
units for the three months ended March 31, 1998. Such dilution was computed
using the treasury stock method.
7. SUBSEQUENT EVENTS
In April 1998, the Operating Partnership repaid approximately $35,000 in
assumed debt related to properties acquired during the quarter ended March 31,
1998.
F-22
<PAGE> 155
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors of
AMB Property Corporation:
We have audited the accompanying consolidated balance sheet of AMB
Property, L.P. and its subsidiaries as of December 31, 1997, and the related
consolidated statements of income, partners' capital, and cash flows for period
from inception (November 26, 1997) to December 31, 1997. These financial
statements and the schedule referred to below are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements and the schedule based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of AMB Property, L.P. and its
subsidiaries as of December 31, 1997, and the results of its operations and cash
flows for the period from inception (November 26, 1997) to December 31, 1997, in
conformity with generally accepted accounting principles.
Our audit was made for the purpose of forming an opinion on the basic
financial statements taken as a whole. The schedule listed in the index to the
financial statements is presented for purposes of complying with the Securities
and Exchange Commission rules and is not a required part of the basic financial
statements. This schedule has been subjected to the auditing procedures applied
in the audit of the basic financial statements and, in our opinion, fairly
states in all material respects the financial data required to be set forth
therein in relation to the basic financial statements taken as a whole.
/s/ ARTHUR ANDERSEN LLP
San Francisco, California
January 27, 1998
F-23
<PAGE> 156
AMB PROPERTY, L.P.
CONSOLIDATED BALANCE SHEET
AS OF DECEMBER 31, 1997
(IN THOUSANDS, EXCEPT UNIT AMOUNTS)
<TABLE>
<CAPTION>
1997
----------
<S> <C>
ASSETS
Investments in real estate:
Land and improvements..................................... $ 550,635
Buildings and improvements................................ 1,822,516
Construction in progress.................................. 69,848
----------
Total investments in real estate.................. 2,442,999
Accumulated depreciation and amortization................. (4,153)
----------
Net investments in real estate.................... 2,438,846
Cash and cash equivalents................................... 39,968
Other assets................................................ 27,441
----------
Total assets...................................... $2,506,255
==========
LIABILITIES AND PARTNERS' CAPITAL
Debt:
Secured debt.............................................. $ 535,652
Unsecured credit facility................................. 150,000
----------
Total debt........................................ 685,652
Other liabilities........................................... 49,350
Payable to affiliates....................................... 38,071
----------
Total liabilities................................. 773,073
----------
Commitments and contingencies............................... --
Minority interests.......................................... 15,784
Partners' Capital:
General Partner, 85,874,513 units outstanding............. 1,668,030
Limited Partners, 2,542,163 units outstanding............. 49,368
----------
Total partners' capital........................... 1,717,398
----------
Total liabilities and partners' capital........... $2,506,255
==========
</TABLE>
The accompanying notes are an integral part of this consolidated financial
statement.
F-24
<PAGE> 157
AMB PROPERTY, L.P.
CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE PERIOD FROM INCEPTION (NOVEMBER 26, 1997) TO DECEMBER 31, 1997
(IN THOUSANDS, EXCEPT UNIT AMOUNTS)
<TABLE>
<S> <C>
REVENUES
Rental revenues........................................... $ 26,465
Other income.............................................. 645
-----------
Total revenues.................................... 27,110
OPERATING EXPENSES
Property operating expenses............................... 5,312
Real estate taxes......................................... 3,587
Interest.................................................. 3,528
Depreciation and amortization............................. 4,195
General and administrative................................ 1,197
-----------
Total operating expenses.......................... 17,819
-----------
Income from operations before minority
interests........................................ 9,291
Minority interests' share of net income..................... (117)
-----------
Net income available to common stockholders....... $ 9,174
===========
Income Available to Unitholders Attributable to:
General Partner........................................ $ 8,634
Limited Partners....................................... 540
-----------
$ 9,174
===========
INCOME PER UNIT
Basic.................................................. $ 0.10
===========
Diluted................................................ $ 0.10
===========
WEIGHTED AVERAGE UNITS OUTSTANDING
Basic.................................................. 88,416,676
===========
Diluted................................................ 88,698,719
===========
</TABLE>
The accompanying notes are an integral part of this consolidated financial
statement.
F-25
<PAGE> 158
AMB PROPERTY, L.P.
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE PERIOD FROM INCEPTION (NOVEMBER 26, 1997) TO DECEMBER 31, 1997
(IN THOUSANDS)
<TABLE>
<CAPTION>
<S> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income.................................................. $ 9,291
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization............................. 4,195
Straight-line rents....................................... (901)
Amortization of debt premiums and financing costs......... (266)
Minority interests' share of net income................... 117
Equity in income of AMB Investment Management............. (61)
Changes in assets and liabilities:
Other assets.............................................. (10,089)
Other liabilities......................................... (2,106)
--------
Net cash provided by operating activities................... 180
CASH FLOWS FROM INVESTING ACTIVITIES
Additions to properties..................................... (222,497)
Additions to buildings improvements and leasing costs....... (1,769)
Additions to construction in progress....................... (2,606)
Cash paid for property in Formation Transactions, net of
cash acquired............................................. (5,935)
--------
Net cash used for investing activities...................... (232,807)
CASH FLOWS FROM FINANCING ACTIVITIES
Partnership Contributions................................. 317,009
Borrowings on Credit Facility............................. 150,000
Borrowings on secured debt................................ 850
Repayment of Credit Facility.............................. (182,000)
Payments on secured debt.................................. (516)
Payment of financing fees................................. (900)
Partnership Distributions................................. (11,848)
--------
Net cash provided by (used in) financing activities......... 272,595
--------
Net increase (decrease) in cash and cash equivalents........ 39,968
Cash and cash equivalents at beginning of period............ --
--------
Cash and cash equivalents at end of period.................. $ 39,968
========
</TABLE>
The accompanying notes are an integral part of this consolidated financial
statement.
F-26
<PAGE> 159
AMB PROPERTY, L.P.
CONSOLIDATED STATEMENT OF PARTNERS' CAPITAL
FOR THE PERIOD FROM INCEPTION (NOVEMBER 26, 1997) TO DECEMBER 31, 1997
(IN THOUSANDS, EXCEPT SHARES)
<TABLE>
<CAPTION>
GENERAL PARTNER LIMITED PARTNERS
------------------------ --------------------
UNITS AMOUNT UNITS AMOUNT TOTAL
---------- ---------- --------- ------- ----------
<S> <C> <C> <C> <C> <C>
INCEPTION (NOVEMBER 25, 1997)... -- $ -- -- $ -- $ --
Contributions................. 85,874,513 1,670,902 2,542,163 49,169 1,720,071
Net income.................... -- 8,634 -- 540 9,174
Distributions................. -- (11,506) -- (341) (11,847)
---------- ---------- --------- ------- ----------
DECEMBER 31, 1997............... 85,874,513 $1,668,030 2,542,163 $49,368 $1,717,398
========== ========== ========= ======= ==========
</TABLE>
The accompanying notes are an integral part of this consolidated financial
statement.
F-27
<PAGE> 160
AMB PROPERTY, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT UNIT AND SQUARE FEET DATA)
1. ORGANIZATION AND FORMATION
AMB Property Corporation, a Maryland corporation (the "Company"), commenced
operations as a fully integrated real estate company effective with the
completion of its initial public offering (the "Offering") on November 26, 1997.
The Company will elect to be taxed as a real estate investment trust ("REIT")
under Sections 856 through 860 of the Internal Revenue Code of 1986, as amended
(the "Code"). The Company, through its controlling interest in its subsidiary
AMB Property, L.P., a Delaware limited partnership (the "Operating
Partnership"), is engaged in the ownership, operation, management, acquisition,
renovation, expansion and development of industrial properties and community
shopping centers in target markets nationwide.
The Company and the Operating Partnership were formed shortly before
consummation of the Offering. AMB Institutional Realty Advisors, Inc., a
California corporation and registered investment advisor (the "Predecessor"),
formed AMB Property Corporation, a wholly owned subsidiary, and merged with and
into the Company (the "Merger") in exchange for 4,746,616 shares of the
Company's Common Stock. In addition, the Company and the Operating Partnership
acquired, through a series of mergers and other transactions, 31.8 million
rentable square feet of industrial property and 6.3 million rentable square feet
of retail property in exchange for 65,022,185 shares of the Company's Common
Stock, 2,542,163 units representing limited partnership interests in the
Operating Partnership, the assumption of debt, and to a limited extent, cash.
The net assets of the Predecessor and the properties acquired with Common Stock
were contributed to the Operating Partnership for 69,768,801 units. The purchase
method of accounting was applied to the acquisition of the properties.
Collectively, the Merger and the other formation transactions described above
are referred to as the "Formation Transactions."
On November 26, 1997, the Company completed its Offering of 16,100,000
shares of Common Stock, $0.01 par value per share (the "Common Stock") for
$21.00 per share, resulting in gross offering proceeds of approximately
$338,100. Net of underwriters' commission and offering costs aggregating
$38,068, the Company received approximately $300,032 in proceeds from the
Offering. The net proceeds of the Offering were contributed to the Operating
Partnership for 16,100,000 units and were used by the Operating Partnership to
repay indebtedness, to purchase interests from certain investors who elected not
to receive shares or units in connection with the Formation Transactions, to
fund property acquisitions, and for general corporate purposes, including
working capital.
As of December 31, 1997, the Company owned an approximate 97.1% general
partner interest in the Operating Partnership. The remaining 2.9% limited
partner interest is owned by nonaffiliated investors. For local law purposes,
properties in certain states are owned through limited partnerships and limited
liability companies owned 99% by the Operating Partnership and 1% by a wholly
owned subsidiary of the Company. The ownership of such Properties through such
entities does not materially affect the Company's overall ownership of the
interests in the Properties. As the sole general partner of the Operating
Partnership, the Company has the full, exclusive and complete responsibility and
discretion in the management and control of the Operating Partnership.
In connection with the Formation Transactions, the Operating Partnership
formed AMB Investment Management Corporation, a Maryland corporation ("AMB
Investment Management"). The Operating Partnership purchased 100% of AMB
Investment Management's non-voting preferred stock (representing a 95% economic
interest). Certain executive officers of the Company collectively purchased 100%
of the Investment Management Subsidiary's voting common stock (representing a 5%
economic interest therein). The Operating Partnership accounts for its
investment in AMB Investment Management using the equity method of accounting.
AMB Investment Management was formed to succeed to the Predecessor's investment
management business of providing real estate investment management services on a
fee basis to clients.
F-28
<PAGE> 161
AMB PROPERTY, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS, EXCEPT UNIT AND SQUARE FEET DATA)
As of December 31, 1997, the Operating Partnership owned 37.3 million
rentable square feet of industrial properties (the "Industrial Properties"),
principally warehouse distribution properties, that were 95.7% leased and 6.2
million rentable square feet of retail properties (the "Retail Properties"),
principally grocer-anchored community shopping centers, that were 96.1% leased.
The Industrial Properties and the Retail Properties collectively are referred to
as the "Properties."
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
GENERALLY ACCEPTED ACCOUNTING PRINCIPLES
These financial statements have been prepared in accordance with generally
accepted accounting principles using the accrual method of accounting. The
preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
PRINCIPLES OF CONSOLIDATION
The accompanying consolidated financial statements include the financial
position, results of operations and cash flows of the Operating Partnership and
subsidiaries, and eight joint ventures (the "Joint Ventures") in which the
Operating Partnership has a controlling interest. Third-party equity interests
in the Joint Ventures are reflected as minority interests in the consolidated
financial statements. All significant intercompany amounts have been eliminated.
BASIS OF PRESENTATION
The consolidated financial statements of the Operating Partnership include
the results of operations for the period from November 26, 1997 (the
commencement of operations) to December 31, 1997.
INVESTMENTS IN REAL ESTATE
Investments in real estate are stated at depreciated cost and are reviewed
for impairment on a property-by-property basis whenever events or changes in
circumstances indicate that the carrying amount of a property may not be
recoverable. Impairment is recognized when estimated expected future cash flows
(undiscounted and without interest charges)are less than the carrying amount of
the property. To the extent an impairment has occurred, the excess of the
carrying amount of the property over its estimated fair value will be charged to
income. As of December 31, 1997, there were no impairments of the carrying
values of the Properties.
Depreciation and amortization are calculated using the straight-line method
over the estimated useful lives of the investments. The estimated lives are as
follows:
<TABLE>
<S> <C>
Land improvements................................... 5 to 40 years
Buildings and improvements.......................... 5 to 40 years
Tenant improvements and leasing costs............... Term of the related lease
</TABLE>
The cost of buildings and improvements includes the purchase price of the
property or interest in property, legal fees and acquisition costs and interest,
property taxes, and other costs incurred during the period of construction.
Expenditures for maintenance and repairs are charged to operations as
incurred. Significant renovations or betterments that extend the economic useful
life of assets are capitalized.
F-29
<PAGE> 162
AMB PROPERTY, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS, EXCEPT UNIT AND SQUARE FEET DATA)
Project costs directly associated with the development and construction of
a real estate project are capitalized as construction in progress. In addition,
interest, real estate taxes and other costs are capitalized during the
construction period.
CASH AND CASH EQUIVALENTS
Cash and cash equivalents include cash held in financial institutions and
other highly liquid short-term investments with original maturities of three
months or less. Cash and cash equivalents as of December 31, 1997 include
restricted cash of $8,074, which represents amounts held in escrow in connection
with property purchases and capital improvements.
DEFERRED FINANCING
Costs incurred in connection with financing are capitalized and amortized
to interest expense on a straight-line basis (which approximates the effective
interest method) over the term of the related loan. As of December 31, 1997,
deferred financing fees were $871, net of accumulated amortization of $29. Such
amounts are included in Other Assets on the consolidated balance sheet.
FAIR VALUE OF FINANCIAL INSTRUMENTS
The Operating Partnership's financial instruments include short-term
investments, accounts receivable, accounts payable, accrued expenses,
construction loans payable, mortgage debt, secured debt, unsecured notes
payable, and an unsecured credit facility. The fair value of these instruments
approximates its carrying or contract values.
DEBT PREMIUMS
In connection with the Formation Transactions, the Operating Partnership
assumed certain secured debt with an aggregate principal value of $517,031 and a
fair value of $535,613. The difference between the principal value and the fair
value was recorded as a debt premium. The debt premium is being amortized into
interest expense over the term of the related debt instrument using the
effective interest method. As of December 31, 1997, the unamortized debt premium
was $18,286.
MINORITY INTERESTS
Minority interests represent the interests held by certain third parties in
eight real estate joint ventures that are consolidated for financial reporting
purposes. Such investments are consolidated because (i) the Operating
Partnership owns a majority interest, or (ii) the Operating Partnership has
significant control over the entity through a 50% or greater ownership interest
combined with the ability to control major operating decisions such as approval
of budgets, selection of property managers and change in financing.
REVENUES
The Operating Partnership, as a lessor, retains substantially all of the
benefits and risks of ownership of the Properties and accounts for its leases as
operating leases. Rental revenues are recognized on a straight-line basis over
the term of the leases.
Reimbursements from tenants for real estate taxes and other recoverable
operating expenses are recognized as revenue in the period the applicable
expenses are incurred.
F-30
<PAGE> 163
AMB PROPERTY, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS, EXCEPT UNIT AND SQUARE FEET DATA)
OTHER INCOME
Other income consists of the Operating Partnership's equity in the earnings
of AMB Investment Management and of interest income on cash and cash
equivalents.
INCOME PER UNIT
For purposes of calculating diluted income per unit for the year ended
December 31, 1997, no adjustment to net income available to unitholders was
necessary. While the Operating Partnership had no dilutive securities
outstanding as of such date, the Operating Partnership is obligated to issue
units to the Company in respect of the contribution of proceeds by the Company
from the exercise of options to purchase common stock under the Company's Stock
Incentive Plan. The effect of the units issuable upon exercise of stock options
outstanding as of December 31, 1997 was to increase weighted average units
outstanding by 282,043 units for the year ended December 31, 1997. Such dilution
was computed using the treasury stock method.
FUTURE ACCOUNTING PRONOUNCEMENTS
In June of 1997, the FASB issued SFAS No. 131, "Disclosures about Segments
of an Enterprise and Related Information." This statement, effective for
financial statements for periods beginning after December 15, 1997, requires
that a public business enterprise report financial and descriptive information
about its reportable operating segments. Generally, information is required to
be reported on the basis that it is used internally for evaluating segment
performance and deciding how to allocate resources to segments. The Operating
Partnership expects to adopt SFAS No. 131 in 1998 to the extent applicable.
3. TRANSACTIONS WITH AFFILIATES
As discussed in "Organization and Formation of the Company," the Operating
Partnership formed AMB Investment Management (which conducts its operations
through the Investment Management Partnership) for the purpose of carrying on
the operations of the Predecessor. The Operating Partnership and the Investment
Management Partnership have an agreement that allows for the sharing of certain
costs and employees. Additionally, the Operating Partnership provides the
Investment Management Partnership with certain acquisition-related services.
As part of the Formation Transactions, the Operating Partnership was
required to pay an amount equal to the net working capital balances at November
25, 1997 of the Predecessor and the acquired properties to the owners of said
entities. As of December 31, 1997, the Operating Partnership owed approximately
$37,808 to owners related to these working capital distributions. Such amount is
included in Payable to affiliates on the consolidated balance sheet and was paid
subsequent to year-end.
The Operating Partnership and the Investment Management Partnership share
common office space under lease obligations of an affiliate of the Predecessor.
Such lease obligations are charged to the Operating Partnership and the
Investment Management Partnership at cost. For the period ended December 31,
1997, the Operating Partnership paid approximately $70 for occupancy costs
related to the lease obligations of the affiliate.
F-31
<PAGE> 164
AMB PROPERTY, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS, EXCEPT UNIT AND SQUARE FEET DATA)
4. DEBT
As of December 31, 1997, debt, excluding unamortized debt premiums,
consists of the following:
<TABLE>
<S> <C>
Secured debt, varying coupon interest
rates from 7.01% to 10.38%, due
November 1998 to December 2008............................ $ 517,366
Unsecured credit facility, variable
interest at LIBOR plus 110 basis points (7.10% at
December 31, 1997) due November 2000...................... 150,000
----------
Total Debt........................................ $ 667,366
==========
</TABLE>
Secured debt generally requires monthly principal and interest payments.
The secured debt is secured by deeds of trust or mortgages on 48 Properties. The
carrying value of real estate investments pledged as collateral under deeds of
trust or mortgages for the secured debt is $1,049,003 as of December 31, 1997.
All of the secured debt bears interest at fixed rates, except for one loan which
bears interest at either LIBOR plus 275 basis point (8.75% at December 31, 1997)
or prime plus 50 basis points, at the borrower's option. The secured debt has
various financial and non-financial covenants. Additionally, certain of the
secured debt is cross-collateralized.
The Operating Partnership has a $500,000 unsecured revolving credit
agreement (the "Credit Facility") with Morgan Guaranty Trust Company of New
York, as agent, and a syndicate of 12 other banks. The Credit Facility has a
term of three years, and is subject to a fee that accrues on the daily average
undrawn funds, which varies between 15 and 25 basis points of the undrawn funds
based on the Operating Partnership's credit rating. The Credit Facility has
various financial and non-financial covenants.
The weighted-average fixed interest rate on secured debt at December 31,
1997 was 7.82%. Interest capitalized related to construction projects for the
period from November 26, 1997 to December 31, 1997 was $448.
The scheduled maturities of the secured debt as of December 31, 1997 are as
follows:
<TABLE>
<S> <C>
1998...................................................... $ 19,390
1999...................................................... 9,666
2000...................................................... 11,862
2001...................................................... 35,654
2002...................................................... 43,967
Thereafter................................................ 396,827
--------
$517,366
========
</TABLE>
F-32
<PAGE> 165
AMB PROPERTY, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS, EXCEPT UNIT AND SQUARE FEET DATA)
5. LEASING ACTIVITY
Future minimum rental income due under noncancelable leases in effect at
December 31, 1997 with tenants is as follows:
<TABLE>
<S> <C>
1998..................................................... $ 214,400
1999..................................................... 188,926
2000..................................................... 160,592
2001..................................................... 128,241
2002..................................................... 101,733
Thereafter............................................... 459,070
----------
$1,252,962
==========
</TABLE>
In addition to minimum rental payments, certain tenants pay reimbursements
for their pro rata share of specified operating expenses, which amounted to
$5,267 for the period from November 26, 1997 to December 31, 1997. These amounts
are included as rental income and operating expenses in the accompanying
consolidated statements of operations. Certain of the leases also provide for
the payment of additional rent based on a percentage of the tenant's revenues.
Some leases contain options to renew. No individual tenant accounts for greater
than 2% of rental revenues.
6. INCOME TAXES
As a partnership, the allocated share of income of the Operating
Partnership is included in the income tax returns of the partners. Accordingly,
no accounting for income taxes is required in the accompanying consolidated
financial statements. State and local taxes are not material.
Taxable income of the Operating Partnership for the period from inception
(November 26, 1997) to December 31, 1997 is estimated to be $12,007. Reconciling
differences between book income and tax income primarily result from timing
differences consisting of (i) depreciation expense, (ii) prepaid rental income
and (iii) straight-line rent. Furthermore, the Operating Partnership's share of
income or loss from AMB Investment Management is excluded from the tax return of
the Operating Partnership.
The Operating Partnership declared distributions per Unit of $0.13 for the
period from inception (November 26, 1997) to December 31, 1997. The following is
a summary of distributions per Unit which represent a return of capital measured
using generally accepted accounting principles:
<TABLE>
<CAPTION>
DISTRIBUTION PER UNIT
<S> <C>
From book net income........................................ $0.10
Representing return of capital.............................. 0.03
-----
Total Distributions......................................... $0.13
=====
</TABLE>
On a federal income tax basis, none of the distributions represented return
of capital.
7. STOCK INCENTIVE PLAN AND 401(k) PLAN
STOCK INCENTIVE PLAN
In November 1997, the Company established a Stock Option and Incentive Plan
(the "Stock Incentive Plan") for the purpose of attracting and retaining
eligible officers, directors and employees. The Company has reserved for
issuance 5,750,000 shares of Common Stock under the Stock Incentive Plan. In
November 1997, the Company granted 3,153,750 non-qualified options to certain
directors, officers and employees. Each option is exchangeable for one share of
the Company's Common Stock and has an exercise price equal to $21.00, the
F-33
<PAGE> 166
AMB PROPERTY, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS, EXCEPT UNIT AND SQUARE FEET DATA)
Company's market price at the date of grant. The options have a 10-year term and
vest pro rata in annual installments over a four-year period from the date of
grant. Upon the exercise of stock options, the Company will contribute the
proceeds to the Operating Partnership in exchange for an equal number of general
partnership units.
The Operating Partnership applies APB Opinion No. 25, "Accounting for Stock
Issued to Employees" and related interpretations in accounting for its Stock
Incentive Plan. Opinion 25 measures compensation cost using the intrinsic value
based method of accounting. Under this method, compensation cost is the excess,
if any, of the quoted market price of the stock at the date of grant over the
amount an employee must pay to acquire the stock. Accordingly, no compensation
cost has been recognized for the Stock Incentive Plan, as the option price for
all option grants in 1997 was equal to the market price at the date of grant.
However, if the Operating Partnership had measured compensation cost using the
fair value base method prescribed in SFAS 123, "Accounting for Stock-Based
Compensation," the impact on pro forma net income and earnings per share would
not have been material.
The fair value of each option grant was estimated at the date of grant
using the Black-Scholes option-pricing model with the following assumptions used
for grants in 1997: dividend yield of 6.52%, expected volatility of 18.75%,
risk-free interest rate of 5.86%, and expected lives of 10 years.
Following is a summary of the option activity for the year ended December
31, 1997:
<TABLE>
<CAPTION>
SHARES
UNDER REMAINING
OPTION EXERCISE CONTRACTUAL
(000) PRICE LIFE
-------- -------- -----------
<S> <C> <C> <C>
Outstanding, 11/25/97................................. -- -- --
Granted............................................... 3,154 $21.0 10 years
Exercised............................................. -- -- --
Forfeited............................................. (10) -- --
------ ----- --------
Outstanding, 12/31/97................................. 3,144 $21.0 10 years
====== ===== ========
Options exercisable at year-end....................... 184 $21.0
====== =====
Fair value of options granted during the year......... $ 2.28
======
</TABLE>
RESTRICTED STOCK
In 1997, the Company sold 5,712 restricted shares of its Common Stock to
certain independent directors for $0.01 per share in cash. The Company
contributed the proceeds from the issuance of restricted shares to the Operating
Partnership in exchange for an equal number of GP units.
401(k) PLAN
In November 1997, the Operating Partnership established a Section 401(k)
Savings/Retirement Plan (the "Section 401(k) Plan"), which is a continuation of
the Section 401(k) plan of the Predecessor, to cover eligible employees of the
Operating Partnership and any designated affiliate. The Section 401(k) Plan
permits eligible employees of the Operating Partnership to defer up to 10% of
their annual compensation, subject to certain limitations imposed by the Code.
The employees' elective deferrals are immediately vested and non-forfeitable
upon contribution to the Section 401(k) Plan. The Operating Partnership matches
the employee contributions to the Section 401(k)Plan in an amount equal to 50%
of the first 3.5% of annual compensation deferred by each employee and may also
make discretionary contributions to the plan. As of December 31,
F-34
<PAGE> 167
AMB PROPERTY, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS, EXCEPT UNIT AND SQUARE FEET DATA)
1997, the Operating Partnership's accrual for 401(k) match was $140. Such amount
was included in Other liabilities on the consolidated balance sheet.
Except for the Section 401(k) Plan, the Operating Partnership offers no
other post-retirement or post-employment benefits to its employees.
8. SUPPLEMENTAL INFORMATION TO STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
--------------------------
1995 1996 1997
---- ---- ----------
<S> <C> <C> <C>
Cash paid for interest................................... $-- $-- $ 2,509
=== === ==========
Non-cash transactions:
Acquisitions of properties in Formation Transactions... $-- $-- $2,216,137
Assumption of debt..................................... -- -- (717,613)
Cash acquired.......................................... -- -- (43,978)
Other assumed assets and liabilities................... -- -- (13,862)
Units issued........................................... -- -- (1,434,749)
--- --- ----------
Net cash paid, net of cash acquired...................... $-- $-- $ 5,935
=== === ==========
</TABLE>
9. PRO FORMA INFORMATION (UNAUDITED)
The following unaudited pro forma condensed consolidated statement of
operations has been prepared as if the Formation Transactions, the Offering (as
described in Note 1) and certain property acquisitions and dispositions in 1997
had occurred on January 1, 1997. In the opinion of management, the pro forma
condensed consolidated statement of operations does not purport to present the
consolidated results that would have occurred if the aforementioned transactions
had been consummated on January 1, 1997, nor does it purport to present the
consolidated results of operations for future periods.
<TABLE>
<S> <C> <C>
Total revenues............................................ $ 284,674
Income from operations before minority interests.......... 103,903
Net income................................................ 102,606
INCOME PER UNIT
Basic................................................... $ 1.16
===========
Diluted................................................. $ 1.16
===========
WEIGHTED AVERAGE UNITS OUTSTANDING
Basic................................................... 88,416,676
===========
Diluted................................................. 88,698,719
===========
</TABLE>
10. COMMITMENTS AND CONTINGENCIES
LITIGATION
In the normal course of business, from time to time, the Operating
Partnership is involved in legal actions relating to the ownership and
operations of its Properties. In management's opinion, the liabilities, if any,
that may ultimately result from such legal actions are not expected to have a
materially adverse effect on the consolidated financial position, results of
operations, or cash flows of the Operating Partnership.
F-35
<PAGE> 168
AMB PROPERTY, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS, EXCEPT UNIT AND SQUARE FEET DATA)
ENVIRONMENTAL MATTERS
The Operating Partnership follows the policy of monitoring its Properties
for the presence of hazardous or toxic substances. The Operating Partnership is
not aware of any environmental liability with respect to the Properties that
would have a material adverse effect on the Operating Partnership's business,
assets or results of operations. There can be no assurance that such a material
environmental liability does not exist. The existence of any such material
environmental liability could have a material adverse effect on the Operating
Partnership's results of operations and cash flow.
GENERAL UNINSURED LOSSES
The Operating Partnership carries comprehensive liability, fire, flood,
environmental, extended coverage and rental loss insurance with policy
specifications, limits and deductibles customarily carried for similar
properties. There are, however, certain types of extraordinary losses that may
be either uninsurable or not economically insurable. Should an uninsured loss
occur, the Operating Partnership could lose its investment in, and anticipated
profits and cash flows from, a property.
Certain of the Properties are located in areas that are subject to
earthquake activity; the Operating Partnership has therefore obtained limited
earthquake insurance.
F-36
<PAGE> 169
AMB PROPERTY, L.P.
SCHEDULE III
CONSOLIDATED REAL ESTATE AND ACCUMULATED DEPRECIATION
AS OF DECEMBER 31, 1997
<TABLE>
<CAPTION>
COSTS
CAPITALIZED
INITIAL COST TO SUBSEQUENT TO
OPERATING PARTNERSHIP ACQUISITION
--------------------- ---------------
PROPERTY LOCATION TYPE ENCUMBRANCES(1) LAND BUILDING LAND BUILDING
-------- -------- ---- --------------- -------- ---------- ---- --------
<S> <C> <C> <C> <C> <C> <C> <C>
72nd Avenue................ WA IND $ -- $ 1,298 $ 4,008 $ -- $ --
Acer Distribution Center... CA IND -- 3,146 9,479 -- --
Activity Distribution
Center................... CA IND 5,400 3,736 11,248 -- --
Alvarado Business Center... CA IND -- 7,906 23,757 -- 75
Amwiler-Gwinnett Industrial
Portfolio................ GA IND 14,360 6,641 19,964 -- 4
Ardenwood Corporate Park... CA IND 10,339 7,321 22,002 -- --
Artesia Industrial
Portfolio................ CA IND 54,742 23,860 71,620 -- 907
Atlanta South.............. GA IND -- 6,550 19,691 -- --
Beacon Industrial Park..... FL IND -- 10,466 31,437 -- --
Belden Avenue.............. IL IND -- 5,019 15,186 -- --
Bensenville................ IL IND 44,593 20,799 62,438 -- 19
Blue Lagoon................ FL IND 11,916 4,945 14,875 -- 23
Boulden.................... DE IND -- 2,807 8,462 -- 36
Brightseat Road............ MD IND -- 1,557 4,841 -- --
Britannia Business Park.... FL IND -- 3,199 9,637 -- 37
Cabot Business Park........ MA IND -- 16,017 48,091 -- 7
Chancellor................. FL IND 2,987 1,587 4,802 -- --
Chicago Industrial......... IL IND 3,522 1,574 4,761 -- --
Commerce................... CA IND -- 2,197 6,653 -- --
Corporate Square........... MN IND -- 4,024 12,113 -- 16
Crossroads Industrial...... IL IND -- 2,583 7,789 -- --
Dixie Highway.............. KY IND -- 1,700 5,149 -- --
Dock's Corner.............. NJ IND -- 2,050 6,190 -- --
Dock's Corner II........... NJ IND -- 2,272 6,917 -- --
Dowe Industrial............ CA IND -- 2,665 8,034 -- --
East Walnut Drive.......... CA IND -- 964 2,918 -- --
Elk Grove Village
Industrial............... IL IND -- 7,713 23,179 -- 8
Empire Drive............... KY IND -- 1,590 4,815 -- --
Executive Drive............ IL IND -- 1,399 4,236 -- --
Fairway Drive Industrial... CA IND -- 1,954 5,479 -- --
<CAPTION>
GROSS AMOUNT CARRIED AT 12/31/97
----------------------------------
YEAR OF DEPRECIABLE
TOTAL ACCUMULATED CONSTRUCTION OR LIFE
PROPERTY LAND BUILDING COSTS(2) DEPRECIATION ACQUISITION (YEARS)
-------- -------- ---------- ---------- ------------ --------------- -----------
<S> <C> <C> <C> <C> <C> <C>
72nd Avenue................ $ 1,298 $ 4,008 $ 5,306 $ 9 1997 5-40
Acer Distribution Center... 3,146 9,479 12,625 22 1997 5-40
Activity Distribution
Center................... 3,736 11,248 14,984 26 1997 5-40
Alvarado Business Center... 7,906 23,832 31,738 54 1997 5-40
Amwiler-Gwinnett Industrial
Portfolio................ 6,641 19,968 26,609 46 1997 5-40
Ardenwood Corporate Park... 7,321 22,002 29,323 50 1997 5-40
Artesia Industrial
Portfolio................ 23,860 72,527 96,387 165 1997 5-40
Atlanta South.............. 6,550 19,691 26,241 45 1997 5-40
Beacon Industrial Park..... 10,466 31,437 41,903 72 1997 5-40
Belden Avenue.............. 5,019 15,186 20,205 35 1997 5-40
Bensenville................ 20,799 62,457 83,256 143 1997 5-40
Blue Lagoon................ 4,945 14,898 19,843 34 1997 5-40
Boulden.................... 2,807 8,498 11,305 19 1997 5-40
Brightseat Road............ 1,557 4,841 6,398 11 1997 5-40
Britannia Business Park.... 3,199 9,674 12,873 22 1997 5-40
Cabot Business Park........ 16,017 48,098 64,115 110 1997 5-40
Chancellor................. 1,587 4,802 6,389 11 1997 5-40
Chicago Industrial......... 1,574 4,761 6,335 11 1997 5-40
Commerce................... 2,197 6,653 8,850 15 1997 5-40
Corporate Square........... 4,024 12,129 16,153 28 1997 5-40
Crossroads Industrial...... 2,583 7,789 10,372 18 1997 5-40
Dixie Highway.............. 1,700 5,149 6,849 12 1997 5-40
Dock's Corner.............. 2,050 6,190 8,240 14 1997 5-40
Dock's Corner II........... 2,272 6,917 9,189 16 1997 5-40
Dowe Industrial............ 2,665 8,034 10,699 18 1997 5-40
East Walnut Drive.......... 964 2,918 3,882 7 1997 5-40
Elk Grove Village
Industrial............... 7,713 23,187 30,900 53 1997 5-40
Empire Drive............... 1,590 4,815 6,405 11 1997 5-40
Executive Drive............ 1,399 4,236 5,635 10 1997 5-40
Fairway Drive Industrial... 1,954 5,479 7,433 13 1997 5-40
</TABLE>
F-37
<PAGE> 170
<TABLE>
<CAPTION>
COSTS
CAPITALIZED
INITIAL COST TO SUBSEQUENT TO
OPERATING PARTNERSHIP ACQUISITION
--------------------- ---------------
PROPERTY LOCATION TYPE ENCUMBRANCES(1) LAND BUILDING LAND BUILDING
-------- -------- ---- --------------- -------- ---------- ---- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Hampden Road............... MA IND -- 2,200 6,678 -- --
Harvest Business Park...... WA IND 3,826 2,371 7,153 -- 51
Hewlett Packard
Distribution............. CA IND 3,437 1,668 5,043 -- --
Holton Drive............... KY IND -- 2,633 7,972 -- --
Industrial Drive........... OH IND -- 1,743 5,410 -- --
International Multifoods... CA IND -- 1,613 4,879 -- --
Itasca Industrial
Portfolio................ IL IND -- 6,416 19,289 -- 213
Janitrol................... OH IND -- 1,797 5,576 -- --
Jasmine Avenue............. CA IND -- 3,157 9,562 -- --
Kent Centre................ WA IND -- 3,042 9,165 -- 23
Kingsport Industrial
Park..................... WA IND 18,161 7,919 23,798 -- 96
L.A. County Industrial
Portfolio (3)............ CA IND -- 11,128 33,423 -- 17
Lake Michigan Industrial
Portfolio................ IL IND -- 2,886 8,699 -- --
Laurelwood................. CA IND -- 2,750 8,538 -- --
Lincoln Industrial
Center................... TX IND -- 671 2,052 -- --
Linder Skokie.............. IL IND -- 2,938 8,854 -- --
Lisle Industrial........... IL IND -- 2,290 6,911 -- --
Lonestar................... TX IND 17,773 7,129 21,428 -- --
McDaniel Drive............. TX IND -- 1,537 4,659 -- --
Melrose Park............... IL IND -- 2,936 9,190 -- --
Metric Center.............. TX IND -- 10,968 32,944 -- 45
Mid-Atlantic Business
Center................... PA IND -- 6,581 19,783 -- 36
Milmont Page............... CA IND -- 3,201 9,642 -- 94
Minneapolis Distribution
Portfolio................ MN IND -- 7,018 21,093 -- 95
Minneapolis Industrial
IV....................... MN IND 8,346 4,938 14,854 -- 42
Minneapolis Industrial V... MN IND 7,952 4,426 13,317 -- 46
Moffett Business Center.... CA IND 12,883 5,892 17,716 -- --
Moffett Park R&D
Portfolio................ CA IND -- 14,807 44,462 -- 598
N. Glenville Avenue........ TX IND -- 1,094 3,316 -- --
Norcross/ Brookhollow
Portfolio................ GA IND -- 3,721 11,180 -- --
Northpointe Commerce....... CA IND -- 1,773 5,358 -- --
Northwest Distribution
Center................... WA IND -- 2,234 6,743 -- 7
O'Hare Industrial
Portfolio................ IL IND -- 7,357 22,112 -- 156
Pacific Business Center.... CA IND 10,679 5,417 16,291 -- 16
<CAPTION>
GROSS AMOUNT CARRIED AT 12/31/97
----------------------------------
YEAR OF DEPRECIABLE
TOTAL ACCUMULATED CONSTRUCTION OR LIFE
PROPERTY LAND BUILDING COSTS(2) DEPRECIATION ACQUISITION (YEARS)
-------- -------- ---------- ---------- ------------ --------------- -----------
<S> <C> <C> <C> <C> <C> <C>
Hampden Road............... 2,200 6,678 8,878 15 1997 5-40
Harvest Business Park...... 2,371 7,204 9,575 16 1997 5-40
Hewlett Packard
Distribution............. 1,668 5,043 6,711 12 1997 5-40
Holton Drive............... 2,633 7,972 10,605 18 1997 5-40
Industrial Drive........... 1,743 5,410 7,153 12 1997 5-40
International Multifoods... 1,613 4,879 6,492 11 1997 5-40
Itasca Industrial
Portfolio................ 6,416 19,502 25,918 44 1997 5-40
Janitrol................... 1,797 5,576 7,373 13 1997 5-40
Jasmine Avenue............. 3,157 9,562 12,719 22 1997 5-40
Kent Centre................ 3,042 9,188 12,230 21 1997 5-40
Kingsport Industrial
Park..................... 7,919 23,894 31,813 54 1997 5-40
L.A. County Industrial
Portfolio (3)............ 11,128 33,440 44,568 76 1997 5-40
Lake Michigan Industrial
Portfolio................ 2,886 8,699 11,585 20 1997 5-40
Laurelwood................. 2,750 8,538 11,288 19 1997 5-40
Lincoln Industrial
Center................... 671 2,052 2,723 5 1997 5-40
Linder Skokie.............. 2,938 8,854 11,792 20 1997 5-40
Lisle Industrial........... 2,290 6,911 9,201 16 1997 5-40
Lonestar................... 7,129 21,428 28,557 49 1997 5-40
McDaniel Drive............. 1,537 4,659 6,196 11 1997 5-40
Melrose Park............... 2,936 9,190 12,126 21 1997 5-40
Metric Center.............. 10,968 32,989 43,957 75 1997 5-40
Mid-Atlantic Business
Center................... 6,581 19,819 26,400 45 1997 5-40
Milmont Page............... 3,201 9,736 12,937 22 1997 5-40
Minneapolis Distribution
Portfolio................ 7,018 21,188 28,206 48 1997 5-40
Minneapolis Industrial
IV....................... 4,938 14,896 19,834 34 1997 5-40
Minneapolis Industrial V... 4,426 13,363 17,789 30 1997 5-40
Moffett Business Center.... 5,892 17,716 23,608 40 1997 5-40
Moffett Park R&D
Portfolio................ 14,807 45,060 59,867 101 1997 5-40
N. Glenville Avenue........ 1,094 3,316 4,410 8 1997 5-40
Norcross/ Brookhollow
Portfolio................ 3,721 11,180 14,901 26 1997 5-40
Northpointe Commerce....... 1,773 5,358 7,131 12 1997 5-40
Northwest Distribution
Center................... 2,234 6,750 8,984 15 1997 5-40
O'Hare Industrial
Portfolio................ 7,357 22,268 29,625 51 1997 5-40
Pacific Business Center.... 5,417 16,307 21,724 37 1997 5-40
</TABLE>
F-38
<PAGE> 171
<TABLE>
<CAPTION>
COSTS
CAPITALIZED
INITIAL COST TO SUBSEQUENT TO
OPERATING PARTNERSHIP ACQUISITION
--------------------- ---------------
PROPERTY LOCATION TYPE ENCUMBRANCES(1) LAND BUILDING LAND BUILDING
-------- -------- ---- --------------- -------- ---------- ---- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Pagemill & Dillworth....... TX IND -- 1,877 5,690 -- --
Patuxent................... MD IND -- 1,696 5,127 -- --
Penn James
Office/Warehouse......... MN IND -- 1,991 6,013 -- 103
Pennsy Drive............... MD IND -- 657 2,011 -- 203
Presidents Drive........... FL IND -- 1,124 3,446 -- --
Presidents Drive II........ FL IND -- 2,563 7,861 -- --
Preston Court.............. MD IND -- 2,313 7,192 -- --
Production Drive........... KY IND -- 425 1,286 -- --
Santa Barbara Court........ MD IND -- 1,617 5,029 -- --
Shiloh Road................ TX IND -- 1,813 5,495 -- --
Silicon Valley R&D
Portfolio................ CA IND -- 8,024 24,205 -- --
South Bay Industrial....... CA IND 20,791 14,992 45,016 -- 465
Southfield................. GA IND -- 7,073 21,259 -- 106
Stadium Business Park...... CA IND 4,909 3,768 11,345 -- 48
Systematics................ CA IND -- 911 2,773 -- --
Texas Industrial Portfolio
(4)...................... TX IND -- 10,806 32,499 -- 218
Twin Cities................ MN IND -- 4,873 14,638 -- --
Two South Middlesex........ NJ IND -- 2,247 6,781 -- --
Valwood.................... TX IND 4,351 1,983 5,989 -- 12
Valwood Parkway II......... TX IND -- 2,219 6,729 -- --
Viscount................... FL IND -- 984 3,016 -- --
Weigman Road............... CA IND -- 1,563 4,852 -- --
West Kiest................. TX IND -- 1,395 4,231 -- --
West North Carrier......... TX IND 3,522 1,375 4,165 -- 85
Windsor Court.............. IL IND -- 766 2,338 -- --
Yosemite Drive............. CA IND -- 2,350 7,297 -- --
Zanker/Charcot
Industrial............... CA IND -- 5,282 15,887 -- 202
Applewood Village Shopping
Center................... CO RET -- 6,716 26,903 -- --
Arapahoe Village Shopping
Center................... CO RET 11,083 3,795 15,220 -- --
Aurora Marketplace......... WA RET -- 3,243 13,013 -- 4
BayHill Shopping Center.... CA RET -- 2,844 11,417 -- 64
Brentwood Commons.......... IL RET 5,460 1,810 7,280 -- 1
Civic Center Plaza......... IL RET 13,689 5,113 20,492 -- 42
Corbins Corner Shopping
Center................... CT RET -- 6,438 25,791 -- 3
<CAPTION>
GROSS AMOUNT CARRIED AT 12/31/97
----------------------------------
YEAR OF DEPRECIABLE
TOTAL ACCUMULATED CONSTRUCTION OR LIFE
PROPERTY LAND BUILDING COSTS(2) DEPRECIATION ACQUISITION (YEARS)
-------- -------- ---------- ---------- ------------ --------------- -----------
<S> <C> <C> <C> <C> <C> <C>
Pagemill & Dillworth....... 1,877 5,690 7,567 13 1997 5-40
Patuxent................... 1,696 5,127 6,823 12 1997 5-40
Penn James
Office/Warehouse......... 1,991 6,116 8,107 14 1997 5-40
Pennsy Drive............... 657 2,214 2,871 5 1997 5-40
Presidents Drive........... 1,124 3,446 4,570 8 1997 5-40
Presidents Drive II........ 2,563 7,861 10,424 18 1997 5-40
Preston Court.............. 2,313 7,192 9,505 16 1997 5-40
Production Drive........... 425 1,286 1,711 3 1997 5-40
Santa Barbara Court........ 1,617 5,029 6,646 11 1997 5-40
Shiloh Road................ 1,813 5,495 7,308 13 1997 5-40
Silicon Valley R&D
Portfolio................ 8,024 24,205 32,229 55 1997 5-40
South Bay Industrial....... 14,992 45,481 60,473 103 1997 5-40
Southfield................. 7,073 21,365 28,438 49 1997 5-40
Stadium Business Park...... 3,768 11,393 15,161 26 1997 5-40
Systematics................ 911 2,773 3,684 6 1997 5-40
Texas Industrial Portfolio
(4)...................... 10,806 32,717 43,523 74 1997 5-40
Twin Cities................ 4,873 14,638 19,511 33 1997 5-40
Two South Middlesex........ 2,247 6,781 9,028 15 1997 5-40
Valwood.................... 1,983 6,001 7,984 14 1997 5-40
Valwood Parkway II......... 2,219 6,729 8,948 15 1997 5-40
Viscount................... 984 3,016 4,000 7 1997 5-40
Weigman Road............... 1,563 4,852 6,415 11 1997 5-40
West Kiest................. 1,395 4,231 5,626 10 1997 5-40
West North Carrier......... 1,375 4,250 5,625 10 1997 5-40
Windsor Court.............. 766 2,338 3,104 5 1997 5-40
Yosemite Drive............. 2,350 7,297 9,647 17 1997 5-40
Zanker/Charcot
Industrial............... 5,282 16,089 21,371 36 1997 5-40
Applewood Village Shopping
Center................... 6,716 26,903 33,619 61 1997 5-40
Arapahoe Village Shopping
Center................... 3,795 15,220 19,015 35 1997 5-40
Aurora Marketplace......... 3,243 13,017 16,260 30 1997 5-40
BayHill Shopping Center.... 2,844 11,481 14,325 26 1997 5-40
Brentwood Commons.......... 1,810 7,281 9,091 17 1997 5-40
Civic Center Plaza......... 5,113 20,534 25,647 47 1997 5-40
Corbins Corner Shopping
Center................... 6,438 25,794 32,232 59 1997 5-40
</TABLE>
F-39
<PAGE> 172
<TABLE>
<CAPTION>
COSTS
CAPITALIZED
INITIAL COST TO SUBSEQUENT TO
OPERATING PARTNERSHIP ACQUISITION
--------------------- ---------------
PROPERTY LOCATION TYPE ENCUMBRANCES(1) LAND BUILDING LAND BUILDING
-------- -------- ---- --------------- -------- ---------- ---- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Eastgate Plaza............. WA RET -- 2,122 8,529 -- 59
Five Points Shopping
Center................... CA RET -- 5,412 21,687 -- 96
Granada Village............ CA RET 15,678 6,533 26,172 -- 251
Kendall Mall............... FL RET 25,162 7,069 28,316 -- 16
La Jolla Village........... CA RET 19,245 6,936 27,785 -- 16
Lakeshore Plaza Shopping
Center................... CA RET 13,839 6,706 26,865 -- 74
Latham Farms............... NY RET 38,833 12,327 49,350 -- 23
Long Gate Shopping
Center................... MD RET -- 9,662 38,677 -- --
Manhattan Village Shopping
Center................... CA RET -- 16,484 66,578 -- 230
Pleasant Hill Shopping
Center................... CA RET -- 5,403 21,654 -- 13
Rancho San Diego Village
Shopping Center.......... CA RET -- 2,645 10,621 -- 2
Randall's Dairy Ashford.... TX RET -- 2,542 10,179 -- --
Randall's Austin Parkway... TX RET -- 2,139 8,563 -- --
Randall's Commons
Memorial................. TX RET -- 2,053 8,221 -- 1
Randall's Woodway.......... TX RET -- 3,075 12,313 -- --
Riverview Plaza Shopping
Center................... IL RET -- 2,656 10,663 -- --
Rockford Road Plaza........ MN RET -- 4,333 17,371 -- 35
Shoppes at Lago Mar........ FL RET 5,932 2,051 8,246 -- 66
Silverado Plaza Shopping
Center................... CA RET 5,203 1,928 7,753 -- --
Southwest Pavilion......... NV RET -- 1,575 8,140 -- 30
The Plaza at Delray........ FL RET 23,455 6,968 27,914 -- 4
Twin Oaks Shopping
Center................... CA RET -- 2,399 9,637 -- 47
Weslayan Plaza............. TX RET -- 7,842 31,409 -- 76
Woodlawn Point Shopping
Center................... GA RET 4,823 2,318 9,312 -- --
Ygnacio Plaza.............. CA RET 8,365 3,021 12,114 -- 38
-------- -------- ---------- ---- ------
$455,256 $550,635 $1,817,216 $ -- $5,300
======== ======== ========== ==== ======
<CAPTION>
GROSS AMOUNT CARRIED AT 12/31/97
----------------------------------
YEAR OF DEPRECIABLE
TOTAL ACCUMULATED CONSTRUCTION OR LIFE
PROPERTY LAND BUILDING COSTS(2) DEPRECIATION ACQUISITION (YEARS)
-------- -------- ---------- ---------- ------------ --------------- -----------
<S> <C> <C> <C> <C> <C> <C>
Eastgate Plaza............. 2,122 8,588 10,710 20 1997 5-40
Five Points Shopping
Center................... 5,412 21,783 27,195 50 1997 5-40
Granada Village............ 6,533 26,423 32,956 60 1997 5-40
Kendall Mall............... 7,069 28,332 35,401 65 1997 5-40
La Jolla Village........... 6,936 27,801 34,737 63 1997 5-40
Lakeshore Plaza Shopping
Center................... 6,706 26,939 33,645 61 1997 5-40
Latham Farms............... 12,327 49,373 61,700 113 1997 5-40
Long Gate Shopping
Center................... 9,662 38,677 48,339 88 1997 5-40
Manhattan Village Shopping
Center................... 16,484 66,808 83,292 152 1997 5-40
Pleasant Hill Shopping
Center................... 5,403 21,667 27,070 49 1997 5-40
Rancho San Diego Village
Shopping Center.......... 2,645 10,623 13,268 24 1997 5-40
Randall's Dairy Ashford.... 2,542 10,179 12,721 23 1997 5-40
Randall's Austin Parkway... 2,139 8,563 10,702 20 1997 5-40
Randall's Commons
Memorial................. 2,053 8,222 10,275 19 1997 5-40
Randall's Woodway.......... 3,075 12,313 15,388 28 1997 5-40
Riverview Plaza Shopping
Center................... 2,656 10,663 13,319 24 1997 5-40
Rockford Road Plaza........ 4,333 17,406 21,739 40 1997 5-40
Shoppes at Lago Mar........ 2,051 8,312 10,363 19 1997 5-40
Silverado Plaza Shopping
Center................... 1,928 7,753 9,681 18 1997 5-40
Southwest Pavilion......... 1,575 8,170 9,745 19 1997 5-40
The Plaza at Delray........ 6,968 27,918 34,886 64 1997 5-40
Twin Oaks Shopping
Center................... 2,399 9,684 12,083 22 1997 5-40
Weslayan Plaza............. 7,842 31,485 39,327 72 1997 5-40
Woodlawn Point Shopping
Center................... 2,318 9,312 11,630 21 1997 5-40
Ygnacio Plaza.............. 3,021 12,152 15,173 26 1997 5-40
-------- ---------- ---------- ------
$550,635 $1,822,516 $2,373,151 $4,153
======== ========== ========== ======
</TABLE>
F-40
<PAGE> 173
AMB PROPERTY, L.P.
SCHEDULE III (CONTINUED)
CONSOLIDATED REAL ESTATE AND ACCUMULATED DEPRECIATION
AS OF DECEMBER 31, 1997
(IN THOUSANDS)
A summary of activity for real estate and accumulated depreciation for the
year ended December 31, 1997 is as follows:
<TABLE>
<CAPTION>
1997
----------
<S> <C>
INVESTMENTS IN REAL ESTATE:
Balance at beginning of year.............................. $ --
Acquisition of Properties(5)........................... 2,367,851
Improvements........................................... 5,300
----------
Balance at end of year.................................... $2,373,151
==========
ACCUMULATED DEPRECIATION:
Balance at beginning of year.............................. $ --
Depreciation expense................................... 4,153
----------
Balance at end of year.................................... $ 4,153
==========
</TABLE>
- ---------------
(1) As of December 31, 1997, Properties with a net book value of $170,979 serve
as collateral for outstanding indebtedness under a $73,000 secured debt
facility.
(2) As of December 31, 1997, the aggregate cost for federal income tax purposes
of investments in real estate was approximately $2,231,504.
(3) Consists of two properties with seven buildings in Los Angeles and one
building in Anaheim.
(4) Consists of two properties with five buildings in Houston and 18 buildings
in Dallas.
(5) As discussed in the "Notes to Consolidated Financial
Statements -- Organization and Formation of the Company," the Company
acquired Properties with a value of $2,216,137 in exchange for common stock
units.
F-41
<PAGE> 174
AMB PROPERTY CORPORATION
CONSOLIDATED BALANCE SHEETS
AS OF DECEMBER 31, 1997 AND MARCH 31, 1998
(UNAUDITED, IN THOUSANDS, EXCEPT SHARE AMOUNTS)
ASSETS
<TABLE>
<CAPTION>
DECEMBER 31, MARCH 31,
1997 1998
------------ ----------
<S> <C> <C>
Investments in real estate:
Land and improvements..................................... $ 550,635 $ 618,956
Buildings and improvements................................ 1,822,516 2,045,834
Construction in progress.................................. 69,848 91,092
---------- ----------
Total investments in real estate.................. 2,442,999 2,755,882
Accumulated depreciation and amortization................. (4,153) (15,834)
---------- ----------
Net investments in real estate.................... 2,438,846 2,740,048
Cash and cash equivalents................................... 39,968 28,584
Other assets................................................ 27,441 29,558
---------- ----------
Total assets...................................... $2,506,255 $2,798,190
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Debt:
Secured debt.............................................. 535,652 610,111
Unsecured credit facility................................. 150,000 312,000
---------- ----------
Total debt........................................ 685,652 922,111
Other liabilities........................................... 49,350 81,611
Payable to affiliates....................................... 38,071 --
---------- ----------
Total liabilities................................. 773,073 1,003,722
Commitments and contingencies............................... -- --
Minority interests.......................................... 65,152 123,763
Stockholders' equity:
Preferred stock, $.01 par value, 100,000,000 shares
authorized, none issued or outstanding................. -- --
Common stock, $.01 par value, 500,000,000 shares
authorized, 85,874,513 issued and outstanding.......... 859 859
Additional paid-in capital................................ 1,667,171 1,669,846
Retained earnings......................................... -- --
---------- ----------
Total stockholders' equity........................ 1,668,030 1,670,705
---------- ----------
Total liabilities and stockholders' equity........ $2,506,255 $2,798,190
========== ==========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-42
<PAGE> 175
AMB PROPERTY CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 1997 AND 1998
(UNAUDITED, IN THOUSANDS, EXCEPT SHARE AMOUNTS)
<TABLE>
<CAPTION>
FOR THE THREE MONTHS ENDED
MARCH 31,
---------------------------
1997 1998
----------- ------------
<S> <C> <C>
REVENUES
Rental revenues........................................... $ -- $ 74,602
Investment management and other income.................... 5,112 1,183
---------- -----------
Total revenues.................................... 5,112 75,785
---------- -----------
OPERATING EXPENSES
Property operating expenses............................... -- 10,004
Real estate taxes......................................... -- 10,248
Interest.................................................. -- 11,841
Depreciation and amortization............................. -- 11,786
General and administrative................................ -- 2,718
Investment management expenses............................ 3,873 --
---------- -----------
Total operating expenses.......................... 3,873 46,597
---------- -----------
Income from operations before minority
interests....................................... 1,239 29,188
---------- -----------
Minority interests' share of net income................... -- (1,282)
---------- -----------
Net income available to common stockholders....... $ 1,239 $ 27,906
========== ===========
INCOME PER SHARE OF COMMON STOCK
Basic..................................................... $ 0.24 $ 0.32
========== ===========
Diluted................................................... $ 0.24 $ 0.32
========== ===========
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING
Basic..................................................... 5,079,855 85,874,513
========== ===========
Diluted................................................... 5,079,855 86,284,736
========== ===========
DISTRIBUTIONS DECLARED PER SHARE OF COMMON STOCK............ $ 0.17 $ 0.34
========== ===========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-43
<PAGE> 176
AMB PROPERTY CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31, 1997 AND 1998
(UNAUDITED, IN THOUSANDS)
<TABLE>
<CAPTION>
FOR THE THREE MONTHS
ENDED MARCH 31,
---------------------
1997 1998
------- ----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income.................................................. $1,239 $ 27,906
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization............................. -- 11,786
Straight-line rents....................................... -- (2,825)
Amortization of debt premiums and financing costs......... -- (669)
Minority interests' share of net income................... -- 1,282
Equity in income of AMB Investment Management............. -- (126)
Changes in assets and liabilities:
Other assets.............................................. 101 (4,512)
Other liabilities......................................... 219 1,978
------ ---------
Net cash provided by operating activities......... 1,559 34,820
CASH FLOWS FROM INVESTING ACTIVITIES
Cash paid for property acquisitions......................... -- (149,874)
Additions to land and building improvements................. -- (3,648)
Additions to tenant improvements and leasing costs.......... -- (2,862)
Additions to construction in progress....................... -- (5,065)
Reduction of payable to affiliates in connection with
Formation Transactions.................................... -- (38,071)
------ ---------
Net cash used in investing activities............. -- (199,520)
CASH FLOWS FROM FINANCING ACTIVITIES
Borrowings on unsecured credit facility..................... -- 162,000
Borrowings on secured debt.................................. -- 1,118
Payments on secured debt.................................... -- (9,429)
Distributions to minority interests......................... -- (373)
Distributions to minority interests of Predecessor.......... (137) --
Distributions to stockholders of Predecessor................ (4,003) --
Principal payment of notes receivable from stockholders of
Predecessor............................................... 328 --
------ ---------
Net cash provided by (used in) financing
activities....................................... (3,812) 153,316
Net decrease in cash and cash equivalents................... (2,253) (11,384)
Cash and cash equivalents at beginning of period............ 3,093 39,968
------ ---------
Cash and cash equivalents at end of period.................. $ 840 $ 28,584
====== =========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash paid during the period for:
Interest.................................................. $ -- $ 13,457
Property acquisitions:
Acquisitions of properties................................ $ -- $ 296,143
Assumption of secured debt................................ -- (83,515)
Minority interests contribution........................... -- (62,754)
------ ---------
Cash paid for property acquisitions....................... $ -- $ 149,874
====== =========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-44
<PAGE> 177
AMB PROPERTY CORPORATION
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
FOR THE THREE MONTHS ENDED MARCH 31, 1998
(UNAUDITED, IN THOUSANDS, EXCEPT SHARE AMOUNTS)
<TABLE>
<CAPTION>
COMMON STOCK
-------------------- ADDITIONAL
NUMBER PAID-IN RETAINED
OF SHARES AMOUNT CAPITAL EARNINGS TOTAL
---------- ------ ---------- -------- ----------
<S> <C> <C> <C> <C> <C>
BALANCE AT DECEMBER 31, 1997...... 85,874,513 $859 $1,667,171 $ -- $1,668,030
Net income...................... -- -- -- 27,906 27,906
Reallocation of Limited
Partners' interests in
Operating Partnership........ -- -- 4,181 -- 4,181
Distributions declared to AMB
Property Corporation
stockholders................. -- -- (1,506) (27,906) (29,412)
---------- ---- ---------- -------- ----------
BALANCE AT MARCH 31, 1998......... 85,874,513 $859 $1,669,846 $ -- $1,670,705
========== ==== ========== ======== ==========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-45
<PAGE> 178
AMB PROPERTY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED, IN THOUSANDS, EXCEPT SHARE, UNIT, SQUARE FEET AND PERCENTAGE DATA)
1. ORGANIZATION AND FORMATION
AMB Property Corporation, a Maryland Corporation (the "Company"), commenced
operations as a fully integrated real estate company effective with the
completion of its initial public offering (the "IPO") on November 26, 1997. The
Company expects to be taxed as a real estate investment trust ("REIT") under
Sections 856 through 860 of the Internal Revenue Code of 1986, as amended (the
"Code"). The Company, through its controlling interest in its subsidiary AMB
Property, L.P., a Delaware limited partnership (the "Operating Partnership"), is
engaged in the ownership, operation, management, acquisition, renovation,
expansion and development of industrial properties and community shopping
centers in target markets nationwide. Unless the context otherwise requires, the
"Company" means AMB Property Corporation, the Operating Partnership and its
other controlled subsidiaries.
The Company and the Operating Partnership were formed shortly before
consummation of the IPO. AMB Institutional Realty Advisors, Inc., a California
corporation and registered investment advisor (the "Predecessor") formed AMB
Property Corporation, a wholly owned subsidiary, and merged with and into the
Company (the "Merger") in exchange for 4,746,616 shares of the Company's Common
Stock. In addition, the Company and the Operating Partnership acquired, through
a series of mergers and other transactions, 31.8 million rentable square feet of
industrial property and 6.3 million rentable square feet of retail property in
exchange for 65,022,185 shares of the Company's Common Stock, 2,542,163 units
representing limited partnership interests in the Operating Partnership, the
assumption of debt and, to a limited extent, cash. The net assets of the
Predecessor and the properties acquired with Common Stock were contributed to
the Operating Partnership for 69,768,801 units. The purchase method of
accounting was applied to the acquisition of the properties. Collectively, the
Merger and the other formation transactions described above are referred to as
the "Formation Transactions."
On November 26, 1997, the Company completed its IPO of 16,100,000 shares of
Common Stock, $0.01 par value per share (the "Common Stock") for $21.00 per
share, resulting in gross offering proceeds of approximately $338,100. Net of
underwriters' commission and offering costs aggregating $38,068, the Company
received approximately $300,032 in proceeds from the IPO. The net proceeds of
the IPO were used to repay indebtedness, to purchase interests from certain
investors who elected not to receive shares or units in connection with the
Formation Transactions, to fund property acquisitions, and for general corporate
purposes, including working capital.
As of March 31, 1998, the Company owned an approximate 95.9% general
partner interest in the Operating Partnership. The remaining 4.1% limited
partner interest is owned by nonaffiliated investors. For local law purposes,
properties in certain states are owned through limited partnerships and limited
liability companies owned 99% by the Operating Partnership and 1% by a wholly
owned subsidiary of the Company. The ownership of such properties through such
entities does not materially affect the Company's overall ownership of the
interests in the properties. As the sole general partner of the Operating
Partnership, the Company has the full, exclusive and complete responsibility and
discretion in the day-to-day management and control of the Operating
Partnership.
In connection with the Formation Transactions, the Operating Partnership
formed AMB Investment Management Corporation, a Maryland corporation ("AMB
Investment Management"). The Operating Partnership purchased 100% of AMB
Investment Management's non-voting preferred stock (representing a 95% economic
interest therein). Certain executive officers of the Company collectively
purchased 100% of the Investment Management Subsidiary's voting common stock
(representing a 5% economic interest therein). The Operating Partnership
accounts for its investment in AMB Investment Management using the equity method
of accounting. AMB Investment Management was formed to succeed to the
Predecessor's investment management business of providing real estate investment
management services on a fee basis to clients.
F-46
<PAGE> 179
AMB PROPERTY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED, IN THOUSANDS, EXCEPT SHARE, UNIT, SQUARE FEET AND PERCENTAGE DATA)
As of March 31, 1998, the Company owned 155 Properties, consisting of 118
industrial properties (the "Industrial Properties") and 37 retail properties
(the "Retail Properties") located in 28 markets throughout the United States.
The Industrial Properties (comprising 415 buildings), principally warehouse
distribution properties, encompass approximately 44.0 million rentable square
feet and, as of March 31, 1998, were 94.6% leased to over 1,000 tenants. The
Retail Properties (comprising 37 centers), principally grocer-anchored community
shopping centers, encompass approximately 6.8 million rentable square feet and,
as of the same date, were 94.6% leased to over 900 tenants. The Industrial
Properties and the Retail Properties collectively are referred to as the
"Properties."
2. INTERIM FINANCIAL STATEMENTS
The consolidated financial statements included herein have been prepared
pursuant to the rules and regulations of the Securities and Exchange Commission.
Accordingly, certain information and note disclosures normally included in the
annual financial statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted. The consolidated financial
statements for prior periods have been reclassified to conform to current
classifications with no effect on results of operations. In the opinion of
management, the accompanying unaudited consolidated financial statements contain
all adjustments, of a normal recurring nature, necessary for a fair presentation
of the company's consolidated financial position and results of operations for
the interim periods.
The interim financial information for the three months ended March 31,
1997, represents the results of the Predecessor, an investment manager. The
Predecessor's revenues consisted primarily of fees earned in connection with
real estate investment management services. As such, information presented for
the three months ended March 31, 1997 and 1998 is not comparable given the
differences in lines of business between the Company and the Predecessor.
The interim results of the three months ended March 31, 1997 and 1998 are
not necessarily indicative of the results expected for the entire year. These
financial statements should be read in conjunction with the financial statements
and the notes thereto included in the Company's Annual Report on Form 10-K for
the year ended December 31, 1997.
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
3. DEBT
In connection with the Formation Transactions, the Company assumed certain
secured debt with an aggregate principal value of $517,031 and a fair value of
$535,613. The difference between the principal value and the fair value was
recorded as a debt premium. The debt premium is being amortized into interest
expense over the term of the related debt instruments using the effective
interest method. As of March 31, 1998, the unamortized debt premium was $17,542.
As of March 31, 1998, debt, excluding unamortized debt premiums, consists of the
following:
<TABLE>
<S> <C>
Secured debt, varying interest rates from 7.01% to 10.39%,
due November 1998 to January 2014......................... $592,569
Unsecured credit facility, variable interest at LIBOR plus
110 basis points, (6.79% at March 31, 1998) due November
2000...................................................... 312,000
--------
Total Debt........................................ $904,569
========
</TABLE>
F-47
<PAGE> 180
AMB PROPERTY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED, IN THOUSANDS, EXCEPT SHARE, UNIT, SQUARE FEET AND PERCENTAGE DATA)
Secured debt generally requires monthly principal and interest payments.
The secured debt is secured by deeds of trust or mortgages on certain
Properties. All of the secured debt bears interest at fixed rates, except for
one loan of $5,623 which bears interest at either LIBOR plus 275 basis points
(8.44% at March 31, 1998) or prime plus 50 basis points, at the borrower's
option. The secured debt has various financial and non-financial covenants.
Additionally, certain of the secured debt is cross-collateralized. The
weighted-average fixed interest rate on secured debt at March 31, 1998, was
8.01%.
The Company has a $500,000 unsecured revolving credit agreement (the
"Credit Facility") with Morgan Guaranty Trust Company of New York as agent, and
a syndicate of 12 other banks. The Credit Facility has a term of three years,
and is subject to a fee that accrues on the daily average undrawn funds, which
varies between 15 and 25 basis points of the undrawn funds based on the
Company's credit rating. The Credit Facility has various financial and
non-financial covenants.
Interest capitalized related to construction projects for the three months
ended March 31, 1998, was $1,253. There was no capitalized interest for periods
prior to the Formation Transactions.
The scheduled maturities of the secured debt as of March 31, 1998 are as
follows:
<TABLE>
<S> <C>
1998...................................................... $ 53,712
1999...................................................... 10,965
2000...................................................... 14,427
2001...................................................... 38,582
2002...................................................... 63,675
Thereafter................................................ 411,208
--------
$592,569
========
</TABLE>
The 1998 maturities included $35,000 of secured debt that was assumed in
connection with certain property acquisitions, and which was repaid in full
subsequent to March 31, 1998.
4. MINORITY INTERESTS
Minority interests in the Company represent the limited partnership
interests in the Operating Partnership and interests held by certain third
parties in 11 real estate joint ventures that are consolidated for financial
reporting purposes. Such investments are consolidated because (i) the Company
owns a majority interest, or (ii) the Company holds significant control over the
entity through a 50% or greater ownership interest combined with the ability to
control all major operating decisions such as approval of budgets, selection of
property managers and changes in financing.
The following table sets forth the minority interest ownership held by
certain joint ventures ("Minority Interest -- Joint Ventures") and the limited
partnership interests' in the Operating Partnership ("Minority
Interest -- Limited Partners") as of March 31, 1998.
<TABLE>
<S> <C>
Minority Interest -- Joint Ventures....................... $ 52,867
Minority Interest -- Limited Partners..................... 70,896
--------
$123,763
========
</TABLE>
5. STOCKHOLDERS' EQUITY
On March 9, 1998, the Company and the Operating Partnership declared a
quarterly cash distribution of $0.3425 per share of common stock, payable on
April 3, 1998, to stockholders and unitholders of record as of March 18, 1998.
F-48
<PAGE> 181
AMB PROPERTY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED, IN THOUSANDS, EXCEPT SHARE, UNIT, SQUARE FEET AND PERCENTAGE DATA)
6. EARNINGS PER SHARE
For purposes of calculating diluted earnings per share for the three months
ended March 31, 1998, no adjustment to net income available to common
stockholders was necessary, as the Company's only dilutive securities
outstanding for such period were stock options issued under its stock incentive
plan. The effect of the stock options was to increase weighted average shares
outstanding by 410,223 for the three months ended March 31, 1998. Such dilution
was computed using the treasury stock method. The Predecessor had no dilutive
securities outstanding during the three months ended March 31, 1997.
7. PRO FORMA INFORMATION
The following summary unaudited pro forma financial information for the
three months ended March 31, 1997 has been prepared as if the Formation
Transactions, the IPO (as described in Note 1) and property acquisitions and
dispositions during the year ended December 31, 1997 had occurred on January 1,
1997. In the opinion of management, the pro forma financial information does not
purport to present the consolidated results that would have occurred if the
aforementioned transactions had been consummated on January 1, 1997, nor does it
purport to present the consolidated results of operations for future periods.
<TABLE>
<CAPTION>
FOR THE THREE
MONTHS ENDED
MARCH 31, 1997
--------------
<S> <C>
Total revenues......................................... $ 68,622
Income from operations before minority interests....... 24,327
Net income available to common stockholders............ 23,342
Income Per Share of Common Stock
Basic................................................ $ 0.27
-----------
Diluted.............................................. $ 0.27
-----------
Weighted Average Common Shares Outstanding
Basic................................................ 85,874,513
===========
Diluted.............................................. 86,284,736
===========
</TABLE>
F-49
<PAGE> 182
AMB PROPERTY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED, IN THOUSANDS, EXCEPT SHARE, UNIT, SQUARE FEET AND PERCENTAGE DATA)
8. OPERATING PARTNERSHIP
As of March 31, 1998, the Company owned a 95.9% general partner interest in
the Operating Partnership. Therefore, the Company consolidates the Operating
Partnership and records the remaining 4.1% limited partner interests as minority
interests in the consolidated financial statements. The Operating Partnership
commenced operations as a fully integrated real estate company in connection
with the Formation Transactions. The following table sets forth summary
financial information of the Operating Partnership as of and for the period from
December 31, 1997 to March 31, 1998:
<TABLE>
<S> <C>
Investments in real estate, net......................... $ 2,740,048
Total assets............................................ 2,798,190
Debt.................................................... 922,111
Partners' capital....................................... 1,741,601
Revenues................................................ 75,785
Income from operations before minority interest......... 29,188
Net income.............................................. 28,726
Net income per unit:
Basic................................................. $ 0.32
Diluted............................................... $ 0.32
Weighted average units outstanding:
Basic................................................. 88,428,969
Diluted............................................... 88,839,192
</TABLE>
Following is a statement of partners' capital of the Operating Partnership
for the three months ended March 31, 1998:
<TABLE>
<CAPTION>
GENERAL PARTNER LIMITED PARTNERS
------------------------ --------------------
UNITS AMOUNT UNITS AMOUNT TOTAL
---------- ---------- --------- ------- ----------
<S> <C> <C> <C> <C> <C>
December 31, 1997............... 85,874,513 $1,668,030 2,542,163 $49,368 $1,717,398
Contributions................... -- -- 1,106,444 25,760 25,760
Net income...................... -- 27,906 -- 820 28,726
Reallocation.................... -- 4,181 -- (4,181) --
Distributions................... -- (29,412) -- (871) (30,283)
---------- ---------- --------- ------- ----------
March 31, 1998.................. 85,874,513 $1,670,705 3,648,607 $70,896 $1,741,601
========== ========== ========= ======= ==========
</TABLE>
9. SUBSEQUENT EVENTS
On April 2, 1998, the Operating Partnership filed a registration statement
with the Securities and Exchange Commission for the issuance of senior unsecured
notes with an aggregate principal amount of $350,000. If such transaction is
consummated, the Company anticipates that it will use the net proceeds from the
issuance to repay borrowings on the Credit Facility and for general working
capital requirements.
In April 1998, the Company repaid approximately $35,000 in assumed debt
related to properties acquired during the quarter ended March 31, 1998.
F-50
<PAGE> 183
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors of
AMB Property Corporation:
We have audited the accompanying consolidated balance sheets of AMB
Property Corporation and subsidiaries as of December 31, 1996 and 1997, and the
related consolidated statements of income, stockholders' equity and cash flows
for each of the three years in the period ended December 31, 1997. These
financial statements and the schedule referred to below are the responsibility
of the Company's management. Our responsibility is to express an opinion on
these financial statements and the schedule based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of AMB Property Corporation and
subsidiaries as of December 31, 1996 and 1997, and the results of its operations
and its cash flows for each of the three years in the period ended December 31,
1997, in conformity with generally accepted accounting principles.
Our audits were made for the purpose of forming an opinion on the basic
financial statements taken as a whole. The schedule listed in the index to the
financial statements is presented for purposes of complying with the Securities
and Exchange Commission rules and is not a required part of the basic financial
statements. This schedule has been subjected to the auditing procedures applied
in the audits of the basic financial statements and, in our opinion, fairly
states in all material respects the financial data required to be set forth
therein in relation to the basic financial statements taken as a whole.
ARTHUR ANDERSEN LLP
San Francisco, California
January 27, 1998
F-51
<PAGE> 184
AMB PROPERTY CORPORATION
CONSOLIDATED BALANCE SHEETS
AS OF DECEMBER 31, 1996 AND 1997
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)
<TABLE>
<CAPTION>
1996 1997
------ ----------
<S> <C> <C>
ASSETS
Investments in real estate:
Land and improvements..................................... $ -- $ 550,635
Buildings and improvements................................ -- 1,822,516
Construction in progress.................................. -- 69,848
------ ----------
Total investments in real estate.................. -- 2,442,999
Accumulated depreciation and amortization................. -- (4,153)
------ ----------
Net investments in real estate.................... -- 2,438,846
Cash and cash equivalents................................... 3,093 39,968
Other assets................................................ 3,992 27,441
------ ----------
Total assets...................................... $7,085 $2,506,255
====== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Debt:
Secured debt.............................................. $ -- $ 535,652
Unsecured credit facility................................. -- 150,000
------ ----------
Total debt........................................ -- 685,652
Other liabilities........................................... 648 49,350
Payable to affiliates....................................... -- 38,071
------ ----------
Total liabilities................................. 648 773,073
------ ----------
Commitments and contingencies............................... -- --
Minority interests.......................................... 137 65,152
Stockholders' equity:
Preferred stock of AMB Property Corporation, $.01 par
value, 100,000,000 shares authorized, none issued or
outstanding............................................ -- --
Common stock of AMB Property Corporation, $.01 par value,
500,000,000 shares authorized, 85,874,513 issued and
outstanding............................................ -- 859
Additional paid-in capital of AMB Property Corporation.... -- 1,667,171
Common stock of Predecessor, no par value, 500,000,000
shares authorized, 5,181,450 issued and outstanding.... 1,349 --
Additional paid-in capital of Predecessor................. 1,298 --
Notes receivable from stockholders of Predecessor......... (869) --
Retained earnings......................................... 4,522 --
------ ----------
Total stockholders' equity........................ 6,300 1,668,030
------ ----------
Total liabilities and stockholders' equity........ $7,085 $2,506,255
====== ==========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-52
<PAGE> 185
AMB PROPERTY CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 1995, 1996 AND 1997
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)
<TABLE>
<CAPTION>
1995 1996 1997
---------- ---------- -----------
<S> <C> <C> <C>
REVENUES
Rental revenues..................................... $ -- $ -- $ 26,465
Investment management and other income.............. 16,865 23,991 29,597
---------- ---------- -----------
Total revenues.............................. 16,865 23,991 56,062
OPERATING EXPENSES
Property operating expenses......................... -- -- 5,312
Real estate taxes................................... -- -- 3,587
Interest............................................ -- -- 3,528
Depreciation and amortization....................... -- -- 4,195
General and administrative.......................... -- -- 1,197
Investment management expenses...................... 13,569 16,851 19,358
---------- ---------- -----------
Total operating expenses.................... 13,569 16,851 37,177
---------- ---------- -----------
Income from operations before minority
interests................................. 3,296 7,140 18,885
Minority interests' share of net income............... (34) (137) (657)
---------- ---------- -----------
Net income available to common
stockholders.............................. $ 3,262 $ 7,003 $ 18,228
========== ========== ===========
INCOME PER SHARE OF COMMON STOCK
Basic............................................ $ 0.64 $ 1.38 $ 1.39
========== ========== ===========
Diluted.......................................... $ 0.64 $ 1.38 $ 1.38
========== ========== ===========
Weighted Average Common Shares Outstanding
Basic............................................ 5,079,855 5,079,855 13,140,218
========== ========== ===========
Diluted.......................................... 5,079,855 5,079,855 13,168,036
========== ========== ===========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-53
<PAGE> 186
AMB PROPERTY CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1995, 1996 AND 1997
(IN THOUSANDS)
<TABLE>
<CAPTION>
1995 1996 1997
------- ------- ---------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income.................................................. $ 3,262 $ 7,003 $ 18,228
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization............................. -- -- 4,195
Straight-line rents....................................... -- -- (901)
Amortization of debt premiums and financing costs......... -- -- (266)
Minority interests' share of net income................... 34 137 657
Equity in income of AMB Investment Management............. -- -- (61)
Changes in assets and liabilities:
Other assets.............................................. (1,538) (249) (11,873)
Other liabilities......................................... 429 (25) 2,301
------- ------- ---------
Net cash provided by operating activities......... 2,187 6,866 12,280
CASH FLOWS FROM INVESTING ACTIVITIES
Additions to properties..................................... -- -- (222,497)
Additions to buildings improvements and leasing costs....... -- -- (1,769)
Additions to construction in progress....................... -- -- (2,606)
Cash paid for property in Formation Transactions, net of
cash acquired............................................. -- -- (5,935)
------- ------- ---------
Net cash used for investing activities............ -- -- (232,807)
CASH FLOWS FROM FINANCING ACTIVITIES
Issuance of common stock (net of $21,091 commission)........ -- -- 317,009
Borrowings on Credit Facility............................... 750 -- 150,000
Borrowings on secured debt.................................. -- -- 850
Repayment of Credit Facility................................ (750) -- (182,000)
Payments on secured debt.................................... -- -- (516)
Payment of financing fees................................... -- -- (900)
Dividends paid to Predecessor stockholders.................. (2,925) (5,262) (16,404)
Distributions paid to AMB Property Corporation
stockholders.............................................. -- -- (11,506)
Distributions to minority interests of Predecessor.......... -- (34) --
Principal payment of notes receivable from stockholders of
Predecessor............................................... 56 318 869
------- ------- ---------
Net cash provided by (used in) financing
activities...................................... (2,869) (4,978) 257,402
------- ------- ---------
Net increase (decrease) in cash and cash equivalents........ (682) 1,888 36,875
Cash and cash equivalents at beginning of period............ 1,887 1,205 3,093
------- ------- ---------
Cash and cash equivalents at end of period.................. $ 1,205 $ 3,093 $ 39,968
======= ======= =========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-54
<PAGE> 187
AMB PROPERTY CORPORATION
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1995, 1996 AND 1997
(IN THOUSANDS, EXCEPT SHARES)
<TABLE>
<CAPTION>
COMMON STOCK NOTES
------------------- ADDITIONAL RECEIVABLE
NUMBER OF PAID-IN RETAINED FROM
SHARES AMOUNT CAPITAL EARNINGS STOCKHOLDERS TOTAL
---------- ------ ---------- -------- ------------ ----------
<S> <C> <C> <C> <C> <C> <C>
PREDECESSOR
Balance at December 31, 1994........... 4,978,260 $ 699 $ 1,298 $ 2,444 $(593) $ 3,848
Net income........................... -- -- -- 3,262 -- 3,262
Dividends declared and paid.......... -- -- -- (2,925) -- (2,925)
Principal payment of notes receivable
from stockholders.................. -- -- -- -- 56 56
Issuance of common stock for notes... 101,595 343 -- -- (343) --
---------- ------ ---------- -------- ----- ----------
Balance at December 31, 1995........... 5,079,855 1,042 1,298 2,781 (880) 4,241
Net income........................... -- -- -- 7,003 -- 7,003
Dividends declared and paid.......... -- -- -- (5,262) -- (5,262)
Principal payment of notes receivable
from stockholders.................. -- -- -- -- 318 318
Issuance of common stock for notes... 101,595 307 -- -- (307) --
---------- ------ ---------- -------- ----- ----------
Balance at December 31, 1996........... 5,181,450 1,349 1,298 4,522 (869) 6,300
AMB PROPERTY CORPORATION
Net income........................... -- -- -- 18,228 -- 18,228
Dividends declared and paid to
Predecessor stockholders........... -- (990) (1,298) (14,116) -- (16,404)
Principal payment of notes receivable
from stockholders.................. -- -- -- -- 869 869
Exchange of Predecessor shares for
shares of AMB Property Corporation,
net................................ (434,834) (312) 312 -- -- --
Issuance of common stock for
Properties......................... 65,022,185 651 1,369,740 -- -- 1,370,391
Issuance of common stock, net of
Offering costs of $38,068.......... 16,100,000 161 299,871 -- -- 300,032
Issuance of restricted stock......... 5,712 -- 120 -- -- 120
---------- ------ ---------- -------- ----- ----------
Distributions paid to AMB Property
Corporation stockholders........... -- -- (2,872) (8,634) -- (11,506)
---------- ------ ---------- -------- ----- ----------
Balance at December 31, 1997........... 85,874,513 $ 859 $1,667,171 $ -- $ -- $1,668,030
========== ====== ========== ======== ===== ==========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-55
<PAGE> 188
AMB PROPERTY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT SHARE AND SQUARE FEET DATA)
1. ORGANIZATION AND FORMATION OF COMPANY
AMB Property Corporation, a Maryland corporation (the "Company"), commenced
operations as a fully integrated real estate company effective with the
completion of its initial public offering (the "Offering") on November 26, 1997.
The Company will elect to be taxed as a real estate investment trust ("REIT")
under Sections 856 through 860 of the Internal Revenue Code of 1986, as amended
(the "Code"). The Company, through its controlling interest in its subsidiary
AMB Property, L.P., a Delaware limited partnership (the "Operating
Partnership"), is engaged in the ownership, operation, management, acquisition,
renovation, expansion, and development of industrial properties and community
shopping centers in target markets nationwide. Unless the context otherwise
requires, the "Company" shall include AMB Property Corporation, the Operating
Partnership and its controlled subsidiaries.
The Company and the Operating Partnership were formed shortly before
consummation of the Offering. AMB Institutional Realty Advisors, Inc., a
California corporation and registered investment advisor (the "Predecessor"),
formed AMB Property Corporation, a wholly owned subsidiary, and merged with and
into the Company (the "Merger") in exchange for 4,746,616 shares of the
Company's Common Stock. In addition, the Company and the Operating Partnership
acquired, through a series of mergers and other transactions, 31.8 million
rentable square feet of industrial property and 6.3 million rentable square feet
of retail property in exchange for 65,022,185 shares of the Company's Common
Stock, 2,542,163 units representing limited partnership interests in the
Operating Partnership, the assumption of debt, and to a limited extent, cash.
The net assets of the Predecessor and the properties acquired with Common Stock
were contributed to the Operating Partnership for 69,768,801 units. The purchase
method of accounting was applied to the acquisition of the properties.
Collectively, the Merger and the other formation transactions described above
are referred to as the "Formation Transactions."
On November 26, 1997, the Company completed its Offering of 16,100,000
shares of Common Stock, $0.01 par value per share (the "Common Stock") for
$21.00 per share, resulting in gross offering proceeds of approximately
$338,100. Net of underwriters' commission and offering costs aggregating
$38,068, the Company received approximately $300,032 in proceeds from the
Offering. The net proceeds of the Offering were used to repay indebtedness, to
purchase interests from certain investors who elected not to receive shares or
units in connection with the Formation Transactions, to fund property
acquisitions, and for general corporate purposes, including working capital.
As of December 31, 1997, the Company owned an approximate 97.1% general
partner interest in the Operating Partnership. The remaining 2.9% limited
partner interest is owned by unaffiliated investors. For local law purposes,
properties in certain states are owned through limited partnerships and limited
liability companies owned 99% by the Operating Partnership and 1% by a wholly
owned subsidiary of the Company. The ownership of such Properties through such
entities does not materially affect the Company's overall ownership of the
interests in the Properties. As the sole general partner of the Operating
Partnership, the Company has the full, exclusive and complete responsibility and
discretion in the management and control of the Operating Partnership.
In connection with the Formation Transactions, the Operating Partnership
formed AMB Investment Management Corporation, a Maryland corporation ("AMB
Investment Management"). The Operating Partnership purchased 100% of AMB
Investment Management's non-voting preferred stock (representing a 95% economic
interest). Certain executive officers of the Company collectively purchased 100%
of the Investment Management Subsidiary's voting common stock (representing a 5%
economic interest therein). The Operating Partnership accounts for its
investment in AMB Investment Management using the equity method of accounting.
AMB Investment Management was formed to succeed to the Predecessor's investment
management business of providing real estate investment management services on a
fee basis to clients.
F-56
<PAGE> 189
AMB PROPERTY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS, EXCEPT SHARE AND SQUARE FEET DATA)
As of December 31, 1997, the Company owned 37.3 million rentable square
feet of industrial properties (the "Industrial Properties"), principally
warehouse distribution properties, that were 95.7% leased and 6.2 million
rentable square feet of retail properties (the "Retail Properties"), principally
grocer-anchored community shopping centers, that were 96.1% leased. The
Industrial Properties and the Retail Properties collectively are referred to as
the "Properties."
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
GENERALLY ACCEPTED ACCOUNTING PRINCIPLES
These financial statements have been prepared in accordance with generally
accepted accounting principles using the accrual method of accounting. The
preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
PRINCIPLES OF CONSOLIDATION
The accompanying consolidated financial statements include the financial
position, results of operations and cash flows of the Company, its wholly owned
qualified REIT subsidiaries, the Operating Partnership, and eight joint ventures
(the "Joint Ventures") in which the Company has a controlling interest.
Third-party equity interests in the Operating Partnership and the Joint Ventures
are reflected as minority interests in the consolidated financial statements.
All significant intercompany amounts have been eliminated.
BASIS OF PRESENTATION
The consolidated financial statements of the Company for 1997 include the
results of operations of the Company, including property operations for the
period from November 26, 1997 (the commencement of operations as a fully
integrated real estate company) to December 31, 1997 and the results of the
Company's Predecessor, an investment manager, for the period from January 1,
1997 to November 25, 1997.
INVESTMENTS IN REAL ESTATE
Investments in real estate are stated at depreciated cost and are reviewed
for impairment on a property-by-property basis whenever events or changes in
circumstances indicate that the carrying amount of a property may not be
recoverable. Impairment is recognized when estimated expected future cash flows
(undiscounted and without interest charges)are less than the carrying amount of
the property. To the extent an impairment has occurred, the excess of the
carrying amount of the property over its estimated fair value will be charged to
income. As of December 31, 1997, there were no impairments of the carrying
values of the Properties.
Depreciation and amortization are calculated using the straight-line method
over the estimated useful lives of the investments. The estimated lives are as
follows:
<TABLE>
<S> <C>
Land improvements................................... 5 to 40 years
Buildings and improvements.......................... 5 to 40 years
Tenant improvements and leasing costs............... Term of the related lease
</TABLE>
The cost of buildings and improvements includes the purchase price of the
property or interest in property, legal fees and acquisition costs and interest,
property taxes, and other costs incurred during the period of construction.
F-57
<PAGE> 190
AMB PROPERTY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS, EXCEPT SHARE AND SQUARE FEET DATA)
Expenditures for maintenance and repairs are charged to operations as
incurred. Significant renovations or betterments that extend the economic useful
life of assets are capitalized.
Project costs directly associated with the development and construction of
a real estate project are capitalized as construction in progress. In addition,
interest, real estate taxes and other costs are capitalized during the
construction period.
CASH AND CASH EQUIVALENTS
Cash and cash equivalents include cash held in financial institutions and
other highly liquid short-term investments with original maturities of three
months or less. Cash and cash equivalents as of December 31, 1997 include
restricted cash of $8,074, which represents amounts held in escrow in connection
with property purchases and capital improvements.
DEFERRED FINANCING
Costs incurred in connection with financing are capitalized and amortized
to interest expense on a straight-line basis (which approximates the effective
interest method) over the term of the related loan. As of December 31, 1997,
deferred financing fees were $871, net of accumulated amortization of $29. Such
amounts are included in Other Assets on the consolidated balance sheet.
FAIR VALUE OF FINANCIAL INSTRUMENTS
The Company's financial instruments include short-term investments,
accounts receivable, accounts payable, accrued expenses, construction loans
payable, mortgage debt, secured debt, unsecured notes payable and an unsecured
credit facility. The fair value of these instruments approximates its carrying
or contract values.
DEBT PREMIUMS
In connection with the Formation Transactions, the Company assumed certain
secured debt with an aggregate principal value of $517,031 and a fair value of
$535,613. The difference between the principal value and the fair value was
recorded as a debt premium. The debt premium is being amortized into interest
expense over the term of the related debt instrument using the effective
interest method. As of December 31, 1997, the unamortized debt premium was
$18,286.
MINORITY INTERESTS
Minority interests in the Company represent the limited partnership
interests in the Operating Partnership and interests held by certain third
parties in eight real estate joint ventures that are consolidated for financial
reporting purposes. Such investments are consolidated because (i) the Company
owns a majority owner interest, or (ii) the Company has significant control over
the entity through a 50% or greater ownership interest combined with the ability
to control major operating decisions such as approval of budgets, selection of
property managers and change in financing.
F-58
<PAGE> 191
AMB PROPERTY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS, EXCEPT SHARE AND SQUARE FEET DATA)
The following table sets forth the minority interest ownership held by
certain joint ventures ("Minority Interest -- Joint Ventures") and the limited
partnership interests in the Operating Partnership ("Minority
Interest -- Limited Partners") as of December 31, 1997.
<TABLE>
<S> <C>
Minority Interest -- Joint Ventures................ $15,784
Minority Interest -- Limited Partners.............. 49,368
-------
$65,152
=======
</TABLE>
REVENUES
The Company, as a lessor, retains substantially all of the benefits and
risks of ownership of the Properties and accounts for its leases as operating
leases. Rental revenues are recognized on a straight-line basis over the term of
the leases.
Reimbursements from tenants for real estate taxes and other recoverable
operating expenses are recognized as revenue in the period the applicable
expenses are incurred.
INVESTMENT MANAGEMENT AND OTHER INCOME
Investment management income consists primarily of professional fees
generated from the Predecessors' real estate investment management services for
periods prior to the Formation Transactions and the Company's equity in the
earnings of AMB Investment Management for periods subsequent to the Formation
Transactions. Other income consists primarily of interest income on cash and
cash equivalents.
INVESTMENT MANAGEMENT EXPENSE
Investment management expense represents the operating expenses of the
Predecessor for periods prior to November 26, 1997 and consists of salaries and
benefits and other management related expenses.
EARNINGS PER SHARE
For purposes of calculating diluted earnings per share for the year ended
December 31, 1997, no adjustment to net income available to common stockholders
was necessary, as the Company's only dilutive securities outstanding for such
period were stock options issued under its stock incentive plan. The effect of
the stock options was to increase weighted average shares outstanding by 27,818
shares for the year ended December 31, 1997. Such dilution was computed using
the treasury stock method. The Predecessor had no dilutive securities
outstanding during the years ended December 31, 1995 and 1996.
RECLASSIFICATIONS
The consolidated financial statements for prior periods have been
reclassified to conform with current classifications with no effect on results
of operations.
FUTURE ACCOUNTING PRONOUNCEMENTS
In June of 1997, the FASB issued SFAS No. 131, "Disclosures about Segments
of an Enterprise and Related Information." This statement, effective for
financial statements for periods beginning after December 15, 1997, requires
that a public business enterprise report financial and descriptive information
about its reportable operating segments. Generally, information is required to
be reported on the basis that it is used internally for evaluating segment
performance and deciding how to allocate resources to segments. The Company
expects to adopt this SFAS in 1998 to the extent applicable.
F-59
<PAGE> 192
AMB PROPERTY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS, EXCEPT SHARE AND SQUARE FEET DATA)
3. TRANSACTIONS WITH AFFILIATES
As discussed in "Organization and Formation of the Company," the Operating
Partnership formed AMB Investment Management (which conducts its operations
through the Investment Management Partnership) for the purpose of carrying on
the operations of the Predecessor. The Company and the Investment Management
Partnership have an agreement that allows for the sharing of certain costs and
employees. Additionally, the Company provides the Investment Management
Partnership with certain acquisition-related services.
As part of the Formation Transactions, the Operating Partnership was
required to pay an amount equal to the net working capital balances at November
25, 1997 of the Predecessor and the acquired properties to the owners of said
entities. As of December 31, 1997, the Company owed approximately $37,808 to
owners related to these working capital distributions. Such amount is included
in Payable to affiliates on the consolidated balance sheet and was paid
subsequent to year-end.
The Company and the Investment Management Partnership share common office
space under lease obligations of an affiliate of the Predecessor. Such lease
obligations are charged to the Company and the Investment Management Partnership
at cost. For the period ended December 31, 1995, 1996 and 1997, the Company paid
approximately $435, $510 and $700, respectively for occupancy costs related to
the lease obligations of the affiliate.
4. DEBT
As of December 31, 1997, debt, excluding unamortized debt premiums,
consists of the following:
<TABLE>
<S> <C>
Secured debt, varying coupon interest
rates from 7.01% to 10.38%, due
November 1998 to December 2008............................ $ 517,366
Unsecured credit facility, variable
interest at LIBOR plus 110 basis points (7.10% at
December 31, 1997) due November 2000...................... 150,000
----------
Total Debt........................................ $ 667,366
==========
</TABLE>
Secured debt generally requires monthly principal and interest payments.
The secured debt is secured by deeds of trust and mortgages on 48 Properties.
The carrying value of real estate investments pledged as collateral under deeds
of trust and mortgages for the secured debt is $1,049,003 as of December 31,
1997. All of the secured debt bears interest at fixed rates, except for one loan
which bears interest at either LIBOR plus 275 basis points (8.75% at December
31, 1997) or prime plus 50 basis points, at the borrower's option. The secured
debt has various financial and non-financial covenants. Additionally, certain of
the secured debt is cross-collateralized.
The Company has a $500,000 unsecured revolving credit agreement (the
"Credit Facility") with Morgan Guaranty Trust Company of New York as agent, and
a syndicate of 12 other banks. The Credit Facility has a term of three years,
and is subject to a fee that accrues on the daily average undrawn funds, which
varies between 15 and 25 basis points of the undrawn funds based on the
Company's credit rating. The Credit Facility has various financial and
non-financial covenants.
The weighted-average fixed interest rate on secured debt at December 31,
1997 was 7.82%. Interest capitalized related to construction projects for the
period from November 26, 1997 to December 31, 1997 was $448. There was no
capitalized interest for periods prior to the Formation Transactions.
F-60
<PAGE> 193
AMB PROPERTY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS, EXCEPT SHARE AND SQUARE FEET DATA)
The scheduled maturities of the secured debt as of December 31, 1997 are as
follows:
<TABLE>
<S> <C>
1998...................................................... $ 19,390
1999...................................................... 9,666
2000...................................................... 11,862
2001...................................................... 35,654
2002...................................................... 43,967
Thereafter................................................ 396,827
--------
$517,366
========
</TABLE>
5. LEASING ACTIVITY
Future minimum rental income due under noncancelable leases in effect at
December 31, 1997 with tenants is as follows:
<TABLE>
<S> <C>
1998..................................................... $ 214,400
1999..................................................... 188,926
2000..................................................... 160,592
2001..................................................... 128,241
2002..................................................... 101,733
Thereafter............................................... 459,070
----------
$1,252,962
==========
</TABLE>
In addition to minimum rental payments, certain tenants pay reimbursements
for their pro rata share of specified operating expenses, which amounted to
$5,267 for the period from November 26, 1997 to December 31, 1997. These amounts
are included as rental income and operating expenses in the accompanying
consolidated statements of operations. Certain of the leases also provide for
the payment of additional rent based on a percentage of the tenant's revenues.
Some leases contain options to renew. No individual tenant accounts for greater
than 2% of rental revenues.
6. INCOME TAXES
The Company intends to be taxed as a REIT under the Code for the fiscal
year ended December 31, 1997. To qualify as a REIT, the Company must meet a
number of organizational and operational requirements, including a requirement
that it currently distribute at least 95% of its taxable income. It is
management's intention to adhere to these requirements and maintain the
Company's REIT status. As a REIT, the Company generally will not be subject to
corporate level federal income tax on net income it distributes currently to its
stockholders. As such, no provision for federal income taxes has been included
in the accompanying consolidated financial statements. If the Company fails to
qualify as a REIT in any taxable year, it will be subject to federal income
taxes at regular corporate rates (including any applicable alternative minimum
tax) and may not be able to qualify as a REIT for four subsequent taxable years.
Even if the Company qualifies for taxation as a REIT, the Company may be subject
to certain state and local taxes on its income and property and to federal
income and excise taxes on its undistributed taxable income.
For federal income tax purposes, cash distributions paid to stockholders
may be characterized as ordinary income, return of capital (generally
non-taxable) or capital gains. On December 8, 1997, the Company declared a
distribution of $0.134 per common share, payable on December 29, 1997 to
stockholders of record on December 18, 1997. The distribution covered the period
from November 26, 1997 through December 31, 1997. For Federal income tax
purposes, 100% of the distribution was ordinary income.
F-61
<PAGE> 194
AMB PROPERTY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS, EXCEPT SHARE AND SQUARE FEET DATA)
Prior to the Merger, the Predecessor conducted its business as an S
corporation, and therefore was exempt from federal income taxes under Subchapter
S of the Code. Under this election federal income taxes were paid by the
stockholders of the Predecessor.
7. STOCK INCENTIVE PLAN AND 401(K) PLAN
STOCK INCENTIVE PLAN
In November 1997, the Company established a Stock Option and Incentive Plan
(the "Stock Incentive Plan") for the purpose of attracting and retaining
eligible officers, directors and employees. The Company has reserved for
issuance 5,750,000 shares of Common Stock under the Stock Incentive Plan. In
November 1997, the Company granted 3,153,750 non-qualified options to certain
directors, officers and employees. Each option is exchangeable for one share of
the Common Stock and has an exercise price equal to $21.00, the market price at
the date of grant. The options have a 10-year term and vest pro rata in annual
installments over a four-year period from the date of grant.
The Company applies APB Opinion No. 25, "Accounting for Stock Issued to
Employees" and related interpretations in accounting for its Stock Incentive
Plan. Opinion 25 measures compensation cost using the intrinsic value based
method of accounting. Under this method, compensation cost is the excess, if
any, of the quoted market price of the stock at the date of grant over the
amount an employee must pay to acquire the stock. Accordingly, no compensation
cost has been recognized for the Stock Incentive Plan, as the option price for
all option grants in 1997 was equal to the market price as of the date of grant.
However, if the Company had measured compensation cost using the fair value
based method prescribed in SFAS 123, "Accounting for Stock-Based Compensation,"
the impact on pro forma net income and earnings per share would not have been
material.
The fair value of each option grant was estimated at the date of grant
using the Black-Scholes option-pricing model with the following assumptions used
for grants in 1997: dividend yield of 6.52%, expected volatility of 18.75%,
risk-free interest rate of 5.86%, and expected lives of 10 years.
Following is a summary of the option activity for the year ended December
31, 1997:
<TABLE>
<CAPTION>
SHARES
UNDER REMAINING
OPTION EXERCISE CONTRACTUAL
(000) PRICE LIFE
-------- -------- -----------
<S> <C> <C> <C>
Outstanding, 11/25/97................................. -- -- --
Granted............................................... 3,154 $21.0 10 years
Exercised............................................. -- -- --
Forfeited............................................. (10) -- --
------ ----- --------
Outstanding, 12/31/97................................. 3,144 $21.0 10 years
====== ===== ========
Options exercisable at year-end....................... 184 $21.0
====== =====
Fair value of options granted during the year......... $ 2.28
======
</TABLE>
RESTRICTED STOCK
In 1997, the Company sold 5,712 restricted shares of its Common Stock to
certain independent directors for $0.01 per share in cash.
401(K) PLAN
In November 1997, the Company established a Section 401(k)
Savings/Retirement Plan (the "Section 401(k) Plan"), which is a continuation of
the Section 401(k) plan of the Predecessor, to cover eligible employees of the
Company and any designated affiliate. The Section 401(k) Plan permits eligible
employees
F-62
<PAGE> 195
AMB PROPERTY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS, EXCEPT SHARE AND SQUARE FEET DATA)
of the Company to defer up to 10% of their annual compensation, subject to
certain limitations imposed by the Code. The employees' elective deferrals are
immediately vested and non-forfeitable upon contribution to the Section 401(k)
Plan. The Company matches the employee contributions to the Section 401(k)Plan
in an amount equal to 50% of the first 3.5% of annual compensation deferred by
each employee and may also make discretionary contributions to the plan. As of
December 31, 1997, the Company's accrual for 401(k) match was $140. Such amount
was included in Other liabilities on the consolidated balance sheet.
Except for the Section 401(k) Plan, the Company offers no other
post-retirement or post-employment benefits to its employees.
8. SUPPLEMENTAL INFORMATION TO STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
--------------------------
1995 1996 1997
---- ---- ----------
<S> <C> <C> <C>
Cash paid for interest................................... $-- $-- $ 2,509
=== === ==========
Non-cash transactions:
Acquisitions of properties in Formation Transactions... $-- $-- $2,216,137
Assumption of debt..................................... -- -- (717,613)
Cash acquired.......................................... -- -- (43,978)
Other assumed assets and liabilities................... -- -- (13,862)
Minority interest...................................... -- -- (64,358)
Shares issued.......................................... -- -- (1,370,391)
--- --- ----------
Net cash paid, net of cash acquired...................... $-- $-- $ 5,935
=== === ==========
</TABLE>
9. PRO FORMA INFORMATION (UNAUDITED)
The following unaudited pro forma condensed consolidated statement of
operations has been prepared as if the Formation Transactions, the Offering (as
described in Note 1) and certain property acquisitions and dispositions in 1997
had occurred on January 1, 1996. In the opinion of management, the pro forma
condensed consolidated statement of operations does not purport to present the
consolidated results that would have occurred if the aforementioned transactions
had been consummated on January 1, 1996, nor does it purport to present the
consolidated results of operations for future periods.
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31,
1996 1997
------------ ------------
<S> <C> <C>
Total revenues............................................ $ 265,550 $ 284,674
Income from operations before minority interests.......... 90,694 103,903
Net income available to common stockholders............... 87,313 99,508
INCOME PER SHARE OF COMMON STOCK
Basic................................................... $ 1.02 $ 1.16
=========== ===========
Diluted................................................. $ 1.01 $ 1.15
=========== ===========
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING
Basic................................................... 85,874,513 85,874,513
=========== ===========
Diluted................................................. 86,156,556 86,156,556
=========== ===========
</TABLE>
F-63
<PAGE> 196
AMB PROPERTY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS, EXCEPT SHARE AND SQUARE FEET DATA)
10. COMMITMENTS AND CONTINGENCIES
LITIGATION
In the normal course of business, from time to time, the Company is
involved in legal actions relating to the ownership and operations of its
Properties. In management's opinion, the liabilities, if any, that may
ultimately result from such legal actions are not expected to have a materially
adverse effect on the consolidated financial position, results of operations, or
cash flows of the Company.
ENVIRONMENTAL MATTERS
The Company follows the policy of monitoring its Properties for the
presence of hazardous or toxic substances. The Company is not aware of any
environmental liability with respect to the Properties that would have a
material adverse effect on the Company's business, assets or results of
operations. There can be no assurance that such a material environmental
liability does not exist. The existence of any such material environmental
liability could have a material adverse effect on the Company's results of
operations and cash flow.
GENERAL UNINSURED LOSSES
The Company carries comprehensive liability, fire, flood, environmental,
extended coverage and rental loss insurance with policy specifications, limits
and deductibles customarily carried for similar properties. There are, however,
certain types of extraordinary losses that may be either uninsurable or not
economically insurable. Should an uninsured loss occur, the Company could lose
its investment in, and anticipated profits and cash flows from, a property.
Certain of the Properties are located in areas that are subject to
earthquake activity; the Company has therefore obtained limited earthquake
insurance.
11. OPERATING PARTNERSHIP
As of December 31, 1997 the Company owned a 97.1% general partner interest
in the Operating Partnership. Therefore, the Company consolidates the Operating
Partnership and records the remaining 2.9% limited partner interests as minority
interest in the consolidated financial statements.
The Operating Partnership commenced operations as a fully intergrated real
estate company on November 26, 1997 upon completion of the Formation
Transactions. For financial reporting purposes, AMB Institutional Realty
Advisors, Inc. is not considered to be the predecessor of the Operating
Partnership. The following table sets forth summary financial information of the
Operating Partnership as of and for the period from November 26, 1997 to
December 31, 1997 (in thousands, except unit data):
<TABLE>
<S> <C>
Investments in real estate, net............................. $2,438,846
Total assets................................................ 2,506,255
Debt........................................................ 685,652
Partners' capital........................................... 1,717,398
Revenues.................................................... 27,110
Income from operations before minority interest............. 9,291
Net income.................................................. 9,174
Total units................................................. 88,416,676
Net income per unit......................................... $0.10
</TABLE>
F-64
<PAGE> 197
AMB PROPERTY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS, EXCEPT SHARE AND SQUARE FEET DATA)
Following is a statement of partners' capital of the Operating Partnership
from November 26, 1997 (inception) to December 31, 1997 (in thousands, except
unit data):
<TABLE>
<CAPTION>
GENERAL PARTNER LIMITED PARTNERS
----------------------- -------------------
UNITS AMOUNT UNITS AMOUNT TOTAL
---------- ---------- --------- ------- ----------
<S> <C> <C> <C> <C> <C>
November 25, 1997.... -- $ -- -- $ -- $ --
Contributions...... 85,874,513 1,670,902 2,542,163 49,169 1,720,071
Net income......... -- 8,634 -- 540 9,174
Distributions...... -- (11,506) -- (341) (11,847)
---------- ---------- --------- ------- ----------
December 31, 1997.... 85,874,513 $1,668,030 2,542,163 $49,368 $1,717,398
========== ========== ========= ======= ==========
</TABLE>
F-65
<PAGE> 198
AMB PROPERTY CORPORATION
SCHEDULE III
CONSOLIDATED REAL ESTATE AND ACCUMULATED DEPRECIATION
AS OF DECEMBER 31, 1997
<TABLE>
<CAPTION>
COSTS
CAPITALIZED
SUBSEQUENT TO
INITIAL COST TO COMPANY ACQUISITION
----------------------- ---------------
PROPERTY LOCATION TYPE ENCUMBRANCES(1) LAND BUILDING LAND BUILDING
-------- -------- ---- --------------- --------- ----------- ---- --------
<S> <C> <C> <C> <C> <C> <C> <C>
72nd Avenue................ WA IND $ -- $ 1,298 $ 4,008 $ -- $ --
Acer Distribution Center... CA IND -- 3,146 9,479 -- --
Activity Distribution
Center................... CA IND 5,400 3,736 11,248 -- --
Alvarado Business Center... CA IND -- 7,906 23,757 -- 75
Amwiler-Gwinnett Industrial
Portfolio................ GA IND 14,360 6,641 19,964 -- 4
Ardenwood Corporate Park... CA IND 10,339 7,321 22,002 -- --
Artesia Industrial
Portfolio................ CA IND 54,742 23,860 71,620 -- 907
Atlanta South.............. GA IND -- 6,550 19,691 -- --
Beacon Industrial Park..... FL IND -- 10,466 31,437 -- --
Belden Avenue.............. IL IND -- 5,019 15,186 -- --
Bensenville................ IL IND 44,593 20,799 62,438 -- 19
Blue Lagoon................ FL IND 11,916 4,945 14,875 -- 23
Boulden.................... DE IND -- 2,807 8,462 -- 36
Brightseat Road............ MD IND -- 1,557 4,841 -- --
Britannia Business Park.... FL IND -- 3,199 9,637 -- 37
Cabot Business Park........ MA IND -- 16,017 48,091 -- 7
Chancellor................. FL IND 2,987 1,587 4,802 -- --
Chicago Industrial......... IL IND 3,522 1,574 4,761 -- --
Commerce................... CA IND -- 2,197 6,653 -- --
Corporate Square........... MN IND -- 4,024 12,113 -- 16
Crossroads Industrial...... IL IND -- 2,583 7,789 -- --
Dixie Highway.............. KY IND -- 1,700 5,149 -- --
Dock's Corner.............. NJ IND -- 2,050 6,190 -- --
Dock's Corner II........... NJ IND -- 2,272 6,917 -- --
Dowe Industrial............ CA IND -- 2,665 8,034 -- --
East Walnut Drive.......... CA IND -- 964 2,918 -- --
Elk Grove Village
Industrial............... IL IND -- 7,713 23,179 -- 8
Empire Drive............... KY IND -- 1,590 4,815 -- --
Executive Drive............ IL IND -- 1,399 4,236 -- --
Fairway Drive Industrial... CA IND -- 1,954 5,479 -- --
<CAPTION>
GROSS AMOUNT CARRIED AT 12/31/97
----------------------------------
YEAR OF DEPRECIABLE
TOTAL ACCUMULATED CONSTRUCTION OR LIFE
PROPERTY LAND BUILDING COSTS(2) DEPRECIATION ACQUISITION (YEARS)
-------- -------- ---------- ---------- ------------ --------------- -----------
<S> <C> <C> <C> <C> <C> <C>
72nd Avenue................ $ 1,298 $ 4,008 $ 5,306 $ 9 1997 5-40
Acer Distribution Center... 3,146 9,479 12,625 22 1997 5-40
Activity Distribution
Center................... 3,736 11,248 14,984 26 1997 5-40
Alvarado Business Center... 7,906 23,832 31,738 54 1997 5-40
Amwiler-Gwinnett Industrial
Portfolio................ 6,641 19,968 26,609 46 1997 5-40
Ardenwood Corporate Park... 7,321 22,002 29,323 50 1997 5-40
Artesia Industrial
Portfolio................ 23,860 72,527 96,387 165 1997 5-40
Atlanta South.............. 6,550 19,691 26,241 45 1997 5-40
Beacon Industrial Park..... 10,466 31,437 41,903 72 1997 5-40
Belden Avenue.............. 5,019 15,186 20,205 35 1997 5-40
Bensenville................ 20,799 62,457 83,256 143 1997 5-40
Blue Lagoon................ 4,945 14,898 19,843 34 1997 5-40
Boulden.................... 2,807 8,498 11,305 19 1997 5-40
Brightseat Road............ 1,557 4,841 6,398 11 1997 5-40
Britannia Business Park.... 3,199 9,674 12,873 22 1997 5-40
Cabot Business Park........ 16,017 48,098 64,115 110 1997 5-40
Chancellor................. 1,587 4,802 6,389 11 1997 5-40
Chicago Industrial......... 1,574 4,761 6,335 11 1997 5-40
Commerce................... 2,197 6,653 8,850 15 1997 5-40
Corporate Square........... 4,024 12,129 16,153 28 1997 5-40
Crossroads Industrial...... 2,583 7,789 10,372 18 1997 5-40
Dixie Highway.............. 1,700 5,149 6,849 12 1997 5-40
Dock's Corner.............. 2,050 6,190 8,240 14 1997 5-40
Dock's Corner II........... 2,272 6,917 9,189 16 1997 5-40
Dowe Industrial............ 2,665 8,034 10,699 18 1997 5-40
East Walnut Drive.......... 964 2,918 3,882 7 1997 5-40
Elk Grove Village
Industrial............... 7,713 23,187 30,900 53 1997 5-40
Empire Drive............... 1,590 4,815 6,405 11 1997 5-40
Executive Drive............ 1,399 4,236 5,635 10 1997 5-40
Fairway Drive Industrial... 1,954 5,479 7,433 13 1997 5-40
</TABLE>
F-66
<PAGE> 199
<TABLE>
<CAPTION>
COSTS
CAPITALIZED
SUBSEQUENT TO
INITIAL COST TO COMPANY ACQUISITION
----------------------- ---------------
PROPERTY LOCATION TYPE ENCUMBRANCES(1) LAND BUILDING LAND BUILDING
-------- -------- ---- --------------- --------- ----------- ---- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Hampden Road............... MA IND -- 2,200 6,678 -- --
Harvest Business Park...... WA IND 3,826 2,371 7,153 -- 51
Hewlett Packard
Distribution............. CA IND 3,437 1,668 5,043 -- --
Holton Drive............... KY IND -- 2,633 7,972 -- --
Industrial Drive........... OH IND -- 1,743 5,410 -- --
International Multifoods... CA IND -- 1,613 4,879 -- --
Itasca Industrial
Portfolio................ IL IND -- 6,416 19,289 -- 213
Janitrol................... OH IND -- 1,797 5,576 -- --
Jasmine Avenue............. CA IND -- 3,157 9,562 -- --
Kent Centre................ WA IND -- 3,042 9,165 -- 23
Kingsport Industrial
Park..................... WA IND 18,161 7,919 23,798 -- 96
L.A. County Industrial
Portfolio (3)............ CA IND -- 11,128 33,423 -- 17
Lake Michigan Industrial
Portfolio................ IL IND -- 2,886 8,699 -- --
Laurelwood................. CA IND -- 2,750 8,538 -- --
Lincoln Industrial
Center................... TX IND -- 671 2,052 -- --
Linder Skokie.............. IL IND -- 2,938 8,854 -- --
Lisle Industrial........... IL IND -- 2,290 6,911 -- --
Lonestar................... TX IND 17,773 7,129 21,428 -- --
McDaniel Drive............. TX IND -- 1,537 4,659 -- --
Melrose Park............... IL IND -- 2,936 9,190 -- --
Metric Center.............. TX IND -- 10,968 32,944 -- 45
Mid-Atlantic Business
Center................... PA IND -- 6,581 19,783 -- 36
Milmont Page............... CA IND -- 3,201 9,642 -- 94
Minneapolis Distribution
Portfolio................ MN IND -- 7,018 21,093 -- 95
Minneapolis Industrial
IV....................... MN IND 8,346 4,938 14,854 -- 42
Minneapolis Industrial V... MN IND 7,952 4,426 13,317 -- 46
Moffett Business Center.... CA IND 12,883 5,892 17,716 -- --
Moffett Park R&D
Portfolio................ CA IND -- 14,807 44,462 -- 598
N. Glenville Avenue........ TX IND -- 1,094 3,316 -- --
Norcross/ Brookhollow
Portfolio................ GA IND -- 3,721 11,180 -- --
Northpointe Commerce....... CA IND -- 1,773 5,358 -- --
Northwest Distribution
Center................... WA IND -- 2,234 6,743 -- 7
O'Hare Industrial
Portfolio................ IL IND -- 7,357 22,112 -- 156
Pacific Business Center.... CA IND 10,679 5,417 16,291 -- 16
<CAPTION>
GROSS AMOUNT CARRIED AT 12/31/97
----------------------------------
YEAR OF DEPRECIABLE
TOTAL ACCUMULATED CONSTRUCTION OR LIFE
PROPERTY LAND BUILDING COSTS(2) DEPRECIATION ACQUISITION (YEARS)
-------- -------- ---------- ---------- ------------ --------------- -----------
<S> <C> <C> <C> <C> <C> <C>
Hampden Road............... 2,200 6,678 8,878 15 1997 5-40
Harvest Business Park...... 2,371 7,204 9,575 16 1997 5-40
Hewlett Packard
Distribution............. 1,668 5,043 6,711 12 1997 5-40
Holton Drive............... 2,633 7,972 10,605 18 1997 5-40
Industrial Drive........... 1,743 5,410 7,153 12 1997 5-40
International Multifoods... 1,613 4,879 6,492 11 1997 5-40
Itasca Industrial
Portfolio................ 6,416 19,502 25,918 44 1997 5-40
Janitrol................... 1,797 5,576 7,373 13 1997 5-40
Jasmine Avenue............. 3,157 9,562 12,719 22 1997 5-40
Kent Centre................ 3,042 9,188 12,230 21 1997 5-40
Kingsport Industrial
Park..................... 7,919 23,894 31,813 54 1997 5-40
L.A. County Industrial
Portfolio (3)............ 11,128 33,440 44,568 76 1997 5-40
Lake Michigan Industrial
Portfolio................ 2,886 8,699 11,585 20 1997 5-40
Laurelwood................. 2,750 8,538 11,288 19 1997 5-40
Lincoln Industrial
Center................... 671 2,052 2,723 5 1997 5-40
Linder Skokie.............. 2,938 8,854 11,792 20 1997 5-40
Lisle Industrial........... 2,290 6,911 9,201 16 1997 5-40
Lonestar................... 7,129 21,428 28,557 49 1997 5-40
McDaniel Drive............. 1,537 4,659 6,196 11 1997 5-40
Melrose Park............... 2,936 9,190 12,126 21 1997 5-40
Metric Center.............. 10,968 32,989 43,957 75 1997 5-40
Mid-Atlantic Business
Center................... 6,581 19,819 26,400 45 1997 5-40
Milmont Page............... 3,201 9,736 12,937 22 1997 5-40
Minneapolis Distribution
Portfolio................ 7,018 21,188 28,206 48 1997 5-40
Minneapolis Industrial
IV....................... 4,938 14,896 19,834 34 1997 5-40
Minneapolis Industrial V... 4,426 13,363 17,789 30 1997 5-40
Moffett Business Center.... 5,892 17,716 23,608 40 1997 5-40
Moffett Park R&D
Portfolio................ 14,807 45,060 59,867 101 1997 5-40
N. Glenville Avenue........ 1,094 3,316 4,410 8 1997 5-40
Norcross/ Brookhollow
Portfolio................ 3,721 11,180 14,901 26 1997 5-40
Northpointe Commerce....... 1,773 5,358 7,131 12 1997 5-40
Northwest Distribution
Center................... 2,234 6,750 8,984 15 1997 5-40
O'Hare Industrial
Portfolio................ 7,357 22,268 29,625 51 1997 5-40
Pacific Business Center.... 5,417 16,307 21,724 37 1997 5-40
</TABLE>
F-67
<PAGE> 200
<TABLE>
<CAPTION>
COSTS
CAPITALIZED
SUBSEQUENT TO
INITIAL COST TO COMPANY ACQUISITION
----------------------- ---------------
PROPERTY LOCATION TYPE ENCUMBRANCES(1) LAND BUILDING LAND BUILDING
-------- -------- ---- --------------- --------- ----------- ---- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Pagemill & Dillworth....... TX IND -- 1,877 5,690 -- --
Patuxent................... MD IND -- 1,696 5,127 -- --
Penn James
Office/Warehouse......... MN IND -- 1,991 6,013 -- 103
Pennsy Drive............... MD IND -- 657 2,011 -- 203
Presidents Drive........... FL IND -- 1,124 3,446 -- --
Presidents Drive II........ FL IND -- 2,563 7,861 -- --
Preston Court.............. MD IND -- 2,313 7,192 -- --
Production Drive........... KY IND -- 425 1,286 -- --
Santa Barbara Court........ MD IND -- 1,617 5,029 -- --
Shiloh Road................ TX IND -- 1,813 5,495 -- --
Silicon Valley R&D
Portfolio................ CA IND -- 8,024 24,205 -- --
South Bay Industrial....... CA IND 20,791 14,992 45,016 -- 465
Southfield................. GA IND -- 7,073 21,259 -- 106
Stadium Business Park...... CA IND 4,909 3,768 11,345 -- 48
Systematics................ CA IND -- 911 2,773 -- --
Texas Industrial Portfolio
(4)...................... TX IND -- 10,806 32,499 -- 218
Twin Cities................ MN IND -- 4,873 14,638 -- --
Two South Middlesex........ NJ IND -- 2,247 6,781 -- --
Valwood.................... TX IND 4,351 1,983 5,989 -- 12
Valwood Parkway II......... TX IND -- 2,219 6,729 -- --
Viscount................... FL IND -- 984 3,016 -- --
Weigman Road............... CA IND -- 1,563 4,852 -- --
West Kiest................. TX IND -- 1,395 4,231 -- --
West North Carrier......... TX IND 3,522 1,375 4,165 -- 85
Windsor Court.............. IL IND -- 766 2,338 -- --
Yosemite Drive............. CA IND -- 2,350 7,297 -- --
Zanker/Charcot
Industrial............... CA IND -- 5,282 15,887 -- 202
Applewood Village Shopping
Center................... CO RET -- 6,716 26,903 -- --
Arapahoe Village Shopping
Center................... CO RET 11,083 3,795 15,220 -- --
Aurora Marketplace......... WA RET -- 3,243 13,013 -- 4
BayHill Shopping Center.... CA RET -- 2,844 11,417 -- 64
Brentwood Commons.......... IL RET 5,460 1,810 7,280 -- 1
Civic Center Plaza......... IL RET 13,689 5,113 20,492 -- 42
Corbins Corner Shopping
Center................... CT RET -- 6,438 25,791 -- 3
<CAPTION>
GROSS AMOUNT CARRIED AT 12/31/97
----------------------------------
YEAR OF DEPRECIABLE
TOTAL ACCUMULATED CONSTRUCTION OR LIFE
PROPERTY LAND BUILDING COSTS(2) DEPRECIATION ACQUISITION (YEARS)
-------- -------- ---------- ---------- ------------ --------------- -----------
<S> <C> <C> <C> <C> <C> <C>
Pagemill & Dillworth....... 1,877 5,690 7,567 13 1997 5-40
Patuxent................... 1,696 5,127 6,823 12 1997 5-40
Penn James
Office/Warehouse......... 1,991 6,116 8,107 14 1997 5-40
Pennsy Drive............... 657 2,214 2,871 5 1997 5-40
Presidents Drive........... 1,124 3,446 4,570 8 1997 5-40
Presidents Drive II........ 2,563 7,861 10,424 18 1997 5-40
Preston Court.............. 2,313 7,192 9,505 16 1997 5-40
Production Drive........... 425 1,286 1,711 3 1997 5-40
Santa Barbara Court........ 1,617 5,029 6,646 11 1997 5-40
Shiloh Road................ 1,813 5,495 7,308 13 1997 5-40
Silicon Valley R&D
Portfolio................ 8,024 24,205 32,229 55 1997 5-40
South Bay Industrial....... 14,992 45,481 60,473 103 1997 5-40
Southfield................. 7,073 21,365 28,438 49 1997 5-40
Stadium Business Park...... 3,768 11,393 15,161 26 1997 5-40
Systematics................ 911 2,773 3,684 6 1997 5-40
Texas Industrial Portfolio
(4)...................... 10,806 32,717 43,523 74 1997 5-40
Twin Cities................ 4,873 14,638 19,511 33 1997 5-40
Two South Middlesex........ 2,247 6,781 9,028 15 1997 5-40
Valwood.................... 1,983 6,001 7,984 14 1997 5-40
Valwood Parkway II......... 2,219 6,729 8,948 15 1997 5-40
Viscount................... 984 3,016 4,000 7 1997 5-40
Weigman Road............... 1,563 4,852 6,415 11 1997 5-40
West Kiest................. 1,395 4,231 5,626 10 1997 5-40
West North Carrier......... 1,375 4,250 5,625 10 1997 5-40
Windsor Court.............. 766 2,338 3,104 5 1997 5-40
Yosemite Drive............. 2,350 7,297 9,647 17 1997 5-40
Zanker/Charcot
Industrial............... 5,282 16,089 21,371 36 1997 5-40
Applewood Village Shopping
Center................... 6,716 26,903 33,619 61 1997 5-40
Arapahoe Village Shopping
Center................... 3,795 15,220 19,015 35 1997 5-40
Aurora Marketplace......... 3,243 13,017 16,260 30 1997 5-40
BayHill Shopping Center.... 2,844 11,481 14,325 26 1997 5-40
Brentwood Commons.......... 1,810 7,281 9,091 17 1997 5-40
Civic Center Plaza......... 5,113 20,534 25,647 47 1997 5-40
Corbins Corner Shopping
Center................... 6,438 25,794 32,232 59 1997 5-40
</TABLE>
F-68
<PAGE> 201
<TABLE>
<CAPTION>
COSTS
CAPITALIZED
SUBSEQUENT TO
INITIAL COST TO COMPANY ACQUISITION
----------------------- ---------------
PROPERTY LOCATION TYPE ENCUMBRANCES(1) LAND BUILDING LAND BUILDING
-------- -------- ---- --------------- --------- ----------- ---- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Eastgate Plaza............. WA RET -- 2,122 8,529 -- 59
Five Points Shopping
Center................... CA RET -- 5,412 21,687 -- 96
Granada Village............ CA RET 15,678 6,533 26,172 -- 251
Kendall Mall............... FL RET 25,162 7,069 28,316 -- 16
La Jolla Village........... CA RET 19,245 6,936 27,785 -- 16
Lakeshore Plaza Shopping
Center................... CA RET 13,839 6,706 26,865 -- 74
Latham Farms............... NY RET 38,833 12,327 49,350 -- 23
Long Gate Shopping
Center................... MD RET -- 9,662 38,677 -- --
Manhattan Village Shopping
Center................... CA RET -- 16,484 66,578 -- 230
Pleasant Hill Shopping
Center................... CA RET -- 5,403 21,654 -- 13
Rancho San Diego Village
Shopping Center.......... CA RET -- 2,645 10,621 -- 2
Randall's Dairy Ashford.... TX RET -- 2,542 10,179 -- --
Randall's Austin Parkway... TX RET -- 2,139 8,563 -- --
Randall's Commons
Memorial................. TX RET -- 2,053 8,221 -- 1
Randall's Woodway.......... TX RET -- 3,075 12,313 -- --
Riverview Plaza Shopping
Center................... IL RET -- 2,656 10,663 -- --
Rockford Road Plaza........ MN RET -- 4,333 17,371 -- 35
Shoppes at Lago Mar........ FL RET 5,932 2,051 8,246 -- 66
Silverado Plaza Shopping
Center................... CA RET 5,203 1,928 7,753 -- --
Southwest Pavilion......... NV RET -- 1,575 8,140 -- 30
The Plaza at Delray........ FL RET 23,455 6,968 27,914 -- 4
Twin Oaks Shopping
Center................... CA RET -- 2,399 9,637 -- 47
Weslayan Plaza............. TX RET -- 7,842 31,409 -- 76
Woodlawn Point Shopping
Center................... GA RET 4,823 2,318 9,312 -- --
Ygnacio Plaza.............. CA RET 8,365 3,021 12,114 -- 38
-------- -------- ---------- ---- ------
$455,256 $550,635 $1,817,216 $ -- $5,300
======== ======== ========== ==== ======
<CAPTION>
GROSS AMOUNT CARRIED AT 12/31/97
----------------------------------
YEAR OF DEPRECIABLE
TOTAL ACCUMULATED CONSTRUCTION OR LIFE
PROPERTY LAND BUILDING COSTS(2) DEPRECIATION ACQUISITION (YEARS)
-------- -------- ---------- ---------- ------------ --------------- -----------
<S> <C> <C> <C> <C> <C> <C>
Eastgate Plaza............. 2,122 8,588 10,710 20 1997 5-40
Five Points Shopping
Center................... 5,412 21,783 27,195 50 1997 5-40
Granada Village............ 6,533 26,423 32,956 60 1997 5-40
Kendall Mall............... 7,069 28,332 35,401 65 1997 5-40
La Jolla Village........... 6,936 27,801 34,737 63 1997 5-40
Lakeshore Plaza Shopping
Center................... 6,706 26,939 33,645 61 1997 5-40
Latham Farms............... 12,327 49,373 61,700 113 1997 5-40
Long Gate Shopping
Center................... 9,662 38,677 48,339 88 1997 5-40
Manhattan Village Shopping
Center................... 16,484 66,808 83,292 152 1997 5-40
Pleasant Hill Shopping
Center................... 5,403 21,667 27,070 49 1997 5-40
Rancho San Diego Village
Shopping Center.......... 2,645 10,623 13,268 24 1997 5-40
Randall's Dairy Ashford.... 2,542 10,179 12,721 23 1997 5-40
Randall's Austin Parkway... 2,139 8,563 10,702 20 1997 5-40
Randall's Commons
Memorial................. 2,053 8,222 10,275 19 1997 5-40
Randall's Woodway.......... 3,075 12,313 15,388 28 1997 5-40
Riverview Plaza Shopping
Center................... 2,656 10,663 13,319 24 1997 5-40
Rockford Road Plaza........ 4,333 17,406 21,739 40 1997 5-40
Shoppes at Lago Mar........ 2,051 8,312 10,363 19 1997 5-40
Silverado Plaza Shopping
Center................... 1,928 7,753 9,681 18 1997 5-40
Southwest Pavilion......... 1,575 8,170 9,745 19 1997 5-40
The Plaza at Delray........ 6,968 27,918 34,886 64 1997 5-40
Twin Oaks Shopping
Center................... 2,399 9,684 12,083 22 1997 5-40
Weslayan Plaza............. 7,842 31,485 39,327 72 1997 5-40
Woodlawn Point Shopping
Center................... 2,318 9,312 11,630 21 1997 5-40
Ygnacio Plaza.............. 3,021 12,152 15,173 26 1997 5-40
-------- ---------- ---------- ------
$550,635 $1,822,516 $2,373,151 $4,153
======== ========== ========== ======
</TABLE>
F-69
<PAGE> 202
AMB PROPERTY CORPORATION
SCHEDULE III (CONTINUED)
CONSOLIDATED REAL ESTATE AND ACCUMULATED DEPRECIATION
AS OF DECEMBER 31, 1997
(IN THOUSANDS)
A summary of activity for real estate and accumulated depreciation for the
year ended December 31, 1997 is as follows:
<TABLE>
<CAPTION>
1997(5)
----------
<S> <C>
INVESTMENTS IN REAL ESTATE:
Balance at beginning of year.............................. $ --
Acquisition of Properties(6)........................... 2,367,851
Improvements........................................... 5,300
----------
Balance at end of year.................................... $2,373,151
==========
ACCUMULATED DEPRECIATION:
Balance at beginning of year.............................. $ --
Depreciation expense................................... 4,153
----------
Balance at end of year.................................... $ 4,153
==========
</TABLE>
- ---------------
(1) As of December 31, 1997, Properties with a net book value of $170,979 serve
as collateral for outstanding indebtedness under a secured debt facility of
$73,000.
(2) As of December 31, 1997, the aggregate cost for federal income tax purposes
of investments in real estate was approximately $2,231,504.
(3) Consists of two properties with seven buildings in Los Angeles and one
building in Anaheim.
(4) Consists of two properties with five buildings in Houston and 18 buildings
in Dallas.
(5) The Company was formed in November 1997. Since the Company did not own real
estate prior to the Formation Transaction, a reconciliation of activity for
real estate and accumulated depreciation is not provided for the years ended
December 31, 1996 and 1995.
(6) As discussed in the "Notes to Consolidated Financial
Statements -- Organization and Formation of the Company," the Company
acquired Properties with a value of $2,216,137 in exchange for shares of the
Company's common stock and units in the Operating Partnership.
F-70
<PAGE> 203
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To AMB Property Corporation:
We have audited the accompanying combined balance sheets of the AMB
Contributed Properties as of December 31, 1995 and 1996, and the related
combined statements of operations, owners' equity and cash flows for the years
ended December 31, 1994, 1995 and 1996. These combined financial statements are
the responsibility of the management of the AMB Contributed Properties. Our
responsibility is to express an opinion on these combined financial statements
based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, the evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the combined financial statements referred to above present
fairly, in all material respects, the financial position of the AMB Contributed
Properties as of December 31, 1995 and 1996, and the results of their operations
and their cash flows for the years ended December 31, 1994, 1995 and 1996, in
conformity with generally accepted accounting principles.
ARTHUR ANDERSEN LLP
San Francisco, California
March 27, 1998
F-71
<PAGE> 204
AMB CONTRIBUTED PROPERTIES
COMBINED BALANCE SHEETS
AS OF DECEMBER 31, 1995 AND 1996
AND SEPTEMBER 30, 1997 (UNAUDITED)
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER 30, 1997
------------------------ --------------------------
1995 1996 HISTORICAL AS ADJUSTED
---------- ---------- ----------- -----------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C>
ASSETS
Investments in real estate:
Land and land improvements................ $ 252,627 $ 431,869 $ 502,385 $ 502,385
Buildings and improvements................ 754,623 1,157,464 1,367,162 1,367,162
Construction in progress.................. 11,431 26,758 31,615 31,615
---------- ---------- ---------- ----------
Total investments in real estate..... 1,018,681 1,616,091 1,901,162 1,901,162
Less -- accumulated depreciation..... (33,726) (61,704) (87,836) (87,836)
---------- ---------- ---------- ----------
Net investments in real estate....... 984,955 1,554,387 1,813,326 1,813,326
Cash and cash equivalents................. 110,474 33,120 46,055 13,168
Accounts receivable, net.................. 9,646 13,842 17,112 17,112
Deferred rent receivable.................. 3,465 5,899 8,347 8,347
Deferred financing and leasing costs,
net..................................... 6,281 13,840 15,130 15,130
Prepaid expenses and other assets......... 2,360 1,471 4,905 4,905
---------- ---------- ---------- ----------
Total assets.................... $1,117,181 $1,622,559 $1,904,875 $1,871,988
========== ========== ========== ==========
LIABILITIES AND OWNERS' EQUITY
Debt:
Mortgage loans.......................... $ 254,067 $ 403,321 $ 443,324 $ 443,324
Secured debt facility................... -- 73,000 73,000 73,000
Secured line of credit.................. -- 46,313 43,613 43,613
Unsecured line of credit................ -- 25,500 181,300 181,300
---------- ---------- ---------- ----------
Total debt...................... 254,067 548,134 741,237 741,237
Accounts payable and other liabilities.... 11,395 14,298 19,662 19,662
Accounts payable to affiliates............ 529 2,713 3,117 3,117
Accrued real estate taxes................. 7,240 8,465 16,278 16,278
Security deposits payable................. 2,141 6,714 8,202 8,202
Unearned rental income.................... 896 1,703 2,354 2,354
---------- ---------- ---------- ----------
Total liabilities............... 276,268 582,027 790,850 790,850
Commitments and contingencies............. -- -- -- --
Minority interests........................ 3,714 12,931 16,224 16,224
Owners' equity............................ 838,007 1,028,377 1,098,526 1,065,639
Note receivable from owner................ (808) (776) (725) (725)
---------- ---------- ---------- ----------
Total owners' equity............ 837,199 1,027,601 1,097,801 1,064,914
---------- ---------- ---------- ----------
Total liabilities and owners'
equity........................ $1,117,181 $1,622,559 $1,904,875 $1,871,988
========== ========== ========== ==========
</TABLE>
The accompanying notes are an integral part of these combined financial
statements.
F-72
<PAGE> 205
AMB CONTRIBUTED PROPERTIES
COMBINED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 1994, 1995 AND 1996,
THE NINE MONTHS ENDED SEPTEMBER 30, 1996 (UNAUDITED) AND
THE PERIOD FROM JANUARY 1, 1997 TO NOVEMBER 25, 1997 (UNAUDITED)
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
NINE MONTHS JANUARY 1,
FOR THE YEARS ENDED DECEMBER 31, ENDED 1997 TO
---------------------------------- SEPTEMBER 30, NOVEMBER 25,
1994 1995 1996 1996 1997
-------- --------- --------- ------------- ------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C>
REVENUES
Rental revenues.................. $50,893 $106,180 $166,415 $120,146 $207,391
Interest and other income........ 789 2,069 1,538 1,066 1,217
------- -------- -------- -------- --------
Total revenues......... 51,682 108,249 167,953 121,212 208,608
OPERATING EXPENSES
Rental expenses.................. 7,216 15,210 22,646 16,013 28,057
Real estate taxes................ 6,361 15,431 23,167 17,460 29,749
Interest expense................. 12,023 20,533 26,867 18,927 45,009
Depreciation and amortization.... 8,812 17,524 28,591 20,549 32,616
Asset management fees to
affiliate...................... 3,167 6,250 9,508 6,593 14,646
General, administrative and
other.......................... 350 782 838 586 823
------- -------- -------- -------- --------
Total operating
expenses............. 37,929 75,730 111,617 80,128 150,900
Income from operations before
disposal of properties and
minority interests............. 13,753 32,519 56,336 41,084 57,708
Gain (loss) on disposition of
properties..................... -- -- (1,471) 43 360
------- -------- -------- -------- --------
Income from operations before
minority interests............. 13,753 32,519 54,865 41,127 58,068
Minority interests' share of
(income) loss.................. (559) 12 (465) (678) (884)
------- -------- -------- -------- --------
Net income....................... $13,194 $ 32,531 $ 54,400 $ 40,449 $ 57,184
======= ======== ======== ======== ========
</TABLE>
The accompanying notes are an integral part of these combined financial
statements.
F-73
<PAGE> 206
AMB CONTRIBUTED PROPERTIES
COMBINED STATEMENTS OF OWNERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1994, 1995 AND 1996 AND
THE NINE MONTHS ENDED SEPTEMBER 30, 1997 (UNAUDITED)
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
NOTE
OWNERS' RECEIVABLE
EQUITY FROM OWNER TOTAL
---------- ---------- ----------
<S> <C> <C> <C>
Balance at December 31, 1993............................ $ 208,810 $(767) $ 208,043
Contributions......................................... 312,241 -- 312,241
Distributions......................................... (43,367) -- (43,367)
Net income............................................ 13,194 -- 13,194
---------- ----- ----------
Balance at December 31, 1994............................ 490,878 (767) 490,111
Contributions......................................... 392,662 -- 392,662
Distributions......................................... (78,064) -- (78,064)
Increase in note receivable from owner................ -- (41) (41)
Net income............................................ 32,531 -- 32,531
---------- ----- ----------
Balance at December 31, 1995............................ 838,007 (808) 837,199
Contributions......................................... 253,322 -- 253,322
Distributions......................................... (117,352) -- (117,352)
Principal reduction on note receivable from owner..... -- 32 32
Net income............................................ 54,400 -- 54,400
---------- ----- ----------
Balance at December 31, 1996............................ 1,028,377 (776) 1,027,601
Contributions......................................... 112,912 -- 112,912
Distributions......................................... (89,598) -- (89,598)
Principal reduction on note receivable from owner..... -- 51 51
Net income............................................ 46,835 -- 46,835
---------- ----- ----------
Balance at September 30, 1997........................... $1,098,526 $(725) $1,097,801
========== ===== ==========
</TABLE>
The accompanying notes are an integral part of these combined financial
statements.
F-74
<PAGE> 207
AMB CONTRIBUTED PROPERTIES
COMBINED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1994, 1995 AND 1996,
THE NINE MONTHS ENDED SEPTEMBER 30, 1996 (UNAUDITED) AND
THE PERIOD FROM JANUARY 1, 1997 TO NOVEMBER 25, 1997 (UNAUDITED)
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
NINE MONTHS JANUARY 1,
FOR THE YEARS ENDED DECEMBER 31, ENDED 1997 TO
--------------------------------- SEPTEMBER 30, NOVEMBER 25,
1994 1995 1996 1996 1997
--------- --------- --------- ------------- ------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income........................... $ 13,194 $ 32,531 $ 54,400 $ 40,449 $ 57,184
Adjustments to reconcile net income
to net cash provided by operating
activities:
Depreciation and amortization...... 8,812 17,524 28,591 20,549 32,616
Amortization of deferred financing
costs........................... 138 217 479 360 1,088
Straight-line rents................ (1,404) (2,061) (2,434) (1,826) (2,965)
Minority interests' share of net
income (loss)................... 559 (12) 465 678 884
(Gain) loss on disposition of
properties...................... -- -- 1,471 (43) (360)
Increase in accounts receivable and
other assets.................... (776) (5,603) (3,307) (1,116) (14,166)
Increase (decrease) in payable to
affiliates...................... 1,001 (472) 2,184 (1,413) 615
Increase in accounts payable and
other liabilities............... 6,998 10,284 9,069 8,405 16,890
--------- --------- --------- --------- ---------
Net cash provided by operating
activities.................... 28,522 52,408 90,918 66,043 91,786
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to properties.............. (345,042) (352,984) (566,278) (220,685) (315,303)
Additions to leasing costs........... (1,898) (2,741) (6,002) (3,732) (4,548)
--------- --------- --------- --------- ---------
Net cash used for investing
activities...................... (346,940) (355,725) (572,280) (224,417) (319,851)
CASH FLOWS FROM FINANCING ACTIVITIES:
Borrowings on debt................... 125,527 59,852 331,023 121,342 188,886
Payments on debt..................... (20,534) (7,744) (36,956) (29,054) (52,004)
Additions to financing fees.......... (836) (816) (3,248) (3,077) (244)
Capital distributions................ (43,367) (78,064) (117,352) (85,437) (90,107)
Capital contributions................ 312,241 384,596 231,491 -- 187,192
Contributions by minority
interests.......................... 150 457 556 78,824 7,980
Distributions to minority
interests.......................... (368) (2,994) (1,538) (1,463) (2,528)
Decrease (increase) in note
receivable from owner.............. (767) (41) 32 83 (17)
--------- --------- --------- --------- ---------
Net cash provided by financing
activities......................... 372,046 355,246 404,008 81,218 239,158
Net increase (decrease) in cash and
equivalents........................ 53,628 51,929 (77,354) (77,156) 11,093
Cash and cash equivalents at
beginning of period................ 4,917 58,545 110,474 110,474 33,120
--------- --------- --------- --------- ---------
Cash and cash equivalents at end of
period............................. $ 58,545 $ 110,474 $ 33,120 $ 33,318 $ 44,213
========= ========= ========= ========= =========
</TABLE>
The accompanying notes are an integral part of these combined financial
statements.
F-75
<PAGE> 208
AMB CONTRIBUTED PROPERTIES
NOTES TO COMBINED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS)
1. ORGANIZATION AND BASIS OF PRESENTATION
The accompanying combined financial statements represent a combination of
the assets, liabilities and operations of 96 properties (the "Properties")
located throughout the United States, which are owned by certain real estate
investment funds, trusts and partnerships. Collectively, the combination of the
operations of the investments in the Properties is referred to as the "AMB
Contributed Properties." During the periods presented, the AMB Contributed
Properties were all managed by AMB Institutional Realty Advisors, Inc. ("AMB"),
the investment manager, under separate investment management agreements (the
"Agreements"). The AMB Contributed Properties is not a legal entity. A summary
of the various entities that own the Properties, the number of properties and
square footage as of November 25, 1997 is as follows:
<TABLE>
<CAPTION>
NUMBER
OF
PROPERTY OWNER PROPERTIES SQUARE FOOTAGE
-------------- ---------- --------------
<S> <C> <C>
AMB Current Income Fund, Inc.(1)............................ 34 14,866,408
AMB Value Added Fund, Inc................................... 5 1,740,103
AMB Western Properties Fund-I............................... 8 1,118,907
Ameritech Pension Trust..................................... 11 4,398,878
City and County of San Francisco Employees' Retirement
System.................................................... 12 3,933,608
First Allmerica Financial Life Insurance Company............ 1 484,370
Milwaukee Employes' Retirement System(1).................... 1 285,480
Southern Company System Master Retirement Trust............. 20 8,427,537
SPP Investment Management................................... 1 699,512
Various Family Trusts....................................... 3 510,298
-- ----------
Total............................................. 96 36,465,101
== ==========
</TABLE>
- ---------------
(1) AMB Current Income Fund, Inc. and Milwaukee Employes' Retirement System own
respective interests in a limited liability company of 66.7% and 33.3%. The
principal asset of the limited liability company is a 2,512,465 square foot
property. The property is included in AMB Current Income Fund, Inc.'s number
of properties and square footage above.
On November 25, 1997, the owners of the AMB Contributed Properties and AMB
completed a business combination plan whereby the owners of the Properties
contributed their property to AMB Property Corporation, a public real estate
company, in exchange for shares in AMB Property Corporation, or units in a
subsidiary partnership, AMB Property, L.P. (the "Operating Partnership") or, in
certain limited circumstances, cash (the "Formation Transaction"). The
allocation of ownership interests among the owners of the AMB Contributed
Properties and AMB was based on the agreed-upon relative values of net assets
contributed. The initial allocation among these entities may change pending the
resolution of certain future performance criteria of AMB Property Corporation.
F-76
<PAGE> 209
AMB CONTRIBUTED PROPERTIES
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
GENERALLY ACCEPTED ACCOUNTING PRINCIPLES
These financial statements have been prepared in accordance with generally
accepted accounting principles using the accrual method of accounting. The
preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
INVESTMENTS IN REAL ESTATE
Investments in real estate are stated at depreciated cost and are reviewed
for impairment on a property-by-property basis whenever events or changes in
circumstances indicate that the carrying amount of a property may not be
recoverable. Impairment is recognized when estimated expected future cash flows
(undiscounted and without interest charges)are less than the carrying amount of
the property. To the extent an impairment has occurred, the excess of the
carrying amount of the property over its estimated fair value will be charged to
income. As of December 31, 1997, there were no impairments of the carrying
values of the Properties.
Depreciation and amortization are calculated using the straight-line method
over the estimated useful lives of the investments. The estimated lives are as
follows:
<TABLE>
<S> <C>
Land improvements................................... 5 to 40 years
Buildings and improvements.......................... 5 to 40 years
Tenant improvements and leasing costs............... Term of the related lease
</TABLE>
The cost of buildings and improvements includes the purchase price of the
property or interest in property, legal fees and acquisition costs and interest,
property taxes, and other costs incurred during the period of construction.
Expenditures for maintenance and repairs are charged to operations as
incurred. Significant renovations or betterments that extend the economic useful
life of assets are capitalized.
Project costs directly associated with the development and construction of
a real estate project are capitalized as construction in progress. In addition,
interest, real estate taxes and other costs are capitalized during the
construction period.
CASH AND CASH EQUIVALENTS
Cash and cash equivalents include cash held in financial institutions and
other highly liquid short-term investments with original maturities of three
months or less. Cash and cash equivalents as of December 31, 1995 and 1996 and
September 30, 1997 (unaudited) include restricted cash of $77,593, $11,042, and
$1,740, respectively, which represent amounts held in escrow in connection with
property purchases and capital improvements.
DEFERRED FINANCING AND LEASING COSTS
Costs incurred in connection with financing or leasing are capitalized and
amortized to interest expense and depreciation and amortization, respectively,
on a straight-line basis (which approximates the effective interest method in
the case of financing costs) over the term of the related loan or lease for
periods generally ranging from six months to 10 years. Unamortized costs are
charged to expense upon the early repayment of
F-77
<PAGE> 210
AMB CONTRIBUTED PROPERTIES
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS)
the related debt or upon the early termination of the lease. Accumulated
amortization as of December 31, 1995 and 1996 and, September 30, 1997
(unaudited) was $1,239, $2,930 and $5,487, respectively.
FAIR VALUE OF FINANCIAL INSTRUMENTS
Based on the borrowing rates currently available to the Properties, the
fair value of its debt at September 30, 1997 (unaudited) (with a carrying amount
of $741,237) was approximately $760,000. Such valuation is based on the current
rates offered to the AMB Contributed Properties for debt of the same remaining
maturities. The carrying amount of cash and cash equivalents approximates fair
value.
MINORITY INTERESTS
Minority interests in the AMB Contributed Properties represent interests
held by certain entities in eight real estate limited partnerships and limited
liability companies that are consolidated for financial reporting purposes. Such
investments are consolidated because 1) the Company owns a controlling general
partner's interest or holds a majority member interest, or 2) the Company as
limited partner holds significant control over the entity through a 50% or
greater ownership interest combined with the ability to control major operating
decisions such as approval of budgets, selection of property managers and change
in financing. Further, in all cases, the Company has the ability to preclude a
sale or refinancing proposed by any other partner.
REVENUES
All leases are classified as operating leases. Rental revenues are
recognized on a straight-line basis over the term of the leases. Deferred rent
receivable represents the excess of rental revenue recognized on a straight-line
basis over cash received under the applicable lease provisions.
INTEREST AND OTHER INCOME
Interest and other income primarily represents interest income on cash and
cash equivalents.
NEW ACCOUNTING PRONOUNCEMENTS
In June of 1997, the FASB issued SFAS No. 131, "Disclosures about Segments
of an Enterprise and Related Information." This statement, effective for
financial statements for periods beginning after December 15, 1997, requires
that a public business enterprise report financial and descriptive information
about its reportable operating segments. Generally, information is required to
be reported on the basis that it is used internally for evaluating segment
performance and deciding how to allocate resources to segments. This statement
is not applicable to the AMB Contributed Properties, as they are not public
business enterprises.
3. NOTE RECEIVABLE FROM OWNER
An affiliate of AMB held a 1% general partnership interest in AMB Western
Properties Fund-I. The general partner's capital contribution was made through a
note payable to AMB Western Properties Fund-I. The note accrues interest at
9.29%, payable from the general partner's quarterly cash distributions. At
December 31, 1995 and 1996 and September 30, 1997 (unaudited), outstanding
principal and interest on the note totaled $808, $776 and $725, respectively.
4. TRANSACTIONS WITH INVESTMENT MANAGER
The owners of the AMB Contributed Properties are obligated to pay AMB
acquisition fees and asset management fees, as defined in the agreements. For
the years ended December 31, 1994, 1995 and 1996, the
F-78
<PAGE> 211
AMB CONTRIBUTED PROPERTIES
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS)
nine months ended September 30, 1996 (unaudited) and the period from January 1,
1997 to November 25, 1997 (unaudited), the AMB Contributed Properties incurred
expenses of $3,167, $6,250, $9,508, $6,593 and $14,646, respectively, related to
asset management of the Properties. In addition, acquisition fees paid to AMB of
$3,521, $3,884, $4,849, $2,053 and $2,989 were capitalized to investments in
real estate in the accompanying combined balance sheets for the years ended
December 31, 1994, 1995 and 1996, for the nine months ended September 30, 1996
(unaudited) and the period from January 1, 1997 to November 25, 1997
(unaudited), respectively. At December 31, 1995 and 1996 and September 30, 1997
(unaudited), total acquisition and asset management fees payable to AMB were
$529, $2,713 and $3,024, respectively.
Certain owners of the AMB Contributed Properties are also obligated to pay
incentive management fees to AMB during ownership and upon disposition of the
Properties to the extent that operations of the Properties and their fair values
meet certain criteria. In connection with the Formation Transaction the owners
of the AMB Contributed Properties agreed to terminate their respective existing
incentive management fee agreements with AMB. One of the owners of the AMB
Contributed Properties agreed to and paid a final incentive management fee of
$3,011.
5. DEBT
As of December 31, 1995 and 1996 and September 30, 1997 (unaudited), debt
consisted of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------- SEPTEMBER 30,
1995 1996 1997
-------- -------- -------------
(UNAUDITED)
-------------
<S> <C> <C> <C>
Mortgage loans, varying interest rates from 7.0%
to 10.4%, due November 1998 to December 2008... $254,067 $403,321 $443,324
Secured debt facility, fixed interest at 7.53%,
due December 2008.............................. -- 73,000 73,000
Secured line of credit, variable interest at
LIBOR plus 50 basis points (6.2% at September
30, 1997), due October 1998.................... -- 46,313 43,613
Unsecured line of credit, variable interest at
LIBOR plus 150 basis points (7.2% at September
30, 1997), due August 1999..................... -- 25,500 181,300
-------- -------- --------
Total debt............................. $254,067 $548,134 $741,237
======== ======== ========
</TABLE>
The unsecured line of credit had total availability of $200,000 as of
September 30, 1997 (unaudited). The unsecured line includes a one-year option to
extend and a fee on average unused funds of 25 basis points.
The secured debt facility and secured line of credit in aggregate had total
availability of $116,613 as of September 30, 1997.
Mortgage loans generally require monthly principal and interest payments.
The mortgage loans are secured by deeds of trust or mortgages on 42 Properties.
The net book value of real estate investments pledged as collateral under deeds
of trust or mortgages for mortgage loans and the secured debt facility at
December 31, 1995 and 1996 and September 30, 1997 (unaudited) is $475,783,
$934,233 and $935,074, respectively. In addition, Properties with a net book
value of $129,192, $147,452 and $146,853 as of December 31, 1995 and 1996 and
September 30, 1997 (unaudited), respectively, are part of a collateral pool for
cross-collateralized mortgage debt of one of the Property owners. As such
mortgage is deemed to be debt of the real estate investment fund rather than of
the Properties and as such Properties were contributed to AMB Property
Corporation free of debt, the debt is not reflected in the accompanying combined
financial statements.
F-79
<PAGE> 212
AMB CONTRIBUTED PROPERTIES
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS)
Also included in mortgage loans is a construction loan with a balance of
$1,928 as of September 30, 1997 (unaudited). Such loan matures in 2000, has
total availability of $8,000 and bears interest at LIBOR plus 275 basis points
or prime plus 50 basis points at the borrower's option.
The secured line is collateralized by capital subscriptions receivable of
$149,436 at September 30, 1997 (unaudited) from the owners of AMB Value Added
Fund, Inc. which have been netted against owners' equity in the accompanying
combined financial statements.
The weighted-average fixed interest rate on debt at September 30, 1997
(unaudited) was 7.87%. Interest capitalized related to construction projects for
the years ended December 31, 1994, 1995 and 1996, for the nine months ended
September 30, 1996 (unaudited) and for the period from January 1, 1997 to
November 25, 1997 (unaudited) was $132, $105, $1,134, $537 and $1,092,
respectively.
The scheduled maturities of all debt outstanding as of September 30, 1997
are as follows:
<TABLE>
<S> <C>
1997 (three months)......................................... $ 1,536
1998........................................................ 63,002
1999........................................................ 190,966
2000........................................................ 9,285
2001........................................................ 35,654
Thereafter.................................................. 440,794
--------
$741,237
========
</TABLE>
6. LEASING ACTIVITY
Future minimum rentals due under noncancelable operating leases with
tenants in effect at September 30, 1997 (unaudited) are as follows:
<TABLE>
<S> <C>
1997 (three months)......................................... $ 43,059
1998........................................................ 178,488
1999........................................................ 158,878
2000........................................................ 138,977
2001........................................................ 117,644
Thereafter.................................................. 509,810
----------
$1,146,856
==========
</TABLE>
In addition to minimum rental payments, certain tenants pay reimbursements
for their pro rata share of specified operating expenses, which reimbursements
amounted to $9,077, $21,008, $33,805, $26,176 and $44,574 for the years ended
December 31, 1994, 1995 and 1996, for the nine months ended September 30, 1996
(unaudited) and for the period from January 1, 1997 to November 25, 1997
(unaudited), respectively. These amounts are included as rental income and
operating expenses in the accompanying combined statements of operations.
Certain of the leases also provide for the payment of additional rent based on a
percentage of the tenant's revenues. Some leases contain options to renew. No
individual tenant accounts for greater than 10% of rental revenues.
7. PROPERTY DISPOSITIONS
During the year ended December 31, 1996 and period from January 1, 1997 to
November 25, 1997 (unaudited), the AMB Contributed Properties disposed of
certain Properties. The accompanying combined financial statements include the
operations of such Properties for periods prior to their disposition. The
following table sets forth the revenues and expenses of the disposed Properties
included in the accompanying
F-80
<PAGE> 213
AMB CONTRIBUTED PROPERTIES
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS)
combined financial statements for the years ended December 31, 1994, 1995 and
1996, the nine months ended September 30, 1996 (unaudited) and the period from
January 1, 1997 to November 25, 1997 (unaudited).
<TABLE>
<CAPTION>
NINE MONTHS JANUARY 1,
YEARS ENDED DECEMBER 31, ENDED 1997 TO
---------------------------- SEPTEMBER 30, NOVEMBER 25,
1994 1995 1996 1996 1997
------ ------- ------- ------------- ------------
<S> <C> <C> <C> <C> <C>
Revenues........................ $1,248 $ 2,170 $ 2,624 $ 1,909 $1,200
Expenses........................ (489) (1,005) (1,475) (1,075) (595)
------ ------- ------- ------- ------
Net Income.................... $ 759 $ 1,165 $ 1,149 $ 834 $ 605
====== ======= ======= ======= ======
</TABLE>
8. INCOME TAXES
The Properties are owned by entities that are generally not subject to
federal income taxes, including tax-exempt master trusts, real estate investment
trusts and partnerships. Accordingly, no provision for income taxes has been
made in the accompanying combined financial statements.
9. COMMITMENTS AND CONTINGENCIES
ENVIRONMENTAL MATTERS
The owners of the AMB Contributed Properties follow the policy of
monitoring its properties for the presence of hazardous or toxic substances. The
owners of the AMB Contributed Properties are not aware of any environmental
liability with respect to the Properties that would have a material adverse
effect on the AMB Contributed Properties' business, assets or results of
operations; however, there can be no assurance that a material environmental
liability does not exist. The existence of any such material environmental
liability could have a material adverse effect on the AMB Contributed
Properties' results of operations and cash flow.
GENERAL UNINSURED LOSSES
The AMB Contributed Properties generally carry comprehensive liability,
fire, flood, extended coverage and rental loss insurance with policy
specifications, limits and deductibles customarily carried for similar
properties. There are, however, certain types of extraordinary losses that may
be either uninsurable, or not economically insurable. Should an uninsured loss
occur, the AMB Contributed Properties could lose its investment in, and
anticipated profits and cash flows from, a property.
Certain of the AMB Contributed Properties are located in areas that are
subject to earthquake activity; the AMB Contributed Properties have therefore
obtained limited earthquake insurance.
10. AS ADJUSTED BALANCE SHEET (UNAUDITED)
The as adjusted balance sheet as of September 30, 1997 reflects a cash
distribution of approximately $32,887 to the owners of the AMB Contributed
Properties. Such distribution was made in connection with the formation of AMB
Property Corporation and was paid subsequent to December 31, 1997. The
distribution was determined based upon the net working capital position of the
Properties as of November 25, 1997.
F-81
<PAGE> 214
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To AMB Property Corporation:
We have audited the accompanying combined statement of revenues and certain
expenses of the Boston Industrial Portfolio for the year ended December 31,
1997. This combined financial statement is the responsibility of the management
of the Company. Our responsibility is to express an opinion on this combined
financial statement based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
The accompanying combined statement of revenues and certain expenses has
been prepared for the purpose of complying with the rules and regulations of the
Securities and Exchange Commission, as described in Note 1, and is not intended
to be a complete presentation of the revenues and expenses of the Boston
Industrial Portfolio.
In our opinion, the combined financial statement referred to above presents
fairly, in all material respects, the revenues and certain expenses of the
Boston Industrial Portfolio for the year ended December 31, 1997, in conformity
with generally accepted accounting principles.
ARTHUR ANDERSEN LLP
San Francisco, California
March 27, 1998
F-82
<PAGE> 215
BOSTON INDUSTRIAL PORTFOLIO
COMBINED STATEMENTS OF REVENUES AND CERTAIN EXPENSES
FOR THE YEAR ENDED DECEMBER 31, 1997 AND FOR THE PERIOD FROM JANUARY 1, 1998
TO MARCH 27, 1998 (UNAUDITED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
1997 1998
------- -----------
(UNAUDITED)
<S> <C> <C>
REVENUES:
Rental revenues........................................ $10,395 $2,847
Other income........................................... 8 6
------- ------
10,403 2,853
CERTAIN EXPENSES:
Property operating expenses............................... 306 30
Real estate taxes......................................... 496 78
------- ------
802 108
------- ------
REVENUES IN EXCESS OF CERTAIN EXPENSES...................... $ 9,601 $2,745
======= ======
</TABLE>
The accompanying notes are an integral part of these combined financial
statements.
F-83
<PAGE> 216
BOSTON INDUSTRIAL PORTFOLIO
NOTES TO COMBINED STATEMENTS OF REVENUES AND CERTAIN EXPENSES
(UNAUDITED, DOLLARS IN THOUSANDS)
1. BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES.
PROPERTIES ACQUIRED
The accompanying combined statements of revenues and certain expenses
include the combined operations of the Boston Industrial Portfolio (the
"Portfolio"). AMB Property Corporation (the "Company") acquired the following
properties from an unrelated party on March 27, 1998 for an aggregate purchase
price of $85,356 and one building with a value of $2,444, which is to be
acquired.
<TABLE>
<CAPTION>
PROPERTY NAME LOCATION RENTABLE SQUARE FEET
------------- -------- --------------------
<S> <C> <C>
Braintree Industrial Braintree, MA 976,634
Braintree Office Braintree, MA 120,000
Stoughton Industrial Stoughton, MA 632,675
Arsenal Street Watertown, MA 191,850
Bedford Street Middleborough, MA 40,018
Brockton Industrial Brockton, MA 300,114
Collins Street Attleboro, MA 152,730
Hartwell Avenue Lexington, MA 40,800
United Drive West Bridgewater, MA 315,000
Mazzeo Randolph, MA 88,420
---------
2,858,241
=========
</TABLE>
BASIS OF PRESENTATION
The accompanying combined statements of revenues and certain expenses are
not representative of the actual operations of the Portfolio for the period
presented. Certain expenses may not be comparable to the expenses expected to be
incurred by the Company in the proposed future operations of the Portfolio;
however, the Company is not aware of any material factors relating to the
Portfolio that would cause the reported financial information not to be
indicative of future operating results. Excluded expenses consist of interest,
depreciation and amortization and other costs not directly related to the future
operations of the Portfolio.
REVENUE RECOGNITION
All leases are classified as operating leases. Rental revenues are
recognized on a straight-line basis over the terms of the leases. No individual
tenant accounted for greater than 10% of revenues.
USE OF ESTIMATES
The preparation of the combined statements of revenues and certain expenses
in conformity with generally accepted accounting principles requires management
to make estimates and assumptions that affect the reported amounts of revenues
and expenses during the reporting period. Actual results could differ from those
estimates.
F-84
<PAGE> 217
BOSTON INDUSTRIAL PORTFOLIO
NOTES TO COMBINED STATEMENTS OF REVENUES AND CERTAIN EXPENSES (CONTINUED)
(UNAUDITED, DOLLARS IN THOUSANDS)
2. LEASING ACTIVITY
The following is a schedule of future minimum rental revenues for 1998 and
annually thereafter on non-cancelable operating leases in effect as of December
31, 1997.
<TABLE>
<S> <C>
1998........................................................ $ 10,746
1999........................................................ 10,283
2000........................................................ 9,284
2001........................................................ 8,864
2002........................................................ 6,381
Thereafter.................................................. 28,196
--------
Total............................................. $ 73,754
========
</TABLE>
In addition to minimum rental payments, tenants pay reimbursements for
their pro rata share of specified operating expenses, which amounted to $610 and
$153 for the year ended December 31, 1997 and for the period from January 1,
1998 to March 27, 1998 (unaudited), respectively. These amounts are included in
rental revenues in the accompanying combined statements of revenues and certain
expenses. Certain leases contain options to renew.
F-85
<PAGE> 218
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To AMB Property, L.P.:
We have audited the accompanying statement of revenues and certain expenses
of the Jamesburg Property, for the year ended December 31, 1997. This financial
statement is the responsibility of the management of the Company. Our
responsibility is to express an opinion on this financial statement based on our
audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
The accompanying statement of revenues and certain expenses has been
prepared for the purpose of complying with the rules and regulations of the
Securities and Exchange Commission, as described in Note 1, and is not intended
to be a complete presentation of the revenues and expenses of the Jamesburg
Property.
In our opinion, the financial statement referred to above presents fairly,
in all material respects, the revenues and certain expenses of the Jamesburg
Property for the year ended December 31, 1997, in conformity with generally
accepted accounting principles.
ARTHUR ANDERSEN LLP
San Francisco, California
March 27, 1998
F-86
<PAGE> 219
THE JAMESBURG PROPERTY
STATEMENTS OF REVENUES AND CERTAIN EXPENSES
FOR THE YEAR ENDED DECEMBER 31, 1997 AND FOR THE PERIOD FROM JANUARY 1, 1998
TO MARCH 20, 1998 (UNAUDITED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
1997 1998
------ -----------
(UNAUDITED)
<S> <C> <C>
REVENUES
Rental revenues........................................... $6,774 $1,466
Other income.............................................. -- --
------ ------
6,774 1,466
CERTAIN EXPENSES
Property operating expenses............................... 1,720 372
Real estate taxes......................................... 790 171
------ ------
2,510 543
------ ------
REVENUES IN EXCESS OF CERTAIN EXPENSES...................... $4,264 $ 923
====== ======
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-87
<PAGE> 220
THE JAMESBURG PROPERTY
NOTES TO STATEMENTS OF REVENUES AND CERTAIN EXPENSES
(DOLLARS IN THOUSANDS)
1. BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES.
PROPERTIES ACQUIRED
The accompanying statements of revenues and certain expenses include the
operations of the Jamesburg Property (the "Property") acquired by AMB Property,
L.P. (the "Company") from an unrelated party on March 20, 1998 for an initial
purchase price of $46,802. The Property is located in Dayton, New Jersey and
includes 821,712 rentable square feet.
BASIS OF PRESENTATION
The accompanying statements of revenues and certain expenses are not
representative of the actual operations of the Property for the period
presented. Certain expenses may not be comparable to the expenses expected to be
incurred by the Company in the proposed future operations of the Property;
however, the Company is not aware of any material factors relating to the
Property that would cause the reported financial information not to be
indicative of future operating results. Excluded expenses consist of interest,
depreciation and amortization and other costs not directly related to the future
operations of the Property.
REVENUE RECOGNITION
All leases are classified as operating leases. Rental revenues are
recognized on a straight-line basis over the terms of the leases. No individual
tenant accounted for greater than 10% of revenues.
USE OF ESTIMATES
The preparation of the statements of revenues and certain expenses in
conformity with generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from those
estimates.
2. LEASING ACTIVITY
The following is a schedule of future minimum rental revenues for 1998 and
annually thereafter on non-cancelable operating leases in effect as of December
31, 1997.
<TABLE>
<S> <C>
1998........................................................ $ 4,783
1999........................................................ 4,404
2000........................................................ 2,480
2001........................................................ 2,085
2002........................................................ 1,080
Thereafter.................................................. 1,712
-------
Total............................................. $16,544
=======
</TABLE>
In addition to minimum rental payments, tenants pay reimbursements for
their pro rata share of specified operating expenses, which amounted to $2,143
and $536 for the year ended December 31, 1997 and for the period from January 1,
1998 to March 20, 1998 (unaudited), respectively. These amounts are included in
rental revenues in the accompanying statements of revenues and certain expenses.
Certain leases contain options to renew.
F-88
<PAGE> 221
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To AMB Property, L.P.:
We have audited the accompanying statement of revenues and certain expenses
of Orlando Central Park, for the year ended December 31, 1997. This financial
statement is the responsibility of the management of the Company. Our
responsibility is to express an opinion on this financial statement based on our
audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
The accompanying statement of revenues and certain expenses has been
prepared for the purpose of complying with the rules and regulations of the
Securities and Exchange Commission, as described in Note 1, and is not intended
to be a complete presentation of the revenues and expenses of Orlando Central
Park.
In our opinion, the financial statement referred to above presents fairly,
in all material respects, the revenues and certain expenses of Orlando Central
Park for the year ended December 31, 1997, in conformity with generally accepted
accounting principles.
ARTHUR ANDERSEN LLP
San Francisco, California
March 27, 1998
F-89
<PAGE> 222
ORLANDO CENTRAL PARK
STATEMENTS OF REVENUES AND CERTAIN EXPENSES
FOR THE YEAR ENDED DECEMBER 31, 1997 AND FOR THE PERIOD FROM JANUARY 1, 1998
TO MARCH 24, 1998 (UNAUDITED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
1997 1998
------- -----------
(UNAUDITED)
<S> <C> <C>
REVENUES
Rental revenues........................................... $ 3,194 $ 792
Other income.............................................. 55 12
------- ------
3,249 804
CERTAIN EXPENSES
Property operating expenses............................... 693 166
Real estate taxes......................................... 376 94
------- ------
1,069 260
------- ------
REVENUES IN EXCESS OF CERTAIN EXPENSES...................... $ 2,180 $ 544
======= ======
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-90
<PAGE> 223
ORLANDO CENTRAL PARK
NOTES TO STATEMENTS OF REVENUES AND CERTAIN EXPENSES
(UNAUDITED, DOLLARS IN THOUSANDS)
1. BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES.
PROPERTIES ACQUIRED
The accompanying statements of revenues and certain expenses include the
operations of Orlando Central Park (the "Property") acquired by AMB Property,
L.P. (the "Company") from an unrelated party on March 24, 1998 for an initial
purchase price of $30,300. The Property is located in Orlando, Florida and
includes 791,386 rentable square feet.
BASIS OF PRESENTATION
The accompanying statements of revenues and certain expenses are not
representative of the actual operations of the Property for the period
presented. Certain expenses may not be comparable to the expenses expected to be
incurred by the Company in the proposed future operations of the Property;
however, the Company is not aware of any material factors relating to the
Property that would cause the reported financial information not to be
indicative of future operating results. Excluded expenses consist of interest,
depreciation and amortization and other costs not directly related to the future
operations of the Property.
REVENUE RECOGNITION
All leases are classified as operating leases. Rental revenues are
recognized on a straight-line basis over the terms of the leases. No individual
tenant accounted for greater than 10% of revenues.
USE OF ESTIMATES
The preparation of the statements of revenues and certain expenses in
conformity with generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from those
estimates.
2. LEASING ACTIVITY
The following is a schedule of future minimum rental revenues for 1998 and
annually thereafter on non-cancelable operating leases in effect as of December
31, 1997.
<TABLE>
<S> <C>
1998........................................................ $1,981
1999........................................................ 1,475
2000........................................................ 1,014
2001........................................................ 412
2002........................................................ 294
Thereafter.................................................. --
------
Total............................................. $5,176
======
</TABLE>
In addition to minimum rental payments, tenants pay reimbursements for
their pro rata share of specified operating expenses, which amounted to $140 and
$35 for the year ended December 31, 1997 and for the period from January 1, 1998
to March 24, 1998 (unaudited), respectively. These amounts are included in
rental revenues in the accompanying statements of revenues and certain expenses.
Certain leases contain options to renew.
F-91
<PAGE> 224
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To AMB Property, L.P.:
We have audited the accompanying statement of revenues and certain expenses
of Totem Lake Malls, for the year ended December 31, 1997. This financial
statement is the responsibility of the management of the Company. Our
responsibility is to express an opinion on this financial statement based on our
audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
The accompanying statement of revenues and certain expenses has been
prepared for the purpose of complying with the rules and regulations of the
Securities and Exchange Commission, as described in Note 1, and is not intended
to be a complete presentation of the revenues and expenses of Totem Lake Malls.
In our opinion, the financial statement referred to above presents fairly,
in all material respects, the revenues and certain expenses of Totem Lake Malls
for the year ended December 31, 1997, in conformity with generally accepted
accounting principles.
ARTHUR ANDERSEN LLP
San Francisco, California
March 27, 1998
F-92
<PAGE> 225
TOTEM LAKE MALLS
STATEMENTS OF REVENUES AND CERTAIN EXPENSES
FOR THE YEAR ENDED DECEMBER 31, 1997 AND FOR THE PERIOD FROM JANUARY 1, 1998
TO MARCH 6, 1998 (UNAUDITED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
1997 1998
------ -----------
(UNAUDITED)
<S> <C> <C>
REVENUES
Rental revenues........................................... $2,749 $742
Other income.............................................. 73 16
------ ----
2,822 758
CERTAIN EXPENSES
Property operating expenses............................... 1,041 235
Real estate taxes......................................... 252 42
------ ----
1,293 277
------ ----
REVENUES IN EXCESS OF CERTAIN EXPENSES...................... $1,529 $481
====== ====
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-93
<PAGE> 226
TOTEM LAKE MALLS
NOTES TO STATEMENTS OF REVENUES AND CERTAIN EXPENSES
(DOLLARS IN THOUSANDS)
1. BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES.
PROPERTIES ACQUIRED
The accompanying statements of revenues and certain expenses include the
operations of Totem Lake Malls (the "Property") acquired by AMB Property, L.P.
(the "Company") from an unrelated party on March 6, 1998 for an initial purchase
price of $26,000. The Property is located in Seattle, Washington and includes
290,204 rentable square feet.
BASIS OF PRESENTATION
The accompanying statements of revenues and certain expenses are not
representative of the actual operations of the Property for the period
presented. Certain expenses may not be comparable to the expenses expected to be
incurred by the Company in the proposed future operations of the Property;
however, the Company is not aware of any material factors relating to the
Property that would cause the reported financial information not to be
indicative of future operating results. Excluded expenses consist of interest,
depreciation and amortization and other costs not directly related to the future
operations of the Property.
REVENUE RECOGNITION
All leases are classified as operating leases. Rental revenues are
recognized on a straight-line basis over the terms of the leases. No individual
tenant accounted for greater than 10% of revenues.
USE OF ESTIMATES
The preparation of the statements of revenues and certain expenses in
conformity with generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from those
estimates.
2. LEASING ACTIVITY
The following is a schedule of future minimum rental revenues for 1998 and
annually thereafter on non-cancelable operating leases in effect as of December
31, 1997.
<TABLE>
<S> <C>
1998........................................................ $ 1,739
1999........................................................ 1,620
2000........................................................ 1,633
2001........................................................ 1,549
2002........................................................ 929
Thereafter.................................................. 4,515
--------
Total............................................. $ 11,985
========
</TABLE>
In addition to minimum rental payments, tenants pay reimbursements for
their pro rata share of specified operating expenses, which amounted to $457 and
$114 for the year ended December 31, 1997 and for the period from January 1,
1998 to March 6, 1998 (unaudited), respectively. These amounts are included in
rental revenues in the accompanying statements of revenues and certain expenses.
Certain leases contain options to renew.
F-94
<PAGE> 227
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Owners of the
AMB Contributed Properties:
We have audited the accompanying combined statement of revenues and certain
expenses of the Cabot Industrial Portfolio (as defined in Note 1) for the year
ended December 31, 1996. This financial statement is the responsibility of the
management of the AMB Contributed Properties. Our responsibility is to express
an opinion on this financial statement based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
The accompanying combined statement of revenues and certain expenses was
prepared for the purpose of complying with the rules and regulations of the
Securities and Exchange Commission for inclusion in the Registration Statement
on Form S-11 of AMB Property Corporation as described in Note 1 and is not
intended to be a complete presentation of the revenues and expenses of the Cabot
Industrial Portfolio.
In our opinion, the combined financial statement referred to above presents
fairly, in all material respects, the revenues and certain expenses of the Cabot
Industrial Portfolio for the year ended December 31, 1996, in conformity with
generally accounting principles.
ARTHUR ANDERSEN LLP
San Francisco, California,
October 29, 1997
F-95
<PAGE> 228
CABOT INDUSTRIAL PORTFOLIO
COMBINED STATEMENTS OF REVENUES AND CERTAIN EXPENSES
FOR THE YEAR ENDED DECEMBER 31, 1996 AND
FOR THE PERIOD FROM JANUARY 1, 1997 TO DECEMBER 30, 1997 (UNAUDITED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
1996 1997
------- -----------
(UNAUDITED)
<S> <C> <C>
REVENUES
Rental revenues........................................... $21,821 $22,843
Other income.............................................. 197 152
------- -------
22,018 22,995
CERTAIN EXPENSES
Property operating expenses............................... 1,418 1,476
Real estate taxes......................................... 2,391 3,299
------- -------
3,809 4,775
------- -------
REVENUES IN EXCESS OF CERTAIN EXPENSES...................... $18,209 $18,220
======= =======
</TABLE>
The accompanying notes are an integral part of these combined financial
statements.
F-96
<PAGE> 229
CABOT INDUSTRIAL PORTFOLIO
NOTES TO COMBINED STATEMENTS OF REVENUES
AND CERTAIN EXPENSES
(DOLLARS IN THOUSANDS)
1. BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Properties Acquired
The accompanying combined statements of revenues and certain expenses
include the combined operations (see "Basis of Presentation" below) of the Cabot
Industrial Portfolio (the "Portfolio"). AMB Property, L.P. (the "Company")
acquired the following 28 properties from an unrelated party on December 30,
1997 for an aggregate purchase price of $216.7 million.
<TABLE>
<CAPTION>
PROPERTY NAME LOCATION RENTABLE SQUARE FEET
------------- -------- --------------------
<S> <C> <C>
Hampden Road Mansfield, MA 204,117
Dock's Corner II South Brunswick, NJ 212,335
Santa Barbara Court Elkridge, MD 166,820
Preston Court Jessup, MD 178,880
Brightseat Road Landover, MD 121,785
President's Drive Orlando, FL 129,372
President's Drive II Orlando, FL 302,400
Viscount Orlando, FL 114,846
Dixie Highway Florence, KY 209,680
Production Drive Florence, KY 50,729
Empire Drive Florence, KY 199,440
Industrial Drive Columbus, OH 225,433
Holton Drive Florence, KY 268,525
Janitrol Columbus, OH 240,000
Belden Avenue Addison, IL 346,233
Pagemill & Dillworth Dallas, TX 217,803
McDaniel Drive Carrollton, TX 157,500
Shiloh Road Garland, TX 192,720
N. Glenville Avenue Richardson, TX 109,000
West Kiest Dallas, TX 248,698
Valwood Parkway II Carrollton, TX 254,209
72nd Avenue Kent, WA 125,654
Wiegman Road Hayward, CA 148,559
Yosemite Drive Milpitas, CA 169,195
Laurelwood Santa Clara, CA 155,500
Commerce Fontana, CA 254,414
East Walnut Drive City of Industry, CA 85,871
Jasmine Avenue Fontana, CA 410,208
---------
5,499,926
=========
</TABLE>
Basis of Presentation
The accompanying combined statements of revenues and certain expenses are
not representative of the actual operations of the Portfolio for the periods
presented. Certain expenses may not be comparable to the expenses expected to be
incurred by the Company in the proposed future operations of the Portfolio;
however, the Company is not aware of any material factors relating to these
Portfolio that would cause the reported
F-97
<PAGE> 230
CABOT INDUSTRIAL PORTFOLIO
NOTES TO COMBINED STATEMENTS OF REVENUES
AND CERTAIN EXPENSES (CONTINUED)
(DOLLARS IN THOUSANDS)
financial information not to be indicative of future operating results. Excluded
expenses consist of interest, depreciation and amortization and other costs not
directly related to the future operations of the Portfolio.
Revenue Recognition
All leases are classified as operating leases, and rental revenue is
recognized on a straight-line basis over the terms of the leases.
Uses of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
2. LEASING ACTIVITY
The following is a schedule of future minimum rental revenues for 1997 and
annually thereafter on non-cancelable operating leases in effect as of December
31, 1997.
<TABLE>
<CAPTION>
YEAR AMOUNT
---- -------
<S> <C>
1998........................................................ $16,476
1999........................................................ 14,502
2000........................................................ 11,336
2001........................................................ 7,335
2002........................................................ 5,514
Thereafter.................................................. 14,353
-------
Total............................................. $69,516
=======
</TABLE>
In addition to minimum rental payments, tenants pay reimbursements for
their pro rata share of specified operating expenses, which amounted to $2,641
and $2,688 for the year ended December 31, 1996 and for the period from January
1, 1997 to December 30, 1997 (unaudited). Certain leases contain options to
renew.
F-98
<PAGE> 231
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Owners of the
AMB Contributed Properties:
We have audited the accompanying statement of revenues and certain expenses
of Cabot Business Park for the year ended December 31, 1996. This financial
statement is the responsibility of the management of the AMB Contributed
Properties. Our responsibility is to express an opinion on this financial
statement based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
The accompanying statement of revenues and certain expenses was prepared
for the purpose of complying with the rules and regulations of the Securities
and Exchange Commission for inclusion in the Registration Statement on Form S-11
of AMB Property Corporation as described in Note 1 and is not intended to be a
complete presentation of the revenues and expenses of Cabot Business Park.
In our opinion, the financial statement referred to above presents fairly,
in all material respects, the revenues and certain expenses of Cabot Business
Park for the year ended December 31, 1996, in conformity with generally
accounting principles.
ARTHUR ANDERSEN LLP
San Francisco, California,
October 29, 1997
F-99
<PAGE> 232
CABOT BUSINESS PARK
STATEMENTS OF REVENUES AND CERTAIN EXPENSES
FOR THE YEAR ENDED DECEMBER 31, 1996 AND
FOR THE PERIOD FROM JANUARY 1, 1997 TO SEPTEMBER 15, 1997 (UNAUDITED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
1996 1997
------- -----------
(UNAUDITED)
<S> <C> <C>
REVENUES
Rental revenues........................................... $ 6,399 $ 4,730
Other income.............................................. 2 4
------- -------
6,401 4,734
CERTAIN EXPENSES
Property operating expenses............................... 500 342
Real estate taxes......................................... 783 553
------- -------
1,283 895
------- -------
REVENUES IN EXCESS OF CERTAIN EXPENSES...................... $ 5,118 $ 3,839
======= =======
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-100
<PAGE> 233
CABOT BUSINESS PARK
NOTES TO STATEMENTS OF REVENUES
AND CERTAIN EXPENSES
(DOLLARS IN THOUSANDS)
1. BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Properties Acquired
The accompanying statements of revenues and certain expenses include the
operations (see "Basis of Presentation" below) of Cabot Business Park (the
"Property") acquired by the Owners of the AMB Contributed Properties (the
"Company") from an unrelated party on September 15, 1997 for an initial purchase
price of $64,108. The property is located in Mansfield, Massachusetts and
includes 1,071,517 rentable square feet.
Basis of Presentation
The accompanying statements of revenues and certain expenses are not
representative of the actual operations of the Property for the periods
presented. Certain expenses may not be comparable to the expenses expected to be
incurred by the Company in the proposed future operations of the Property;
however, the Company is not aware of any material factors relating to the
Property that would cause the reported financial information not to be
indicative of future operating results. Excluded expenses consist of interest,
depreciation and amortization and other costs not directly related to the future
operations of the Property.
Revenue Recognition
All leases are classified as operating leases, and rental revenue is
recognized on a straight-line basis over the terms of the leases.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
2. LEASING ACTIVITY
The following is a schedule of future minimum rental revenues for 1997 and
annually thereafter on non-cancelable operating leases in effect as of December
31, 1996.
<TABLE>
<CAPTION>
YEAR AMOUNT
---- -------
<S> <C>
1997........................................................ $ 6,373
1998........................................................ 5,608
1999........................................................ 6,055
2000........................................................ 6,165
2001........................................................ 6,307
Thereafter.................................................. 6,673
-------
Total............................................. $37,181
=======
</TABLE>
In addition to minimum rental payments, tenants pay reimbursements for
their pro rata share of specified operating expenses, which amounted to $1,042
and $774 for the year ended December 31, 1996 and for the period from January 1,
1997 to September 15, 1997 (unaudited). Certain leases contain options to renew.
F-101
<PAGE> 234
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Owners of the
AMB Contributed Properties:
We have audited the accompanying statement of revenues and certain expenses
of the Manhattan Village Shopping Center for the year ended December 31, 1996.
This financial statement is the responsibility of the management of the AMB
Contributed Properties. Our responsibility is to express an opinion on this
financial statement based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
The accompanying statement of revenues and certain expenses was prepared
for the purpose of complying with the rules and regulations of the Securities
and Exchange Commission for inclusion in the Registration Statement on Form S-11
of AMB Property Corporation as described in Note 1 and is not intended to be a
complete presentation of the revenues and expenses of Manhattan Village Shopping
Center.
In our opinion, the financial statement referred to above presents fairly,
in all material respects, the revenues and certain expenses of the Manhattan
Village Shopping Center for the year ended December 31, 1996, in conformity with
generally accounting principles.
ARTHUR ANDERSEN LLP
San Francisco, California,
October 17, 1997
F-102
<PAGE> 235
MANHATTAN VILLAGE SHOPPING CENTER
STATEMENTS OF REVENUES AND CERTAIN EXPENSES
FOR THE YEAR ENDED DECEMBER 31, 1996 AND
FOR THE PERIOD FROM JANUARY 1, 1997 TO AUGUST 19, 1997 (UNAUDITED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
1996 1997
------ -----------
(UNAUDITED)
<S> <C> <C>
REVENUES
Rental revenues........................................... $8,197 $5,467
Other income.............................................. 19 --
------ ------
8,216 5,467
CERTAIN EXPENSES
Property operating expenses............................... 2,119 1,485
Real estate taxes......................................... 978 443
------ ------
3,097 1,928
------ ------
REVENUES IN EXCESS OF CERTAIN EXPENSES...................... $5,119 $3,539
====== ======
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-103
<PAGE> 236
MANHATTAN VILLAGE SHOPPING CENTER
NOTES TO STATEMENTS OF REVENUES
AND CERTAIN EXPENSES
(DOLLARS IN THOUSANDS)
1. BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Properties Acquired
The accompanying statements of revenues and certain expenses include the
operations of the Manhattan Village Shopping Center (the "Property"). AMB
Property Corporation (the "Company") acquired the Property from an unrelated
party on August 19, 1998 for an initial purchase price of $79,300. The Portfolio
is located in Manhattan Beach, California and includes 423,950 rentable square
feet.
Basis of Presentation
The accompanying statements of revenues and certain expenses are not
representative of the actual operations of the Property for the periods
presented. Certain expenses may not be comparable to the expenses expected to be
incurred by the Company in the proposed future operations of the Property;
however, the Company is not aware of any material factors relating to the
Property that would cause the reported financial information not to be
indicative of future operating results. Excluded expenses consist of interest,
depreciation and amortization and other costs not directly related to the future
operations of the Property.
Revenue Recognition
All leases are classified as operating leases, and rental revenue is
recognized on a straight-line basis over the terms of the leases.
Uses of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
2. LEASING ACTIVITY
The following is a schedule of future minimum rental revenues for 1997 and
annually thereafter on non-cancelable operating leases in effect as of December
31, 1996.
<TABLE>
<CAPTION>
YEAR AMOUNT
---- -------
<S> <C>
1997........................................................ $ 6,546
1998........................................................ 7,287
1999........................................................ 8,566
2000........................................................ 8,756
2001........................................................ 9,005
Thereafter.................................................. 20,473
-------
Total............................................. $60,633
=======
</TABLE>
In addition to minimum rental payments, tenants pay reimbursements for
their pro rata share of specified operating expenses, which amounted to $2,502
and $1,995 for the year ended December 31, 1996 and for the nine months ended
August 19, 1997 (unaudited). Certain leases contain options to renew.
F-104
<PAGE> 237
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Owners of the
AMB Contributed Properties:
We have audited the accompanying statement of revenues and certain expenses
of the Weslayan Plaza (as defined in Note 1) for the year ended December 31,
1996. This financial statement is the responsibility of management of the AMB
Contributed Properties. Our responsibility is to express an opinion on this
financial statement based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
The accompanying statement of revenues and certain expenses was prepared
for the purpose of complying with the rules and regulations of the Securities
and Exchange Commission for inclusion in the Registration Statement on Form S-11
of AMB Property Corporation as described in Note 1 and is not intended to be a
complete presentation of the revenues and expenses of Weslayan Plaza.
In our opinion, the financial statement referred to above presents fairly,
in all material respects, the revenues and certain expenses of the Weslayan
Plaza for the year ended December 31, 1996, in conformity with generally
accounting principles.
ARTHUR ANDERSEN LLP
San Francisco, California,
October 17, 1997
F-105
<PAGE> 238
WESLAYAN PLAZA
STATEMENTS OF REVENUES AND CERTAIN EXPENSES
FOR THE YEAR ENDED DECEMBER 31, 1996 AND
FOR THE PERIOD FROM JANUARY 1, 1997 TO SEPTEMBER 30, 1997 (UNAUDITED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
1996 1997
------ -----------
(UNAUDITED)
<S> <C> <C>
REVENUES
Rental revenues........................................... $4,619 $3,259
Other income.............................................. 19 --
------ ------
4,638 3,259
CERTAIN EXPENSES
Property operating expenses............................... 539 496
Real estate taxes......................................... 659 494
------ ------
1,198 990
------ ------
REVENUES IN EXCESS OF CERTAIN EXPENSES...................... $3,440 $2,269
====== ======
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-106
<PAGE> 239
WESLAYAN PLAZA
NOTES TO STATEMENTS OF REVENUES
AND CERTAIN EXPENSES
(DOLLARS IN THOUSANDS)
1. BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Properties Acquired
The accompanying statements of revenues and certain expenses include the
operations of Weslayan Plaza (the "Property"). AMB Property Corporation (the
"Company") acquired the Property from an unrelated party, on September 30, 1997
for an initial purchase price of $37,393. The Property is located in Houston,
Texas, and includes 216,870 rentable square feet.
Basis of Presentation
The accompanying statements of revenues and certain expenses are not
representative of the actual operations of the Property for the periods
presented. Certain expenses may not be comparable to the expenses expected to be
incurred by the Company in the proposed future operations of the Property;
however, the Company is not aware of any material factors relating to the
Property that would cause the reported financial information not to be
indicative of future operating results. Excluded expenses consist of interest,
depreciation and amortization and other costs not directly related to the future
operations of the Property.
Revenue Recognition
All leases are classified as operating leases, and rental revenue is
recognized on a straight-line basis over the terms of the leases.
Uses of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
2. LEASING ACTIVITY
The following is a schedule of future minimum rental revenues for 1997 and
annually thereafter on non-cancelable operating leases in effect as of December
31, 1996.
<TABLE>
<CAPTION>
YEAR AMOUNT
---- -------
<S> <C>
1997........................................................ $ 3,576
1998........................................................ 3,171
1999........................................................ 2,168
2000........................................................ 1,715
2001........................................................ 1,213
Thereafter.................................................. 5,956
-------
Total............................................. $17,799
=======
</TABLE>
In addition to minimum rental payments, tenants pay reimbursements for
their pro rata share of specified operating expenses, which amounted to $864,584
and $449,425 for the year ended December 31, 1996 and for the period from
January 1, 1997 to December 30, 1997 (unaudited). Certain leases contain options
to renew.
F-107
<PAGE> 240
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Owners of the
AMB Contributed Properties:
We have audited the accompanying statement of revenues and certain expenses
of the Silicon Valley R&D Portfolio (as defined in Note 1) for the year ended
December 31, 1996. This financial statement is the responsibility of the
management of the AMB Contributed Properties. Our responsibility is to express
an opinion on this financial statement based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
The accompanying statement of revenues and certain expenses was prepared
for the purpose of complying with the rules and regulations of the Securities
and Exchange Commission for inclusion in the Registration Statement on Form S-11
of AMB Property Corporation as described in Note 1 and is not intended to be a
complete presentation of the revenues and expenses of the Silicon Valley R&D
Portfolio.
In our opinion, the financial statement referred to above presents fairly,
in all material respects, the revenues and certain expenses of the Silicon
Valley R&D Portfolio for the year ended December 31, 1996, in conformity with
generally accounting principles.
ARTHUR ANDERSEN LLP
San Francisco, California,
October 17, 1997
F-108
<PAGE> 241
SILICON VALLEY R&D PORTFOLIO
STATEMENTS OF REVENUES AND CERTAIN EXPENSES
FOR THE YEAR ENDED DECEMBER 31, 1996 AND
FOR THE PERIOD FROM JANUARY 1, 1997 TO NOVEMBER 25, 1997 (UNAUDITED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
1996 1997
------ -----------
(UNAUDITED)
<S> <C> <C>
REVENUES
Rental revenues........................................... $2,546 $2,958
Other income.............................................. 2 --
------ ------
2,548 2,958
CERTAIN EXPENSES
Property operating expenses............................... 306 190
Real estate taxes......................................... 199 121
------ ------
505 311
------ ------
REVENUES IN EXCESS OF CERTAIN EXPENSES...................... $2,043 $2,647
====== ======
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-109
<PAGE> 242
SILICON VALLEY R&D PORTFOLIO
NOTES TO STATEMENTS OF REVENUES
AND CERTAIN EXPENSES
(DOLLARS IN THOUSANDS)
1. BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PROPERTIES ACQUIRED
The accompanying statements of revenues and certain expenses include the
operations of the Silicon Valley R&D Portfolio (the "Portfolio"). AMB Property
Corporation (the "Company") acquired the Portfolio from an unrelated party on
November 25, 1997 for an initial purchase price of $29,850. The Portfolio is
located throughout the greater San Jose, California area and includes 5
buildings comprising 287,228 rentable square feet.
Basis of Presentation
The accompanying statements of revenues and certain expenses are not
representative of the actual operations of the Portfolio for the periods
presented. Certain expenses may not be comparable to the expenses expected to be
incurred by the Company in the proposed future operations of the Portfolio;
however, the Company is not aware of any material factors relating to these
Portfolio that would cause the reported financial information not to be
indicative of future operating results. Excluded expenses consist of interest,
depreciation and amortization and other costs not directly related to the future
operations of the Portfolio.
Revenue Recognition
All leases are classified as operating leases, and rental revenue is
recognized on a straight-line basis over the terms of the leases.
Uses of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
2. LEASING ACTIVITY
The following is a schedule of future minimum rental revenues for 1997 and
annually thereafter on non-cancelable operating leases in effect as of November
25, 1997.
<TABLE>
<CAPTION>
YEAR AMOUNT
---- -------
<S> <C>
1997........................................................ $ 2,175
1998........................................................ 1,507
1999........................................................ 1,404
2000........................................................ 1,289
2001........................................................ 629
Thereafter.................................................. 156
-------
Total............................................. $ 7,160
=======
</TABLE>
In addition to minimum rental payments, tenants pay reimbursements for
their pro rata share of specified operating expenses, which amounted to $430 and
$501 for the year ended December 31, 1996 and for the nine months ended November
25, 1997 (unaudited). Certain leases contain options to renew.
F-110
<PAGE> 243
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 31. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth the fees and expenses in connection with the
issuance and distribution of the securities being registered hereunder. Except
for the SEC registration fee, all amounts are estimates.
<TABLE>
<S> <C>
SEC Registration Fee........................................ $ 121,725
Rating Agencies Fees........................................ 450,000
Printing and Engraving Expenses............................. 95,000
Legal Fees and Expenses..................................... 250,000
Accounting Fees and Expenses................................ 75,000
Trustee Fees and Expenses................................... 100,000
Blue Sky Fees and Expenses.................................. 15,000
Miscellaneous Expenses...................................... 18,275
----------
Total............................................. $1,125,000
==========
</TABLE>
All of the costs identified above will be paid by the Operating Partnership.
ITEM 32. SALES TO SPECIAL PARTIES
See Item 33.
ITEM 33. RECENT SALES OF UNREGISTERED SECURITIES
In connection with its formation, the Company issued 4,746,624 unregistered
shares of Common Stock to AMB for a purchase price of $21.00 per share. In
connection with the Formation Transactions, the Company issued an aggregate of
69,963,529 shares of Common Stock in connection with the mergers of certain
corporations, and the Operating Partnership issued 2,386,910 limited partnership
Units in consideration for the contribution of certain Properties.
In January 1995, AMB issued 101,595 shares of its common stock to one of
its officers, for total consideration of $342,806, and in December 1996, it
issued 101,595 shares of common stock to one of its officers, for total
consideration of $307,071.
All of the above sales were made to "accredited investors" as defined in
Regulation D under the Securities Act in transactions not involving a public
offering pursuant to Regulation D.
ITEM 34. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 2-418 of the MGCL permits a corporation to indemnify its directors
and officers and certain other parties against judgments, penalties, fines,
settlements, and reasonable expenses actually incurred by them in connection
with any proceeding to which they may be made a party by reason of their service
in those or other capacities unless it is established that (i) the act or
omission of the director or officer was material to the matter giving rise to
the proceeding and (a) was committed in bad faith or (b) was the result of
active and deliberate dishonesty; (ii) the director or officer actually received
an improper personal benefit in money, property or services; or (iii) in the
case of any criminal proceeding, the director or officer had reasonable cause to
believe that the act or omission was unlawful. Indemnification may be made
against 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 may not be made 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 to the director or officer,
whether or not involving action in the director's or officer's official
capacity, in which the director or officer was adjudged to be liable on the
II-1
<PAGE> 244
basis that personal benefit was received. The termination of any proceeding by
conviction, or upon a plea of nolo contendere or its equivalent, or an entry of
any order of probation prior to judgment, creates a rebuttable presumption that
the director or officer did not meet the requisite standard of conduct required
for indemnification to be permitted.
In addition, Section 2-418 of the MGCL requires that, unless prohibited by
its charter, a corporation indemnify any director or officer who is made a party
to any proceeding by reason of service in that capacity against reasonable
expenses incurred by the director or officer in connection with the proceeding,
in the event that the director or officer is successful, on the merits or
otherwise, in the defense of the proceeding.
The Company's Charter and Bylaws provide in effect for the indemnification
by the Company of the directors and officers of the Company to the fullest
extent permitted by applicable law. The Company has purchased directors' and
officers' liability insurance for the benefit of its directors and officers.
The Company has entered into indemnification agreements with each of its
executive officers and directors. The indemnification agreements require, among
other matters, that the Company indemnify its executive officers and directors
to the fullest extent permitted by law and reimburse the executive officers and
directors for all related expenses as incurred, subject to return if it is
subsequently determined that indemnification is not permitted.
The Partnership Agreement of the Operating Partnership requires the
Operating Partnership to indemnify the Company, the directors and officers of
the Company, and such other persons as the Company may from time to time
designate against any loss or damage, including reasonable legal fees and court
costs incurred by such person by reason of anything it may do or refrain from
doing for or on behalf of the Operating Partnership or in connection with its
business or affairs unless it is established that: (i) the act or omission of
the indemnified person was material to the matter giving rise to the proceeding
and either was committed in bad faith or was the result of active and deliberate
dishonesty; (ii) the indemnified person actually received an improper personal
benefit in money, property or services; or (iii) in the case of any criminal
proceeding, the indemnified person had reasonable cause to believe that the act
or omission was unlawful.
ITEM 35. TREATMENT OF PROCEEDS FROM STOCK BEING REGISTERED
Not applicable.
ITEM 36. FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULES AND EXHIBITS
(a)(1) FINANCIAL STATEMENTS
Pro Forma Financial Information (Unaudited)
AMB Property, L.P.
Pro forma condensed consolidated balance sheet as of March 31, 1998
Notes to pro forma condensed consolidated balance sheet
Pro forma condensed consolidated statement of operations for the three
months ended March 31, 1998
Notes to pro forma condensed consolidated statement of operations
Pro forma condensed consolidated statement of operations for the year ended
December 31, 1997
Notes to pro forma condensed consolidated statement of operations
Historical Financial Information
AMB Property, L.P. -- March 31, 1998
Consolidated balance sheets as of December 31, 1997 and March 31, 1998
(unaudited)
Consolidated statements of operations for the three months ended March 31,
1998 (unaudited)
II-2
<PAGE> 245
Consolidated statements of cash flows for the three months ended March 31,
1998 (unaudited)
Consolidated statements of partners' capital for the three months ended
March 31, 1998 (unaudited)
Notes to consolidated financial statements (unaudited)
AMB Property, L.P. -- December 31, 1997
Report of independent public accountants
Consolidated balance sheets as of December 31, 1997
Consolidated statement of operations for the period from inception
(November 26, 1997) to December 31, 1997
Consolidated statement of cash flows for the period from inception
(November 26, 1997) to December 31, 1997
Consolidated statement of partners' capital for the period from inception
(November 26, 1997) to December 31, 1997
Notes to consolidated financial statements
AMB Property Corporation -- March 31, 1998
Consolidated balance sheets as of December 31, 1997 and March 31, 1998
Consolidated statements of operations for the three months ended March 31,
1997 and 1998 (unaudited)
Consolidated statements of cash flows for the three months ended March 31,
1997 and 1998 (unaudited)
Consolidated statement of stockholders' equity for the three months ended
March 31, 1998 (unaudited)
Notes to consolidated financial statements (unaudited)
AMB Property Corporation -- December 31, 1995, 1996 and 1997
Report of independent public accountants
Combined balance sheets as of December 31, 1995 and 1996 and September 30,
1997 (unaudited)
Combined statements of operations for the years ended December 31, 1994,
1995 and 1996, the nine months ended September 30, 1996 (unaudited) and the
period from January 1, 1997 to November 25, 1997 (unaudited)
Combined statements of owners' equity for the years ended December 31,
1994, 1995 and 1996 and the nine months ended September 30, 1997
(unaudited)
Combined statements of cash flows for the years ended December 31, 1994,
1995 and 1996, the nine months ended September 30, 1996 (unaudited) and the
period from January 1, 1997 to November 25, 1997 (unaudited)
Notes to combined financial statements
AMB Contributed Properties -- December 31, 1995, 1996 and 1997
Report of independent public accountants
Combined balance sheets as of December 31, 1995 and 1996 and September 30,
1997 (unaudited)
Combined statements of operations for the years ended December 31, 1994,
1995 and 1996, the nine months ended September 30, 1996 (unaudited) and the
period from January 1, 1997 to November 25, 1997 (unaudited)
Combined statements of owners' equity for the years ended December 31,
1994, 1995 and 1996 and the nine months ended September 30, 1997
(unaudited)
II-3
<PAGE> 246
Combined statements of cash flows for the years ended December 31, 1994,
1995 and 1996, the nine months ended September 30, 1996 (unaudited) and the
period from January 1, 1997 to November 25, 1997 (unaudited)
Notes to combined financial statements
The 1997 and 1998 Acquired Properties
Boston Industrial Portfolio
Report of independent public accountants
Statements of revenues and certain expenses for the year ended December 31,
1997 and for the period from January 1, 1998 to March 27, 1998 (unaudited)
Notes to combined statement of revenues and certain expenses
Jamesburg
Report of independent public accountants
Statements of revenues and certain expenses for the year ended December 31,
1997 and for the period from January 1, 1998 to March 20, 1998 (unaudited)
Notes to statements of revenues and certain expenses
Orlando Central Park
Report of independent public accountants
Statements of revenues and certain expenses for the year ended December 31,
1997 and for the period from January 1, 1998 to March 24, 1998 (unaudited)
Notes to statements of revenues and certain expenses
Totem Lake Malls
Report of independent public accountants
Statements of revenues and certain expenses for the year ended December 31,
1997 and for the period from January 1, 1998 to March 6, 1998 (unaudited)
Notes to statements of revenues and certain expenses
Cabot Industrial Portfolio
Report of independent public accountants
Statements of revenues and certain expenses for the year ended December 31,
1996 and the for period from January 1, 1997 to December 30, 1997
(unaudited)
Notes to statements of revenue and certain expenses
Cabot Business Park
Report of independent public accountants
Statements of revenues and certain expenses for the year ended December 31,
1996 and for the period from January 1, 1997 to September 15, 1997
(unaudited)
Notes to statements of revenue and certain expenses
II-4
<PAGE> 247
Manhattan Village Shopping Center
Report of independent public accountants
Statements of revenues and certain expenses for the year ended December 31,
1997 and for the period from January 1, 1997 to August 19, 1997 (unaudited)
Notes to statements of revenues and certain expenses
Weslayan Plaza
Report of independent public accountants
Statements of revenues and certain expenses for the year ended December 31,
1997 and for the period from January 1, 1997 to September 30, 1997
(unaudited)
Notes to statement of revenues and certain expenses
Silicon Valley R&D Portfolio
Report of independent public accountants
Statements of revenues and certain expenses for the year ended December 31,
1996 and the period from January 1, 1997 to November 25, 1997 (unaudited)
Notes to statements of revenue and certain expenses
(a)(2) FINANCIAL STATEMENT SCHEDULE
Historical Financial Information -- AMB Property Corporation
Schedule III -- Historical Consolidated Real Estate and Accumulated
Depreciation.
(b) Exhibits
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<C> <S>
1.1 Form of Underwriting Agreement.
3.1 Articles of Incorporation of the Registrant (incorporated by
reference to Exhibit 3.1 of the Company's Registration
Statement on Form S-11 (No. 333-35915)).
3.2 Bylaws of the Registrant (incorporated by reference to
Exhibit 3.2 of the Company's Registration Statement on Form
S-11 (No. 333-35915)).
4.1 Indenture (the "Indenture") by and among the Operating
Partnership, the Guarantors and State Street Bank and Trust
Company of California, N.A., as trustee.
4.2 First Supplemental Indenture, by and among the Operating
Partnership, the Guarantors and State Street Bank and Trust
Company of California, N.A., as trustee.
4.3 Second Supplemental Indenture, by and among the Operating
Partnership, the Guarantors and State Street Bank and Trust
Company of California, N.A., as trustee.
4.4 Third Supplemental Indenture, by and among the Operating
Partnership, the Guarantors and State Street Bank and Trust
Company of California, N.A., as trustee.
4.5 Specimen of % Notes due 2008 (included in the First
Supplemental Indenture incorporated by reference as Exhibit
4.2).
4.6 Specimen of % Notes due 2018 (included in the Second
Supplemental Indenture incorporated by reference as Exhibit
4.3).
4.7 Specimen of % Reset Put Securities due 2015 (included
in the Third Supplemental Indenture incorporated by
reference as Exhibit 4.4).
8.1 Opinion of Latham & Watkins.
</TABLE>
II-5
<PAGE> 248
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<C> <S>
10.1 Amended and Restated Agreement of Limited Partnership of AMB
Property, L.P. (incorporated by reference to Exhibit 10.1 to
the Company's Registration Statement on Form S-11 (No.
333-35915)).
10.2 Form of Registration Rights Agreement among the Registrant
and the persons named therein. (incorporated by reference to
Exhibit 10.2 to the Company's Registration Statement on Form
S-11 (No. 333-35915))
10.3 Amended and Restated Credit Agreement, dated August 8, 1997
(incorporated by reference to Exhibit 10.3 to the Company's
Registration Statement on Form S-11 (No. 333 -35915)).
10.4 Form of Employment Agreement between AMB Property
Corporation and certain of its executive officers
(incorporated by reference to Exhibit 10.4 to the Company's
Registration Statement on Form S-11 (No. 333-35915)).
10.5 The 1997 Stock Option and Incentive Plan of the Registrant
(incorporated by reference to Exhibit 10.5 of the Company's
Registration Statement on Form S-11 (No. 333-35915)).
10.6 Calculation Agency Agreement between the Operating
Partnership and Morgan Stanley & Co. Incorporated.
12.1 Statement regarding computation of ratios.
21.1 Subsidiaries of the Registrant.
23.1 Consent of Latham & Watkins (included in Exhibit 8.1 above).
23.2 Consent of Arthur Andersen LLP.
**24.1 Power of Attorney.
*25.1 Form T-1 Statement of Eligibility and Qualification under
the Trust Indenture Act of 1939 of , as
Trustee.
**27.1 Financial Data Schedule.
</TABLE>
- ---------------
* To be filed by amendment.
** Previously filed.
ITEM 37. UNDERTAKINGS
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 (the "Act") may be permitted to directors, officers, and controlling
persons of the Registrant pursuant to the provisions described under Item 34
above, or otherwise, the Registrant has been advised that in the opinion of the
Securities and Exchange Commission, such indemnification is against public
policy as expressed in the 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 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 Act and
will be governed by the final adjudication of such issue.
The Registrant hereby undertakes:
(1) For purposes of determining any liability under the Act, the
information omitted from the form of Prospectus filed as part of the
Registration Statement in reliance upon Rule 430A and contained in the form
of Prospectus filed by the Registrant pursuant to Rule 424(b)(1) or (4) or
497(h) under the Act shall be deemed to be part of the Registration
Statement as of the time it was declared effective.
II-6
<PAGE> 249
(2) For the purpose of determining any liability under the Act, each
post-effective amendment that contains a form of prospectus 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 Registrant hereby undertakes to provide to the Underwriters at the
closing specified in the Underwriting Agreement certificates in such
denominations and registered in such names as required by the Underwriters to
permit prompt delivery to each purchaser.
II-7
<PAGE> 250
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, each of the
Registrants certifies that it has reasonable grounds to believe that it meets
all of the requirements for filing on Form S-11 and has duly caused this
Amendment No. 1 to Registration Statement to be signed on its behalf by the
undersigned thereunto duly authorized in the City of San Francisco, State of
California, on the 13th day of May, 1998.
AMB PROPERTY CORPORATION
By: *
---------------------------------------
Hamid R. Moghadam
President and Chief Executive Officer
AMB PROPERTY, L.P.
By AMB PROPERTY CORPORATION,
its general partner
By: *
---------------------------------------
Hamid R. Moghadam
President and Chief Executive Officer
AMB PROPERTY II, L.P.
By AMB PROPERTY HOLDING CORPORATION,
its general partner
By: *
---------------------------------------
Hamid R. Moghadam
President and Chief Executive Officer
LONG GATE LLC
By AMB PROPERTY HOLDING CORPORATION,
its managing member
By: *
---------------------------------------
Hamid R. Moghadam
President and Chief Executive Officer
II-8
<PAGE> 251
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Registration Statement has been signed below by the following persons on
behalf of each of the Registrants and in the capacities and on the dates
indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
* Chairman of the Board and May 14, 1998
- ----------------------------------------------------- Director
T. Robert Burke
* President, Chief Executive May 14, 1998
- ----------------------------------------------------- Officer and Director
Hamid R. Moghadam (Principal Executive
Officer)
* Chairman of Investment May 14, 1998
- ----------------------------------------------------- Committee and Director
Douglas D. Abbey
* Chief Financial Officer May 14, 1998
- ----------------------------------------------------- (Principal Financial
S. Davis Carniglia Officer)
/s/ MICHAEL A. COKE Vice President and Director May 14, 1998
- ----------------------------------------------------- of Financial Management
Michael A. Coke Reporting (Principal
Accounting Officer)
* Director May 14, 1998
- -----------------------------------------------------
Daniel H. Case, III
Director May , 1998
- -----------------------------------------------------
Robert H. Edelstein, Ph.D.
* Director May 14, 1998
- -----------------------------------------------------
Lynn M. Sedway
Director May , 1998
- -----------------------------------------------------
Jeffrey L. Skelton, Ph.D.
Director May , 1998
- -----------------------------------------------------
Thomas W. Tusher
* Director May 14, 1998
- -----------------------------------------------------
Caryl B. Welborn
*By: /s/ MICHAEL A. COKE
---------------------------------------------------
Michael A. Coke
Attorney-in-Fact
</TABLE>
II-9
<PAGE> 252
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<C> <S>
1.1 Form of Underwriting Agreement.
3.1 Articles of Incorporation of the Registrant (incorporated by
reference to Exhibit 3.1 of the Company's Registration
Statement on Form S-11 (No. 333-35915)).
3.2 Bylaws of the Registrant (incorporated by reference to
Exhibit 3.2 of the Company's Registration Statement on Form
S-11 (No. 333-35915)).
4.1 Indenture (the "Indenture") by and among the Operating
Partnership, the Guarantors and State Street Bank and Trust
Company of California, N.A., as trustee.
4.2 First Supplemental Indenture, by and among the Operating
Partnership, the Guarantors and State Street Bank and Trust
Company of California, N.A., as trustee.
4.3 Second Supplemental Indenture, by and among the Operating
Partnership, the Guarantors and State Street Bank and Trust
Company of California, N.A., as trustee.
4.4 Third Supplemental Indenture, by and among the Operating
Partnership, the Guarantors and State Street Bank and Trust
Company of California, N.A., as trustee.
4.5 Specimen of % Notes due 2008 (included in the First
Supplemental Indenture incorporated by reference as Exhibit
4.2).
4.6 Specimen of % Notes due 2018 (included in the Second
Supplemental Indenture incorporated by reference as Exhibit
4.3).
4.7 Specimen of % Reset Put Securities due 2015 (included
in the Third Supplemental Indenture incorporated by
reference as Exhibit 4.4).
8.1 Opinion of Latham & Watkins.
10.1 Amended and Restated Agreement of Limited Partnership of AMB
Property, L.P. (incorporated by reference to Exhibit 10.1 to
the Company's Registration Statement on Form S-11 (No.
333-35915)).
10.2 Form of Registration Rights Agreement among the Registrant
and the persons named therein. (incorporated by reference to
Exhibit 10.2 to the Company's Registration Statement on Form
S-11 (No. 333-35915))
10.3 Amended and Restated Credit Agreement, dated August 8, 1997
(incorporated by reference to Exhibit 10.3 to the Company's
Registration Statement on Form S-11 (No. 333 -35915)).
10.4 Form of Employment Agreement between AMB Property
Corporation and certain of its executive officers
(incorporated by reference to Exhibit 10.4 to the Company's
Registration Statement on Form S-11 (No. 333-35915)).
10.5 The 1997 Stock Option and Incentive Plan of the Registrant
(incorporated by reference to Exhibit 10.5 of the Company's
Registration Statement on Form S-11 (No. 333-35915)).
10.6 Calculation Agency Agreement between the Operating
Partnership and Morgan Stanley & Co. Incorporated.
12.1 Statement regarding computation of ratios.
21.1 Subsidiaries of the Registrant.
23.1 Consent of Latham & Watkins (included in Exhibit 8.1 above).
23.2 Consent of Arthur Andersen LLP.
**24.1 Power of Attorney.
</TABLE>
<PAGE> 253
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<C> <S>
*25.1 Form T-1 Statement of Eligibility and Qualification under
the Trust Indenture Act of 1939 of , as
Trustee.
**27.1 Financial Data Schedule.
</TABLE>
- ---------------
* To be filed by amendment.
** Previously filed.
<PAGE> 1
EXHIBIT 1.1
$350,000,000
AMB PROPERTY, L.P.
$100,000,000 ___% NOTES DUE 2008
$100,000,000 ___% NOTES DUE 2018
$150,000,000 ___% RESET PUT SECURITIES (REPSSM) DUE 2015*
UNDERWRITING AGREEMENT
MAY __, 1998
*REPS is a service mark of Morgan Stanley Dean Witter & Co.
<PAGE> 2
May __, 1998
Morgan Stanley & Co. Incorporated
Goldman, Sachs & Co.
J.P. Morgan Securities Inc.
c/o Morgan Stanley & Co. Incorporated
1585 Broadway
New York, New York 10036
Dear Sirs and Mesdames:
AMB Property, L.P., a Delaware limited partnership (the "OPERATING
PARTNERSHIP"), proposes to issue and sell to the several Underwriters named in
Schedule I hereto (the "UNDERWRITERS"), $100,000,000 aggregate principal amount
of its ___% Notes due 2008 (the "2008 NOTES"), $100,000,000 aggregate principal
amount of its ___% Notes due 2018 (the "2018 NOTES") and $150,000,000 aggregate
principal amount of its ___% Reset Put Securities (REPSSM) due 2015 (the "REPS,"
and collectively with the 2008 Notes and the 2018 Notes, the "Securities") to be
issued pursuant to the provisions of an Indenture dated as of May __, 1998 (the
"INDENTURE") among the Operating Partnership, AMB Property Corporation, a
Maryland corporation and a guarantor of the Securities (the "REIT"), AMB
Property II, L.P., a Delaware limited partnership and a guarantor of the
Securities ("PROPERTY II"), Long Gate LLC, a Delaware limited liability company
and a guarantor of the Securities ("LONG Gate," and collectively with the REIT
and Property II, the "GUARANTORS") and ___________, as Trustee (the "Trustee").
As used sometimes herein, the "COMPANY" shall include the Operating
Partnership, the REIT, Property II, Long Gate and the other direct and indirect
subsidiaries of the REIT and the Operating Partnership.
Morgan Stanley & Co. Incorporated, Goldman, Sachs & Co. and J.P. Morgan
Securities Inc. are acting as representatives of the several Underwriters and in
such capacity are hereinafter referred to as the "REPRESENTATIVES."
The Operating Partnership has filed with the Securities and Exchange
Commission (the "COMMISSION") a registration statement on Form S-11 (File No.
333-49163), including a prospectus, relating to the Securities. The registration
statement as amended at the time it becomes effective, including the information
(if any) deemed to be part of the registration statement at the time of
effectiveness pursuant to Rule 430A under the Securities Act of 1933, as amended
(the "SECURITIES ACT"), is hereinafter referred to as the "REGISTRATION
STATEMENT"; the prospectus in the form first used to confirm sales of Securities
is referred to as the "PROSPECTUS." If the Operating Partnership has filed an
abbreviated registration statement to register additional ___% Notes due 2008,
___% Notes due 2018 or ___% Reset Put Securities (REPSSM) due 2015 pursuant to
Rule 462(b) under the Securities Act (the "RULE 462 REGISTRATION STATEMENT"),
then any reference herein to the term "REGISTRATION STATEMENT" shall be deemed
to include such Rule 462 Registration Statement.
<PAGE> 3
1. REPRESENTATIONS AND WARRANTIES. The Operating Partnership and the
REIT, jointly and severally, represent and warrant to and agree with each of the
Underwriters that:
(a) The Registration Statement has become effective; no stop
order suspending the effectiveness of the Registration Statement is in
effect, and no proceedings for such purpose are pending before or, to
the knowledge of the Operating Partnership and the REIT, threatened by
the Commission.
(b) (i) The Registration Statement, when it became effective,
did not contain and, as amended or supplemented, if applicable, will
not contain any untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the
statements therein not misleading, (ii) the Registration Statement and
the Prospectus comply and, as amended or supplemented, if applicable,
will comply in all material respects with the Securities Act and the
applicable rules and regulations of the Commission thereunder and (iii)
the Prospectus does not contain and, as amended or supplemented, if
applicable, will not contain any untrue statement of a material fact or
omit to state a material fact necessary to make the statements therein,
in the light of the circumstances under which they were made, not
misleading, except that the representations and warranties set forth in
this paragraph 1(b) do not apply to (A) statements or omissions in the
Registration Statement or the Prospectus based upon information
relating to any Underwriter furnished to the REIT in writing by such
Underwriter through you expressly for use therein, which are (i) the
legend on the inside front cover page of the Prospectus with respect to
stabilizing activity and (ii) the allocation table, and the _________
paragraphs under the caption "Underwriters" contained in the Prospectus
or (B) that part of the Registration Statement that constitutes the
Statement of Eligibility (Form T-1) under the Trust Indenture Act of
1939, as amended (the "TRUST INDENTURE ACT"), of the Trustee.
(c) The REIT has been duly incorporated and is validly
existing as a corporation in good standing under the laws of the State
of Maryland, and has all power and authority necessary to own, lease
and operate its properties and to conduct the businesses in which it is
engaged or proposes to engage as described in the Prospectus and to
enter into and perform its obligations under this Agreement. The REIT
is duly qualified or registered as a foreign corporation and is in good
standing in California and is in good standing in each other
jurisdiction in which such qualification or registration is required,
whether by reason of the ownership or leasing of property or the
conduct of business, except where the failure so to qualify or be
registered or to be in good standing in such other jurisdiction would
not result in a material adverse effect on the consolidated financial
position, results of operations or business of the Operating
Partnership, the REIT and each subsidiary of the Operating Partnership
or the REIT set forth on Schedule II hereto (each, a "SUBSIDIARY," and,
collectively, the "SUBSIDIARIES"), taken as a whole (a "MATERIAL
ADVERSE EFFECT").
(d) The Operating Partnership is a limited partnership duly
formed and existing under and by virtue of the laws of the State of
Delaware and is in good standing under the Delaware Revised Uniform
Limited Partnership Act with partnership power and authority to own,
lease and operate its properties, to conduct the business in which it
2
<PAGE> 4
is engaged or proposes to engage as described in the Prospectus and to
enter into and perform its obligations under this Agreement. The
Operating Partnership is duly qualified or registered as a foreign
partnership and is in good standing in California and is in good
standing in each other jurisdiction in which such qualification or
registration is required, whether by reason of the ownership or leasing
of property or the conduct of business, except where the failure so to
qualify or be registered or to be in good standing in such other
jurisdiction would not have Material Adverse Effect. The REIT is the
sole general partner of the Operating Partnership and owns an
approximate 97.1% interest in the Operating Partnership.
(e) Each Subsidiary has been, as the case may be, duly
incorporated or organized, is validly existing as a partnership,
corporation, limited liability company or real estate investment trust
in good standing under the laws of its respective jurisdiction of
organization, has the corporate, partnership or other power and
authority to own its property and to conduct its business as described
in the Prospectus and, with respect to Property II and Long Gate, to
enter into and perform its obligations under this Agreement. Each
Subsidiary is duly qualified to transact business and is in good
standing in each jurisdiction in which the conduct of its business or
its ownership or leasing of property requires such qualification,
except to the extent that the failure to be so qualified or be in good
standing would not have a Material Adverse Effect; all of the issued
shares of capital stock or other ownership interests of each Subsidiary
have been duly and validly authorized and issued, are fully paid and
non-assessable and, except as set forth in the Prospectus, are owned
directly or indirectly by the Operating Partnership or the REIT, free
and clear of all liens, encumbrances, equities or claims. The REIT and
the Operating Partnership have no subsidiaries other than the
Subsidiaries.
(f) Each of the joint venture partnerships or limited
liability companies listed on Schedule III hereto (the "JOINT
VENTURES") has been duly formed and is validly existing as a limited
partnership or limited liability company in good standing under the
laws of its state of organization, with power and authority to own,
lease and operate its properties and to conduct the business in which
it is engaged. Each Joint Venture is duly qualified or registered as a
foreign limited partnership or limited liability company to transact
business in each jurisdiction in which such qualification or
registration is required, whether by reason of the ownership or leasing
of property or the conduct of business, except where the failure so to
qualify or be registered would not have a Material Adverse Effect. The
Operating Partnership, the REIT or a Subsidiary of the Operating
Partnership or the REIT owns the partnership or other equity interest
in each of the Joint Ventures as set forth on Schedule III hereto (the
"JOINT VENTURE INTERESTS"), and each of the Joint Venture Interests is
validly issued and fully paid and free and clear of any security
interest, mortgage, pledge, lien encumbrance, claim or equity.
(g) This Agreement has been duly authorized, executed and
delivered by the Operating Partnership and the Guarantors and
constitutes the valid and binding agreement of each of them,
enforceable against them in accordance with its terms, subject to
applicable bankruptcy, insolvency or similar laws affecting creditors'
rights generally and general principles of equity.
3
<PAGE> 5
(h) The Indenture has been duly qualified under the Trust
Indenture Act and has been duly authorized, executed and delivered by
the Operating Partnership and the Guarantors and is a valid and binding
agreement of each of them, enforceable in accordance with its term,
subject to applicable bankruptcy, insolvency or similar laws affecting
creditors' rights generally and general principles of equity.
(i) The Securities have been duly authorized and, when
executed and authenticated in accordance with the provisions of the
Indenture and delivered to and paid for by the Underwriters in
accordance with the terms of this Agreement, will be entitled to the
benefits of the Indenture and will be valid and binding obligations of
the Operating Partnership, enforceable in accordance with their terms,
subject to applicable bankruptcy, insolvency or similar laws affecting
creditors' rights generally and general principles of equity.
(j) The guaranty of each of the Guarantors (the "GUARANTY,"
and collectively, the "GUARANTEES") has been duly authorized and, when
executed and authenticated in accordance with the provisions of the
Indenture, will be entitled to the benefits of the Indenture and will
be valid and binding obligations of the Guarantors, enforceable in
accordance with their terms, subject to applicable bankruptcy,
insolvency or similar laws affecting creditors' rights generally and
general principles of equity.
(k) With respect to the REPS, each of the Calculation Agency
Agreement and the Securities Purchase Option Agreement has been duly
authorized, executed and delivered by the Operating Partnership and is
a valid and binding agreement of the Operating Partnership, enforceable
in accordance with its terms, subject to applicable bankruptcy,
insolvency or similar laws affecting creditors' rights generally and
general principles of equity.
(l) The Securities and the Indenture will conform in all
material respects to the respective statements relating thereto
contained in the Prospectus and will be in substantially the respective
forms filed as exhibits to the Registration Statement.
(m) The Securities rank and will rank on a parity with all
unsecured indebtedness of the Operating Partnership that is outstanding
on the date hereof or that may be incurred hereafter, and senior to all
subordinated indebtedness of the Operating Partnership that is
outstanding on the date hereof or that may be incurred hereafter.
(n) The Operating Partnership has notified Morgan Guaranty
Trust Company of New York ("MGT"), the agent under the Credit Facility
(as defined in the Prospectus), of the terms and conditions of the
Securities, the Guarantees and the offering made hereby and has
certified to MGT in writing that the incurrence of the debt to be
evidenced by the Securities and the related Guarantees do not violate
any restrictions contained in the Credit Facility, and has otherwise
complied with all conditions and obligations under the Credit Facility
with respect to the issuance of the Securities, the incurrence of the
indebtedness evidenced thereby and the Guarantees.
4
<PAGE> 6
(o) The Operating Partnership has an authorized capitalization
as set forth in the Prospectus, and all of the issued and outstanding
units of the Operating Partnership (the "UNITS") have been duly and
validly authorized and issued, are fully paid and non-assessable and
conform to the description thereof contained in the Prospectus. The
Units owned by the REIT are owned directly by the REIT, free and clear
of all liens, encumbrances, equities or claims.
(p) As of the date of the Prospectus, there were approximately
___________ shares of the REIT's common stock, par value $0.01 per
share (the "COMMON STOCK"), issued and outstanding. The shares of
issued and outstanding Common Stock have been duly authorized and
validly issued, are fully paid and non-assessable; and none of the
outstanding shares of Common Stock was issued in violation of any
preemptive or other similar rights arising by operation of the Maryland
General Corporation Law (the "MGCL"), under the charter or by-laws of
the REIT, under any agreement or instrument to which the REIT or any of
its subsidiaries is a party or otherwise.
(q) The execution, delivery and performance of the
Underwriting Agreement and the Indenture by the Operating Partnership
and the Guarantors and the consummation of the transactions
contemplated hereby, and, with respect to the REPS, the execution,
delivery and performance of the Calculation Agency Agreement and the
Securities Purchase Option Agreement by the Operating Partnership, will
not (A) conflict with or result in a breach or violation of any of the
terms or provisions of, or constitute a default under, any indenture,
mortgage, deed of trust, loan agreement, joint venture agreement,
partnership agreement, limited liability company agreement or any other
agreement or instrument to which the Operating Partnership, the
Guarantors or any Subsidiary is a party or by which the Operating
Partnership, the Guarantors or any Subsidiary is bound or to which any
of the property or assets of the Operating Partnership, the Guarantors
or any Subsidiary is subject, except for such breach or violation which
would not, singly or in the aggregate, have a Material Adverse Effect,
(B) result in any violation of the provisions of the charter, by-laws,
certificate of limited partnership, partnership agreement or other
organizational documents of the Operating Partnership, the Guarantors
or any Subsidiary, as the case may be, or (C) result in any violation
of any statute or any order, rule or regulation of any court or
governmental agency or body having jurisdiction over the Operating
Partnership, the Guarantors or any Subsidiary, except where such
noncompliance or violation of any such statute, order, rule or
regulation would not, singly or in the aggregate, have a Material
Adverse Effect. No consent, approval, authorization or order of, or
filing or registration with, any such court or governmental agency or
body is required for the execution, delivery and performance of this
Agreement by the Operating Partnership, the Guarantors or any
Subsidiary and the consummation of the transactions contemplated
hereby, except for (i) the registration of the Securities under the
Securities Act and such consents, approvals, authorizations,
registrations or qualifications as may be required under the Securities
Exchange Act of 1934, as amended (the "EXCHANGE ACT"), and applicable
state and foreign securities laws in connection with the purchase and
distribution of the Securities by the Underwriters and (ii) consents,
approvals, authorizations, orders, filings or registrations that will
be completed on or prior to the Closing Date.
5
<PAGE> 7
(r) There are no legal or governmental proceedings pending or,
to the knowledge of the Operating Partnership and the REIT, threatened,
to which the Operating Partnership, the Guarantors or any Subsidiary is
a party or to which any of the properties of the Operating Partnership,
the Guarantors or any Subsidiary is subject that are required to be
described in the Registration Statement or the Prospectus and are not
so described, or any statutes, regulations, contracts or other
documents that are required to be described in the Registration
Statement or the Prospectus or to be filed as exhibits to the
Registration Statement that are not described or filed as required.
(s) Each preliminary prospectus filed as part of the
registration statement as originally filed or as part of any amendment
thereto, or filed pursuant to Rule 424 under the Securities Act,
complied when so filed in all material respects with the Securities Act
and the applicable rules and regulations of' the Commission thereunder.
(t) None of the Operating Partnership, the Guarantors or any
Subsidiary is, and after giving effect to the offering and sale of the
Securities and the application of the proceeds thereof as described in
the Prospectus, none will be, an "investment company" as such term is
defined in the Investment Company Act of 1940, as amended.
(u) There has not occurred any material adverse change, or any
development involving a prospective material adverse change, in the
condition, financial or otherwise, or in the earnings, business or
operations of the Company from that set forth in the Prospectus
(exclusive of any amendments or supplements thereto subsequent to the
date of this Agreement). Subsequent to the respective dates as of which
information is given in the Registration Statement and the Prospectus,
(i) the Operating Partnership, the Guarantors and the Subsidiaries have
not incurred any material liability or obligation, direct or
contingent, nor entered into any material transaction not in the
ordinary course of business; (ii) the REIT has not purchased any of its
outstanding capital stock, nor declared, paid or otherwise made any
dividend or distribution of any kind on its capital stock; (iii) the
Operating Partnership has not purchased any of its outstanding Units,
nor declared, paid or otherwise made any dividend or distribution of
any kind on its Units; and (iv) there has not been any material change
in the capital stock, short-term debt or long-term debt of the
Operating Partnership, the Guarantors or the Subsidiaries, except in
each case as described in or contemplated by the Prospectus.
(v) Except as otherwise disclosed in the Prospectus:
(i) the Company has good and marketable fee simple
title to the land underlying the Properties (as defined in the
Prospectus) and good and marketable title to the improvements
thereon, other than those improvements located on land which
the Company acts as the ground lessor, as disclosed in the
Prospectus (the "TENANT OWNED IMPROVEMENTS"), and all other
assets that are required for the effective operation of such
Properties in the manner in which they currently are operated,
subject, however, to existing mortgages on such Properties, to
utility easements serving such Properties and other immaterial
easements, reciprocal easement agreements and licenses, to
liens of ad valorem taxes and other assessments not delinquent
as of the Closing Date, to zoning and similar
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<PAGE> 8
governmental land use matters affecting such Properties that
are consistent with the current uses of such Properties, to
matters of title not adversely affecting marketability of
title to such Properties, other material statutory liens not
due and payable as of the Closing Date, title matters that may
be material in character, amount or extent but which do not
materially detract from the value, or interfere with the use
of, the Properties or otherwise materially impair the business
operations being conducted or proposed to be conducted
thereon, service marks and trade names used in connection with
such Properties, ownership by others of certain items of
equipment and other items of personal property that are not
material to the conduct of business operations at such
Properties and ownership of improvements pursuant to certain
valid, existing and enforceable ground leases;
(ii) with respect to the Properties held through
Joint Ventures (the "JOINT VENTURE PROPERTIES"), the Joint
Ventures that currently own such Properties have good and
marketable fee simple title to the land underlying such
Properties and good and marketable title to the improvements
thereon, other than the Tenant Owned Improvements, and all
other assets that are required for the effective operation of
such Properties in the manner in which they currently are
operated, subject to the exceptions set forth in clause (i)
above;
(iii) all liens, charges, encumbrances, claims, or
restrictions on or affecting any of the Properties or the
assets of the Company which are required to be disclosed in
the Prospectus are disclosed therein;
(iv) neither the Company nor any tenant of any of the
Properties is in default under any of the leases pursuant to
which the Company, as lessor, leases its Property (and neither
the REIT nor the Operating Partnership knows of any event
which, but for the passage of time or the giving of notice, or
both, would constitute a default under any of such leases)
other than such defaults that would not result in a Material
Adverse Effect;
(v) any real property and buildings held under lease
by the Operating Partnership, the REIT or the Subsidiaries are
held by them under valid, subsisting and enforceable leases
with such exceptions as are not material and do not interfere
with the use made and proposed to be made of such property and
buildings by the Operating Partnership, the REIT or the
Subsidiaries, in each case except as described in or
contemplated by the Prospectus;
(vi) no person has an option or right of first
refusal to purchase all or part of any Property or any
interest therein which is material to the Company;
(vii) each of the Properties complies with all
applicable codes, laws and regulations (including, without
limitation, building and zoning codes, laws and regulations
and laws relating to access to the Properties), except if and
to the extent disclosed in the Prospectus and except for such
failures to comply that would not individually or in the
aggregate result in a Material Adverse Effect;
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<PAGE> 9
(viii) neither of the Operating Partnership or the
REIT has knowledge of any pending or threatened condemnation
proceedings, zoning change, or other similar proceeding or
action that will in any manner affect the size of, use of,
improvements on, construction on or access to any of the
Properties, except such proceedings or actions that would not
have a Material Adverse Effect; and
(ix) the ground leases identified in the Prospectus
are in full force and effect, and the Operating Partnership,
the Guarantors and the Subsidiaries and, to the knowledge of
the Operating Partnership and the REIT, the Joint Ventures or
other named lessees under such leases (A) are not in default
in respect of any of the terms or provisions of such leases
and (B) have not received notice of the assertion of any claim
by anyone adverse to such person's or entity's rights as
lessees under such leases, or affecting or questioning such
person's or entity's right to the continued possession or use
of the Property under such leases or of a default under such
leases.
(w) Except as disclosed in the Prospectus:
(i) each Property, including, without limitation, the
Environment (as defined below) associated with such Property,
is free of any Hazardous Substance (as defined below) in
violation of any Environmental Law (as defined below)
applicable to such Property, except for Hazardous Substances
that would not result in a Material Adverse Effect;
(ii) none of the Operating Partnership, the REIT or
any Subsidiary has caused or suffered to occur any Release (as
defined below) of any Hazardous Substance into the Environment
on, in, under or from any Property in violation of any
Environmental Law applicable to such Property, other than such
Releases which, singly or in the aggregate, do not require
significant remediation, and no condition exists on, in, under
or, to the knowledge of the Operating Partnership and the
REIT, adjacent to any Property that could result in the
incurrence of material liabilities or any material violations
of any Environmental Law applicable to such Property, give
rise to the imposition of any material Lien (as defined below)
under any Environmental Law, or cause or constitute a material
health, safety or environmental hazard to any property, person
or entity;
(iii) none of the Operating Partnership, the REIT or
any Subsidiary is engaged, and neither the Operating
Partnership, the REIT nor any Subsidiary intends to engage in
any manufacturing or any other similar operations at the
Properties that (A) require the use, handling, transportation,
storage, treatment or disposal of any Hazardous Substance
(other than cleaning solvents and similar materials and other
than insecticides and herbicides or other Hazardous Substances
that are used in the ordinary course of operating the
Properties and in compliance with all applicable Environmental
Laws) or (B) require permits or are otherwise regulated
pursuant to any Environmental Law;
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<PAGE> 10
(iv) none of the Operating Partnership, the REIT or
any Subsidiary has received any written notice of a claim
under or pursuant to any Environmental Law applicable to a
Property or under common law pertaining to Hazardous
Substances on or originating from any Property;
(v) none of the Operating Partnership, the REIT or
any Subsidiary has received any notice from any Governmental
Authority (as defined below) claiming any violation of any
Environmental Law applicable to a Property that is uncured or
unremediated as of the date hereof;
(vi) no Property is included or, to the knowledge of
the Operating Partnership and the REIT, proposed for inclusion
on the National Priorities List issued pursuant to CERCLA (as
defined below) by the United States Environmental Protection
Agency (the "EPA") or on the Comprehensive Environmental
Response, Compensation, and Liability Information System
database maintained by the EPA, and has not otherwise been
identified by the EPA as a potential CERCLA removal, remedial
or response site or included or, to the knowledge of the
Operating Partnership and the REIT, proposed for inclusion on,
any similar list of potentially contaminated sites pursuant to
any other applicable Environmental Law nor has the Operating
Partnership, the REIT or any Subsidiary received any written
notice from the EPA or any other Governmental Authority
proposing the inclusion of any Property on such list; and
(vii) there are no underground storage tanks located
on or in any Property which have not been disclosed to the
Representatives.
As used herein: "HAZARDOUS SUBSTANCE" shall include, without
limitation, any hazardous substance, hazardous waste, toxic or
dangerous substance, pollutant, solid waste or similarly designated
materials, including, without limitation, oil, petroleum or any
petroleum-derived substance or waste, asbestos or asbestos-containing
materials, PCBs, pesticides, explosives, radioactive materials,
dioxins, urea formaldehyde insulation or any constituent of any such
substance, pollutant or waste, including any such substance, pollutant
or waste identified or regulated under any Environmental Law
(including, without limitation, materials listed in the United States
Department of Transportation Optional Hazardous Material Table, 49
C.F.R. Section 172.101, as heretofore amended, or in the EPA's List of
Hazardous Substances and Reportable Quantities, 40 C.F.R. Part 302, as
heretofore amended); "Environment" shall mean any surface water,
drinking water, ground water, land surface, subsurface strata, river
sediment, buildings, structures, and ambient, workplace and indoor air;
"ENVIRONMENTAL Law" shall mean the Comprehensive Environmental
Response, Compensation and Liability Act of 1980, as amended (42 U.S.C.
Section 9601 et seq.) ("CERCLA"), the Resource Conservation and
Recovery Act of 1976, as amended (42 U.S.C. Section 6901, et seq.), the
Clean Air Act, as amended (42 U.S.C. Section 7401, et seq.), the Clean
Water Act, as amended (33 U.S.C. Section 1251, et seq.), the Toxic
Substances Control Act, as amended (15 U.S.C. Section 2601, et seq.),
the Occupational Safety and Health Act of 1970, as amended (29 U.S.C.
Section 651, et seq.), the Hazardous Materials Transportation Act, as
amended (49 U.S.C. Section 1801, et seq.), and all other applicable
9
<PAGE> 11
federal, state and local laws, ordinances, regulations, rules, orders,
decisions and permits relating to the protection of the environment or
of human health from environmental effects; "GOVERNMENTAL AUTHORITY"
shall mean any federal, state or local governmental office, agency or
authority having the duty or authority to promulgate, implement or
enforce any Environmental Law; "LIEN" shall mean, with respect to any
Property, any mortgage, deed of trust, pledge, security interest, lien,
encumbrance, penalty, fine, charge, assessment, judgment or other
liability in, on or affecting such Property; and "RELEASE" shall mean
any spilling, leaking, pumping, pouring, emitting, emptying,
discharging, injecting, escaping, leaching, dumping, emanating or
disposing of any Hazardous Substance into the Environment, including,
without limitation, the abandonment or discard of barrels, containers,
tanks (including, without limitation, underground storage tanks) or
other receptacles containing or previously containing any Hazardous
Substance or any release, emission, discharge or similar term, as those
terms are defined or used in any Environmental Law.
(x) The Operating Partnership, the REIT and the Subsidiaries
(i) are in compliance with any and all applicable federal, state and
local laws and regulations relating to the protection of occupational
health and safety and all Environmental Laws, (ii) have received all
permits, licenses or other approvals required of them under applicable
federal and state occupational safety and health laws and regulations
and Environmental Laws to conduct their respective businesses and (iii)
are in compliance with all terms and conditions of any such permit,
license or approval, except in each case where such noncompliance,
failure to receive required permits, licenses or other approvals or
failure to comply with the terms and conditions of such permits,
licenses or approvals would not, singly or in the aggregate, have a
Material Adverse Effect.
(y) There are no costs or liabilities associated with
Environmental Laws (including, without limitation, any capital or
operating expenditures required for clean-up, closure of properties or
compliance with Environmental Laws or any permit, license or approval,
any related constraints on operating activities and any potential
liabilities to third parties) which would, singly or in the aggregate,
have a Material Adverse Effect.
(z) The Operating Partnership, the REIT and the Subsidiaries
own or possess, or can acquire on reasonable terms, all material
patents, patent rights, licenses, inventions, copyrights, know-how
(including trade secrets and other unpatented and/or unpatentable
proprietary or confidential information, systems or procedures),
trademarks, service marks and trade names currently employed by them in
connection with the business now operated by them, and none of the
Operating Partnership, the REIT nor the Subsidiaries have received any
notice of infringement of or conflict with asserted rights of others
with respect to any of the foregoing which, singly or in the aggregate,
if the subject of an unfavorable decision, ruling or finding, would
result in a Material Adverse Effect.
(aa) Arthur Andersen LLP, who have certified certain financial
statements in the Registration Statement, whose report appears in the
Prospectus, are independent public accountants as required by the
Securities Act and the rules and regulations of the
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<PAGE> 12
Commission thereunder during the periods covered by the financial
statements on which they reported contained in the Prospectus.
(bb) The Operating Partnership, the REIT and each of the
Subsidiaries are insured by insurers of recognized financial
responsibility against such losses and risks and in such amounts as are
prudent and customary in the businesses in which they are engaged; none
of the Operating Partnership, the REIT nor any Subsidiary has been
refused any insurance coverage sought or applied for; and none of the
Operating Partnership, the REIT nor any Subsidiary has any reason to
believe that it will not be able to renew its existing insurance
coverage as and when such coverage expires or to obtain similar
coverage from similar insurers as may be necessary to continue its
business at a cost that would not materially and adversely affect the
condition, financial or otherwise, or the earnings, business or
operations of the Operating Partnership, the REIT and the Subsidiaries,
taken as a whole, except as described in or contemplated by the
Prospectus.
(cc) The Operating Partnership, the REIT and the Subsidiaries
possess all certificates, authorizations and permits issued by the
appropriate federal, state or foreign regulatory authorities necessary
to conduct their respective businesses, and none of the Operating
Partnership, the REIT nor any Subsidiary has received any notice of
proceedings relating to the revocation or modification of any such
certificate, authorization or permit which, singly or in the aggregate,
if the subject of an unfavorable decision, ruling or finding, would
result in a Material Adverse Effect, except as described in or
contemplated by the Prospectus.
(dd) The Company maintains a system of internal accounting
controls sufficient to provide reasonable assurance that (i)
transactions are executed in accordance with management's general or
specific authorizations; (ii) transactions are recorded as necessary to
permit preparation of financial statements in conformity with generally
accepted accounting principles and to maintain asset accountability;
(iii) access to assets is permitted only in accordance with
management's general or specific authorization; and (iv) the recorded
accountability for assets is compared with the existing assets at
reasonable intervals and appropriate action is taken with respect to
any differences.
(ee) The Company has complied with all provisions of Section
517.075, Florida Statutes relating to doing business with the
Government of Cuba (the "CUBA ACT") or with any person or affiliate
located in Cuba.
(ff) The Company has filed all federal, state, and local
income tax returns which have been required to be filed and has paid
all taxes required to be paid and any other assessment, fine or penalty
levied against it, to the extent that any of the foregoing is due and
payable, except, in all cases, for any such tax, assessment, fine or
penalty that is being contested in good faith (and except in any case
in which the failure to so file or pay would not have a Material
Adverse Effect).
(gg) The financial statements (including the notes thereto)
included in the Registration Statement and the Prospectus present
fairly the financial position of the respective entity or entities
presented therein at the respective dates indicated and the
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<PAGE> 13
results of their operations for the respective periods specified, and
except as otherwise stated in the Registration Statement, said
financial statements have been prepared in conformity with generally
accepted accounting principles ("GAAP") applied on a consistent basis.
The supporting schedules included in the Registration Statement present
fairly the information required to be stated therein. The financial
information and data included in the Registration Statement and the
Prospectus present fairly the information included therein and have
been prepared on a basis consistent with that of the books and records
of the respective entities presented therein. Pro forma financial
information included in the Prospectus has been prepared in accordance
with the applicable requirements of Rules 11-01 and 11-02 of Regulation
S-X under the 1933 Act, and the necessary pro forma adjustments have
been properly applied to the historical amounts in the compilation of
such information, and, in management's opinion, the assumptions used in
the preparation thereof are reasonable and the adjustments used therein
are appropriate to give effect to the transactions and circumstances
referred to therein.
(hh) No relationship, direct or indirect, exists between or
among the Operating Partnership or the REIT on the one hand, and the
directors, officers, stockholders (in the case of the REIT), limited
partners (in the case of the Operating Partnership), customers or
suppliers of the Operating Partnership or the REIT on the other hand,
which is required to be described in the Prospectus which is not so
described.
(ii) The REIT and the Operating Partnership are in compliance
in all material respects with all presently applicable provisions of
the Employee Retirement Income Security Act of 1974, as amended,
including the regulations and published interpretations thereunder
("ERISA"); no "reportable event" (as defined in ERISA) has occurred
with respect to any "pension plan" (as defined in ERISA) for which the
Operating Partnership or the REIT would have any liability; neither the
REIT nor the Operating Partnership has incurred and does not expect to
incur liability under (i) Title IV of ERISA with respect to termination
of, or withdrawal from, any "pension plan" or (ii) Sections 412 or 4971
of the Code including the regulations and published interpretations
thereunder; each "pension plan" for which the Operating Partnership or
the REIT would have any liability that is intended to be qualified
under Section 401(a) of the Code is so qualified in all material
respects and nothing has occurred, whether by action or by failure to
act, which would cause the loss of such qualification; and each
"pension plan" for which the Operating Partnership, the REIT or any of
their affiliates has any liability or with respect to which the
Operating Partnership, the REIT or any of their affiliates is a
disqualified person (as defined in the Code) or party-in-interest (as
defined in ERISA) has not been a party to any "prohibited transaction"
(as defined in ERISA and the Code), except for such noncompliance,
reportable events, liabilities, or failures to qualify that would not
have a Material Adverse Effect.
(jj) Neither the REIT nor the Operating Partnership, nor any
director, officer, agent, employee or other person associated with or
acting on behalf of the Operating Partnership or the REIT, has used any
corporate funds for any unlawful contribution, gift, entertainment or
other unlawful expense relating to political activity; made any direct
or indirect unlawful payment to any foreign or domestic government
official or employee from corporate funds; violated or is in violation
of any provision of the Foreign Corrupt
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<PAGE> 14
Practices Act of 1977; or made any bribe, rebate, payoff, influence
payment, kickback or other unlawful payment.
(kk) The Operating Partnership, the REIT and the Subsidiaries
are currently in substantial compliance with all presently applicable
provisions of the Americans with Disabilities Act and no failure of the
Operating Partnership, the REIT or any Subsidiary to comply with all
presently applicable provisions of the Americans with Disabilities Act
would have a Material Adverse Effect.
(ll) The REIT was and is organized to qualify as a "real
estate investment trust" under the Internal Revenue Code of 1986, as
amended (the "CODE"); the REIT expects that it has qualified and will
continue to qualify as a "real estate investment trust" under the Code
beginning with its taxable year ended December 31, 1997, and will
continue to qualify as a "real estate investment trust" under the Code
after consummation of the transactions contemplated by the Prospectus;
and the REIT's present and contemplated operations, assets and income
will enable the REIT to meet the requirements for qualification as a
"real estate investment trust" under the Code.
Any certificate signed by any officer of the REIT, on its own behalf
and as general partner of the Operating Partnership, and delivered to the
Representatives or to counsel for the Underwriters shall be deemed a
representation and warranty by the Operating Partnership and the REIT to each
Underwriter as to the matters covered thereby.
2. AGREEMENTS TO SELL AND PURCHASE. The Operating Partnership hereby
agrees to sell to the several Underwriters, and each Underwriter, upon the basis
of the representations and warranties herein contained, but subject to the
conditions hereinafter stated, agrees, severally and not jointly, to purchase
from the Operating Partnership the respective principal amounts of Securities
set forth in Schedule I hereto opposite its name at _____% of the principal
amount thereof plus accrued interest, if any, from May __, 1998 to the date of
payment and delivery.
3. TERMS OF PUBLIC OFFERING. The Operating Partnership is advised by
you that the Underwriters propose to make a public offering of their respective
portions of the Securities as soon after the Registration Statement and this
Agreement have become effective as in your judgment is advisable. The Operating
Partnership is further advised by you that the Securities are to be offered to
the public initially at ____% of their principal amount (the "PUBLIC OFFERING
PRICE") plus accrued interest, if any, from May __, 1998 to the date of payment
and delivery and to certain dealers selected by you at a price that represents a
concession not in excess of ____% of their principal amount, and that any
Underwriter may allow, and such dealers may reallow, a concession, not in excess
of ____% of their principal amount, to any Underwriter or to certain other
dealers.
4. PAYMENT AND DELIVERY. Payment for the Securities shall be made to
the Operating Partnership in Federal or other funds immediately available in New
York City at 10:00 a.m., New York City time, on May __, 1998, or at such other
time on the same or such other date, not later than May __, 1998 as shall be
designated in writing by you. The time and date of such payment are hereinafter
referred to as the "CLOSING DATE."
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Payment for the Securities shall be made against delivery to you on the
Closing Date for the respective accounts of the several Underwriters of the
Securities registered in such names and in such denominations as you shall
request in writing not less than one full business day prior to the Closing
Date, with any transfer taxes payable in connection with the transfer of the
Securities to the Underwriters duly paid.
5. CONDITIONS TO THE UNDERWRITERS' OBLIGATIONS. The obligations of the
Operating Partnership to sell the Securities to the Underwriters and the several
obligations of the Underwriters to purchase and pay for the Securities are
subject to the condition that the Registration Statement shall have become
effective not later than 5:30 P.M. (New York City time) on the date hereof.
The several obligations of the Underwriters are subject to the
following further conditions:
(a) Subsequent to the execution and delivery of this Agreement
and prior to the Closing Date:
(i) there shall not have occurred any downgrading,
nor shall any notice have been given of any intended or
potential downgrading or of any review for a possible change
that does not indicate the direction of the possible change,
in the rating accorded the Operating Partnership, the REIT,
any of their respective securities or in the rating outlook
for either of them by any "nationally recognized statistical
rating organization," as such term is defined for purposes of
Rule 436(g)(2) under the Securities Act; and
(ii) there shall not have occurred any change, or any
development involving a prospective change, in the condition,
financial or otherwise, or in the earnings, business or
operations of the Operating Partnership, the REIT and their
subsidiaries, taken as a whole, from that set forth in the
Prospectus (exclusive of any amendments or supplements thereto
subsequent to the date of this Agreement) that, in your
judgment, is material and adverse and that makes it, in your
judgment, impracticable to market the Securities on the terms
and in the manner contemplated in the Prospectus.
(b) The Underwriters shall have received on the Closing Date a
certificate, dated the Closing Date and signed by an executive officer
of the REIT on behalf of the REIT and in the REIT's capacity as general
partner of the Operating Partnership, to the effect set forth in clause
(a)(i) above and to the effect that the representations and warranties
of the Operating Partnership and the REIT contained in this Agreement
are true and correct as of the Closing Date and that the Operating
Partnership and the REIT have complied with all of the agreements and
satisfied all of the conditions on their part to be performed or
satisfied hereunder on or before the Closing Date.
The officer signing and delivering such certificate may rely
upon the best of his or her knowledge as to proceedings threatened.
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(c) The Underwriters shall have received on the Closing Date
an opinion of Latham & Watkins, outside counsel for the Operating
Partnership and the REIT, dated the Closing Date, to the effect that:
(i) the Operating Partnership is a limited
partnership duly formed and existing under and by virtue of
the laws of the State of Delaware and is in good standing
under the Delaware Revised Uniform Limited Partnership Act
with partnership power and authority to own, lease and operate
its properties, to conduct the business in which it is engaged
or proposes to engage as described in the Prospectus and to
enter into and perform its obligations under the Underwriting
Agreement. The Operating Partnership is duly qualified or
registered as a foreign partnership and is in good standing in
California and is in good standing in each other jurisdiction
in which such qualification or registration is required,
whether by reason of the ownership or leasing of property or
the conduct of business, except where the failure so to
qualify or be registered or to be in good standing in such
other jurisdiction would not have a Material Adverse Effect.
The REIT is the sole general partner of the Operating
Partnership and owns outstanding partnership interests in the
Operating Partnership as set forth in the Prospectus;
(ii) the REIT is duly qualified to transact business
and is in good standing in each jurisdiction in which the
conduct of its business or its ownership or leasing of
property requires such qualification, except to the extent
that the failure to be so qualified or be in good standing
would not have a Material Adverse Effect;
(iii) each Subsidiary has been duly incorporated, is
validly existing as a partnership, corporation or limited
liability company in good standing under the laws of its
respective jurisdiction of organization, has the corporate,
partnership or other power and authority to own its property
and to conduct its business as described in the Prospectus
and, with respect to Property II and Long Gate, to enter into
and perform its obligations under the Underwriting Agreement.
Each Subsidiary is duly qualified to transact business and is
in good standing in each jurisdiction in which the conduct of
its business or its ownership or leasing of property requires
such qualification, except to the extent that the failure to
be so qualified or be in good standing would not have a
Material Adverse Effect. To such counsel's knowledge, each of
the partnership or member agreements of the Subsidiaries (as
applicable) is in full force and effect;
(iv) all of the issued ownership interests of
Property II and Long Gate have been, assuming the due
authorization by the REIT in its capacity as general partner
of the Operating Partnership in its capacity as sole general
partner of Property II, and the due authorization of AMB
Property Holding Corporation, a Maryland corporation, in its
capacity as the sole managing member of Long Gate, duly and
validly authorized and issued, are fully paid and
non-assessable and, except as described above, are owned of
record directly or indirectly by the
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<PAGE> 17
Operating Partnership or the REIT, to the best of such
counsel's knowledge, free and clear of all liens,
encumbrances, equities or claims;
(v) the issued and outstanding Units of the Operating
Partnership have been, assuming the due authorization by the
REIT in its capacity as the sole general partner of the
Operating Partnership, duly authorized for issuance by the
Operating Partnership to the holders thereof and are validly
issued and fully paid and conform to the description thereof
contained in the Prospectus. The Units owned by the REIT are
owned directly by the REIT, free and clear of all liens,
encumbrances, equities or claims. The Units have been offered
and sold on or prior to the Closing Date in compliance with
all federal and California securities laws;
(vi) the execution, delivery and performance of the
Underwriting Agreement and the Indenture by the Operating
Partnership and the Guarantors and the consummation of the
transactions contemplated hereby, and the execution, delivery
and performance of the Calculation Agency Agreement and the
Securities Purchase Option Agreement by the Operating
Partnership, (A) will not conflict with or result in a breach
or violation of any of the terms or provisions of, or
constitute a default under, any of the documents set forth on
Schedule IV hereto, except for any such conflicts, breaches or
violations which are not, singly or in the aggregate,
material, (B) will not result in any violation of the
provisions of the charter, by-laws, certificate of limited
partnership, partnership agreement or other organizational
documents of the Operating Partnership, the REIT or any
Subsidiary, as the case may be and (C) will not, to the best
of such counsel's knowledge, result in any violation of
federal securities laws, California law and the General
Corporation Law of the State of Delaware. Except for the
registration of the Securities under the Securities Act, such
consents, approvals, authorizations, registrations and
qualifications as may be required under the Exchange Act, and
applicable state Blue Sky and foreign securities laws in
connection with the purchase and distribution of the
Securities by the Underwriters and such other consents,
approvals, authorizations, registrations and qualifications
which if not obtained would not, singly or in the aggregate,
have a Material Adverse Effect, no consent, approval,
authorization or order of, or filing or registration with, any
federal or California court or governmental agency or body is
required under the covered laws by the Operating Partnership,
the REIT or any Subsidiary for the execution, delivery and
performance of this Agreement by the Operating Partnership and
the Guarantors and the consummation of the transactions
contemplated hereby;
(vii) the Underwriting Agreement has been duly
authorized, executed and delivered by the Operating
Partnership, Property II and Long Gate, and, assuming due
authorization, execution and delivery by the other parties
thereto, is a valid and binding agreement of each of them,
enforceable in accordance with its terms, subject to
applicable bankruptcy, insolvency or similar laws affecting
creditors' rights generally and general principles of equity;
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(viii) the Indenture has been duly qualified under
the Trust Indenture Act and has been duly authorized, executed
and delivered by the Operating Partnership, Property II and
Long Gate, and, assuming due authorization, execution and
delivery by the other parties thereto, is a valid and binding
agreement of each of them, enforceable in accordance with its
terms, subject to applicable bankruptcy, insolvency or similar
laws affecting creditors' rights generally and general
principles of equity;
(ix) the Securities have been duly authorized and,
when executed and authenticated in accordance with the
provisions of the Indenture and delivered to and paid for by
the Underwriters in accordance with the terms of this
Agreement, will be entitled to the benefits of the Indenture
and will be valid and binding obligations of the Operating
Partnership, enforceable in accordance with their terms,
subject to applicable bankruptcy, insolvency or similar laws
affecting creditors' rights generally and general principles
of equity;
(x) the Guarantees have been duly authorized and,
when executed and authenticated in accordance with the
provisions of the Indenture, will be entitled to the benefits
of the Indenture and will be valid and binding obligations of
the respective Guarantors, enforceable in accordance with
their terms, subject to applicable bankruptcy, insolvency or
similar laws affecting creditors' rights generally and general
principles of equity;
(xi) the Calculation Agency Agreement and the
Securities Purchase Option Agreement have been duly
authorized, executed and delivered by the Operating
Partnership and, assuming due authorization, execution and
delivery by the other parties thereto, are valid and binding
agreements of the Operating Partnership, enforceable in
accordance with their terms, subject to applicable bankruptcy,
insolvency or similar laws affecting creditors' rights
generally and general principles of equity;
(xii) the statements (A) in the Prospectus under the
captions "Description of Notes," "Certain Federal Income Tax
Considerations Relating to the REPS," "Description of Certain
Provisions of the Partnership Agreement of the Operating
Partnership," "Capital Stock" and "Underwriters" and (B) in
the Registration Statement in Items 33 and 34, in each case
insofar as such statements constitute summaries of the legal
matters, documents or proceedings referred to therein, fairly
present the information called for with respect to such legal
matters, documents and proceedings and fairly summarize the
matters referred to therein;
(xiii) based solely upon the representations of the
Operating Partnership and the REIT contained in this Agreement
and a certificate of an officer of the REIT, such counsel does
not know of any legal or governmental proceedings pending or
threatened to which the Operating Partnership, the REIT or any
Subsidiary is a party or to which any of the properties of the
Operating Partnership, the REIT or any Subsidiary is subject
that are required to be described in the Registration
Statement or the Prospectus and are not so described
17
<PAGE> 19
or any statutes, regulations, contracts or other documents
that are required to be described in the Registration
Statement or the Prospectus or to be filed as exhibits to the
Registration Statement that are not described or filed as
required. To the best knowledge of such counsel, all
descriptions in the Registration Statement of contracts and
other documents to which the Operating Partnership, the REIT
or any Subsidiary is a party fairly present the information
called for with respect to such documents and fairly summarize
the matters referred to therein;
(xiv) none of the Operating Partnership, the REIT or
any Subsidiary is, and after giving effect to the offering and
sale of the Securities and the application of the proceeds
thereof as described in the Prospectus none will be, an
"investment company" as such term is defined in the Investment
Company Act of 1940, as amended; and
(xv) such counsel is of the opinion that the
Registration Statement and Prospectus (except for financial
statements and schedules and other financial and statistical
data included therein or any Form T-1 as to which such counsel
need not express any opinion) comply as to form in all
material respects with the Securities Act and the applicable
rules and regulations of the Commission thereunder.
(d) The Underwriters shall have received on the Closing Date
an opinion of Ballard Spahr Andrews & Ingersoll, special Maryland
counsel for the REIT, dated the Closing Date, to the effect that:
(i) the REIT has been duly incorporated, is validly
existing as a corporation in good standing under the laws of
the State of Maryland, has the corporate power and authority
to own its property and to conduct its business as described
in the Prospectus and to enter into and perform its
obligations under the Underwriting Agreement;
(ii) each of AMB Institutional Realty Advisors, Inc.,
AMB Institutional Realty Advisors Limited Partnership and AMB
Property Holding Corporation [others?] has been duly
incorporated, is validly existing as a corporation or
partnership in good standing under the laws of the State of
Maryland and has the corporate power and authority to own its
property and to conduct its business;
(iii) the authorized capital stock of the REIT
conforms as to legal matters to the description thereof'
contained in the Prospectus;
(iv) the Underwriting Agreement has been duly
authorized, executed and delivered by the REIT in its
individual capacity and in its capacity as the general partner
of the Operating Partnership, and, assuming due authorization,
execution and delivery by the other parties thereto, is a
valid and binding agreement of the REIT, enforceable in
accordance with its terms, subject to
18
<PAGE> 20
applicable bankruptcy, insolvency or similar laws affecting
creditors' rights generally and general principles of equity;
(v) the Indenture has been duly authorized, executed
and delivered by the REIT in its individual capacity and in
its capacity as the general partner of the Operating
Partnership and, assuming due authorization, execution and
delivery by the other parties thereto, is a valid and binding
agreement of the REIT, enforceable in accordance with its
terms, subject to applicable bankruptcy, insolvency or similar
laws affecting creditors' rights generally and general
principles of equity;
(vi) the execution, delivery and performance of this
Agreement by the REIT and the consummation of the transactions
contemplated hereby (A) will not contravene any provision of
the MGCL, (B) will not result in any violation of the
provisions of the charter or by-laws of the REIT and (C) will
not, to the best of such counsel's knowledge, result in any
violation of any order, rule, regulation or decree of any
court or governmental agency or authority of the State of
Maryland issued under or pursuant to the MGCL and applicable
to the properties, assets or businesses owned directly or
indirectly by the REIT;
(vii) no consent, approval, authorization, order of
or qualification with any court or governmental agency or
authority of the State of Maryland is required to be obtained
by the Operating Partnership, the REIT, any Subsidiary or any
Predecessor Entity under the MGCL in connection with the
offering, issuance or sale of the Securities under this
Agreement except for such as have been obtained; and
(viii) the information in the Prospectus under the
caption "Description of Capital Stock," to the extent that it
constitutes matters of Maryland Law, summaries of legal
matters, documents or proceedings, or legal conclusions, has
been reviewed by them and is correct in all material respects.
(e) The Underwriters shall have received on the Closing Date
an opinion of Gibson, Dunn & Crutcher LLP, counsel for the
Underwriters, dated the Closing Date, in form and substance
satisfactory to the Underwriters.
With respect to subparagraph (xiv) of paragraph (c) above,
Latham & Watkins may state that its opinion and belief are based upon
(i) its participation in the preparation of the Registration Statement
and Prospectus and any amendments or supplements thereto and review and
discussion of the contents thereof, but are without independent check
or verification, except as specified, and (ii) representations of the
Operating Partnership and the REIT as to factual matters.
The opinions of Latham & Watkins and Ballard Spahr Andrews &
Ingersoll described in paragraph (c) and (d) above shall be rendered to
the Underwriters at the request of the Operating Partnership and the
REIT and shall so state therein.
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<PAGE> 21
(f) The Underwriters shall have received, on each of the date
hereof and the Closing Date, a letter dated the date hereof or the
Closing Date, as the case may be, in form and substance satisfactory to
the Underwriters, from Arthur Andersen LLP, independent public
accountants, containing statements and information of the type
ordinarily included in accountants' "comfort letters" to underwriters
with respect to the financial statements and certain financial
information contained in the Registration Statement and the Prospectus;
provided that the letter delivered on the Closing Date shall use a
"cut-off date" not earlier than the date hereof.
(g) At the date of this Agreement and at the Closing Date, the
Securities (or the general unsecured indebtedness of the Operating
Partnership or the REIT, as the case may be) shall be rated at least
_____ by Moody's Investor's Service Inc. and ____ by Standard & Poor's
Corporation, and the Operating Partnership shall have delivered to the
Representatives a letter, dated the Closing Date, from each such rating
agency, or other evidence satisfactory to the Representatives,
confirming that the Securities (or the general unsecured indebtedness
of the Operating Partnership or the REIT, as the case may be) have such
ratings.
6. COVENANTS OF THE OPERATING PARTNERSHIP AND THE REIT. In further
consideration of the agreements of the Underwriters herein contained, the
Operating Partnership and the REIT covenant with each Underwriter as follows:
(a) The Operating Partnership will advise the Representatives
promptly of the issuance by the Commission of any stop order suspending
the effectiveness of the Registration Statement or of the institution
of any proceedings for that purpose, and will use its best efforts to
prevent the issuance of any such stop order and to obtain as soon as
possible the lifting thereof, if issued. The Operating Partnership will
advise the Representatives promptly of any request by the Commission
for any amendment of or supplement to the Registration Statement or the
Prospectus or for additional information, and will not at any time file
any amendment to the Registration Statement or supplement to the
Prospectus which shall not previously have been submitted to the
Representatives a reasonable time prior to the proposed filing or use
thereof or to which the Representatives shall reasonably object or
which is not in compliance with the Securities Act and the rules and
regulations thereunder. The Operating Partnership will advise the
Representatives promptly when the Prospectus has been filed pursuant to
Rule 424(b) of the Securities Act.
(b) To furnish to you, without charge, four signed copies of
the Registration Statement (including exhibits thereto) and for
delivery to each other Underwriter a conformed copy of the Registration
Statement (without exhibits thereto) and to furnish to you in New York
City, without charge, prior to 10:00 A.M. New York City time on the
business day next succeeding the date of this Agreement and during the
period mentioned in paragraph (d) below, as many copies of the
Prospectus and any supplements and amendments thereto or to the
Registration Statement as you may reasonably request.
(c) Before amending or supplementing the Registration
Statement or the Prospectus, to furnish to you a copy of each such
proposed amendment or supplement
20
<PAGE> 22
and not to file any such proposed amendment or supplement to which you
reasonably object, and to file with the Commission within the
applicable period specified in Rule 424(b) under the Securities Act any
prospectus required to be filed pursuant to such Rule.
(d) If, during such period after the first date of the public
offering of the Securities, in the opinion of counsel for the
Underwriters, the Prospectus is required by law to be delivered in
connection with sales by an Underwriter or dealer, any event shall
occur or condition exist as a result of which it is necessary to amend
or supplement the Prospectus in order to make the statements therein,
in the light of the circumstances under which they were made, not
misleading when the Prospectus is delivered to a purchaser, or if, in
the opinion of counsel for the Underwriters, it is necessary to amend
or supplement the Prospectus to comply with applicable law, forthwith
to prepare, file with the Commission and furnish, at its own expense,
to the Underwriters and to the dealers (whose names and addresses you
will furnish to the Operating Partnership) to which Securities may have
been sold by you on behalf of the Underwriters and to any other dealers
upon request, either amendments or supplements to the Prospectus so
that the statements in the Prospectus as so amended or supplemented
will not, in the light of the circumstances under which they were made,
be misleading when the Prospectus is delivered to a purchaser, or so
that the Prospectus, as amended or supplemented, will comply with law.
(e) To endeavor to qualify the Securities for offer and sale
under the securities or Blue Sky laws and real estate syndication laws
of such jurisdictions as you shall reasonably request.
(f) To make generally available to the REIT's security holders
and to you as soon as practicable an earnings statement covering the
twelve-month period ending June 30, 1999 that satisfies the provisions
of Section 11(a) of the Securities Act and the rules and regulations of
the Commission thereunder.
(g) During the period beginning on the date hereof and
continuing through and including the Closing Date, not to offer, sell,
contract to sell or otherwise dispose of any debt securities of the
Operating Partnership, the REIT or any of the Subsidiaries which are
substantially similar to the Securities (other than the Securities) or
any securities convertible into or exchangeable or exercisable for any
debt securities of the Operating Partnership, the REIT or any of the
Subsidiaries which are substantially similar to the Securities or any
rights, warrants or options to purchase any debt securities of the
Operating Partnership, the REIT or any of the Subsidiaries which are
substantially similar to the Securities, without the prior written
consent of Morgan Stanley & Co. Incorporated.
(h) Whether or not the transactions contemplated in this
Agreement are consummated or this Agreement is terminated, to pay or
cause to be paid all expenses incident to the performance of their
obligations under this Agreement, including: (i) the fees,
disbursements and expenses of counsel for the Operating Partnership and
the Guarantors and their accountants in connection with the
registration and delivery of the Securities under the Securities Act
and all other fees or expenses in connection with the
21
<PAGE> 23
preparation and filing of the Registration Statement, any preliminary
prospectus, the Prospectus and amendments and supplements to any of the
foregoing, including all printing costs associated therewith, and the
mailing and delivering of copies thereof to the Underwriters and
dealers, in the quantities hereinabove specified, (ii) all costs and
expenses related to the transfer and delivery of the Securities to the
Underwriters, including any transfer or other taxes payable thereon,
(iii) the cost of printing or producing any Blue Sky or Legal
Investment memorandum in connection with the offer and sale of the
Securities under state securities laws and all expenses in connection
with the qualification of the Securities for offer and sale under state
securities laws as provided in Section 6(e) hereof, including filing
fees and the reasonable fees and disbursements of counsel for the
Underwriters in connection with such qualification and in connection
with the Blue Sky or Legal Investment memorandum, (iv) all filing fees
and the reasonable fees and disbursements of counsel to the
Underwriters, if any, incurred in connection with the review and
qualification of the offering of the Securities by the National
Association of Securities Dealers, Inc., (v) any fees charged by the
rating agencies for the rating of the Securities or of Operating
Partnership or the REIT, (vi) the cost of printing certificates
representing the Securities, (vii) the fees and expenses of the
Trustee, including, if required, the fees and disbursements of counsel
for the Trustee in connection with the Indenture and the Securities,
(viii) the fees and expenses of any transfer agent, registrar or
depositary in connection with holding the Securities in book-entry
form, (ix) the costs and expenses of the Company relating to investor
presentations on any "road show" undertaken in connection with the
marketing of the offering of the Securities, including, without
limitation, expenses associated with the production of road show slides
and graphics, fees and expenses of any consultants engaged in
connection with the road show presentations with the prior approval of
the Company, travel and lodging expenses of the representatives and
officers of the Company and any such consultants, and the cost of any
aircraft chartered in connection with the road show, and (x) all other
costs and expenses incident to the performance of the obligations of
the Operating Partnership and the Guarantors hereunder for which
provision is not otherwise made in this Section. It is understood,
however, that except as provided in this Section, Section 7 entitled
"Indemnity and Contribution," and the last paragraph of Section 9
below, the Underwriters will pay all of their costs and expenses,
including fees and disbursements of their counsel, transfer taxes
payable on resale of any of the Securities by them and any advertising
expenses connected with any offers they may make.
(i) The Operating Partnership will use the net proceeds
received by it from the sale of the Securities sold by it in the manner
specified in the Prospectus Supplement under "Use of Proceeds."
(j) In accordance with the provisions of the Cuba Act, if
applicable, and without limitation to the provisions of Section 7
hereof, the Operating Partnership and the REIT will indemnify each
Underwriter against any and all losses, claims, damages, liabilities
and expenses (including attorneys' fees) arising out of or based upon
any violation by the Company of the Cuba Act.
7. INDEMNITY AND CONTRIBUTION. (a) The Operating Partnership and the
REIT, jointly and severally, agree to indemnify and hold harmless each
Underwriter and each person, if
22
<PAGE> 24
any, who controls any Underwriter within the meaning of either Section 15 of the
Securities Act or Section 20 of the Exchange Act, from and against any and all
losses, claims, damages and liabilities (including, without limitation, any
legal or other expenses reasonably incurred in connection with defending or
investigating any such action or claim) caused by any untrue statement or
alleged untrue statement of a material fact contained in the Registration
Statement or any amendment thereof, any preliminary prospectus or the Prospectus
(as amended or supplemented if the Operating Partnership shall have furnished
any amendments or supplements thereto), or caused by any omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, except insofar as such
losses, claims, damages or liabilities are caused by any such untrue statement
or omission or alleged untrue statement or omission based upon information
relating to any Underwriter furnished to the Operating Partnership or the REIT
in writing by such Underwriter through you expressly for use therein and set
forth in Section 1(b) hereof; provided, however, that the foregoing indemnity
agreement with respect to any preliminary prospectus shall not inure to the
benefit of any Underwriter from whom the person asserting any such losses,
claims, damages or liabilities purchased Securities, or any person controlling
such Underwriter, if a copy of the Prospectus (as then amended or supplemented
if the Operating Partnership shall have furnished any amendments or supplements
thereto) was not sent or given by or on behalf of such Underwriter to such
person, if required by law so to have been delivered, at or prior to the written
confirmation of the sale of the Securities to such person, and if the Prospectus
(as so amended or supplemented) would have cured the defect giving rise to such
losses, claims, damages or liabilities, unless such failure is the result of
noncompliance by the Operating Partnership or the REIT with Section 6(b) hereof.
(b) Each Underwriter agrees, severally and not jointly, to
indemnify and hold harmless the Operating Partnership, the REIT, the REIT's
directors and the officers who sign the Registration Statement and each person,
if any, who controls the Operating Partnership or the REIT within the meaning of
either Section 15 of the Securities Act or Section 20 of the Exchange Act to the
same extent as the foregoing indemnities from the Operating Partnership and the
REIT to such Underwriter, but only with reference to information relating to
such Underwriter furnished to the Operating Partnership or the REIT in writing
by such Underwriter through you expressly for use in the Registration Statement,
any preliminary prospectus, the Prospectus or any amendments or supplements
thereto.
(c) In case any proceeding (including any governmental
investigation) shall be instituted involving any person in respect of which
indemnity may be sought pursuant to Section 7(a) or 7(b), such person (the
"INDEMNIFIED PARTY") shall promptly notify the person against whom such
indemnity may be sought (the "INDEMNIFYING PARTY") in writing and the
indemnifying party, upon request of the indemnified party, shall retain counsel
reasonably satisfactory to the indemnified party to represent the indemnified
party and any others the indemnifying party may designate in such proceeding and
shall pay the fees and disbursements of such counsel related to such proceeding.
In any such proceeding, any indemnified party shall have the right to retain its
own counsel, but the fees and expenses of such counsel shall be at the expense
of such indemnified party unless (i) the indemnifying party and the indemnified
party shall have mutually agreed to the retention of such counsel or (ii) the
named parties to any such proceeding (including any impleaded parties) include
both the indemnifying party and the indemnified party and representation of both
parties by the same counsel would be inappropriate
23
<PAGE> 25
due to actual or potential differing interests between them. It is understood
that the indemnifying party shall not, in respect of the legal expenses of any
indemnified party in connection with any proceeding or related proceedings in
the same jurisdiction, be liable for the fees and expenses of more than one
separate firm (in addition to any local counsel) for all such indemnified
parties and that all such fees and expenses shall be reimbursed as they are
incurred. Such firm shall be designated in writing by Morgan Stanley & Co.
Incorporated, in the case of parties indemnified pursuant to Section 7(a), and
by the REIT, in the case of parties indemnified pursuant to Section 7(b). The
indemnifying party shall not be liable for any settlement of any proceeding
effected without its written consent, but if settled with such consent or if
there be a final judgment for the plaintiff, the indemnifying party agrees to
indemnify the indemnified party from and against any loss or liability by reason
of such settlement or judgment. Notwithstanding the foregoing sentence, if at
any time an indemnified party shall have requested an indemnifying party to
reimburse the indemnified party for fees and expenses of counsel as contemplated
by the second and third sentences of this paragraph, the indemnifying party
agrees that it shall be liable for any settlement of any proceeding effected
without its written consent if (i) such settlement is entered into more than 60
days after receipt by such indemnifying party of the aforesaid request and (ii)
such indemnifying party shall not have reimbursed the indemnified party in
accordance with such request prior to the date of such settlement. No
indemnifying party shall, without the prior written consent of each indemnified
party, effect any settlement of any pending or threatened proceeding in respect
of which any indemnified party is or could have been a party and indemnity could
have been sought hereunder by such indemnified party, unless such settlement
includes an unconditional release of such indemnified party from all liability
on claims that are the subject matter of such proceeding.
(d) To the extent the indemnification provided for in Section
7(a) or 7(b) is unavailable to an indemnified party or insufficient in respect
of any losses, claims, damages or liabilities referred to therein, then each
indemnifying party under such paragraph, in lieu of indemnifying such
indemnified party thereunder, shall contribute to the amount paid or payable by
such indemnified party as a result of such losses, claims, damages or
liabilities (i) in such proportion as is appropriate to reflect the relative
benefits received by the Operating Partnership and the REIT on the one hand and
the Underwriters on the other hand from the offering of the Securities or (ii)
if the allocation provided by clause (i) above is not permitted by applicable
law, in such proportion as is appropriate to reflect not only the relative
benefits referred to in clause (i) above but also the relative fault of the
Operating Partnership and the REIT on the one hand and of the Underwriters on
the other hand in connection with the statements or omissions that resulted in
such losses, claims, damages or liabilities, as well as any other relevant
equitable considerations. The relative benefits received by the Operating
Partnership and the REIT on the one hand and the Underwriters on the other hand
in connection with the offering of the Securities shall be deemed to be in the
same respective proportions as the net proceeds from the offering of the
Securities (before deducting expenses) received by the Operating Partnership and
the total underwriting discounts and commissions received by the Underwriters,
in each case as set forth in the table on the cover of the Prospectus, bear to
the aggregate Public Offering Price of the Securities. The relative fault of the
Operating Partnership and the REIT on the one hand and the Underwriters on the
other hand shall be determined by reference to, among other things, whether the
untrue or alleged untrue statement of a material fact or the omission or alleged
omission to state a material fact relates to information supplied by the
Operating Partnership and the REIT or by the Underwriters and the parties'
relative intent, knowledge, access to information and
24
<PAGE> 26
opportunity to correct or prevent such statement or omission. The Underwriters'
respective obligations to contribute pursuant to this Section 7 are several in
proportion to the respective principal amounts of Securities they have purchased
hereunder, and not joint.
(e) The Operating Partnership, the REIT and the Underwriters
agree that it would not be just or equitable if contribution pursuant to this
Section 7 were determined by pro rata allocation (even if the Underwriters were
treated as one entity for such purpose) or by any other method of allocation
that does not take account of the equitable considerations referred to in
Section 7(d). The amount paid or payable by an indemnified party as a result of
the losses, claims, damages and liabilities referred to in the immediately
preceding paragraph shall be deemed to include, subject to the limitations set
forth above, any legal or other expenses reasonably incurred by such indemnified
party in connection with investigating or defending any such action or claim.
Notwithstanding the provisions of this Section 7, no Underwriter shall be
required to contribute any amount in excess of the amount by which the total
price at which the Securities underwritten by it and distributed to the public
were offered to the public exceeds the amount of any damages that such
Underwriter has otherwise been required to pay by reason of such untrue or
alleged untrue statement or omission or alleged omission. No person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the
Securities Act) shall be entitled to contribution from any person who was not
guilty of such fraudulent misrepresentation. The remedies provided for in this
Section 7 are not exclusive and shall not limit any rights or remedies which may
otherwise be available to any indemnified party at law or in equity.
(f) The indemnity and contribution provisions contained in
this Section 7 and the representations, warranties and other statements of the
Operating Partnership and the REIT contained in this Agreement shall remain
operative and in full force and effect regardless of (i) any termination of this
Agreement, (ii) any investigation made by or on behalf of any Underwriter or any
person controlling any Underwriter or by or on behalf of the Operating
Partnership or the REIT, the REIT's officers or directors or any person
controlling the Operating Partnership or the REIT and (iii) acceptance of and
payment for any of the Securities.
8. TERMINATION. This Agreement shall be subject to termination by
notice given by you to the REIT, if (a) after the execution and delivery of this
Agreement and prior to the Closing Date (i) trading generally shall have been
suspended or materially limited on or by, as the case may be, any of the New
York Stock Exchange, the American Stock Exchange, the National Association of
Securities Dealers, Inc., the Chicago Board of Options Exchange, the Chicago
Mercantile Exchange or the Chicago Board of Trade, (ii) trading of any
securities of the REIT shall have been suspended on any exchange or in any
over-the-counter market, (iii) a general moratorium on commercial banking
activities in New York shall have been declared by either federal or New York
State authorities or (iv) there shall have occurred any outbreak or escalation
of hostilities or any change in financial markets or any calamity or crisis
that, in your judgment, is material and adverse and (b) in the case of any of
the events specified in clauses (a)(i) through (iv), such event, singly or
together with any other such event, makes it, in your judgment, impracticable to
market the Securities on the terms and in the manner contemplated in the
Prospectus.
9. EFFECTIVENESS; DEFAULTING UNDERWRITERS. This Agreement shall become
effective upon the execution and delivery hereof by the parties hereto.
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<PAGE> 27
If, on the Closing Date, any one or more of the Underwriters shall fail
or refuse to purchase Securities that it has or they have agreed to purchase
hereunder on such date, and the aggregate principal amount of Securities which
such defaulting Underwriter or Underwriters agreed but failed or refused to
purchase is not more than one-tenth of the aggregate principal amount of the
Securities to be purchased on such date, the other Underwriters shall be
obligated severally in the proportions that the principal amount of Securities
set forth opposite their respective names in Schedule I bears to the principal
amount of Securities set forth opposite the names of all such non-defaulting
Underwriters, or in such other proportions as you may specify, to purchase the
Securities which such defaulting Underwriter or Underwriters agreed but failed
or refused to purchase on such date; provided that in no event shall the
principal amount of Securities that any Underwriter has agreed to purchase
pursuant to this Agreement be increased pursuant to this Section 9 by an amount
in excess of one-ninth of such principal amount of Securities without the
written consent of such Underwriter. If, on the Closing Date, any Underwriter or
Underwriters shall fail or refuse to purchase Securities and the aggregate
principal amount of Securities with respect to which such default occurs is more
than one-tenth of the aggregate principal amount of Securities to be purchased,
and arrangements satisfactory to you and the Operating Partnership for the
purchase of such Securities are not made within 36 hours after such default,
this Agreement shall terminate without liability on the part of any
non-defaulting Underwriter, the Operating Partnership or the REIT. In any such
case either you or the Operating Partnership shall have the right to postpone
the Closing Date, but in no event for longer than seven days, in order that the
required changes, if any, in the Registration Statement and in the Prospectus or
in any other documents or arrangements may be effected. Any action taken under
this paragraph shall not relieve any defaulting Underwriter from liability in
respect of any default of such Underwriter under this Agreement.
If this Agreement shall be terminated by the Underwriters, or any of
them, because of any failure or refusal on the part of the Operating Partnership
or the REIT to comply with the terms or to fulfill any of the conditions of this
Agreement, or if for any reason the Operating Partnership or the REIT shall be
unable to perform their respective obligations under this Agreement, the
Operating Partnership and the REIT will, jointly and severally, reimburse the
Underwriters or such Underwriters as have so terminated this Agreement with
respect to themselves, severally, for all out-of-pocket expenses (including the
fees and disbursements of their counsel) reasonably incurred by such
Underwriters in connection with this Agreement or the offering contemplated
hereunder.
10. COUNTERPARTS. This Agreement may be signed in two or more
counterparts, each of which shall be an original, with the same effect as if the
signatures thereto and hereto were upon the same instrument.
11. APPLICABLE LAW. This Agreement shall be governed by and construed
in accordance with the internal laws of the State of New York.
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<PAGE> 28
12. HEADINGS. The headings of the sections of this Agreement have been
inserted for convenience of reference only and shall not be deemed a part of
this Agreement.
Very truly yours,
AMB PROPERTY, L.P.
By: AMB Property Corporation,
its General Partner
By:____________________________________
S. Davis Carniglia
Managing Director, Chief Financial
Officer and Secretary
AMB PROPERTY CORPORATION
By:_________________________________________
S. Davis Carniglia
Managing Director, Chief Financial Officer
and Secretary
AMB PROPERTY II, L.P.
By: AMB Property, L.P.,
its General Partner
By: AMB Property Corporation,
its General Partner
By:____________________________________
S. Davis Carniglia
Managing Director, Chief Financial
Officer and Secretary
LONG GATE LLC
By: AMB Property Holding Corporation,
its Managing Member
By:________________________________________
S. Davis Carniglia
Managing Director, Chief Financial
Officer and Secretary
27
<PAGE> 29
Accepted as of the date hereof
MORGAN STANLEY & CO. INCORPORATED
GOLDMAN, SACHS & CO.
J.P. MORGAN SECURITIES INC.
Acting severally on behalf of themselves and the several Underwriters named in
Schedule I hereto.
By Morgan Stanley & Co. Incorporated
By:_____________________________________
W. Blake Baird
Managing Director
28
<PAGE> 30
SCHEDULE I
<TABLE>
<CAPTION>
AMOUNT OF AMOUNT OF AMOUNT OF
2008 NOTES 2018 NOTES REPS
UNDERWRITER TO BE PURCHASED TO BE PURCHASED TO BE PURCHASED
- ----------- --------------- --------------- ---------------
<S> <C> <C> <C>
Morgan Stanley & Co. Incorporated....................
Goldman, Sachs & Co..................................
J.P. Morgan Securities Inc...........................
Total................................................ $100,000,000 $100,000,000 $150,000,000
============ ============ ============
</TABLE>
<PAGE> 31
SCHEDULE II
SUBSIDIARIES OF THE COMPANY
AMB Property II, L.P.
AMB Property Holding Corporation
Long Gate LLC
AMB Institutional Realty Advisors, Inc.
AMB Institutional Realty Advisors Limited Partnership
[UPDATE; LIST OTHERS]
<PAGE> 32
SCHEDULE III
JOINT VENTURES
<TABLE>
<CAPTION>
OWNERSHIP INTEREST
NAME OF JOINT VENTURE IN JOINT VENTURE
--------------------- ----------------
<S> <C>
American Beauty General 50.0001% G.P. Interest
CH-VAF Orlando Joint Venture 90% G.P. Interest
Dark Starr Limited Partnership 50.0001% L.P. Interest
Fairway Drive Venture LLC 70.00% Member Interest
Hamilton Lakes/AMB CIF 50% L.P. Interest
Met Phase I 95, Ltd. 87.15% L.P. Interest
St. Stephen Limited Partnership 50.0001% L.P. Interest
Met 4/12, Ltd. 87.15% L.P. Interest
Manhattan Village, LLC 90.00% LLC Interest
Jamesburg 50.00 ___ Interest
Corporate Park/Hickory Hill 50.00 ___ Interest
</TABLE>
<PAGE> 33
SCHEDULE IV
CERTAIN MATERIAL CONTRACTS
1. All agreements filed as Exhibits to the Registration Statement on Form
S-11 (File No. 333-49163).
2. All joint venture agreements documenting the interests of the Operating
Partnership, the REIT or one of their subsidiaries in the Joint
Ventures listed on Schedule III hereto.
3. The loan agreements and other documents governing the $500 Credit
Facility with Morgan Guaranty Trust Company of New York.
4. The loan agreements and other documents governing the $73 million CIF
secured credit facility that bears interest at a fixed rate of 7.53%.
5. The purchase agreement and other documents entered into with CP
Institutional Partners I, Inc. governing the acquisition of the Cabot
properties.
[update; list other material contracts]
<PAGE> 1
EXHIBIT 4.1
AMB PROPERTY, L.P.,
AMB Property Corporation,
as Parent Guarantor
Certain Subsidiaries of AMB PROPERTY, L.P., now or in the future, parties hereto
as Subsidiary Guarantors
and
State Street Bank and Trust Company of California, N.A.
as Trustee
-----------------------------
Unsecured Senior Notes
Guarantees
-----------------------------
Indenture
Dated as of ________, 1998
-----------------------------
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C> <C>
ARTICLE ONE
DEFINITIONS AND OTHER PROVISIONS OF GENERAL APPLICATION
SECTION 101. DEFINITIONS.....................................................2
SECTION 102. COMPLIANCE CERTIFICATES AND OPINIONS...........................11
SECTION 103. FORM OF DOCUMENTS DELIVERED TO TRUSTEE.........................12
SECTION 104. ACTS OF HOLDERS................................................13
SECTION 105. NOTICES, ETC., TO TRUSTEE AND OPERATING PARTNERSHIP............14
SECTION 106. NOTICE TO HOLDERS; WAIVER......................................14
SECTION 107. EFFECT OF HEADINGS AND TABLE OF CONTENTS.......................14
SECTION 108. SUCCESSORS AND ASSIGNS.........................................15
SECTION 109. SEPARABILITY CLAUSE............................................15
SECTION 110. BENEFITS OF INDENTURE..........................................15
SECTION 111. GOVERNING LAW..................................................15
SECTION 112. LEGAL HOLIDAYS.................................................15
SECTION 113. COUNTERPARTS...................................................15
ARTICLE TWO
NOTE FORMS
SECTION 201. FORMS OF NOTES.................................................15
SECTION 202. FORM OF TRUSTEE'S CERTIFICATE OF
AUTHENTICATION............................................16
SECTION 203. NOTES ISSUABLE IN GLOBAL FORM..................................16
ARTICLE THREE
THE NOTES
SECTION 301. AMOUNT LIMITED; ISSUABLE IN SERIES.............................17
</TABLE>
i
<PAGE> 3
<TABLE>
<S> <C> <C>
SECTION 302. DENOMINATIONS..................................................18
SECTION 303. EXECUTION, AUTHENTICATION, DELIVERY
AND DATING................................................18
SECTION 304. TEMPORARY NOTES................................................19
SECTION 305. REGISTRATION, REGISTRATION OF TRANSFER AND EXCHANGE............20
SECTION 306. MUTILATED, DESTROYED, LOST AND STOLEN NOTES....................22
SECTION 307. PAYMENT OF INTEREST; INTEREST RIGHTS
PRESERVED.................................................23
SECTION 308. PERSONS DEEMED OWNERS..........................................24
SECTION 309. CANCELLATION...................................................24
SECTION 310. COMPUTATION OF INTEREST........................................25
ARTICLE FOUR
SATISFACTION AND DISCHARGE
SECTION 401. SATISFACTION AND DISCHARGE OF INDENTURE........................25
SECTION 402. APPLICATION OF TRUST FUNDS.....................................26
ARTICLE FIVE
REMEDIES
SECTION 501. EVENTS OF DEFAULT..............................................26
SECTION 502. ACCELERATION OF MATURITY; RESCISSION AND ANNULMENT.............28
SECTION 503. COLLECTION OF INDEBTEDNESS AND SUITS FOR ENFORCEMENT
BY TRUSTEE................................................29
SECTION 504. TRUSTEE MAY FILE PROOFS OF CLAIM...............................29
SECTION 505. TRUSTEE MAY ENFORCE CLAIMS WITHOUT
POSSESSION OF NOTES.......................................30
SECTION 506. APPLICATION OF MONEY COLLECTED.................................30
SECTION 507. LIMITATION ON SUITS............................................31
</TABLE>
ii
<PAGE> 4
<TABLE>
<S> <C> <C>
SECTION 508. UNCONDITIONAL RIGHT OF HOLDERS TO RECEIVE PRINCIPAL, PREMIUM,
IF ANY, AND INTEREST......................................31
SECTION 509. RESTORATION OF RIGHTS AND REMEDIES.............................32
SECTION 510. RIGHTS AND REMEDIES CUMULATIVE.................................32
SECTION 511. DELAY OR OMISSION NOT WAIVER...................................32
SECTION 512. CONTROL BY HOLDERS OF NOTES....................................32
SECTION 513. WAIVER OF PAST DEFAULTS........................................32
SECTION 514. WAIVER OF USURY, STAY OR EXTENSION LAWS........................33
SECTION 515. UNDERTAKING FOR COSTS..........................................33
ARTICLE SIX
THE TRUSTEE
SECTION 601. NOTICE OF DEFAULTS.............................................33
SECTION 602. CERTAIN RIGHTS OF TRUSTEE......................................34
SECTION 603. NOT RESPONSIBLE FOR RECITALS OR ISSUANCE OF NOTES..............35
SECTION 604. MAY HOLD NOTES.................................................35
SECTION 605. MONEY HELD IN TRUST............................................35
SECTION 606. COMPENSATION AND REIMBURSEMENT.................................36
SECTION 607. CORPORATE TRUSTEE REQUIRED; ELIGIBILITY; CONFLICTING
INTERESTS.................................................36
SECTION 608. RESIGNATION AND REMOVAL; APPOINTMENT OF SUCCESSOR..............37
SECTION 609. ACCEPTANCE OF APPOINTMENT BY SUCCESSOR.........................38
SECTION 610. MERGER, CONVERSION, CONSOLIDATION OR SUCCESSION TO BUSINESS....39
SECTION 611. APPOINTMENT OF AUTHENTICATING AGENT............................39
</TABLE>
iii
<PAGE> 5
<TABLE>
<S> <C> <C>
ARTICLE SEVEN
HOLDERS' LISTS AND REPORTS BY TRUSTEE AND OPERATING PARTNERSHIP
SECTION 701. DISCLOSURE OF NAMES AND ADDRESSES
OF HOLDERS................................................41
SECTION 702. REPORTS BY TRUSTEE.............................................41
SECTION 704. OPERATING PARTNERSHIP TO FURNISH TRUSTEE NAMES AND ADDRESSES
OF HOLDERS................................................41
ARTICLE EIGHT
CONSOLIDATION, MERGER, SALE, LEASE OR CONVEYANCE
SECTION 801. CONSOLIDATIONS AND MERGERS OF OPERATING
PARTNERSHIP AND SALES, LEASES AND
CONVEYANCES PERMITTED SUBJECT TO CERTAIN
CONDITIONS................................................42
SECTION 802. RIGHTS AND DUTIES OF SUCCESSOR CORPORATION.....................42
SECTION 803. OFFICERS' CERTIFICATE AND OPINION OF COUNSEL...................42
ARTICLE NINE
SUPPLEMENTAL INDENTURES
SECTION 901. SUPPLEMENTAL INDENTURES WITHOUT CONSENT
OF HOLDERS................................................43
SECTION 902. SUPPLEMENTAL INDENTURES WITH CONSENT OF HOLDERS................44
SECTION 903. EXECUTION OF SUPPLEMENTAL INDENTURES...........................45
SECTION 904. EFFECT OF SUPPLEMENTAL INDENTURES..............................45
SECTION 905. CONFORMITY WITH TRUST INDENTURE ACT............................45
SECTION 906. REFERENCE IN NOTES TO SUPPLEMENTAL
INDENTURES................................................45
ARTICLE TEN
COVENANTS
SECTION 1001. PAYMENT OF PRINCIPAL, PREMIUM, IF ANY, AND INTEREST............45
SECTION 1002. MAINTENANCE OF OFFICE OR AGENCY................................45
</TABLE>
iv
<PAGE> 6
<TABLE>
<S> <C> <C>
SECTION 1003. MONEY FOR NOTES PAYMENTS TO BE HELD
IN TRUST..................................................46
SECTION 1004. AGGREGATE DEBT TEST............................................47
SECTION 1005. DEBT SERVICE TEST..............................................48
SECTION 1006. SECURED DEBT TEST..............................................48
SECTION 1007. MAINTENANCE OF TOTAL UNENCUMBERED ASSETS.......................49
SECTION 1008. EXISTENCE......................................................49
SECTION 1009. MAINTENANCE OF PROPERTIES......................................49
SECTION 1010. INSURANCE......................................................49
SECTION 1011. PAYMENT OF TAXES AND OTHER CLAIMS..............................49
SECTION 1012. PROVISION OF FINANCIAL INFORMATION.............................50
SECTION 1013. WAIVER OF CERTAIN COVENANTS....................................50
SECTION 1014. STATEMENT AS TO COMPLIANCE.....................................51
ARTICLE ELEVEN
REDEMPTION OF NOTES
SECTION 1101. APPLICABILITY OF ARTICLE.......................................51
SECTION 1102. ELECTION TO REDEEM; NOTICE TO TRUSTEE..........................51
SECTION 1103. SELECTION BY TRUSTEE OF NOTES TO BE
REDEEMED..................................................51
SECTION 1104. NOTICE OF REDEMPTION...........................................52
SECTION 1105. DEPOSIT OF REDEMPTION PRICE....................................53
SECTION 1106. NOTES PAYABLE ON REDEMPTION DATE...............................53
SECTION 1107. NOTES REDEEMED IN PART.........................................53
ARTICLE TWELVE
RESET PUT SECURITIES
</TABLE>
v
<PAGE> 7
<TABLE>
<S> <C> <C>
ARTICLE TWELVE
DEFEASANCE AND COVENANT DEFEASANCE
SECTION 1201. OPERATING PARTNERSHIP'S OPTION TO EFFECT
DEFEASANCE OR COVENANT DEFEASANCE.........................53
SECTION 1202. DEFEASANCE AND DISCHARGE.......................................54
SECTION 1203. COVENANT DEFEASANCE............................................54
SECTION 1204. CONDITIONS TO DEFEASANCE OR COVENANT DEFEASANCE................54
SECTION 1205. DEPOSITED MONEY AND GOVERNMENT OBLIGATIONS
TO BE HELD IN TRUST; OTHER MISCELLANEOUS
PROVISIONS................................................56
SECTION 1206. REINSTATEMENT..................................................57
ARTICLE THIRTEEN
MEETINGS OF HOLDERS OF NOTES
SECTION 1301. PURPOSES FOR WHICH MEETINGS MAY BE CALLED......................57
SECTION 1302. CALL, NOTICE AND PLACE OF MEETINGS.............................57
SECTION 1303. PERSONS ENTITLED TO VOTE AT MEETINGS...........................58
SECTION 1304. QUORUM; ACTION.................................................58
SECTION 1305. DETERMINATION OF VOTING RIGHTS; CONDUCT
AND ADJOURNMENT OF MEETINGS...............................59
SECTION 1306. COUNTING VOTES AND RECORDING ACTION OF MEETINGS................60
ARTICLE FOURTEEN
THE GUARANTEES
SECTION 1401. GUARANTEES.....................................................60
SECTION 1402. PROCEEDINGS AGAINST THE GUARANTORS.............................63
SECTION 1403. GUARANTEES FOR BENEFIT OF HOLDERS OF NOTES.....................63
SECTION 1404. MERGER OR CONSOLIDATION OF GUARANTORS..........................64
SECTION 1405. ADDITIONAL GUARANTORS..........................................64
</TABLE>
vi
<PAGE> 8
AMB PROPERTY, L.P.
Reconciliation and tie between Trust Indenture Act of 1939 (the "TIA")
and Indenture, dated as of _______ 1998
<TABLE>
<CAPTION>
TIA SECTION INDENTURE SECTION
----------- -----------------
<S> <C>
Section 310(a)(1)....................................607
(a)(2)....................................607
(b).......................................604, 608
Section 312(b).......................................701
(c).......................................701
Section 313..........................................101 ("Outstanding")
Section 313(a).......................................702
(c).......................................601, 702, 703
Section 314(a).......................................703
(a)(4)....................................1012
(c)(1)....................................102
(c)(2)....................................102
(e).......................................102
Section 315(a)-(d)...................................303
(e).......................................608
Section 316(a) (last sentence).......................101 ("Outstanding")
(c).......................................104
Section 317(a)(1)....................................503
(a)(2)....................................504
Section 318(a).......................................111
(c).......................................111
</TABLE>
NOTE: This reconciliation and tie shall not, for any purpose, be deemed
to be a part of the Indenture.
Attention should also be directed to Section 318(c) of the TIA, which
provides that the provisions of Sections 310 to and including 317 of the TIA are
a part of and govern every qualified indenture, whether or not physically
contained therein.
1
<PAGE> 9
INDENTURE (the "Indenture"), dated as of ________, 1998, is among AMB
PROPERTY, L.P., a Delaware limited partnership (hereinafter called the
"Operating Partnership"), having its principal office at 505 Montgomery Street,
San Francisco, California 94111, AMB PROPERTY CORPORATION, a Maryland
Corporation (hereinafter called the "Parent Guarantor"), having its principal
office at 505 Montgomery Street, San Francisco, California 94111, each of the
Operating Partnership's Subsidiaries that either now or in the future are
parties hereto as guarantors (the "Subsidiary Guarantors") and State Street Bank
and Trust Company of California, N.A., a national banking association organized
and existing under the laws of the United States of America, as Trustee
hereunder (hereinafter called the "Trustee"), having its Corporate Trust Office
at 633 West Fifth Street, 12th Floor, Los Angeles, California 90071.
RECITALS OF THE OPERATING PARTNERSHIP
Whereas, the Operating Partnership deems it necessary to issue for its
lawful purposes its unsecured and unsubordinated Notes in an aggregate principal
amount not to exceed $_____________ (the "Notes") in one or more series and to
provide the terms and conditions upon which the Notes are to be authenticated,
issued and delivered, and it has duly authorized the execution and delivery of
this Indenture to provide for the issuance of the Notes.
Whereas, the Guarantors have duly authorized the execution and delivery
of this Indenture and their guarantees of the Notes (the "Guarantees") as
provided herein.
Whereas, this Indenture is subject to the provisions of the Trust
Indenture Act of 1939, as amended, that are deemed to be incorporated into this
Indenture and shall, to the extent applicable, be governed by such provisions.
Whereas, all things necessary to make this Indenture a valid agreement
of the Operating Partnership and the Guarantors, in accordance with its terms,
have been done.
NOW, THEREFORE, THIS INDENTURE WITNESSETH:
For and in consideration of the premises and the purchase of the Notes
by the Holders thereof, it is mutually covenanted and agreed, for the equal and
proportionate benefit of all Holders of the Notes, as follows:
ARTICLE ONE
DEFINITIONS AND OTHER PROVISIONS OF GENERAL APPLICATION
SECTION 101. DEFINITIONS. For all purposes of this Indenture, except as
otherwise expressly provided or unless the context otherwise requires:
(1) the terms defined in this Article have the meanings assigned
to them in this Article, and include the plural as well as the singular;
(2) all other terms used herein which are defined in the TIA,
either directly or by reference therein, have the meanings assigned to
them therein, and the terms "cash
2
<PAGE> 10
transaction" and "self-liquidating paper," as used in TIA Section 311,
shall have the meanings assigned to them in the rules of the Commission
adopted under the TIA;
(3) all accounting terms not otherwise defined herein have the
meanings assigned to them in accordance with GAAP; and
(4) the words "herein," "hereof" and "hereunder" and other words
of similar import refer to this Indenture as a whole and not to any
particular Article, Section or other subdivision.
Certain terms used principally in Article Three, Article Five, Article
Six and Article Ten are defined in those Articles.
"Acquired Debt" means Debt of a Person (i) existing at the time such
Person is merged or consolidated with or into, or becomes a Subsidiary of, the
Operating Partnership or (ii) assumed by the Operating Partnership or any of its
Subsidiaries in connection with the acquisition of assets from such Person.
Acquired Debt shall be deemed to be incurred on the date the acquired Person is
merged or consolidated with or into, or becomes a Subsidiary of, the Operating
Partnership or the date of the related acquisition, as the case may be.
"Act," when used with respect to any Holder, has the meaning specified
in Section 104.
"Affiliate" of any specified Person means any other Person directly or
indirectly controlling or controlled by or under direct or indirect common
control with such specified Person. For the purposes of this definition,
"control" when used with respect to any specified Person means the power to
direct the management and policies of such Person, directly or indirectly,
whether through the ownership of voting securities, by contract or otherwise;
and the terms "controlling" and "controlled" have meanings correlative to the
foregoing.
"Annual Debt Service Charge" means, for any period, the interest expense
of the Operating Partnership and its Subsidiaries for such period (including,
without duplication, (i) all amortization of debt discount and premiums, (ii)
all accrued interest, (iii) all capitalized interest and (iv) the interest
component of capitalized lease obligations), determined on a consolidated basis
in accordance with generally accepted accounting principles.
"Authenticating Agent" means any authenticating agent appointed by the
Trustee pursuant to Section 611.
"Authorized Newspaper" means a newspaper, printed in the English
language, customarily published on each Business Day, whether or not published
on Saturdays, Sundays or holidays, and of general circulation in each place in
connection with which the term is used or in the financial community of each
such place. Whenever successive publications are required to be made in
Authorized Newspapers, the successive publications may be made in the same or in
different Authorized Newspapers in the same city meeting the foregoing
requirements and in each case on any Business Day.
"Bankruptcy Law" has the meaning specified in Section 501.
3
<PAGE> 11
"Board of Directors" means the board of directors of the General Partner
or, if the Operating Partnership shall be succeeded by a corporation pursuant to
the provisions of this Indenture, the board of directors of the Operating
Partership's corporate successor or any committee of such applicable board duly
authorized to act generally or in any particular respect hereunder.
"Board Resolution" means a copy of a resolution certified by the
Secretary or an Assistant Secretary of the General Partner or, if the Operating
Partnership shall be succeeded by a corporation pursuant to the provisions of
this Indenture, of the Operating Partership's corporate successor to have been
duly adopted by the Board of Directors and to be in full force and effect on the
date of such certification, and delivered to the Trustee.
"Business Day" means, unless otherwise specified with respect to any
securities pursuant to Section 301, any day, other than a Saturday or Sunday,
that is neither a legal holiday nor a day on which banking institutions in the
States of California or New York are authorized or required by law, regulation
or executive order to close.
"Commission" means the Securities and Exchange Commission, as from time
to time constituted, created under the Securities Exchange Act of 1934, as
amended, or, if at any time after execution of this instrument such Commission
is not existing and performing the duties now assigned to it under the Trust
Indenture Act, then the body performing such duties on such date.
"Common Shares" means, with respect to any Person that is a corporation,
capital stock issued by such Person other than Preferred Shares.
"Comparable Treasury Issue" means, with respect to Notes of any series
to be redeemed, the United States Treasury security selected by the Independent
Investment Banker as having a maturity comparable to the remaining term of such
Notes to be redeemed that would be utilized, at the time of selection and in
accordance with customary financial practice, in pricing new issues of corporate
debt securities of comparable maturity to the remaining term of such Notes.
"Comparable Treasury Price" means with respect to any Redemption Date
(i) the average of the two remaining Reference Treasury Dealer Quotations for
such Redemption Date, after excluding the highest and lowest such Reference
Treasury Dealer Quotations from the four selected, or (ii) if the Trustee
obtains fewer than four such Reference Treasury Dealer Quotations, the average
of all such quotations.
"Consolidated Income Available For Debt Service" for any period means
Consolidated Net Income of the Operating Partnership and its Subsidiaries for
such period, plus amounts which have been deducted and minus amounts which have
been added for (without duplication) (i) interest expense on Debt, (ii)
provision for taxes based on income, (iii) amortization of debt discount,
premium and deferred financing costs, (iv) provisions for gains and losses on
sales or other dispositions of properties and other investments, (v) property
depreciation and amortization, (vi) the effect of any non-cash items, and (vii)
amortization of deferred charges, all determined on a consolidated basis in
accordance with generally accepted accounting principles.
4
<PAGE> 12
"Consolidated Net Income" for any period means the amount of net income
(or loss) of the Operating Partnership and its Subsidiaries for such period,
excluding (without duplication) (i) extraordinary items and (ii) the portion of
net income (but not losses) of the Operating Partnership and its Subsidiaries
allocable to minority interests in unconsolidated Persons to the extent that
cash dividends or distributions have not actually been received by the Operating
Partnership or one of its Subsidiaries, all determined on a consolidated basis
in accordance with generally accepted accounting principles.
"Corporate Trust Office" means the office of the Trustee at which, at
any particular time, its corporate trust business shall be principally
administered, which office at the date hereof is located at 633 West Fifth
Street, 12th Floor, Los Angeles, California 90071.
"Corporation" or "corporation" includes corporations, associations, and
business trusts; provided, however, that for purposes of Article Eight, the term
"corporation" shall not include associations, companies or business trusts.
"Custodian" has the meaning specified in section 501.
"Debt" means, with respect to any Person, any indebtedness of such
Person, whether or not contingent, in respect of (i) borrowed money or evidenced
by bonds, notes, debentures or similar instruments, (ii) indebtedness secured by
any Lien on any property or asset owned by such Person, but only to the extent
of the lesser of (x) the amount of indebtedness so secured and (y) the fair
market value (determined in good faith by the board of directors of such Person
or, in the case of the Operating Partnership or a Subsidiary, by the Board of
Directors) of the property subject to such Lien, (iii) reimbursement
obligations, contingent or otherwise, in connection with any letters of credit
actually issued or amounts representing the balance deferred and unpaid of the
purchase price of any property except any such balance that constitutes an
accrued expense or trade payable, or (iv) any lease of property by such Person
as lessee which is required to be reflected on such Person's balance sheet as a
capitalized lease in accordance with GAAP, and also includes, to the extent not
otherwise included, any obligation of such Person to be liable for, or to pay,
as obligor, guarantor or otherwise (other than for purposes of collection in the
ordinary course of business), Debt of the types referred to above of another
Person (it being understood that Debt shall be deemed to be incurred by such
Person whenever such Person shall create, assume, guarantee or otherwise become
liable in respect thereof).
"Defaulted Interest" has the meaning set forth in Section 307.
"Dollar" or "$" means a dollar or other equivalent unit in such coin or
currency of the United States of America as at the time shall be legal tender
for the payment of public and private debts.
"DTC" means The Depository Trust Company and any successor to DTC in its
capacity as depositary for any Notes.
"Event Of Default" has the meaning specified in Section 501.
5
<PAGE> 13
"GAAP" and "generally accepted accounting principles" mean generally
accepted accounting principles, as in effect from time to time, as used in the
United States of America applied on a consistent basis.
"General Partner" means AMB Property Corporation, a Maryland corporation
until a successor shall have become such pursuant to the applicable provisions
of this Indenture, and thereafter "General Partner" shall mean such successor
corporation.
"Government Obligations" means securities which are (i) direct
obligations of the United States of America, for the payment of which its full
faith and credit is pledged or (ii) obligations of a Person controlled or
supervised by and acting as an agency or instrumentality of the United States of
America, the payment of which is unconditionally guaranteed as a full faith and
credit obligation by the United States of America, which, in either case, are
not callable or redeemable at the option of the issuer thereof, and shall also
include a depositary receipt issued by a bank or trust company as custodian with
respect to any such Government Obligation or a specific payment of interest on
or principal of any such Government Obligation held by such custodian for the
account of the holder of a depositary receipt, provided that (except as required
by law) such custodian is not authorized to make any deduction from the amount
payable to the holder of such depositary receipt from any amount received by the
custodian in respect of the Government Obligation or the specific payment of
interest on or principal of the Government Obligation evidenced by such
depositary receipt.
"Guarantors" means the Parent Guarantor and each of the Subsidiary
Guarantors.
"Guarantees" means each Guarantee executed pursuant to the provisions of
this Indenture.
"Holder" means the Person in whose name a Note is registered in the Note
Register.
"Indenture" means this instrument as originally executed or as it may
from time to time be supplemented or amended by one or more indentures
supplemental hereto entered into pursuant to the applicable provisions hereof
(as such terms and provisions may be amended pursuant to the applicable
provisions hereof).
"Independent Investment Banker" means Morgan Stanley & Co. Incorporated
or, if such firm is unwilling or unable to select the Comparable Treasury Issue,
an independent investment banking institution of national standing appointed by
the Operating Partnership after consultation with the Trustee.
"Interest Payment Date" when used with respect to any Note, means the
Stated Maturity of an installment of interest on such Note.
"Lien" means any mortgage, deed of trust, lien, charge, pledge, security
interest, security agreement or other encumbrance of any kind.
"Maturity" when used with respect to any Note, means the date on which
the principal of such Note or an installment of principal becomes due and
payable as therein or herein provided,
6
<PAGE> 14
whether at the Stated Maturity or by declaration of acceleration, notice of
redemption, notice of option to elect repayment or otherwise.
"Note" has the meaning stated in the first recital of this Indenture
and, more particularly, means any Note or Notes authenticated and delivered
under this Indenture; provided, however, that, if at any time there is more than
one Person acting as Trustee under this Indenture, "Notes" with respect to the
Indenture as to which such Person is Trustee shall have the meaning stated in
the first recital of this Indenture and shall more particularly mean Notes
authenticated and delivered under this Indenture, exclusive, however, of Notes
of any series as to which such Person is not Trustee.
"Note Register" and "Note Registrar" have the respective meanings
specified in Section 305.
"Officers' Certificate" means a certificate signed by the Chairman, the
President or a Vice President and by the Treasurer, an Assistant Treasurer, the
Secretary or an Assistant Secretary of the General Partner, and delivered to the
Trustee, provided that if the Operating Partnership shall be succeeded by a
corporation pursuant to the provisions of this Indenture, "Officers'
Certificate" shall mean a certificate signed by the Chairman, the President or a
Vice President and by the Treasurer, an Assistant Treasurer, the Secretary or an
Assistant Secretary of such successor corporation, and delivered to the Trustee.
"Operating Partnership" means the Person named as the "Operating
Partnership" in the first paragraph of this Indenture until a successor shall
have become such pursuant to the applicable provisions of this Indenture, and
thereafter "Operating Partnership" shall mean such successor person.
"Operating Partnership Request" and "Operating Partnership Order" mean,
respectively, a written request or order signed in the name of the Operating
Partnership by the General Partner by its Chairman, any Vice Chairman, its
President or a Vice President, and by its Treasurer, an Assistant Treasurer, its
Secretary or an Assistant Secretary and delivered to the Trustee, provided that
if the Operating Partnership shall be succeeded by a corporation pursuant to the
provisions of this Indenture, "Operating Partnership Request" and "Operating
Partnership Order" shall mean, respectively, a written request or order signed
in the name of the Operating Partnership by its Chairman, any Vice Chairman, its
President or a Vice President, and by its Treasurer, an Assistant Treasurer, its
Secretary or an Assistant Secretary and delivered to the Trustee.
"Opinion of Counsel" means a written opinion of counsel, who may be
counsel for the Operating Partnership or the General Partner or who may be an
employee of or other counsel for the Operating Partnership or the General
Partner and who shall be reasonably satisfactory to the Trustee.
"Outstanding," when used with respect to Notes, means, as of the date of
determination, all Notes theretofore authenticated and delivered under this
Indenture, except:
(i) Notes theretofore canceled by the Trustee or delivered to
the Trustee for cancellation;
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(ii) Notes, or portions thereof, for whose payment at the
Maturity thereof money in the necessary amount has been theretofore
deposited (other than pursuant to Article Twelve hereof) with the
Trustee or any Paying Agent (other than the Operating Partnership) in
trust or set aside and segregated in trust by the Operating Partnership
(if the Operating Partnership shall act as its own Paying Agent) for the
Holders of such Notes, provided that, if such Notes are to be redeemed,
notice of such redemption has been duly given pursuant to this Indenture
or provision therefor satisfactory to the Trustee has been made;
(iii) Notes, except to the extent provided in Sections 1202 and
1203, with respect to which the Operating Partnership has effected
defeasance and/or covenant defeasance as provided in Article Twelve; and
(iv) Notes which have been paid pursuant to Section 306 or in
exchange for or in lieu of which other Notes have been authenticated and
delivered pursuant to this Indenture, other than any such Notes in
respect of which there shall have been presented to the Trustee proof
satisfactory to it that such Notes are held by a bona fide purchaser in
whose hands such Notes are valid obligations of the Operating
Partnership;
provided, however, that in determining whether the Holders of the requisite
principal amount of the Outstanding Notes have given any request, demand,
authorization, direction, notice, consent or waiver hereunder or are present at
a meeting of Holders for quorum purposes, and for the purpose of making the
calculations required by TIA Section 313, Notes owned by the Operating
Partnership or any other obligor upon the Notes or any Affiliate of the
Operating Partnership or of such other obligor shall be disregarded and deemed
not to be Outstanding, except that, in determining whether the Trustee shall be
protected in making such calculation or in relying upon any such request,
demand, authorization, direction, notice, consent or waiver, only Notes which
the Trustee knows to be so owned shall be so disregarded. Notes so owned which
have been pledged in good faith may be regarded as Outstanding if the pledgee
establishes to the satisfaction of the Trustee the pledgee's right so to act
with respect to such Notes and that the pledgee is not the Operating Partnership
or any other obligor upon the Notes or any Affiliate of the Operating
Partnership or of such other obligor.
"Parent Guarantor" means AMB Property Corporation, a Maryland
corporation until a successor shall have become such pursuant to the applicable
provisions of this Indenture, and thereafter "Parent Guarantor" shall mean such
successor person.
"Paying Agent" means any Person authorized by the Operating Partnership
to pay the principal of (and premium, if any) or interest on any Notes on behalf
of the Operating Partnership.
"Person" means any individual, corporation, business trust, partnership,
joint venture, limited liability company, association, joint-stock company,
trust, unincorporated organization or government or any agency or political
subdivision thereof.
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"Place of Payment," when used with respect to the Notes of or within any
series, means the place or places where the principal of (and premium, if any)
and interest on such Notes are payable as specified as contemplated by Sections
301 and 1002.
"Predecessor Note" of any particular Note means every previous security
evidencing all or a portion of the same debt as that evidenced by such
particular Note; and, for the purposes of this definition, any Note
authenticated and delivered under Section 306 in exchange for or in lieu of a
mutilated, destroyed, lost or stolen Note.
"Preferred Shares" means, with respect to any Person that is a
corporation, capital stock issued by such Person that is entitled to a
preference or priority over any other capital stock issued by such Person upon
any distribution of such Person's assets, whether by dividend or upon
liquidation.
"Redemption Date," when used with respect to any Note to be redeemed, in
whole or in part, means the date fixed for such redemption pursuant to Section
1102.
"Redemption Price," when used with respect to any Note to be redeemed,
means an amount equal to the greater of (i) 100% of the principal amount of the
Notes to be redeemed and (ii) the sum of the present values of the remaining
scheduled payments of principal and interest thereon (exclusive of interest
accrued to such Redemption Date) discounted to such Redemption Date on a
semiannual basis (assuming a 360-day year consisting of twelve 30-day months) at
the Treasury Rate plus ____ basis points, plus, in either case, accrued and
unpaid interest on the principal amount being redeemed to such Redemption Date.
"Reference Treasury Dealer" means Morgan Stanley & Co. Incorporated,
Goldman, Sachs & Co., J.P. Morgan Securities Inc. and any additional Reference
Treasury Dealer appointed by the Trustee after consultation with the Operating
Partnership and their successors; provided, however, that if Morgan Stanley &
Co. Incorporated, Goldman, Sachs & Co., J.P. Morgan Securities Inc. or such
additional Reference Treasury Dealer and their successors shall cease to be a
primary U.S. Government securities dealer in New York City (a "Primary Treasury
Dealer"), the Operating Partnership will substitute therefor another Primary
Treasury Dealer.
"Reference Treasury Dealer Quotations" means, with respect to each
Reference Treasury Dealer and any Redemption Date, the average, as determined by
the Trustee, of the bid and asked prices for the Comparable Treasury Issue
(expressed in each case as a percentage of its principal amount) quoted in
writing to the Trustee by such Reference Treasury Dealer at 5:00 p.m., New York
time, on the third Business Day preceding such Redemption Date.
"Regular Record Date" for the interest payable on any Interest Payment
Date on the Notes of or within any series means the date specified for that
purpose as contemplated by Section 301, whether or not a Business Day.
"Responsible Officer," when used with respect to the Trustee, means the
chairman or vice-chairman of the board of directors, the chairman or
vice-chairman of the executive committee of the board of directors, the
president, any vice president, the secretary, any assistant secretary, the
treasurer, any assistant treasurer, the cashier, any assistant cashier, any
trust officer
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or assistant trust officer, the controller or any other officer of the Trustee
customarily performing functions similar to those performed by any of the above
designated officers.
"Securities Exchange Act of 1934" means the Securities Exchange Act of
1934, as amended, and any reference herein to such Act or a particular provision
or section thereof shall mean, unless otherwise expressly stated or the context
otherwise requires, such Act, provision or section, as the case may be, as
amended or replaced from time to time or as supplemented from time to time.
"Significant Subsidiary" means any Subsidiary which is a "significant
subsidiary" (as defined in Rule 1-02 of Regulation S-X promulgated under the
Securities Act of 1933, as in effect on January 1, 1998) of the Operating
Partnership.
"Special Record Date" for the payment of any Defaulted Interest on the
Notes of or within any series means a date fixed by the Trustee pursuant to
Section 307.
"Stated Maturity," when used with respect to any Note or any installment
of principal thereof or interest thereon, means the date specified in such Note
or pursuant to this Indenture as the fixed date on which the principal of such
Note or such installment of principal or interest is due and payable.
"Subsidiary" means (i) a corporation, partnership, joint venture,
limited liability company or other Person the majority of the shares, if any, of
the non-voting capital stock or other equivalent ownership interests of which
(except directors' qualifying shares) are at the time directly or indirectly
owned by the Operating Partnership and/or any other Subsidiary or Subsidiaries,
and the majority of the shares of the voting capital stock or other equivalent
ownership interests of which (except directors' qualifying shares) are at the
time directly or indirectly owned by the Operating Partnership, any other
Subsidiary or Subsidiaries, and (ii) any other Person the accounts of which are
consolidated with the accounts of the Operating Partnership.
"Subsidiary Guarantors" means AMB Property II, L.P., a Delaware limited
partnership, Long Gate LLC, a Delaware limited liability company, and any other
Subsidiary of the Operating Partnership that from time to time shall execute a
guarantee of the obligations of the Operating Partnership under any Debt of the
Operating Partnership.
"Total Assets" means the sum of (without duplication) (i) Undepreciated
Real Estate Assets and (ii) all other assets (excluding accounts receivable and
intangibles) of the Operating Partnership and its Subsidiaries, all determined
on a consolidated basis in accordance with generally accepted accounting
principles.
"Total Unencumbered Assets" means the sum of (without duplication) (i)
those Undepreciated Real Estate Assets which are not subject to a Lien securing
Debt and (ii) all other assets (excluding accounts receivable and intangibles)
of the Operating Partnership and its Subsidiaries not subject to a Lien securing
Debt, all determined on a consolidated basis in accordance with generally
accepted accounting principles.
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"Treasury Rate" means, with respect to any Redemption Date, (i) the
yield, under the heading which represents the average for the immediately
preceding week, appearing in the most recently published statistical release
designated "H.15(519)" or any successor publication which is published weekly by
the Board of Governors of the Federal Reserve System and which establishes
yields on actively traded United States Treasury securities adjusted to constant
maturity under the caption "Treasury Constant Maturities," for the maturity
corresponding to the Comparable Treasury Issue (if no maturity is within three
months before or after the Stated Maturity of principal, yields for the two
published maturities most closely corresponding to the Comparable Treasury Issue
shall be determined and the Treasury Rate shall be interpolated or extrapolated
from such yields on a straight line basis, rounding to the nearest month) or
(ii) if such release (or any successor release) is not published during the week
preceding the calculation date or does not contain such yields, the rate per
annum equal to the semi-annual equivalent yield to maturity of the Comparable
Treasury Issue, calculated using a price for the Comparable Treasury Issue
(expressed as a percentage of its principal amount) equal to the Comparable
Treasury Price for such Redemption Date. The Treasury Rate shall be calculated
on the third Business Day preceding the Redemption Date.
"Trust Indenture Act" or "TIA" means the Trust Indenture Act of 1939, as
amended, and any reference herein to the Trust Indenture Act or the TIA or a
particular provision thereof shall mean such Act or provision, as the case may
be, as amended or replaced from time to time or as supplemented from time to
time by rules or regulations adopted by the Commission under or in furtherance
of the purposes of such Act or provision, as the case may be.
"Trustee" means the Person named as the "Trustee" in the first paragraph
of this Indenture until a successor Trustee shall have become such pursuant to
the applicable provisions of this Indenture, and thereafter "Trustee" shall mean
or include each Person who is then a Trustee hereunder; provided, however, that
if at any time there is more than one such Person, "Trustee" as used with
respect to the Notes of any series shall mean only the Trustee with respect to
Notes of that series.
"Undepreciated Real Estate Assets" means, as of any date, the cost
(original cost plus capital improvements) of real estate assets of the Operating
Partnership and its Subsidiaries on such date, before depreciation and
amortization, all determined on a consolidated basis in accordance with
generally accepted accounting principles.
"Unsecured Debt" means Debt of the Operating Partnership or any of its
Subsidiaries which is not secured by a Lien on any property or assets of the
Operating Partnership or any of its Subsidiaries.
SECTION 102. COMPLIANCE CERTIFICATES AND OPINIONS. Upon any application
or request by the Operating Partnership to the Trustee to take any action under
any provision of this Indenture, the Operating Partnership shall furnish to the
Trustee an Officers' Certificate stating that all conditions precedent, if any,
provided for in this Indenture relating to the proposed action have been
complied with and an Opinion of Counsel stating that in the opinion of such
counsel all such conditions precedent, if any, have been complied with, except
that in the case of any such application or request as to which the furnishing
of such documents is
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specifically required by any provision of this Indenture relating to such
particular application or request, no additional certificate or opinion need be
furnished.
Every certificate or opinion with respect to compliance with a condition
or covenant provided for in this Indenture shall include:
(1) a statement that each individual signing such certificate or
opinion has read such condition or covenant and the definitions herein
relating thereto;
(2) a brief statement as to the nature and scope of the
examination or investigation upon which the statements or opinions
contained in such certificate or opinion are based;
(3) a statement that, in the opinion of each such individual, he
has made such examination or investigation as is necessary to enable him
to express an informed opinion as to whether or not such condition or
covenant has been satisfied or complied with; and
(4) a statement as to whether, in the opinion of each such
individual, such condition or covenant has been satisfied or complied
with.
SECTION 103. FORM OF DOCUMENTS DELIVERED TO TRUSTEE. In any case where
several matters are required to be certified by, or covered by an opinion of,
any specified Person, it is not necessary that all such matters be certified by,
or covered by the opinion of, only one such Person, or that they be so certified
or covered by only one document, but one such Person may certify or give an
opinion as to some matters and one or more other such Persons as to other
matters, and any such Person may certify or give an opinion as to such matters
in one or several documents.
Any certificate or opinion of an officer of the General Partner, any
Guarantor, any general partner or manager of any Guarantor or any corporate
successor of the Operating Partnership or any Guarantor may be based, insofar as
it relates to legal matters, upon an Opinion of Counsel, or a certificate or
representations by counsel, unless such officer knows, or in the exercise of
reasonable care should know, that the opinion, certificate or representations
with respect to the matters upon which his certificate or opinion is based are
erroneous. Any such Opinion of Counsel or certificate or representations may be
based, insofar as it relates to factual matters, upon a certificate or opinion
of, or representations by, an officer or officers of the General Partner, any
Guarantor, any general partner or manager of any Guarantor or any corporate
successor of the Operating Partnership or any Guarantor, as applicable, stating
that the information as to such factual matters is in the possession of the
General Partner, any Guarantor, any general partner or manager of any Guarantor
or any corporate successor of the Operating Partnership or any Guarantor, as
applicable, unless such counsel knows that the certificate or opinion or
representations as to such matters are erroneous.
Where any Person is required to make, give or execute two or more
applications, requests, consents, certificates, statements, opinions or other
instruments under this Indenture, they may, but need not, be consolidated and
form one instrument.
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SECTION 104. ACTS OF HOLDERS. (a) Any request, demand, authorization,
direction, notice, consent, waiver or other action provided by this Indenture to
be given or taken by Holders of the outstanding Notes of any series or all
series, as the case may be, may be embodied in and evidenced by one or more
instruments of substantially similar tenor signed by such Holders in person or
by agents duly appointed in writing. Except as herein otherwise expressly
provided, such action shall become effective when such instrument or instruments
are delivered to the Trustee and, where it is hereby expressly required, to the
Operating Partnership. Such instrument or instruments (and the action embodied
therein and evidenced thereby) are herein sometimes referred to as the "Act" of
the Holders signing such instrument or instruments or so voting at any such
meeting. Proof of execution of any such instrument or of a writing appointing
any such agent, or of the holding by any Person of a Note, shall be sufficient
for any purpose of this Indenture and conclusive in favor of the Trustee and the
Operating Partnership and any agent of the Trustee or the Operating Partnership,
if made in the manner provided in this Section. The record of any meeting of
Holders shall be proved in the manner provided in Section 1306.
(b) The fact and date of the execution by any Person of any such
instrument or writing may be proved by the affidavit of a witness of such
execution or by a certificate of a notary public or other officer authorized by
law to take acknowledgments of deeds, certifying that the individual signing
such instrument or writing acknowledged to him the execution thereof. Where such
execution is by a signer acting in a capacity other than his individual
capacity, such certificate or affidavit shall also constitute sufficient proof
of his authority. The fact and date of the execution of any such instrument or
writing, or the authority of the Person executing the same, may also be proved
in any other reasonable manner which the Trustee deems sufficient in its
reasonable discretion.
(c) The ownership of Notes shall be proved by the Note Register.
(d) If the Operating Partnership shall solicit from the Holders any
request, demand, authorization, direction, notice, consent, waiver or other Act,
the Operating Partnership may, at its option, in or pursuant to a Board
Resolution, fix in advance a record date for the determination of Holders
entitled to give such request, demand, authorization, direction, notice,
consent, waiver or other Act, but the Operating Partnership shall have no
obligation to do so. Notwithstanding TIA Section 316(c), such record date shall
be the record date specified in or pursuant to such Board Resolution, which
shall be a date not earlier than the date 30 days prior to the first
solicitation of Holders generally in connection therewith and not later than the
date such solicitation is completed. If such a record date is fixed, such
request, demand, authorization, direction, notice, consent, waiver or other Act
may be given before or after such record date, but only the Holders of record at
the close of business on such record date shall be deemed to be Holders for the
purposes of determining whether Holders of the requisite proportion of
outstanding Notes have authorized or agreed or consented to such request,
demand, authorization, direction, notice, consent, waiver or other Act, and for
that purpose the Outstanding Notes shall be computed as of such record date;
provided that no such authorization, agreement or consent by the Holders on such
record date shall be deemed effective unless it shall become effective pursuant
to the provisions of this Indenture not later than eleven months after the
record date.
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(e) Any request, demand, authorization, direction, notice, consent,
waiver or other Act of the Holder of any Note shall bind every future Holder of
the same Note and the Holder of every Note issued upon the registration of
transfer thereof or in exchange therefor or in lieu thereof in respect of
anything done, omitted or suffered to be done by the Trustee, any Note
Registrar, any Paying Agent, any Authenticating Agent or the Operating
Partnership in reliance thereon, whether or not notation of such action is made
upon such Note.
SECTION 105. NOTICES, ETC., TO TRUSTEE AND OPERATING PARTNERSHIP. Any
request, demand, authorization, direction, notice, consent, waiver or Act of
Holders or other document provided or permitted by this Indenture to be made
upon, given or furnished to, or filed with,
(1) the Trustee by any Holder or by the Operating Partnership
shall be sufficient for every purpose hereunder if made, given,
furnished or filed in writing to or with the Trustee at its Corporate
Trust Office, Attention: Corporate Trust Department, or
(2) the Operating Partnership by the Trustee or by any Holder
shall be sufficient for every purpose hereunder (unless otherwise herein
expressly provided) if in writing and mailed, first-class postage
prepaid, to the Operating Partnership addressed to it at the address of
its principal office specified in the first paragraph of this Indenture
or at any other address previously furnished in writing to the Trustee
by the Operating Partnership.
SECTION 106. NOTICE TO HOLDERS; WAIVER. Where this Indenture provides
for notice of any event to Holders by the Operating Partnership or the Trustee,
such notice shall be sufficiently given (unless otherwise herein expressly
provided) if in writing and mailed, first-class postage prepaid, to each such
Holder affected by such event, at his address as it appears in the Note
Register, not later than the latest date, and not earlier than the earliest
date, prescribed for the giving of such notice. In any case where notice to
Holders is given by mail, neither the failure to mail such notice, nor any
defect in any notice so mailed, to any particular Holder shall affect the
sufficiency of such notice with respect to other Holders. Any notice mailed to a
Holder in the manner herein prescribed shall be conclusively deemed to have been
received by such Holder, whether or not such Holder actually receives such
notice.
If by reason of the suspension of or irregularities in regular mail
service or by reason of any other cause it shall be impracticable to give such
notice by mail, then such notification to Holders as shall be made with the
approval of the Trustee shall constitute a sufficient notification to such
Holders for every purpose hereunder.
Where this Indenture provides for notice in any manner, such notice may
be waived in writing by the Person entitled to receive such notice, either
before or after the event, and such waiver shall be the equivalent of such
notice. Waivers of notice by Holders shall be filed with the Trustee, but such
filing shall not be a condition precedent to the validity of any action taken in
reliance upon such waiver.
SECTION 107. EFFECT OF HEADINGS AND TABLE OF CONTENTS. The Article and
Section headings herein and the Table of Contents are for convenience only and
shall not affect the construction hereof.
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SECTION 108. SUCCESSORS AND ASSIGNS. All covenants and agreements in
this Indenture by the Operating Partnership and the Guarantors shall bind their
respective successors and assigns, whether so expressed or not.
SECTION 109. SEPARABILITY CLAUSE. In case any provision in this
Indenture or in any Note shall be invalid, illegal or unenforceable, the
validity, legality and enforceability of the remaining provisions shall not in
any way be affected or impaired thereby.
SECTION 110. BENEFITS OF INDENTURE. Nothing in this Indenture or in the
Notes, express or implied, shall give to any Person, other than the parties
hereto, any Note Registrar, any Paying Agent, any Authenticating Agent and their
successors hereunder and the Holders, any benefit or any legal or equitable
right, remedy or claim under this Indenture.
SECTION 111. GOVERNING LAW. This Indenture and the Notes shall be
governed by and construed in accordance with the law of the State of New York.
This Indenture is subject to the provisions of the TIA that are required to be
part of this Indenture and shall, to the extent applicable, be governed by such
provisions.
SECTION 112. LEGAL HOLIDAYS. In any case where any Interest Payment
Date, Redemption Date, Repayment Date, Stated Maturity or Maturity of any Note
shall not be a Business Day, then (notwithstanding any other provision of this
Indenture or any Note), payment of interest or principal (and premium, if any)
need not be made on such date, but may be made on the next succeeding Business
Day with the same force and effect as if made on the Interest Payment Date,
Redemption Date, Repayment Date, or at the Stated Maturity or Maturity, as the
case may be, provided that no interest shall accrue on the amount so payable for
the period from and after such Interest Payment Date, Redemption Date, Repayment
Date, Stated Maturity or Maturity, as the case maybe.
SECTION 113. COUNTERPARTS. This Indenture may be executed in any number
of counterparts, each of which so executed shall be deemed to be an original,
but all such counterparts shall together constitute but one and the same
Indenture.
ARTICLE TWO
NOTE FORMS
SECTION 201. FORM OF NOTES. The Notes of each series shall be in
substantially the forms as shall be established in or pursuant to one or more
indentures supplemental hereto, shall have such appropriate insertions,
omissions, substitutions and other variations as are required or permitted by
this Indenture or any indenture supplemental hereto, and may have such letters,
numbers or other marks of identification or designation and such legends or
endorsements placed thereon as the Operating Partnership may deem appropriate
and as are not inconsistent with the provisions of this Indenture, or as may be
required to comply with any law or with any rule or regulation made pursuant
thereto or with any rule or regulation of any stock exchange on which the Notes
may be listed, or to conform to usage.
The definitive Notes (and Guarantees) shall be printed, lithographed or
engraved or produced by any combination of these methods on a steel engraved
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border or steel engraved borders or may be produced in any other manner, all as
determined by the officer executing such Notes (and Guarantees), as evidenced by
his or her execution of such Notes.
SECTION 202. FORM OF TRUSTEE'S CERTIFICATE OF AUTHENTICATION. Subject
to Section 611, the Trustee's certificate of authentication shall be in
substantially the following form:
This is one of the Notes of the series designated therein referred to in
the within-mentioned Indenture.
State Street Bank and Trust Company of California, N.A., as Trustee
By:
--------------------------------
Authorized Signatory
SECTION 203. NOTES ISSUABLE IN GLOBAL FORM. The Notes shall be issuable
only in global form (without coupons). Beneficial owners of interests in the
permanent global Notes may exchange such interests for Notes of like tenor or
any authorized form and denomination only in the manner provided in Section 305.
DTC shall be the depositary with respect to the permanent global Notes.
Notwithstanding the provisions of Section 302, any such global Note shall
represent such of the Outstanding Notes of such series as shall be specified
therein and may provide that it shall represent the aggregate amount of
Outstanding Notes of such series from time to time endorsed thereon and that the
aggregate amount of Outstanding Notes of such series represented thereby may
from time to time be increased or decreased to reflect exchanges. Any
endorsement of a Note in global form to reflect the amount, or any increase or
decrease in the amount, of Outstanding Notes represented thereby shall be made
by or at the direction of the Trustee in such manner and upon instructions given
by such Person or Persons as shall be specified therein or pursuant to Section
301 or in the Operating Partnership Order to be delivered to the Trustee
pursuant to Section 303 or 304. Subject to the provisions of Section 303 and, if
applicable, Section 304, the Trustee shall deliver and redeliver any Note in
permanent global form in the manner and upon instructions given by the Person or
Persons specified therein or pursuant to Section 301 or in the applicable
Operating Partnership Order. If an Operating Partnership Order pursuant to
Section 304 or 305 has been or is delivered, any instructions by the Operating
Partnership with respect to endorsement or delivery or redelivery of a Note in
global form shall be in writing but need not comply with Section 102 and need
not be accompanied by an Opinion of Counsel.
The provisions of the last sentence of Section 303 shall apply to any
Note represented by a Note in global form if such Note was never issued and sold
by the Operating Partnership and the Operating Partnership delivers to the
Trustee the Note in global form together with written instructions (which need
not comply with Section 102 and need not be accompanied by an Opinion of
Counsel) with regard to the reduction in the principal amount of Notes
represented thereby, together with the written statement contemplated by the
last sentence of Section 303.
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Notwithstanding the provisions of Section 307, unless otherwise
specified as contemplated by Section 301, payment of principal of and any
premium and interest on any Note in global form shall be made to the Person or
Persons specified therein.
Notwithstanding the provisions of Section 308 and except as provided in
the preceding paragraph, the Operating Partnership, any agent of the Operating
Partnership and the Trustee shall treat the Holder of a global Note as the
Holder of such principal amount of Outstanding Notes represented by such global
Note.
ARTICLE THREE
THE NOTES
SECTION 301. AMOUNT LIMITED; ISSUABLE IN SERIES. The aggregate
principal amount of Notes which may be authenticated and delivered under this
Indenture is limited to $____________.
The Notes shall be issued in three series. There shall be established in
one or more Board Resolutions or pursuant to authority granted by one or more
Board Resolutions and set forth or established in or pursuant to one or more
indentures supplemental hereto, prior to the issuance of Notes of any series,
any or all of the following, as applicable:
(1) the title of the Notes of the series (which shall distinguish
the Notes of such series from all other series of Notes);
(2) the limit upon the aggregate principal amount of the Notes of
the series that may be authenticated and delivered under this Indenture
(except for Notes authenticated and delivered upon registration of
transfer of, or in exchange for, or in lieu of, other Notes of the
series pursuant to Section 304, 305, 306, 906 or 1107);
(3) the date or dates, or the method by which such date or dates
will be determined, on which the principal of the Notes of the series
shall be payable;
(4) the rate or rates at which the Notes of the series shall bear
interest, the date or dates from which such interest shall accrue, the
Interest Payment Dates on which such interest will be payable and the
Regular Record Date for the interest payable on any Note on any Interest
Payment Date;
(5) the place or places, if any, other than or in addition to The
Borough of Manhattan, The City of New York, where the principal of (and
premium, if any), interest payable in respect of, Notes of the series
shall be payable, any Notes of the series may be surrendered for
registration of transfer or exchange and notices or demands to or upon
the Operating Partnership in respect of the Notes of the series and this
Indenture may be served;
(6) the obligation, if any, of the Operating Partnership to
redeem, repay or purchase Notes of the series at the option of a Holder
thereof, and the period or periods within which or the date or dates on
which, the price or prices at which, and other terms
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and conditions upon which Notes of the series shall be redeemed, repaid
or purchased, in whole or in part, pursuant to such obligation;
(7) if other than the Trustee, the identity of each Note
Registrar and/or Paying Agent;
(8) provisions, if any, granting special rights to the Holders of
the series upon the occurrence of such events as may be specified;
(9) any deletions from, modifications of, or additions to the
Events of Default or covenants of the Operating Partnership with respect
to Notes of the series, whether or not such Events of Default or
covenants are consistent with the Events of Default or covenants set
forth herein;
(10) the Person to whom any interest on any Note of the series
shall be payable, if other than the Person in whose name that Note (or
one or more Predecessor Notes) is registered at the close of business on
the Regular Record Date for such interest, and
(11) any other terms of the series and any deletions from or
modifications or additions to this Indenture in respect of such Notes
(whether or not consistent with the other provisions of this Indenture).
All Notes of any one series and the Guarantees appertaining to any Notes
of such series shall be substantially identical except as to denomination and
the date from which interest, if any, shall accrue and except as may otherwise
be provided by the Operating Partnership in the Board Resolution, or pursuant to
the Board Resolution and set forth in the Officers' Certificate, or in any
indenture or indentures supplemental hereto, as the case may be, pertaining to
such series of Notes. The terms of the Notes of any series may provide, without
limitation, that the Notes shall be authenticated and delivered by the Trustee
on original issue from time to time upon telephonic or written order of persons
designated in or pursuant to the relevant Board Resolution, Officers'
Certificate or supplemental indenture, as the case may be (telephonic
instructions to be promptly confirmed in writing by such person) and that such
persons are authorized to determine, consistent with such Board Resolution,
Officers' Certificate or supplemental indenture, as the case may be, such terms
and conditions of the Notes of such series as are specified in such Board
Resolution, Officers' Certificate or supplemental indenture, as the case may be.
All Notes of any one series must be issued at the same time(except for Notes
authenticated and delivered upon registration of transfer of, or in exchange
for, or in lieu of, other Notes of the series pursuant to Section 304, 305, 306,
906 or 1107).
SECTION 302. DENOMINATIONS. The Notes of any series shall be issuable
in denominations of $1,000 and any integral multiple thereof.
SECTION 303. EXECUTION, AUTHENTICATION, DELIVERY AND DATING. The Notes
shall be executed on behalf of the Operating Partnership by its General Partner
by such General Partner's Chairman, President or any Vice President. If a
Guarantor is a corporation its Guarantee shall be executed on behalf of the
Guarantor by its Chairman, President or any Vice President and attested to by
its Treasurer, any Assistant Treasurer, its Secretary or any Assistant Secretary
and if a Guarantor is a partnership or a limited liability company its
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Guarantee shall be executed on behalf of such Guarantor by the Chairman,
President or any Vice President and attested to by the Treasurer, any Assistant
Treasurer, the Secretary or any Assistant Secretary of its general partner or
manager, as applicable. The signature of any of these officers on the Notes or
Guarantee may be manual or facsimile signatures of the present or any future
such authorized officer and may be imprinted or otherwise reproduced on the
Notes or the Guarantees.
The Guarantees or Notes bearing the manual or facsimile signatures of
individuals who were at any time the proper officers of the Operating
Partnership's General Partner, the Guarantors (or the general partner or manager
of such Guarantor) or any corporate successor of the Operating Partnership, as
applicable shall bind the Operating Partnership or the applicable Guarantor,
notwithstanding that such individuals or any of them have ceased to hold such
offices prior to the authentication and delivery of such Notes or Guarantees or
did not hold such offices at the date of such Notes or Guarantees.
Each Note and Guarantee shall be dated the date of its authentication.
No Note or Guarantee shall be entitled to any benefit under this
Indenture or be valid or obligatory for any purpose unless there appears on such
Note a certificate of authentication substantially in the form provided for
herein duly executed by the Trustee by manual signature of an authorized
signatory, and such certificate upon any Note shall be conclusive evidence, and
the only evidence, that such Note has been duly authenticated and delivered
hereunder and is entitled to the benefits of this Indenture. Notwithstanding the
foregoing, if any Note shall have been authenticated and delivered hereunder but
never issued and sold by the Operating Partnership, and the Operating
Partnership shall deliver such Note to the Trustee for cancellation as provided
in Section 309 together with a written statement (which need not comply with
Section 102 and need not be accompanied by an Opinion of Counsel) stating that
such Note has never been issued and sold by the Operating Partnership, for all
purposes of this Indenture such Note shall be deemed never to have been
authenticated and delivered hereunder and shall never be entitled to the
benefits of this Indenture.
SECTION 304. TEMPORARY NOTES. Pending the preparation of definitive
Notes of any series, the Operating Partnership may execute, and upon Operating
Partnership Order the Trustee shall authenticate and deliver, temporary Notes
which are printed, lithographed, typewritten, mimeographed or otherwise
produced, in any authorized denomination, substantially of the tenor of the
definitive Notes in lieu of which they are issued, in registered form, and with
such appropriate insertions, omissions, substitutions and other variations as
the officers executing such Notes may determine, as conclusively evidenced by
their execution of such Notes. In the case of Notes of any series, such
temporary Notes may be in global form.
If temporary Notes of any series are issued, the Operating Partnership
will cause definitive Notes of that series to be prepared without unreasonable
delay. After the preparation of definitive Notes of such series, the temporary
Notes of such series shall be exchangeable for definitive Notes of such series
upon surrender of the temporary Notes of such series at the office or agency of
the Operating Partnership in a Place of Payment for that series, without charge
to the Holder. Upon surrender for cancellation of any one or more temporary
Notes of any series,
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the Operating Partnership shall execute and the Trustee shall authenticate and
deliver in exchange therefor a like principal amount of definitive Notes of the
same series of authorized denominations. Until so exchanged, the temporary Notes
of any series shall in all respects be entitled to the same benefits under this
Indenture as definitive Notes of such series.
SECTION 305. REGISTRATION, REGISTRATION OF TRANSFER AND EXCHANGE. The
Operating Partnership shall cause to be kept at the Corporate Trust Office of
the Trustee or in any office or agency of the Operating Partnership in a Place
of Payment a register for any series of Notes (the registers maintained in such
office or in any such office or agency of the Operating Partnership in a Place
of Payment being herein sometimes referred to collectively as the "Note
Register") in which, subject to such reasonable regulations as it may prescribe,
the Operating Partnership shall provide for the registration of Notes and of
transfers and exchanges of Notes. The Note Register shall be in written form or
any other form capable of being converted into written form within a reasonable
time. The Trustee, at its Corporate Trust Office and at the office of its
affiliate in the Borough of Manhattan, The City of New York at the address set
forth in Section 1002 (or at such other address at which the Trustee's
affiliate's New York office may subsequently be located), is hereby initially
appointed "Note Registrar" for the purpose of registering Notes and transfers
and exchanges of Notes on such Note Register as herein provided. In the event
that the Trustee shall cease to be Note Registrar, it shall have the right to
examine the Note Register at all reasonable times.
Subject to the provisions of this Section 305, upon surrender for
registration of transfer of any Note of any series at any office or agency of
the Operating Partnership in a Place of Payment for that series, the Operating
Partnership shall execute, and the Trustee shall authenticate and deliver, in
the name of the designated transferee or transferees, one or more new Notes of
the same series, of any authorized denominations and of a like aggregate
principal amount, bearing a number not contemporaneously outstanding, and
containing identical terms and provisions. Subject to the provisions of this
Section 305, at the option of the Holder, Notes of any series may be exchanged
for other Notes of the same series, of any authorized denomination or
denominations and of a like aggregate principal amount, containing identical
terms and provisions, upon surrender of the Notes to be exchanged at any such
office or agency. Whenever any such Notes are so surrendered for exchange, the
Operating Partnership shall execute, and the Trustee shall authenticate and
deliver, the Notes which the Holder making the exchange is entitled to receive.
Any permanent global Note shall be exchangeable only as provided in this
paragraph. If the depositary for any permanent global Note is DTC, then, unless
the terms of such global Note expressly permit such global Note to be exchanged
in whole or in part for definitive Notes, a global Note may be transferred, in
whole but not in part, only to a nominee of DTC, or by a nominee of DTC to DTC,
or to a successor to DTC for such global Note selected or approved by the
Operating Partnership or to a nominee of such successor to DTC. If at any time
(i) DTC notifies the Operating Partnership that it is unwilling or unable to
continue as depositary for the applicable global Note or Notes or if at any time
DTC ceases to be a clearing agency registered under the Securities Exchange Act
of 1934 if so required by applicable law or regulation, and, in either case, a
successor depositary is not appointed by the Operating Partnership within 90
days after the Operating Partnership receives such notice or becomes aware of
such ineligibility, (ii) the Operating Partnership in its sole discretion
determines that such global Notes shall be
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exchangeable for definitive Notes or (iii) there shall have occurred and be
continuing an Event of Default under this Indenture with respect to the Notes of
any series and beneficial owners representing a majority in aggregate principal
amount of the Outstanding Notes represented by such global Notes advise DTC to
cease acting as depositary, then the Operating Partnership shall execute, and
the Trustee shall authenticate and deliver, definitive Notes of like series,
rank, tenor and terms in definitive form in an aggregate principal amount equal
to the principal amount of such global Note or Notes. If any beneficial owner of
an interest in a permanent global Note is otherwise entitled to exchange such
interest for Notes of such series and of like tenor and principal amount of
another authorized form and denomination, as specified as contemplated by
Section 301 and provided that any applicable notice provided in the permanent
global Note shall have been given, then without unnecessary delay but in any
event not later than the earliest date on which such interest may be so
exchanged, the Operating Partnership shall execute, and the Trustee shall
authenticate and deliver, definitive Notes in aggregate principal amount equal
to the principal amount of such beneficial owner's interest in such permanent
global Note. On or after the earliest date on which such interests may be so
exchanged, such permanent global Note shall be surrendered for exchange by DTC
or such other depositary as shall be specified in the Operating Partnership
Order with respect thereto to the Trustee, as the Operating Partnership's agent
for such purpose. If a Note is issued in exchange for any portion of a permanent
global Note after the close of business at the office or agency where such
exchange occurs on (i) any Regular Record Date and before the opening of
business at such office or agency on the relevant Interest Payment Date, or (ii)
any special Record Date and before the opening of business at such office or
agency on the related proposed date for payment of Defaulted Interest, Interest
or Defaulted Interest, as the case may be, such interest will not be payable on
such Interest Payment Date or proposed date for payment, as the case may be, in
respect of such Note, but will be payable on such Interest Payment Date or
proposed date for payment, as the case may be, only to the Person to whom
interest in respect of such portion of such permanent global Note is payable in
accordance with the provisions of this Indenture.
All Notes issued upon any registration of transfer or exchange of Notes
shall be the valid obligations of the Operating Partnership, evidencing the same
Debt, and entitled to the same benefits under this Indenture, as the Notes
surrendered upon such registration of transfer or exchange.
Every Note presented or surrendered for registration of transfer or for
exchange or redemption shall (if so required by the Operating Partnership or the
Note Registrar) be duly endorsed, or be accompanied by a written instrument of
transfer in form satisfactory to the Operating Partnership and the Note
Registrar duly executed by the Holder thereof or his attorney duly authorized in
writing.
No service charge shall be made to the Holder for any registration of
transfer or exchange of Notes, but the Operating Partnership may require payment
of a sum sufficient to cover any tax or other governmental charge that may be
imposed in connection with any registration of transfer or exchange of Notes,
other than exchanges pursuant to Section 304, 906 or 1107.
The Operating Partnership or the Trustee, as applicable, shall not be
required (i) to issue, register the transfer of or exchange any Note if such
Note may be among those selected for redemption during a period beginning at the
opening of business 15 days before selection of the
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Notes to be redeemed under Section 1103 and ending at the close of business on
the day of the mailing of the relevant notice of redemption, or (ii) to register
the transfer of or exchange any Note so selected for redemption in whole or in
part, except, in the case of any Note to be redeemed in part, the portion
thereof not to be redeemed, or (iii) if applicable, to issue, register the
transfer of or exchange any Note which has been surrendered for repayment at the
option of the Holder, except the portion, if any, of such Note not to be so
repaid.
SECTION 306. MUTILATED, DESTROYED, LOST AND STOLEN NOTES. If any
mutilated Note or a Note with a Guarantee appertaining thereto is surrendered to
the Trustee or the Operating Partnership, together with, in proper cases,
indemnity as may be required by the Operating Partnership or the Trustee to save
each of them or any agent of either of them harmless, the Operating Partnership
shall execute and the Trustee shall authenticate and deliver in exchange
therefor a new Note of the same series and principal amount, containing
identical terms and provisions and bearing a number not contemporaneously
outstanding, with Guarantees corresponding to the Guarantees appertaining to the
surrendered Note.
If there shall be delivered to the Operating Partnership and to the
Trustee (i) evidence to their satisfaction of the destruction, loss or theft of
any Note or Guarantee, and (ii) such security or indemnity as may be required by
them to save each of them and any agent of either of them harmless, then, in the
absence of notice to the Operating Partnership or the Trustee that such Note or
Guarantee has been acquired by a bona fide purchaser, the Operating Partnership
shall execute and upon its request the Trustee shall authenticate and deliver,
in lieu of any such destroyed, lost or stolen Note or in exchange for the Note
to which a destroyed, lost or stolen Guarantee appertains, a new Note of the
same series and principal amount, containing identical terms and provisions and
bearing a number not contemporaneously outstanding with Guarantees corresponding
to the Guarantees appertaining to such destroyed, lost or stolen Note or to the
Note to which such destroyed, lost or stolen Guarantee appertains.
Notwithstanding the provisions of the previous two paragraphs, in case
any such mutilated, destroyed, lost or stolen Note has become or is about to
become due and payable, the Operating Partnership in its discretion may, instead
of issuing a new Note, pay such Note.
Upon the issuance of any new Note under this Section, the Operating
Partnership may require the payment of a sum sufficient to cover any tax or
other governmental charge that may be imposed in relation thereto and any other
expenses (including the fees and expenses of the Trustee) connected therewith.
Every new Note of any series issued pursuant to this Section in lieu of
any destroyed, lost or stolen Note shall constitute an original additional
contractual obligation of the Operating Partnership, whether or not the
destroyed, lost or stolen Note shall be at any time enforceable by anyone, and
shall be entitled to all the benefits of this Indenture equally and
proportionately with any and all other Notes of that series duly issued
hereunder.
The provisions of this Section are exclusive and shall preclude (to the
extent lawful) all other rights and remedies with respect to the replacement or
payment of mutilated, destroyed, lost or stolen Notes or Guarantees.
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SECTION 307. PAYMENT OF INTEREST; INTEREST RIGHTS PRESERVED. Except as
otherwise specified with respect to a series of Notes in accordance with the
provisions of Section 301, interest on any Note that is payable, and is
punctually paid or duly provided for, on any Interest Payment Date shall be paid
to the Person in whose name that Note (or one or more Predecessor Notes) is
registered at the close of business on the Regular Record Date for such interest
at the office or agency of the Operating Partnership maintained for such purpose
pursuant to Section 1002; provided, however, that each installment of interest
on any Note may at the Operating Partnership's option be paid by (i) mailing a
check for such interest, payable to or upon the written order of the Person
entitled thereto pursuant to Section 308, to the address of such Person as it
appears on the Note Register or (ii) wire transfer to an account maintained by
the payee located in the United States.
Unless otherwise provided as contemplated by Section 301, interest, if
any, payable on any permanent global Note on any Interest Payment Date will be
paid to DTC, with respect to that portion of such permanent global Note held for
its account by Cede & Co. (or by another nominee of DTC or by DTC) for the
purpose of permitting such party to credit the interest received by it in
respect of such permanent global Note to the accounts of the beneficial owners
thereof.
Except as otherwise specified with respect to a series of Notes in
accordance with the provisions of Section 301, any interest on any Note of any
series that is payable, but is not punctually paid or duly provided for, on any
Interest Payment Date (herein called "Defaulted Interest") shall forthwith cease
to be payable to the registered Holder thereof on the relevant Regular Record
Date by virtue of having been such Holder, and such Defaulted Interest may be
paid by the Operating Partnership, at its election in each case, as provided in
clause (1) or (2) below:
(1) The Operating Partnership may elect to make payment of any Defaulted
Interest to the Persons in whose names the Notes of such series (or their
respective Predecessor Notes) are registered at the close of business on a
Special Record Date for the payment of such Defaulted Interest, which shall be
fixed in the following manner. The Operating Partnership shall notify the
Trustee in writing of the amount of Defaulted Interest proposed to be paid on
each Note of such series and the date of the proposed payment (which shall not
be less than 20 days after such notice is received by the Trustee), and at the
same time the Operating Partnership shall deposit with the Trustee an amount of
money (except as otherwise specified pursuant to Section 301 for the Notes of
such series) equal to the aggregate amount proposed to be paid in respect of
such Defaulted Interest or shall make arrangements satisfactory to the Trustee
for such deposit on or prior to the date of the proposed payment, such money
when deposited to be held in trust for the benefit of the Persons entitled to
such Defaulted Interest as in this clause provided. Thereupon the Trustee shall
fix a Special Record Date for the payment of such Defaulted Interest which shall
be not more than 15 days and not less than 10 days prior to the date of the
proposed payment and not less than 10 days after the receipt by the Trustee of
the notice of the proposed payment. The Trustee shall promptly notify the
Operating Partnership of such Special Record Date and, in the name and at the
expense of the Operating Partnership, shall cause notice of the proposed payment
of such Defaulted Interest and the Special Record Date therefor to be mailed,
first-class postage prepaid, to each Holder of such series at his address as it
appears in the Note Register not less than 10 days prior to such Special Record
Date. The Trustee shall in the name
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and at the expense of the Operating Partnership, cause a similar notice to be
published at least once in an Authorized Newspaper in each Place of Payment, but
such publications shall not be a condition precedent to the establishment of
such Special Record Date. Notice of the proposed payment of such Defaulted
Interest and the Special Record Date therefor having been mailed as aforesaid,
such Defaulted Interest shall be paid to the Persons in whose names the Notes of
such series (or their respective Predecessor Notes) are registered at the close
of business on such Special Record Date and shall no longer be payable pursuant
to the following clause (2).
(2) The Operating Partnership may make payment of any Defaulted Interest
on the Notes of any series in any other lawful manner not inconsistent with the
requirements of any securities exchange on which such Notes may be listed, and
upon such notice as may be required by such exchange, if, after notice given by
the Operating Partnership to the Trustee of the proposed payment pursuant to
this clause, such manner of payment shall be deemed practicable by the Trustee.
Subject to the foregoing provisions of this Section and Section 305,
each Note delivered under this Indenture upon registration of transfer of or in
exchange for or in lieu of any other Note shall carry the rights to interest
accrued and unpaid, and to accrue, which were carried by such other Note.
SECTION 308. PERSONS DEEMED OWNERS. Prior to due presentment of a Note
for registration of transfer, the Operating Partnership, the Guarantors, the
Trustee and any agent of the Operating Partnership or the Trustee may treat the
Person in whose name such Note is registered as the owner of such Note for the
purpose of receiving payment of principal of (and premium, if any), and (subject
to Sections 305 and 307) interest on, such Note and for all other purposes
whatsoever, whether or not such Note be overdue, and neither the Operating
Partnership, the Guarantors, the Trustee nor any agent of the Operating
Partnership, the Guarantors or the Trustee shall be affected by notice to the
contrary.
None of the Operating Partnership, the Guarantors, the Trustee, any
Paying Agent or the Note Registrar will have any responsibility or liability for
any aspect of the records relating to or payments made on account of beneficial
ownership interests of a Note in global form or for maintaining, supervising or
reviewing any records relating to such beneficial ownership interests.
Notwithstanding the foregoing, with respect to any global Note, nothing
herein shall prevent the Operating Partnership, the Trustee, or any agent of the
Operating Partnership or the Trustee from giving effect to any written
certification, proxy or other authorization furnished by any depositary, as a
Holder, with respect to such global Note or impair, as between such depositary
and owners of beneficial interests in such global Note, the operation of
customary practices governing the exercise of the rights of such depositary (or
its nominee) as Holder of such global Note.
SECTION 309. CANCELLATION. All Notes surrendered for payment,
redemption, repayment at the option of the Holder, or registration of transfer
or exchange shall, if surrendered to any Person other than the Trustee, be
delivered to the Trustee, and any such Notes surrendered directly to the Trustee
for any such purpose shall be promptly canceled by it. The Operating Partnership
may at any time deliver to the Trustee for cancellation any Notes
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previously authenticated and delivered hereunder which the Operating Partnership
may have acquired in any manner whatsoever, and may deliver to the Trustee (or
to any other Person for delivery to the Trustee) for cancellation any Notes
previously authenticated hereunder which the Operating Partnership has not
issued and sold, and all Notes so delivered shall be promptly canceled by the
Trustee. If the Operating Partnership shall so acquire any of the Notes,
however, such acquisition shall not operate as a redemption or satisfaction of
the indebtedness represented by such Notes unless and until the same are
surrendered to the Trustee for cancellation. No Notes shall be authenticated in
lieu of or in exchange for any Notes canceled as provided in this Section,
except as expressly permitted by or pursuant to this Indenture. Canceled Notes
held by the Trustee shall be destroyed by the Trustee and the Trustee shall
deliver a certificate of such destruction to the Operating Partnership, unless
by a Operating Partnership Order the Operating Partnership directs their return
to it.
SECTION 310. COMPUTATION OF INTEREST. Interest on the Notes of any
series shall be computed on the basis of a 360-day year consisting of twelve
30-day months.
ARTICLE FOUR
SATISFACTION AND DISCHARGE
SECTION 401. SATISFACTION AND DISCHARGE OF INDENTURE. This Indenture
shall upon Operating Partnership Request cease to be of further effect with
respect to any series of Notes specified in such Operating Partnership Request
(except as hereinafter provided in this Section 401). The Trustee, upon receipt
of an Operating Partnership Order, and at the expense of the Operating
Partnership, shall execute proper instruments acknowledging satisfaction and
discharge of this Indenture as to such series when (1) either
(A) all Notes of such series theretofore authenticated and delivered
have been delivered to the Trustee for cancellation; or
(B) all Notes of such series
(i) have become due and payable, or
(ii) will become due and payable at their Stated Maturity within
one year, or
(iii) if redeemable at the option of the Operating Partnership,
are to be called for redemption within one year under arrangements
satisfactory to the Trustee for the giving of notice of redemption by
the Trustee in the name, and at the expense, of the Operating
Partnership,
and the Operating Partnership, in the case of (i), (ii) or (iii) above,
has irrevocably deposited or caused to be deposited with the Trustee as trust
funds in trust, an amount sufficient to pay and discharge the entire
indebtedness on such Notes, for principal (and premium, if any) and interest to
the date of such deposit (in the case of Notes which have become due and
payable) or to the Stated Maturity or Redemption Date, as the case may be;
(2) the Operating Partnership has paid or caused to be paid all other
sums payable hereunder by the Operating Partnership; and
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(3) the Operating Partnership has delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel, each stating that all conditions
precedent herein provided for relating to the satisfaction and discharge of this
Indenture as to such series have been complied with.
Notwithstanding the satisfaction and discharge of this Indenture, the
obligations of the Operating Partnership to the Trustee and any predecessor
Trustee under Section 606, the obligations of the Operating Partnership to any
Authenticating Agent under Section 611 and, if money shall have been deposited
with and held by the Trustee pursuant to subclause (B) of clause (1) of this
Section, the obligations of the Operating Partnership and the Trustee with
respect to the Notes of such series under Sections 305, 306, 402, 1002 and 1003,
shall survive.
SECTION 402. APPLICATION OF TRUST FUNDS. Subject to the provisions of
the last paragraph of Section 1003, all money deposited with the Trustee
pursuant to Section 401 shall be held in trust and applied by it, in accordance
with the provisions of the Notes and this Indenture, to the payment, either
directly or through any Paying Agent (other than the Operating Partnership
acting as its own Paying Agent) as the Trustee may determine, to the Persons
entitled thereto, of the principal (and premium, if any), and interest, if any,
for whose payment such money has been deposited with or received by the Trustee,
but such money need not be segregated from other funds except to the extent
required by law.
ARTICLE FIVE
REMEDIES
SECTION 501. EVENTS OF DEFAULT. "Event of Default," means, with respect
to any series of Notes, any one of the following events (whatever the reason for
such Event of Default and whether or not it shall be voluntary or involuntary or
be effected by operation of law or pursuant to any judgment, decree or order of
any court or any order, rule or regulation of any administrative or governmental
body):
(1) default in the payment of any interest on any Note of that
series, when such interest becomes due and payable, and continuance of
such default for a period of 30 days; or
(2) default in the payment of any principal of or premium, if
any, on any Note of that series when it becomes due and payable at its
Maturity (whether at Stated Maturity, upon redemption or otherwise); or
(3) default in the performance, or breach, of any covenant or
warranty of the Operating Partnership in this Indenture with respect to
any Note of that series (other than a covenant or warranty a default in
whose performance or whose breach is elsewhere in this Section
specifically dealt with or included herein solely for the benefit of a
series of Notes other than that series), and continuance of such default
or breach for a period of 60 days after there has been given, by
registered or certified mail, to the Operating Partnership by the
Trustee or to the Operating Partnership and the Trustee by the Holders
of at least 25% in principal amount of the Outstanding Notes of that
series a written notice specifying such default or breach and requiring
it to be remedied and stating that such notice is a "Notice of Default"
hereunder; or
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(4) (a) default by the Operating Partnership or any Subsidiary of
the Operating Partnership in the payment (whether at stated maturity,
upon acceleration, upon required prepayment or otherwise), beyond any
period of grace provided therefor, of any principal of or interest on
any bond, note, debenture or other evidence of indebtedness, or (b) any
other breach or default (or other event or condition) shall occur under
any agreement, indenture or instrument relating to any such bond, note,
debenture or other evidence of indebtedness beyond any cure period
provided therefor, if as a result thereof the holder or holders of any
such bond, note, debenture or other evidence of indebtedness (or a
person on behalf of such holder or holders) has the immediate right to
cause (upon the giving of notice, if required) any such bond, note,
debenture or other evidence of indebtedness to become or be declared due
and payable, or required to be prepaid, redeemed, purchased or defeased
(or an offer of prepayment, redemption, purchase or defeasance be made),
prior to its stated maturity (other than by a scheduled mandatory
prepayment), which in the aggregate under (a) and (b) have a principal
amount equal to or greater than $20,000,000; or
(5) the entry by a court of competent jurisdiction of one or more
judgments, orders or decrees against the Operating Partnership or any
Significant Subsidiary in an aggregate amount (excluding amounts fully
covered by insurance) in excess of $20,000,000 and such judgments,
orders or decrees remain undischarged, unstayed and unsatisfied in an
aggregate amount (excluding amounts fully covered by insurance) in
excess of $20,000,000 for a period of 30 consecutive days; or
(6) the Operating Partnership, the General Partner or any
Significant Subsidiary of the Operating Partnership pursuant to or
within the meaning of any Bankruptcy Law:
(A) commences a voluntary case or proceeding,
(B) consents to the entry of an order or decree for relief
against it in an involuntary case or to the commencement of any
bankruptcy or insolvency case or proceeding against it,
(C) consents to the appointment of a Custodian (as defined
below) of it or for any substantial part of its property, or
(D) makes a general assignment for the benefit of its
creditors; or
(7) a court of competent jurisdiction enters an order or decree
under any Bankruptcy Law that:
(A) is for relief against the Operating Partnership, the
General Partner or any Significant Subsidiary of the Operating
Partnership in an involuntary case,
(B) adjudges the Operating Partnership, the General
Partner or any Significant Subsidiary of the Operating
Partnership a bankrupt or insolvent,
(C) approves as properly filed a petition seeking
reorganization, arrangement, adjustment or composition of or in
respect of the Operating
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Partnership, the General Partner or any Significant Subsidiary
of the Operating Partnership,
(D) appoints a Custodian of the Operating Partnership, the
General Partner or any Significant Subsidiary of the Operating
Partnership or for all or any substantial part of the property of
the Operating Partnership, the General Partner or any Significant
Subsidiary of the Operating Partnership, or
(E) orders the winding up or liquidation of the Operating
Partnership, the General Partner or any Significant Subsidiary of
the Operating Partnership, and the order or decree described in
this clause (7) remains unstayed and in effect for 60 days.
As used in this Section 501, the term "Bankruptcy Law" means Title 11
U.S. Code or any similar Federal or State law for the relief of debtors and the
term "Custodian" means any receiver, trustee, assignee, liquidator, sequestrator
or other similar official under any Bankruptcy Law.
SECTION 502. ACCELERATION OF MATURITY; RESCISSION AND ANNULMENT. If an
Event of Default with respect to Notes of any series at the time outstanding
occurs and is continuing, then and in every such case the Trustee or the Holders
of not less than 25% in principal amount of the Outstanding Notes of that series
may declare the principal of all the Notes of that series to be due and payable
immediately, by a notice in writing to the Operating Partnership (and to the
Trustee if given by the Holders), and upon the delivery of any such declaration
to the Operating Partnership such principal or specified portion thereof shall
become immediately due and payable.
At any time after such a declaration of acceleration with respect to
Notes of any series has been made and before a judgment or decree for payment of
the money due has been obtained by the Trustee as hereinafter in this Article
provided, the Holders of not less than a majority in principal amount of the
Outstanding Notes of that series, by written notice to the Operating Partnership
and the Trustee, may rescind and annul such declaration and its consequences if:
(1) the Operating Partnership has paid or deposited with the
Trustee a sum sufficient to pay:
(A) all overdue installments of interest on all
Outstanding Notes of that series,
(B) the principal of (and premium, if any, on) any
Outstanding Notes of that series which have become due otherwise
than by such declaration of acceleration and interest thereon at
the rate or rates borne by or provided for in such Notes,
(C) to the extent that payment of such interest is lawful,
interest upon overdue installments of interest at the rate or
rates borne by or provided for in such Notes, and
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(D) all sums paid or advanced by the Trustee hereunder and
the reasonable compensation, expenses, disbursements and advances
of the Trustee, its agents and counsel; and
(2) all Events of Default with respect to Notes of that series,
other than the nonpayment of the principal of (or premium, if any) or
interest on Notes of that series which have become due solely by such
declaration of acceleration, have been cured or waived as provided in
Section 513.
No such rescission shall affect any subsequent default or impair any right
consequent thereon.
SECTION 503. COLLECTION OF INDEBTEDNESS AND SUITS FOR ENFORCEMENT BY
TRUSTEE. The Operating Partnership covenants that if:
(1) default is made in the payment of any installment of interest
on any Note of any series when such interest becomes due and payable and
such default continues for a period of 30 days, or
(2) default is made in the payment of the principal of (or
premium, if any, on) any Note of any series at its Maturity,
then the Operating Partnership will, upon demand of the Trustee, pay to the
Trustee, for the benefit of the Holders of such Notes of such series, the whole
amount then due and payable on such Notes for principal (and premium, if any)
and interest, with interest upon any overdue principal (and premium, if any)
and, to the extent that payment of such interest shall be legally enforceable,
upon any overdue installments of interest at the rate or rates borne by or
provided for in such Notes, and, in addition thereto, such further amount as
shall be sufficient to cover the costs and expenses of collection, including the
reasonable compensation, expenses, disbursements and advances of the Trustee,
its agents and counsel.
If the Operating Partnership fails to pay such amounts forthwith upon
such demand, the Trustee, in its own name and as trustee of an express trust,
may institute a judicial proceeding for the collection of the sums so due and
unpaid, and may prosecute such proceeding to judgment or final decree, and may
enforce the same against the Operating Partnership or any Guarantor or any other
obligor upon such Notes or Guarantees of such series and collect the moneys
adjudged or decreed to be payable in the manner provided by law out of the
property of the Operating Partnership or Guarantor or any other obligor upon
such Notes or Guarantees of such series, wherever situated.
If an Event of Default with respect to Notes of any series occurs and is
continuing, the Trustee may in its discretion proceed to protect and enforce its
rights and the rights of the Holders of such series and any related Guarantees
by such appropriate judicial proceedings as the Trustee shall deem most
effectual to protect and enforce any such rights, whether for the specific
enforcement of any covenant or agreement in this Indenture or in aid of the
exercise of any power granted herein, or to enforce any other proper remedy.
SECTION 504. TRUSTEE MAY FILE PROOFS OF CLAIM. In case of the pendency
of any receivership, insolvency, liquidation, bankruptcy, reorganization,
arrangement,
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adjustment, composition or other judicial proceeding relative to the Operating
Partnership, any Guarantor or any other obligor upon the Notes or the property
of the Operating Partnership, any Guarantor or of such other obligor, the
Trustee (irrespective of whether the principal of the Notes of any series shall
then be due and payable as therein expressed or by declaration or otherwise and
irrespective of whether the Trustee shall have made any demand on the Operating
Partnership or any Guarantor for the payment of overdue principal, premium, if
any, or interest) shall be entitled and empowered, by intervention in such
proceeding or otherwise:
(i) to file and prove a claim for the whole amount, or such
lesser amount as may be provided for in the Notes of such series, of
principal (and premium, if any) and interest owing and unpaid in respect
of the Notes or Guarantees and to file such other papers or documents as
may be necessary or advisable in order to have the claims of the Trustee
(including any claim for the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and counsel) and
of the Holders allowed in such judicial proceeding, and
(ii) to collect and receive any moneys or other property payable
or deliverable on any such claims and to distribute the same;
and any custodian, receiver, assignee, trustee, liquidator, sequestrator (or
other similar official) in any such judicial proceeding is hereby authorized by
each Holder of such series and Guarantees to make such payments to the Trustee,
and in the event that the Trustee shall consent to the making of such payments
directly to the Holders, to pay to the Trustee any amount due to it for the
reasonable compensation, expenses, disbursements and advances of the Trustee and
any predecessor Trustee, their agents and counsel, and any other amounts due the
Trustee or any predecessor Trustee under Section 606.
Nothing herein contained shall be deemed to authorize the Trustee to
authorize or consent to or accept or adopt on behalf of any Holder any plan of
reorganization, arrangement, adjustment or composition affecting the Notes or
Guarantees or the rights of any Holder thereof, or to authorize the Trustee to
vote in respect of the claim of any Holder in any such proceeding.
SECTION 505. TRUSTEE MAY ENFORCE CLAIMS WITHOUT POSSESSION OF NOTES .
All rights of action and claims under this Indenture or any of the Notes or
Guarantees may be prosecuted and enforced by the Trustee without the possession
of any of the Notes or Guarantees or the production thereof in any proceeding
relating thereto, and any such proceeding instituted by the Trustee shall be
brought in its own name as trustee of an express trust, and any recovery of
judgment shall, after provision for the payment of the reasonable compensation,
expenses, disbursements and advances of the Trustee, its agents and counsel, be
for the ratable benefit of the Holders of the Notes or Guarantees in respect of
which such judgment has been recovered.
SECTION 506. APPLICATION OF MONEY COLLECTED. Any money collected by the
Trustee pursuant to this Article shall be applied in the following order, at the
date or dates fixed by the Trustee and, in case of the distribution of such
money on account of principal (or premium, if any) or interest, upon
presentation of the Notes or Guarantees, or any
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thereof, and the notation thereon of the payment if only partially paid and upon
surrender thereof if fully paid:
FIRST: To the payment of all amounts due the Trustee and any
predecessor Trustee under Section 606;
SECOND: To the payment of the amounts then due and unpaid upon
the Notes and Guarantees for principal (and premium, if any) and
interest in respect of which or for the benefit of which such money has
been collected, ratably, without preference or priority of any kind,
according to the aggregate amounts due and payable on such Notes and
Guarantees for principal (and premium, if any) and interest,
respectively; and
THIRD: To the payment of the remainder, if any, to the Operating
Partnership.
SECTION 507. LIMITATION ON SUITS. No Holder of any Note of any series
shall have any right to institute any proceeding, judicial or otherwise, with
respect to this Indenture, or for the appointment of a receiver or trustee, or
for any other remedy hereunder, unless:
(1) such Holder has previously given written notice to the
Trustee of a continuing Event of Default with respect to the Notes of
that series;
(2) the Holders of not less than 25% in principal amount of the
Outstanding Notes of that series shall have made written request to the
Trustee to institute proceedings in respect of such Event of Default in
its own name as Trustee hereunder;
(3) such Holder or Holders have offered to the Trustee indemnity
reasonably satisfactory to the Trustee against the costs, expenses and
liabilities to be incurred in compliance with such request;
(4) the Trustee for 60 days after its receipt of such notice,
request and offer of indemnity has failed to institute any such
proceeding; and
(5) no direction inconsistent with such written request has been
given to the Trustee during such 60-day period by the Holders of a
majority in principal amount of the Outstanding Notes of that series;
it being understood and intended that no one or more of such Holders shall have
any right in any manner whatever by virtue of, or by availing of, any provision
of this Indenture to affect, disturb or prejudice the rights of any other of
such Holders, or to obtain or to seek to obtain priority or preference over any
other of such Holders or to enforce any right under this Indenture, except in
the manner herein provided and for the equal and ratable benefit of all such
Holders.
SECTION 508. UNCONDITIONAL RIGHT OF HOLDERS TO RECEIVE PRINCIPAL,
PREMIUM, IF ANY, AND INTEREST. Notwithstanding any other provision in this
Indenture, the Holder of any Note shall have the right which is absolute and
unconditional to receive payment of the principal of (and premium, if any) and
(subject to Sections 305 and 307) interest on such Note on the due date
expressed in such Note (or, in the case of redemption, on
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the Redemption Date) and (subject to Section 507) to institute suit for the
enforcement of any such payment, and such rights shall not be impaired without
the consent of such Holder.
SECTION 509. RESTORATION OF RIGHTS AND REMEDIES. If the Trustee or any
Holder has instituted any proceeding to enforce any right or remedy under this
Indenture and such proceeding has been discontinued or abandoned for any reason,
or has been determined adversely to the Trustee or to such Holder, then and in
every such case, the Operating Partnership, each Guarantor, the Trustee and the
Holders shall, subject to any determination in such proceeding, be restored
severally and respectively to their former positions hereunder and thereafter
all rights and remedies of the Trustee and the Holders shall continue as though
no such proceeding had been instituted.
SECTION 510. RIGHTS AND REMEDIES CUMULATIVE. Except as otherwise
provided with respect to the replacement or payment of mutilated, destroyed,
lost or stolen Notes or Guarantees in the last paragraph of Section 306, no
right or remedy herein conferred upon or reserved to the Trustee or to the
Holders or Guarantees is intended to be exclusive of any other right or remedy,
and every right and remedy shall, to the extent permitted by law, be cumulative
and in addition to every other right and remedy given hereunder or now or
hereafter existing at law or in equity or otherwise. The assertion or employment
of any right or remedy hereunder, or otherwise, shall not prevent the concurrent
assertion or employment of any other appropriate right or remedy.
SECTION 511. DELAY OR OMISSION NOT WAIVER. No delay or omission of the
Trustee or of any Holder of any Note or Guarantee to exercise any right or
remedy accruing upon any Event of Default shall impair any such right or remedy
or constitute a waiver of any such Event of Default or an acquiescence therein.
Every right and remedy given by this Article Five or by law to the Trustee or to
the Holders may be exercised from time to time, and as often as may be deemed
expedient, by the Trustee or by the Holders or Guarantees, as the case may be.
SECTION 512. CONTROL BY HOLDERS OF NOTES. The Holders of not less than
a majority in principal amount of the Outstanding Notes of any series shall have
the right to direct the Trustee as to the time, method and place of conducting
any proceeding for any remedy available or exercising any trust or power
conferred on the Trustee with respect to the Notes of such series, provided that
(1) such direction shall not be in conflict with any rule of law
or with this Indenture,
(2) the Trustee may take any other action deemed proper by the
Trustee which is not inconsistent with such direction, and
(3) the Trustee need not take any action which, in its reasonable
determination, might involve it in personal liability or be unduly
prejudicial to the Holders of such series not joining therein.
SECTION 513. WAIVER OF PAST DEFAULTS. The Holders of not less than a
majority in principal amount of the Outstanding Notes of any series may on
behalf of the Holders
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of all the Notes of such series waive any past default hereunder with respect to
such series and its consequences, except a default
(1) in the payment of the principal of (or premium, if any) or
interest on or payable in respect of any Note of such series, or
(2) in respect of a covenant or provision hereof which under
Article Nine cannot be modified or amended without the consent of the
Holder of each Outstanding Note of such series affected.
Upon any such waiver, such default shall cease to exist, and any Event
of Default arising therefrom shall be deemed to have been cured, for every
purpose of this Indenture; but no such waiver shall extend to any subsequent or
other default or Event of Default or impair any right consequent thereon.
SECTION 514. WAIVER OF USURY, STAY OR EXTENSION LAWS. The Operating
Partnership covenants (to the extent that it may lawfully do so) that it will
not at any time insist upon, or plead, or in any manner whatsoever claim or take
the benefit or advantage of, any usury, stay or extension law wherever enacted,
now or at any time hereafter in force, which may affect the covenants or the
performance of this Indenture; and the Operating Partnership (to the extent that
it may lawfully do so) hereby expressly waives all benefit or advantage of any
such law, and covenants that it will not hinder, delay or impede the execution
of any power herein granted to the Trustee, but will suffer and permit the
execution of every such power as though no such law had been enacted.
SECTION 515. UNDERTAKING FOR COSTS. All parties to this Indenture
agree, and each Holder of any Note by his acceptance thereof shall be deemed to
have agreed, that any court may in its discretion require in any suit for the
enforcement of any right or remedy under this Indenture, or in any suit against
the Trustee for any action taken or omitted by it as Trustee, the filing by any
party litigant in such suit of any undertaking to pay the costs of such suit,
and that such court may in its discretion assess reasonable costs, including
reasonable attorneys' fees, against any party litigant in such suit having due
regard to the merits and good faith of the claims or defenses made by such party
litigant; but the provisions of this Section shall not apply to any suit
instituted by the Trustee, to any suit instituted by any Holder, or group of
Holders, holding in the aggregate more than 10% in principal amount of the
Outstanding Notes of any series, or to any suit instituted by any Holder for the
enforcement of the payment of the principal of (or premium, if any) or interest
on any Note on or after the respective Stated Maturities expressed in such Note
(or, in the case of redemption, on or after the Redemption Date).
ARTICLE SIX
THE TRUSTEE
SECTION 601. NOTICE OF DEFAULTS. Within 90 days after the occurrence of
any default hereunder with respect to the Notes of any series, the Trustee shall
transmit, in the manner and to the extent provided in TIA Section 313(c), notice
to Holders of such default hereunder actually known to the Trustee, unless such
default shall have been cured or waived;
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provided, however, that, except in the case of a default in the payment of the
principal of (or premium, if any) or interest on any Note of such series, the
Trustee shall be protected in withholding such notice if and so long as a
Responsible Officer of the Trustee in good faith determines, that the
withholding of such notice is in the interests of the Holders of the Notes; and
provided further that in the case of any default or breach of the character
specified in Section 501(4) with respect to the Notes, no such notice to Holders
shall be given until at least 60 days after the occurrence thereof. For the
purpose of this Section, the term "default" means any event which is, or after
notice or lapse of time or both would become, an Event of Default with respect
to the Notes of such series.
SECTION 602. CERTAIN RIGHTS OF TRUSTEE. Subject to the provisions of
TIA Section 315(a) through 315(d):
(1) the Trustee may rely and shall be protected in acting or
refraining from acting upon any resolution, certificate, statement,
instrument, opinion, report, notice, request, direction, consent, order,
bond, debenture, note, coupon or other paper or document believed by it
to be genuine and to have been signed or presented by the proper party
or parties;
(2) any request or direction of the Operating Partnership
mentioned herein shall be sufficiently evidenced by an Operating
Partnership Request or an Operating Partnership Order (other than
delivery of any Note to the Trustee for authentication and delivery
pursuant to Section 303 which shall be sufficiently evidenced as
provided therein) and any resolution of the Board of Directors shall be
sufficiently evidenced by a Board Resolution;
(3) whenever in the administration of this Indenture the Trustee
shall deem it desirable that a matter be proved or established prior to
taking, suffering or omitting any action hereunder, the Trustee (unless
other evidence be herein specifically prescribed) may, in the absence of
bad faith on its part, rely upon an Officers' Certificate;
(4) the Trustee may consult with counsel and the advice of such
counsel or any Opinion of Counsel shall be full and complete
authorization and protection in respect of any action taken, suffered or
omitted by it hereunder in good faith and in reliance thereon;
(5) the Trustee shall be under no obligation to exercise any of
the rights or powers vested in it by this Indenture at the request or
direction of any of the Holders of any series or any related Guarantees
pursuant to this Indenture, unless such Holders shall have offered to
the Trustee security or indemnity reasonably satisfactory to the Trustee
against the costs, expenses and liabilities which might be incurred by
it in compliance with such request or direction;
(6) the Trustee shall not be bound to make any investigation into
the facts or matters stated in any resolution, certificate, statement,
instrument, opinion, report, notice, request, direction, consent, order,
bond, debenture, note, coupon or other paper or document, but the
Trustee, in its discretion, may make such reasonable further inquiry or
investigation into such facts or matters as it may see fit, and, if the
Trustee shall
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determine to make such further inquiry or investigation, it shall be
entitled to examine the books, records and premises of the Operating
Partnership, personally or by agent or attorney reasonably related to
such inquiry;
(7) the Trustee may execute any of the trusts or powers hereunder
or perform any duties hereunder either directly or by or through agents
or attorneys and the Trustee shall not be responsible for any misconduct
or negligence on the part of any agent or attorney appointed with due
care by it hereunder; and
(8) the Trustee shall not be liable for any action taken,
suffered or omitted by it in good faith and reasonably believed by it to
be authorized or within the discretion or rights or powers conferred
upon it by this Indenture.
The Trustee shall not be required to expend or risk its own funds or
otherwise incur any financial liability in the performance of any of its duties
hereunder, or in the exercise of any of its rights or powers, if it shall have
reasonable grounds for believing that repayment of such funds or adequate
indemnity against such risk or liability is not reasonably assured to it.
In no event shall the Trustee be liable for any indirect, special or
consequential damages in connection with the performance of its obligations
hereunder.
Except during the continuance of an Event of Default, the Trustee
undertakes to perform only such duties as are specifically set forth in this
Indenture, and no implied covenants or obligations shall be read into this
Indenture against the Trustee.
SECTION 603. NOT RESPONSIBLE FOR RECITALS OR ISSUANCE OF NOTES. The
recitals contained herein and in the Notes and Guarantees, except the Trustee's
certificate of authentication, shall be taken as the statements of the Operating
Partnership or any Guarantor, and neither the Trustee nor any Authenticating
Agent assumes any responsibility for their correctness. The Trustee makes no
representations as to the validity or sufficiency of this Indenture or of the
Notes or the Guarantees, except that the Trustee represents that it is duly
authorized to execute and deliver this Indenture, authenticate the Notes and
perform its obligations hereunder. Neither the Trustee nor any Authenticating
Agent shall be accountable for the use or application by the Operating
Partnership of Notes or the proceeds thereof.
SECTION 604. MAY HOLD NOTES AND GUARANTEES. The Trustee, any Paying
Agent, Note Registrar, Authenticating Agent or any other agent of the Operating
Partnership, in its individual or any other capacity, may become the owner or
pledgee of Notes and Guarantees and, subject to TIA Sections 310(b) and 311, may
otherwise deal with the Operating Partnership or any Guarantor with the same
rights it would have if it were not Trustee, Paying Agent, Note Registrar,
Authenticating Agent or such other agent.
SECTION 605. MONEY HELD IN TRUST. Money held by the Trustee in trust
hereunder need not be segregated from other funds except to the extent required
by law. The Trustee shall be under no liability for interest on any money
received by it hereunder except as otherwise agreed in writing with the
Operating Partnership.
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SECTION 606. COMPENSATION AND REIMBURSEMENT. The Operating Partnership
agrees:
(1) to pay to the Trustee from time to time reasonable
compensation for all services rendered by it hereunder (which
compensation shall not be limited by any provision of law in regard to
the compensation of a trustee of an express trust);
(2) except as otherwise expressly provided herein, to reimburse
each of the Trustee and any predecessor Trustee upon its request for all
reasonable expenses, disbursements and advances incurred or made by the
Trustee in accordance with any provision of this Indenture (including
the reasonable compensation and the expenses and disbursements of its
agents and counsel), except any such expense, disbursement or advance as
may be attributable to its negligence or willful misconduct; and
(3) to indemnify each of the Trustee and any predecessor Trustee
for, and to hold it harmless against, any loss, liability or expense
incurred without negligence or bad faith on its own part, arising out of
or in connection with the acceptance or administration of the trust or
trusts hereunder, including the costs and expenses of defending itself
against any claim or liability in connection with the exercise or
performance of any of its powers or duties hereunder.
When the Trustee incurs expenses or renders services in connection with
an Event of Default specified in Section 501(6) or Section 501(7), the expenses
(including the reasonable charges and expenses of its counsel) and the
compensation for the services are intended to constitute expenses of
administration under any applicable Federal or state bankruptcy, insolvency or
other similar law.
As security for the performance of the obligations of the Operating
Partnership under this Section, the Trustee shall have a lien for payment of the
Trustee's fees and expenses prior to the Notes upon all property and funds held
or collected by the Trustee as such, except funds held in trust for the payment
of principal of (or premium, if any) with respect to particular Notes.
The provisions of this Section shall survive the termination of this
Indenture.
SECTION 607. CORPORATE TRUSTEE REQUIRED; ELIGIBILITY; CONFLICTING
INTERESTS. There shall at all times be a Trustee hereunder which shall be
eligible to act as Trustee under TIA Section 310(a) (1) and shall have a
combined capital and surplus of at least $100,000,000 (or which trust company
shall have an ultimate parent holding company with a combined capital and
surplus of at least $100,000,000). If such corporation (or ultimate parent
holding company, as the case may be) publishes reports of condition at least
annually, pursuant to law or the requirements of federal, state, territorial or
District of Columbia supervising or examining authority, then for the purposes
of this Section, the combined capital and surplus of such corporation (or
ultimate parent holding company, as the case may be) shall be deemed to be its
combined capital and surplus as set forth in its most recent report of condition
so published. If at any time the Trustee shall cease to be eligible in
accordance with the provisions of this Section, it shall resign immediately in
the manner and with the effect hereinafter specified in this Article.
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SECTION 608. RESIGNATION AND REMOVAL; APPOINTMENT OF SUCCESSOR.
(a) No resignation or removal of the Trustee and no appointment
of a successor Trustee pursuant to this Article shall become effective
until the acceptance of appointment by the successor Trustee in
accordance with the applicable requirements of Section 609.
(b) The Trustee may resign at any time with respect to the Notes
of one or more series by giving written notice thereof to the Operating
Partnership. If an instrument of acceptance by a successor Trustee shall
not have been delivered to the Trustee within 30 days after the giving
of such notice of resignation, the resigning Trustee may petition any
court of competent jurisdiction for the appointment of a successor
Trustee.
(c) The Trustee may be removed at any time with respect to the
Notes of any series by Act of the Holders of a majority in principal
amount of the Outstanding Notes of such series delivered to the Trustee
and to the Operating Partnership.
(d) If at any time:
(1) the Trustee shall fail to comply with the provisions
of TIA Section 310(b) after written request therefor by the
Operating Partnership or by any Holder who has been a bona fide
Holder for at least six months, or
(2) the Trustee shall cease to be eligible under Section
607 and shall fail to resign after written request therefor by
the Operating Partnership or by any Holder who has been a bona
fide Holder for at least six months, or
(3) the Trustee shall become incapable of acting or shall
be adjudged a bankrupt or insolvent or a receiver of the Trustee
or of its property shall be appointed or any public officer shall
take charge or control of the Trustee or of its property or
affairs for the purpose of rehabilitation, conservation or
liquidation,
then, in any such case, (i) the Operating Partnership by or pursuant to
a Board Resolution may remove the Trustee and appoint a successor
Trustee with respect to all Notes, or (ii) subject to TIA Section
315(e), any Holder who has been a bona fide Holder for at least six
months may, on behalf of himself and all others similarly situated,
petition any court of competent jurisdiction for the removal of the
Trustee with respect to all Notes and the appointment of a successor
Trustee or Trustees.
(e) If the Trustee shall resign, be removed or become incapable
of acting, or if a vacancy shall occur in the office of Trustee for any
cause with respect to the Notes of one or more series, the Operating
Partnership, by or pursuant to a Board Resolution, shall promptly
appoint a successor Trustee or Trustees with respect to the Notes of
that or those series (it being understood that any such successor
Trustee may be appointed with respect to the Notes of one or more or all
of such series and that at any time there shall be only one Trustee with
respect to the Notes of any particular series). If, within one year
after such resignation, removal or incapability, or the occurrence of
such vacancy, a
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successor Trustee with respect to the Notes of any series shall be
appointed by Act of the Holders of a majority in principal amount of the
Outstanding Notes of such series delivered to the Operating Partnership
and the retiring Trustee, the successor Trustee so appointed shall,
forthwith upon its acceptance of such appointment, become the successor
Trustee with respect to the Notes of such series and to that extent
supersede the successor Trustee appointed by the Operating Partnership.
If no successor Trustee with respect to the Notes of any series shall
have been so appointed by the Operating Partnership or the Holders and
accepted appointment in the manner hereinafter provided, any Holder who
has been a bona fide Holder of such series for at least six months may,
on behalf of himself and all others similarly situated, petition any
court of competent jurisdiction for the appointment of a successor
Trustee with respect to Notes of such series.
(f) The Operating Partnership shall give notice of each
resignation and each removal of the Trustee with respect to the Notes of
any series and each appointment of a successor Trustee with respect to
the Notes of any series in the manner provided for notices to the
Holders in section 106. Each notice shall include the name of the
successor Trustee with respect to the Notes of such series and the
address of its Corporate Trust Office.
SECTION 609. ACCEPTANCE OF APPOINTMENT BY SUCCESSOR.
(a) In case of the appointment hereunder of a successor Trustee
with respect to all Notes, every such successor Trustee shall execute,
acknowledge and deliver to the Operating Partnership and to the retiring
Trustee an instrument accepting such appointment, and thereupon the
resignation or removal of the retiring Trustee shall become effective
and such successor Trustee, without any further act, deed or conveyance,
shall become vested with all the rights, powers, trusts and duties of
the retiring Trustee; but, on request of the Operating Partnership or
the successor Trustee, such retiring Trustee shall, upon payment of its
charges, execute and deliver an instrument transferring to such
successor Trustee all the rights, powers and trusts of the retiring
Trustee, and shall duly assign, transfer and deliver to such successor
Trustee all property and money held by such retiring Trustee hereunder,
subject nevertheless to its lien and claim, if any, provided for in
Section 606.
(b) In case of the appointment hereunder of a successor Trustee
with respect to the Notes of one or more (but not all) series, the
Operating Partnership, the retiring Trustee and each successor Trustee
with respect to the Notes of one or more series shall execute and
deliver an indenture supplemental hereto, pursuant to Article Nine
hereof, wherein each successor Trustee shall accept such appointment and
which (1) shall contain such provisions as shall be necessary or
desirable to transfer and confirm to, and to vest in, each successor
Trustee all the rights, powers, trusts and duties of the retiring
Trustee with respect to the Notes of that or those series to which the
appointment of such successor Trustee relates, (2) if the retiring
Trustee is not retiring with respect to all Notes, shall contain such
provisions as shall be deemed necessary or desirable to confirm that all
the rights, powers, trusts and duties of the retiring Trustee with
respect to the Notes of that or those series as to which the retiring
Trustee is not retiring shall continue to be vested in the retiring
Trustee, and (3) shall add to or change any of the provisions of
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this Indenture as shall be necessary to provide for or facilitate the
administration of the trusts hereunder by more than one Trustee, it
being understood that nothing herein or in such supplemental indenture
shall constitute such Trustees co-trustees of the same trust and that
each such Trustee shall be trustee of a trust or trusts hereunder
separate and apart from any trust or trusts hereunder administered by
any other such Trustee; and upon the execution and delivery of such
supplemental indenture the resignation or removal of the retiring
Trustee shall become effective to the extent provided therein and each
such successor Trustee, without any further act, deed or conveyance,
shall become vested with all the rights, powers, trusts and duties of
the retiring Trustee with respect to the Notes of that or those series
to which the appointment of such successor Trustee relates; but, on
request of the Operating Partnership or any successor Trustee, such
retiring Trustee shall duly assign, transfer and deliver to such
successor Trustee all property and money held by such retiring Trustee
hereunder with respect to the Notes of that or those series to which the
appointment of such successor Trustee relates.
(c) Upon request of any such successor Trustee, the Operating
Partnership shall execute any and all instruments for more fully and
certainly vesting in and confirming to such successor Trustee all such
rights, powers and trusts referred to in paragraph (a) or (b) of this
Section, as the case may be.
(d) No successor Trustee shall accept its appointment unless at
the time of such acceptance such successor Trustee shall be qualified
and eligible under this Article Six.
SECTION 610. MERGER, CONVERSION, CONSOLIDATION OR SUCCESSION TO
BUSINESS. Any corporation into which the Trustee may be merged or converted or
with which it may be consolidated, or any corporation resulting from any merger,
conversion or consolidation to which the Trustee shall be a party, or any
corporation succeeding to all or substantially all of the corporate trust
business of the Trustee, shall be the successor of the Trustee hereunder,
provided such corporation shall be otherwise qualified and eligible under this
Article, without the execution or filing of any paper or any further act on the
part of any of the parties hereto. In case any Notes shall have been
authenticated, but not delivered, by the Trustee then in office, any successor
by merger, conversion or consolidation to such authenticating Trustee may adopt
such authentication and deliver the Notes so authenticated with the same effect
as if such successor Trustee had itself authenticated such Notes. In case any
Notes shall not have been authenticated by such predecessor Trustee, any such
successor Trustee may authenticate and deliver such Notes, in either its own
name or that of its predecessor Trustee, with the full force and effect which
this Indenture provides for the certificate of authentication of the Trustee.
SECTION 611. APPOINTMENT OF AUTHENTICATING AGENT. At any time when any
of the Notes remain Outstanding, the Trustee may appoint an Authenticating Agent
or Agents with respect to one or more series of Notes which shall be authorized
to act on behalf of the Trustee to authenticate Notes of such series issued upon
exchange, registration of transfer or partial redemption or repayment thereof,
and Notes so authenticated shall be entitled to the benefits of this Indenture
and shall be valid and obligatory for all purposes as if authenticated by the
Trustee hereunder. Any such appointment shall be evidenced by an instrument in
writing signed by a Responsible Officer of the Trustee, a copy of which
instrument shall be promptly
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furnished to the Operating Partnership. Wherever reference is made in this
Indenture to the authentication and delivery of Notes by the Trustee or the
Trustee's certificate of authentication, such reference shall be deemed to
include authentication and delivery on behalf of the Trustee by an
Authenticating Agent and a certificate of authentication executed on behalf of
the Trustee by an Authenticating Agent. Each Authenticating Agent shall be
acceptable to the Operating Partnership and shall at all times be a bank or
trust company or corporation organized and doing business and in good standing
under the laws of the United States of America or of any State or the District
of Columbia, authorized under such laws to act as Authenticating Agent, having
(or whose bank holding company has) a combined capital and surplus of not less
than $50,000,000 and subject to supervision or examination by Federal or state
authorities. If such Authenticating Agent publishes reports of condition at
least annually, pursuant to law or the requirements of the aforesaid supervising
or examining authority, then for the purposes of this Section, the combined
capital and surplus of such Authenticating Agent shall be deemed to be its
combined capital and surplus as set forth in its most recent report of condition
so published. In case at any time an Authenticating Agent shall cease to be
eligible in accordance with the provisions of this Section, such Authenticating
Agent shall resign immediately in the manner and with the effect specified in
this section.
Any corporation into which an Authenticating Agent may be merged or
converted or with which it may be consolidated, or any corporation resulting
from any merger, conversion or consolidation to which such Authenticating Agent
shall be a party, or any corporation succeeding to the corporate agency or
corporate trust business of an Authenticating Agent, shall continue to be an
Authenticating Agent, provided such corporation shall be otherwise eligible
under this Section, without the execution or filing of any paper or further act
on the part of the Trustee or the Authenticating Agent.
An Authenticating Agent for any series of Notes may at any time resign
by giving written notice of resignation to the Trustee for such series and to
the Operating Partnership. The Trustee for any series of Notes may at any time
terminate the agency of an Authenticating Agent by giving written notice of
termination to such Authenticating Agent and to the Operating Partnership. Upon
receiving such a notice of resignation or upon such a termination, or in case at
any time such Authenticating Agent shall cease to be eligible in accordance with
the provisions of this Section, the Trustee for such series may appoint a
successor Authenticating Agent which shall be acceptable to the Operating
Partnership and shall give notice of such appointment to all Holders of the
series with respect to which such Authenticating Agent will serve in the manner
set forth in Section 106. Any successor Authenticating Agent upon acceptance of
its appointment hereunder shall become vested with all the rights, powers and
duties of its predecessor hereunder, with like effect as if originally named as
an Authenticating Agent herein. No successor Authenticating Agent shall be
appointed unless eligible under the provisions of this Section.
The Operating Partnership agrees to pay to each Authenticating Agent
from time to time reasonable compensation including reimbursement of its
reasonable expenses for its services under this Section.
If an appointment with respect to one or more series is made pursuant to
this Section, the Notes of such series may have endorsed thereon, in addition to
or in lieu of the Trustee's
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certificate of authentication, an alternate certificate of authentication
substantially in the following form:
This is one of the Notes of the series designated therein referred to in
the within-mentioned Indenture.
State Street Bank and Trust Company of California, N.A.,
as Trustee
By:
----------------------------------
as Authenticating Agent
By:
----------------------------------
Authenticating Officer
ARTICLE SEVEN
HOLDERS' LISTS AND REPORTS BY TRUSTEE AND OPERATING PARTNERSHIP
SECTION 701. DISCLOSURE OF NAMES AND ADDRESSES OF HOLDERS. Every Holder
or Guarantees, by receiving and holding the same, agrees with the Operating
Partnership and the Trustee that neither the Operating Partnership nor the
Trustee nor any Authenticating Agent nor any Paying Agent nor any Note Registrar
shall be held accountable by reason of the disclosure of any information as to
the names and addresses of the Holders in accordance with TIA Section 312,
regardless of the source from which such information was derived, and that the
Trustee shall not be held accountable by reason of mailing any material pursuant
to a request made under TIA Section 312(b).
SECTION 702. REPORTS BY TRUSTEE. Within 60 days after May 15 of each
year commencing with the first May 15 after the first issuance of Notes pursuant
to this Indenture, the Trustee shall transmit by mail to all Holders as provided
in TIA Section 313 (c) a brief report dated as of such May 15 if required by TIA
Section 313(a).
SECTION 703. OPERATING PARTNERSHIP TO FURNISH TRUSTEE NAMES AND
ADDRESSES OF HOLDERS. The Operating Partnership will furnish or cause to be
furnished to the Trustee:
(a) semi-annually, not later than 15 days before the
Regular Record Date for interest for any series of Notes, a list,
in such form as the Trustee may reasonably require, of the names
and addresses of the Holders of such series as of such Regular
Record Date, and
(b) at such other times as the Trustee may request in
writing, within 30 days after the receipt by the Operating
Partnership of any such request, a list of similar form and
content as of a date not more than 15 days prior to the time such
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list is furnished, provided, however, that, so long as the
Trustee is the Note Registrar, no such list shall be required to
be furnished
ARTICLE EIGHT
CONSOLIDATION, MERGER, SALE, LEASE OR CONVEYANCE
SECTION 801. CONSOLIDATIONS AND MERGERS OF OPERATING PARTNERSHIP AND
SALES, LEASES AND CONVEYANCES PERMITTED SUBJECT TO CERTAIN CONDITIONS. The
Operating Partnership will not, in any transaction or series of related
transactions, consolidate with, or sell, lease, assign, transfer or otherwise
convey all or substantially all of its assets to, or merge with or into, any
other Person unless (i) either the Operating Partnership shall be the continuing
Person, or the successor Person (if other than the Operating Partnership) formed
by or resulting from any such consolidation or merger or which shall have
received the transfer of such assets shall be a corporation, partnership,
limited liability company or other entity organized and existing under the laws
of the United States of America or a State thereof or the District of Columbia
and shall expressly assume, by supplemental indenture executed by such successor
entity and delivered by it to the Trustee (which supplemental indenture shall
comply with Article Nine hereof and shall be reasonably satisfactory to the
Trustee), the due and punctual payment of the principal of (and premium, if any)
and interest payable in respect of, all of the Outstanding Notes, according to
their tenor, and the due and punctual performance and observance of all of the
other covenants and conditions contained in this Indenture and the Notes to be
performed or observed by the Operating Partnership; (ii) immediately after
giving effect to such transaction and treating any Debt (including Acquired
Debt) which becomes an obligation of the Operating Partnership or any of its
Affiliates as a result thereof as having been incurred by the Operating
Partnership or such Affiliate at the time of such transaction, no Event of
Default, and no event which, after notice or the lapse of time, or both, would
become an Event of Default, shall have occurred and shall be continuing; and
(iii) the Operating Partnership shall have delivered to the Trustee the
Officers' Certificate and Opinion of Counsel required pursuant to Section 803
below. In the event that the Operating Partnership is not the continuing
corporation, then, for purposes of clause (ii) of the preceding sentence, the
successor corporation shall be deemed to be the "Operating Partnership" referred
to in such clause (ii).
SECTION 802. RIGHTS AND DUTIES OF SUCCESSOR CORPORATION. In case of any
such consolidation, sale, lease, assignment, transfer, conveyance or merger and
upon any such assumption by the successor, such successor shall succeed to and
be substituted for and may exercise every right and power of the Operating
Partnership, with the same effect as if it had been named as the "Operating
Partnership" herein; and the predecessor corporation shall be released, except
in the case of a lease, from any further obligation under this Indenture and the
Notes.
SECTION 803. OFFICERS' CERTIFICATE AND OPINION OF COUNSEL. Any
consolidation, sale, lease, assignment, transfer, conveyance or merger permitted
under Section 801 is also subject to the condition precedent that the Trustee
receive an Officers' Certificate and an Opinion of Counsel to the effect that
any such consolidation, merger, sale, lease, assignment, transfer or conveyance,
and the assumption by any successor corporation,
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complies with the provisions of this Article and that all conditions precedent
herein provided for relating to such transaction have been complied with.
ARTICLE NINE
SUPPLEMENTAL INDENTURES
SECTION 901. SUPPLEMENTAL INDENTURES WITHOUT CONSENT OF HOLDERS.
Without the consent of any Holders, the Operating Partnership, when authorized
by or pursuant to a Board Resolution, the applicable Guarantors and the Trustee,
at any time and from time to time, may enter into one or more indentures
supplemental hereto, in form satisfactory to the Trustee, for any of the
following purposes:
(1) to evidence the succession of another Person to the Operating
Partnership or any Guarantor and the assumption by any such successor of
the covenants of the Operating Partnership herein and in the Notes or
Guarantees; or
(2) to add to the covenants of the Operating Partnership or any
Guarantor for the benefit of the Holders of all or any series of Notes
(and if such covenants are to be for the benefit of less than all series
of Notes, stating that such covenants are expressly being included
solely for the benefit of such series) or to surrender any right or
power herein conferred upon the Operating Partnership or any Guarantor;
or
(3) to add any additional Events of Default for the benefit of
the Holders of all or any series of Notes (and if such Events of Default
are to be for the benefit of less than all series of Notes, stating that
such Events of Default are expressly being included solely for the
benefit of such series); provided, however, that in respect of any such
additional Events of Default such supplemental indenture may provide for
a particular period of grace after default (which period may be shorter
or longer than that allowed in the case of other defaults) or may
provide for an immediate enforcement upon such default or may limit the
remedies available to the Trustee upon such default or may limit the
right of the Holders of a majority in aggregate principal amount of that
or those series of Notes to which such additional Events of Default
apply to waive such default; or
(4) to add or change any provisions of this Indenture to
facilitate the issuance of the Notes in certificate form, provided that
such amendment shall not adversely affect the interest of the Holders of
any Notes in any material respect; or
(5) to secure the Notes or Guarantees; or
(6) to evidence and provide for the acceptance of appointment
hereunder by a successor Trustee with respect to the Notes of one or
more series and to add to or change any of the provisions of this
Indenture as shall be necessary to provide for or facilitate the
administration of the trusts hereunder by more than one Trustee; or
(7) to cure any ambiguity, to correct or supplement any provision
herein which may be defective or inconsistent with any other provision
herein or to make any other provisions with respect to matters or
questions arising under this Indenture which shall not be inconsistent
with the provisions of this Indenture, provided such action shall not
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adversely affect the interests of the Holders of any series or any
related Guarantees in any material respect; or
(8) to supplement any of the provisions of this Indenture to such
extent as shall be necessary to permit or facilitate the discharge,
defeasance or covenant defeasance, as the case may be, of any series of
Notes pursuant to Sections 401, 1202 and 1203; provided that any such
action shall not adversely affect the interests of the Holders of such
series and any related Guarantees or any other series of Notes in any
material respect.
SECTION 902. SUPPLEMENTAL INDENTURES WITH CONSENT OF HOLDERS. With the
consent of the Holders of not less than a majority in principal amount of all
Outstanding Notes of any series affected by such supplemental indenture, by Act
of said Holders delivered to the Operating Partnership, the Guarantors and the
Trustee, the Operating Partnership, when authorized by or pursuant to a Board
Resolution, and the Trustee may enter into an indenture or indentures
supplemental hereto for the purpose of adding any provisions to or changing in
any manner or eliminating any of the provisions of this Indenture or of the
Notes of such series or of modifying in any manner the rights of the Holders of
such series and any related Guarantees under this Indenture; provided, however,
that no such supplemental indenture shall, without the consent of the Holder of
any Outstanding Note affected thereby:
(1) change the Stated Maturity of the principal of (or premium,
if any, on) or any installment of principal of, or premium, if any, or
interest with respect to, any Note; or reduce the principal amount
thereof or the rate or amount of interest thereon, or any premium
payable thereon, or adversely affect any right of the Holder of any Note
to repayment of such Note at such Holder's option, or change any Place
of Payment where, or the coin or currency in which, the principal of any
Note or any premium or interest thereon is payable, or impair the right
to institute suit for the enforcement of any such payment on or after
the Stated Maturity thereof (or, in the case of redemption, on or after
the Redemption Date) or that would be provable in bankruptcy, or
(2) reduce the percentage in principal amount of the Outstanding
Notes of any series, the consent of whose Holders is required for any
such supplemental indenture, or the consent of whose Holders is required
for any waiver with respect to such series (of compliance with certain
provisions of this Indenture or certain defaults hereunder and their
consequences) provided for in this Indenture, or reduce the requirements
of Section 1304 for quorum or voting, or
(3) modify any of the provisions of this Section, Section 513 or
Section 1013, except to increase the percentage required to effect such
action or to provide that certain other provisions of this Indenture
cannot be modified or waived without the consent of the Holder of any
Outstanding Note affected thereby, or
(4) impair the right to institute suit for the enforcement of any
payment on or with respect to any such Note.
It shall not be necessary for any Act of Holders under this Section to
approve the particular form of any proposed supplemental indenture, but it shall
be sufficient if such Act shall
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approve the substance thereof. A supplemental indenture which changes or
eliminates any covenant or other provision of this Indenture which has expressly
been included solely for the benefit of one or more particular series of Notes,
or which modifies the rights of the Holders of such series with respect to such
covenant or other provision, shall be deemed not to affect the rights under this
Indenture of the Holders of any other series.
SECTION 903. EXECUTION OF SUPPLEMENTAL INDENTURES. In executing, or
accepting the additional trusts created by, any supplemental indenture permitted
by this Article or the modification thereby of the trusts created by this
Indenture, the Trustee shall be entitled to receive, and shall be fully
protected in relying upon, an Opinion of Counsel stating that the execution of
such supplemental indenture is authorized or permitted by this Indenture. The
Trustee may, but shall not be obligated to, enter into any such supplemental
indenture which affects the Trustee's own rights, duties or immunities under
this Indenture or otherwise.
SECTION 904. EFFECT OF SUPPLEMENTAL INDENTURES. Upon the execution of
any supplemental indenture under this Article Nine, this Indenture shall be
modified in accordance therewith, and such supplemental indenture shall form a
part of this Indenture for all purposes; and every Holder theretofore
authenticated and delivered hereunder shall be bound thereby.
SECTION 905. CONFORMITY WITH TRUST INDENTURE ACT. Every supplemental
indenture executed pursuant to this Article Nine shall conform to the
requirements of the Trust Indenture Act as then in effect.
SECTION 906. REFERENCE IN NOTES TO SUPPLEMENTAL INDENTURES. Notes
authenticated and delivered after the execution of any supplemental indenture
pursuant to this Article Nine may, and shall, if required by the Trustee, bear a
notation in form approved by the Trustee as to any matter provided for in such
supplemental indenture. If the Operating Partnership shall so determine, new
Notes of any series so modified as to conform, in the opinion of the Trustee and
the Operating Partnership, to any such supplemental indenture may be prepared
and executed by the Operating Partnership and authenticated and delivered by the
Trustee in exchange for Outstanding Notes of such series.
ARTICLE TEN
COVENANTS
SECTION 1001. PAYMENT OF PRINCIPAL, PREMIUM, IF ANY, AND INTEREST. The
Operating Partnership covenants and agrees for the benefit of the Holders of any
series of Notes that it will duly and punctually pay the principal of (and
premium, if any) and interest on the Notes of that series in accordance with the
terms of such series of Notes and this Indenture.
SECTION 1002. MAINTENANCE OF OFFICE OR AGENCY. The Operating
Partnership shall maintain in each Place of Payment for any series of Notes an
office or agency where Notes of that series may be presented or surrendered for
payment or conversion, where Notes of that series may be surrendered for
registration of transfer or exchange and where notices and demands to or upon
the Operating Partnership in respect of the Notes of that series and this
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Indenture may be served. The Operating Partnership will give prompt written
notice to the Trustee of the location, and any change in the location, of each
such office or agency. If at any time the Operating Partnership shall fail to
maintain any such required office or agency or shall fail to furnish the Trustee
with the address thereof, such presentations, surrenders, notices and demands
shall be made or served at the Corporate Trust Office of the Trustee (and the
Operating Partnership hereby appoints the Trustee its agent to receive all such
presentations, surrenders, notices and demands), and the Operating Partnership
hereby appoints the same as its agent to receive such presentations, surrenders,
notices and demands.
The Operating Partnership may from time to time designate one or more
other offices or agencies where the Notes of one or more series may be presented
or surrendered for any or all of such purposes, and may from time to time
rescind such designations; provided, however, that no such designation or
rescission shall in any manner relieve the Operating Partnership of its
obligation to maintain an office or agency in accordance with the requirements
set forth above for Notes of any series for such purposes. The Operating
Partnership will give prompt written notice to the Trustee of any such
designation or rescission and of any change in the location of any such other
office or agency. Unless otherwise specified pursuant to Section 301 with
respect to a series of Notes, the Operating Partnership hereby designates as the
Place of Payment for any series of Notes the office or agency of the Operating
Partnership in the Borough of Manhattan, The City of New York, and initially
appoints the Trustee, at the office of its affiliate, State Street Bank and
Trust Company, which on the date of this Indenture are located at 61 Broadway,
15th Floor, New York, New York 10006 in such city and as its agent to receive
all such presentations, surrenders, notices and demands and appoints the
Trustee, at its Corporate Trust Office and at the office of its affiliate, State
Street Bank and Trust Company, in the Borough of Manhattan, The City of New
York, as Paying Agent and Note Registrar. The Operating Partnership may
subsequently appoint a different office or agency in the Borough of Manhattan,
The City of New York and a different Paying Agent and Note Registrar for the
Notes of any Series.
SECTION 1003. MONEY FOR NOTES PAYMENTS TO BE HELD IN TRUST. If the
Operating Partnership shall at any time act as its own Paying Agent with respect
to any series of any Notes, it will, on or before each due date of the principal
of (or premium, if any) or interest on the Notes of that series, segregate and
hold in trust for the benefit of the Persons entitled thereto the sum in which
the Notes of such series are payable (except as otherwise specified pursuant to
Section 301 for the Notes of such series) sufficient to pay the principal (and
premium, if any) and interest so becoming due until such sums shall be paid to
such Persons or otherwise disposed of as herein provided, and will promptly
notify the Trustee of its action or failure so to act.
Whenever the Operating Partnership shall have one or more Paying Agents
for any series of Notes, it will, on or before each due date of the principal of
(or premium, if any) or interest on any Notes of that series, deposit with a
Paying Agent a sum sufficient to pay the principal (and premium, if any) and
interest so becoming due, such sum to be held in trust for the benefit of the
Persons entitled to such principal, premium and interest and (unless such Paying
Agent is the Trustee) the Operating Partnership will promptly notify the Trustee
of its action or failure so to act.
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The Operating Partnership will cause each Paying Agent other than the
Trustee to execute and deliver to the Trustee an instrument in which such Paying
Agent shall agree with the Trustee, subject to the provisions of this Section,
that such Paying Agent will:
(1) hold all sums held by it for the payment of principal of (and
premium, if any) and interest on the Notes in trust for the benefit of
the Persons entitled thereto until such sums shall be paid to such
Persons or otherwise disposed of as herein provided;
(2) give the Trustee notice of any default by the Operating
Partnership (or any other obligor upon the Notes) in the making of any
such payment of principal (or premium, if any) or interest; and
(3) at any time during the continuance of any such default upon
the written request of the Trustee, forthwith pay to the Trustee all
sums so held in trust by such Paying Agent.
The Operating Partnership may at any time, for the purpose of obtaining
the satisfaction and discharge of this Indenture or for any other purpose, pay,
or by Operating Partnership Order direct any Paying Agent to pay, to the Trustee
all sums held in trust by the Operating Partnership or such Paying Agent, such
sums to be held by the Trustee upon the same trusts as those upon which such
sums were held by the Operating Partnership or such Paying Agent; and, upon such
payment by any Paying Agent to the Trustee, such Paying Agent shall be released
from all further liability with respect to such sums.
Any money deposited with the Trustee or any Paying Agent, or held by the
Operating Partnership, in trust for the payment of the principal of (or premium,
if any) or interest on any Note of any series and remaining unclaimed for two
years after such principal (or premium, if any), or interest has become due and
payable shall, if such money was then on deposit with the Trustee or any Paying
Agent, be paid to the Operating Partnership upon Operating Partnership Request
or (if then held by the Operating Partnership) shall be discharged from such
trust; and the Holder of such Note shall thereafter, as an unsecured general
creditor, look only to the Operating Partnership and the Guarantors for payment
of such principal of (or premium, if any) or interest on, such Note, and all
liability of the Trustee or such Paying Agent with respect to such trust money,
and all liability of the Operating Partnership as trustee thereof, shall
thereupon cease; provided, however, that the Trustee or such Paying Agent,
before being required to make any such repayment, may at the expense of the
Operating Partnership cause to be published once, in an Authorized Newspaper,
notice that such money remains unclaimed and that, after a date specified
therein, which shall not be less than 30 days from the date of such publication,
any unclaimed balance of such money then remaining will be repaid to the
Operating Partnership.
SECTION 1004. AGGREGATE DEBT TEST. The Operating Partnership will not,
and will not permit any of its Subsidiaries to, incur any Debt (including,
without limitation, Acquired Debt) if, immediately after giving effect to the
incurrence of such Debt and the application of the proceeds therefrom on a pro
forma basis, the aggregate principal amount of all outstanding Debt of the
Operating Partnership and its Subsidiaries (determined on a consolidated basis
in accordance with generally accepted accounting principles) is greater than 60%
of the sum of (without duplication) (i) the Total Assets of the Operating
Partnership and its Subsidiaries
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as of the last day of the then most recently ended fiscal quarter and (ii) the
aggregate purchase price of any real estate assets or mortgages receivable
acquired, and the aggregate amount of any securities offering proceeds received
(to the extent such proceeds were not used to acquire real estate assets or
mortgages receivable or used to reduce Debt), by the Operating Partnership or
any of its Subsidiaries since the end of such fiscal quarter, including the
proceeds obtained from the incurrence of such additional Debt, determined on a
consolidated basis in accordance with generally accepted accounting principles.
For purposes of the foregoing Debt shall be deemed to be "incurred" by the
Operating Partnership or a Subsidiary whenever the Operating Partnership and its
Subsidiary shall create, assume, guarantee or otherwise become liable in respect
thereof.
SECTION 1005. DEBT SERVICE TEST. The Operating Partnership will not,
and will not permit any of its Subsidiaries to, incur any Debt (including,
without limitation, Acquired Debt) if the ratio of Consolidated Income Available
for Debt Service to the Annual Debt Service Charge for the period consisting of
the four consecutive fiscal quarters most recently ended prior to the date on
which such additional Debt is to be incurred shall have been less than 1.5:1 on
a pro forma basis after giving effect to the incurrence of such Debt and the
application of the proceeds therefrom, and calculated on the assumption that (i)
such Debt and any other Debt (including, without limitation, Acquired Debt)
incurred by the Operating Partnership or any of its Subsidiaries since the first
day of such four-quarter period had been incurred, and the application of the
proceeds therefrom (including to repay or retire other Debt) had occurred, on
the first day of such period, (ii) the repayment or retirement of any other Debt
of the Operating Partnership or any of its Subsidiaries since the first day of
such four-quarter period had occurred on the first day of such period (except
that, in making such computation, the amount of Debt under any revolving credit
facility, line of credit or similar facility shall be computed based upon the
average daily balance of such Debt during such period), and (iii) in the case of
any acquisition or disposition by the Operating Partnership or any of its
Subsidiaries of any asset or group of assets, in any such case with a fair
market value (determined in good faith by the Board of Directors) in excess of
$1 million, since the first day of such four-quarter period, whether by merger,
stock purchase or sale or asset purchase or sale or otherwise, such acquisition
or disposition had occurred as of the first day of such period with the
appropriate adjustments with respect to such acquisition or disposition being
included in such pro forma calculation. If the Debt giving rise to the need to
make the foregoing calculation or any other Debt incurred after the first day of
the relevant four-quarter period bears interest at a floating rate then, for
purposes of calculating the Annual Debt Service Charge, the interest rate on
such Debt shall be computed on a pro forma basis by applying the average daily
rate which would have been in effect during the entire such four-quarter period
to the greater of the amount of such Debt outstanding at the end of such period
or the average amount of Debt outstanding during such period. For purposes of
the foregoing Debt shall be deemed to be "incurred" by the Operating Partnership
or a Subsidiary whenever the Operating Partnership and its Subsidiary shall
create, assume, guarantee or otherwise become liable in respect thereof.
SECTION 1006. SECURED DEBT TEST. The Operating Partnership will not,
and will not permit any of its Subsidiaries to, incur any Debt (including,
without limitation, Acquired Debt) secured by any Lien on any property or assets
of the Operating Partnership or any of its Subsidiaries, whether owned on the
date of this Indenture or thereafter acquired, if, immediately after giving
effect to the incurrence of such Debt and the application of the proceeds
therefrom on a pro forma basis, the aggregate principal amount (determined on a
consolidated basis in
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accordance with generally accepted accounting principles) of all outstanding
Debt of the Operating Partnership and its Subsidiaries which is secured by any
Lien on any property or assets of the Operating Partnership or any of its
Subsidiaries is greater than 40% of the sum of (without duplication) (i) the
Total Assets of the Operating Partnership and its Subsidiaries as of the last
day of the then most recently ended fiscal quarter and (ii) the aggregate
purchase price of any real estate assets or mortgages receivable acquired, and
the aggregate amount of any securities offering proceeds received (to the extent
such proceeds were not used to acquire real estate assets or mortgages
receivable or used to reduce Debt), by the Operating Partnership or any of its
Subsidiaries since the end of such fiscal quarter, including the proceeds
obtained from the incurrence of such additional Debt, determined on a
consolidated basis in accordance with generally accepted accounting principles.
For purposes of the foregoing Debt shall be deemed to be "incurred" by the
Operating Partnership or a Subsidiary whenever the Operating Partnership and its
Subsidiary shall create, assume, guarantee or otherwise become liable in respect
thereof.
SECTION 1007. MAINTENANCE OF TOTAL UNENCUMBERED ASSETS. The Operating
Partnership will not have at any time Total Unencumbered Assets of less than
150% of the aggregate principal amount of all outstanding Unsecured Debt of the
Operating Partnership and its Subsidiaries, determined on a consolidated basis
in accordance with generally accepted accounting principles.
SECTION 1008. EXISTENCE. Subject to Article Eight, the Operating
Partnership will do or cause to be done all things necessary to preserve and
keep in full force and effect its existence, rights (charter and statutory) and
franchises; provided, however, that the Operating Partnership will not be
required to preserve any right or franchise if the applicable Board of Directors
determines that the preservation thereof is no longer desirable in the conduct
of its business and that the loss thereof is not disadvantageous in any material
respect to the Holders of the Notes Outstanding under this Indenture.
SECTION 1009. MAINTENANCE OF PROPERTIES. The Operating Partnership will
cause all of its properties used or useful in the conduct of its business or the
business of any Subsidiary to be maintained and kept in good condition, repair
and working order and supplied with all necessary equipment and will cause to be
made all necessary repairs, renewals, replacements, betterments and improvements
thereof, all as in the judgment of the Operating Partnership may be necessary so
that the business carried on in connection therewith may be properly and
advantageously conducted at all times.
SECTION 1010. INSURANCE. The Operating Partnership will, and will cause
each of its Subsidiaries to, keep in force upon all of its properties and
operations policies of insurance carried with responsible companies in such
amounts and covering all such risks as shall be customary in the industry in
accordance with prevailing market conditions and availability.
SECTION 1011. PAYMENT OF TAXES AND OTHER CLAIMS. The Operating
Partnership will pay or discharge or cause to be paid or discharged, before the
same shall become delinquent, (1) all taxes, assessments and governmental
charges levied or imposed upon it or any Subsidiary or upon the income, profits
or property of the Operating Partnership or any Subsidiary, and (2) all lawful
claims for labor, materials and supplies which, if unpaid, might by
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law become a lien upon the property of the Operating Partnership or any
Subsidiary; provided, however, that the Operating Partnership will not be
required to pay or discharge or cause to be paid or discharged any such tax,
assessment, charge or claim whose amount, applicability or validity is being
contested in good faith by appropriate proceedings.
SECTION 1012. PROVISION OF FINANCIAL INFORMATION. The Operating
Partnership will:
(1) file with the Trustee, within 15 days after the Operating
Partnership or the General Partner is required to file the same with the
Commission, copies of the annual reports and of the information,
documents and other reports (or copies of such portions of any of the
foregoing as the Commission may from time to time by rules and
regulations prescribe) which the Operating Partnership or the General
Partner may be required to file with the Commission pursuant to Section
13 or Section 15(d) of the Securities Exchange Act of 1934; or, if the
Operating Partnership or the General Partner is not required to file
information, documents or reports pursuant to any of such Sections, then
it will file with the Trustee and the commission, in accordance with
rules and regulations prescribed from time to time by the Commission,
such of the supplementary and periodic information, documents and
reports which may be required pursuant to Section 13 of the Securities
Exchange Act of 1934 in respect of a security listed and registered on a
national securities exchange as may be prescribed from time to time in
such rules and regulations;
(2) file with the Trustee and the Commission, in accordance with
rules and regulations prescribed from time to time by the Commission,
such additional information, documents and reports with respect to
compliance by the Operating Partnership and the General Partner with the
conditions and covenants of this Indenture as may be required from time
to time by such rules and regulations; and
(3) transmit by mail to the Holders, within 30 days after the
filing thereof with the Trustee, in the manner and to the extent
provided in TIA Section 313(c), such summaries of any information,
documents and reports required to be filed by the Operating Partnership
and the Guarantor pursuant to paragraphs (1) and (2) of this Section as
may be required by rules and regulations prescribed from time to time by
the Commission.
SECTION 1013. ADDITIONAL SUBSIDIARY GUARANTEES. (a) The Operating
Partnership will not permit any of its Subsidiaries that is not a Subsidiary
Guarantor to guarantee or secure through the granting of Liens, the payment of
any Debt of the Company or any Guarantor and (b) the Operating Partnership will
not and will not permit any of its Subsidiaries to pledge any intercompany notes
representing obligations of any of its Subsidiaries, to secure the payment of
any debt of the Operating Partnership or any Guarantor, in each case unless such
Subsidiary, the Operating Partnership and the Trustee execute and deliver a
supplemental indenture evidencing such Subsidiary's Guarantee (providing for the
unconditional Guarantee by such Subsidiary, on a senior basis, of the Notes).
SECTION 1014. WAIVER OF CERTAIN COVENANTS. The Operating Partnership
may omit in any particular instance to comply with any term, provision or
condition
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set forth in Sections 1004 to 1012, inclusive, if before or after the time for
such compliance the Holders of at least a majority in principal amount of all
Outstanding Notes of such series, by Act of such Holders, either waive such
compliance in such instance or generally waive compliance with such covenant or
condition, but no such waiver shall extend to or affect such covenant or
condition except to the extent so expressly waived, and, until such waiver shall
become effective, the obligations of the Operating Partnership and the duties of
the Trustee in respect of any such term, provision or condition shall remain in
full force and effect.
SECTION 1015. STATEMENT AS TO COMPLIANCE. The Operating Partnership
will deliver to the Trustee, within 120 days after the end of each fiscal year,
a brief certificate from its General Partner's principal executive officer,
principal financial officer or principal accounting officer as to his or her
knowledge of the Operating Partnership's compliance with all conditions and
covenants under this Indenture and, in the event of any noncompliance,
specifying such noncompliance and the nature and status thereof., provided that
if the Operating Partnership has been succeeded to by a corporate successor
pursuant to the provisions hereof such certificate will be from such successor's
principal executive officer, principal financial officer or principal accounting
officer. For purposes of this Section 1015, such compliance shall be determined
without regard to any period of grace or requirement of notice under this
Indenture.
ARTICLE ELEVEN
REDEMPTION OF NOTES
SECTION 1101. APPLICABILITY OF ARTICLE. Notes of any series shall be
redeemable, in whole or in part, before their Stated Maturity at the option of
the Operating Partnership on any date (a "Redemption Date"), at the Redemption
Price provided that installments of interest on Notes which are due and payable
on an Interest Payment Date falling on or prior to the relevant Redemption Date
shall be payable to the holders of such Notes registered as such at the close of
business on the relevant record date according to their terms and the provisions
of this Indenture in accordance with this Article.
SECTION 1102. ELECTION TO REDEEM; NOTICE TO TRUSTEE. The election of
the Operating Partnership to redeem any Notes shall be evidenced by or pursuant
to a Board Resolution. In case of any redemption at the election of the
Operating Partnership of less than all of the Notes of any series, the Operating
Partnership shall, at least 45 days prior to the giving of the notice of
redemption referred to in Section 1104 (unless a shorter notice shall be
satisfactory to the Trustee), notify the Trustee of such Redemption Date and of
the principal amount of Notes of such series to be redeemed.
SECTION 1103. SELECTION BY TRUSTEE OF NOTES TO BE REDEEMED. If less
than all the Notes of any series are to be redeemed, the particular Notes to be
redeemed shall be selected not more than 60 days prior to the Redemption Date by
the Trustee, from the Outstanding Notes of such series not previously called for
redemption (excluding any such Outstanding Notes held by the Operating
Partnership or any of its Subsidiaries), by such method as the Trustee shall
deem fair and appropriate and which may provide for the selection for redemption
of portions (equal to the minimum authorized denomination for Notes of that
series
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or any integral multiple thereof) of the principal amount of Notes of such
series of a denomination larger than the minimum authorized denomination for
Notes of that series.
The Trustee shall promptly notify the Operating Partnership and the Note
Registrar (if other than itself) in writing of the Notes selected for redemption
and, in the case of any Notes selected for partial redemption, the principal
amount thereof to be redeemed.
For all purposes of this Indenture, unless the context otherwise
requires, all provisions relating to the redemption of Notes shall relate, in
the case of any Note redeemed or to be redeemed only in part, to the portion of
the principal amount of such Note which has been or is to be redeemed.
SECTION 1104. NOTICE OF REDEMPTION. Notice of redemption shall be given
in the manner provided in Section 106, not less than 30 days nor more than 60
days prior to the Redemption Date to each Holder to be redeemed, but failure to
give such notice in the manner herein provided to the Holder of any Note
designated for redemption as a whole or in part, or any defect in the notice to
any such Holder, shall not affect the validity of the proceedings for the
redemption of any other such Note or portion thereof.
Any notice that is mailed to the Holders in the manner herein provided
shall be conclusively presumed to have been duly given, whether or not the
Holder receives the notice.
All notices of redemption shall state:
(1) the Redemption Date,
(2) the Redemption Price and the amount of accrued interest to
the Redemption Date payable as provided in Section 1106, if any,
(3) if less than all Outstanding Notes of any series are to be
redeemed, the identification (and, in the case of partial redemption,
the principal amount) of the particular Note or Notes to be redeemed,
(4) in case any Note is to be redeemed in part only, the notice
shall state that on and after the Redemption Date, upon surrender of
such Note, the Holder will receive, without a charge, a new Note or
Notes of such series of authorized denominations for the principal
amount thereof remaining unredeemed,
(5) that on the Redemption Date the Redemption Price and accrued
interest to the Redemption Date payable as provided in Section 1106,
will become due and payable upon each such Note, or the portion thereof,
to be redeemed and, if applicable, that interest thereon shall cease to
accrue on and after said date,
(6) the Place or Places of Payment where such Notes, maturing
after the Redemption Date, are to be surrendered for payment of the
Redemption Price and accrued interest, and
(7) the CUSIP number and series of such Note.
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SECTION 1105. DEPOSIT OF REDEMPTION PRICE. At or prior to 12:00 noon
(New York Time) on any Redemption Date, the Operating Partnership shall deposit
with the Trustee or with a Paying Agent (or, if the Operating Partnership is
acting as its own Paying Agent, segregate and hold in trust as provided in
Section 1003) an amount of money sufficient to pay on the Redemption Date the
Redemption Price of, and (except if the Redemption Date shall be an Interest
Payment Date) accrued interest on all the Notes or portions thereof which are to
be redeemed on that date.
SECTION 1106. NOTES PAYABLE ON REDEMPTION DATE. Notice of redemption
having been given as aforesaid, the Notes so to be redeemed shall, on the
Redemption Date, become due and payable at the Redemption Price therein
specified (together with accrued interest to the Redemption Date), and from and
after such date (unless the Operating Partnership shall default in the payment
of the Redemption Price or accrued interest) such Notes shall cease to bear
interest. Upon surrender of any such Note for redemption in accordance with said
notice such Note shall be paid by the Operating Partnership at the Redemption
Price, together with accrued interest to the Redemption Date.
Installments of interest on Notes which are due and payable on an
Interest Payment Date falling on or prior to the relevant Redemption Date shall
be payable to the Holders of such Notes registered as such at the close of
business on the relevant record date according to their terms and the provisions
of the Indenture.
If any Note called for redemption shall not be so paid upon surrender
thereof for redemption, the principal (and premium, if any) shall, until paid,
bear interest from the Redemption Date at the rate borne by or provided in the
Note.
SECTION 1107. NOTES REDEEMED IN PART. Any Note which is to be redeemed
only in part (pursuant to the provisions of this Article) shall be surrendered
at a Place of Payment therefor (with, if the Operating Partnership or the
Trustee so requires, due endorsement by, or a written instrument of transfer in
form satisfactory to the Operating Partnership and the Trustee duly executed by,
the Holder thereof or his attorney duly authorized in writing) and the Operating
Partnership shall execute and the Trustee shall authenticate and deliver to the
Holder of such Note without service charge a new Note or Notes of the same
series, of any authorized denomination as requested by such Holder in aggregate
principal amount equal to and in exchange for the unredeemed portion of the
principal of the Note so surrendered.
ARTICLE TWELVE
DEFEASANCE AND COVENANT DEFEASANCE
SECTION 1201. OPERATING PARTNERSHIP'S OPTION TO EFFECT DEFEASANCE OR
COVENANT DEFEASANCE. The Operating Partnership may at its option by Board
Resolution, at any time, with respect to any series of Notes elect to have
Section 1202 or Section 1203 be applied to such Outstanding Notes upon
compliance with the conditions set forth below in this Article. The Operating
Partnership's right, if any, to elect defeasance pursuant to Section 1202 or
covenant defeasance pursuant to Section 1203 may only be exercised with respect
to all of the Outstanding Notes of any series.
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SECTION 1202. DEFEASANCE AND DISCHARGE. Upon the Operating
Partnership's exercise of the above option applicable to this Section with
respect to any Notes of or within a series, the Operating Partnership shall be
deemed to have been discharged from its obligations with respect to such
Outstanding Notes on the date the conditions set forth in Section 1204 are
satisfied (hereinafter "defeasance"). For this purpose, such defeasance means
that the Operating Partnership shall be deemed to have paid and discharged the
entire indebtedness represented by such Outstanding Notes, which shall
thereafter be deemed to be "Outstanding" only for the purposes of Section 1205
and the other Sections of this Indenture referred to in clauses (A) through (D)
below, and to have satisfied all of its other obligations under such Notes and
this Indenture insofar as such Notes are concerned (and the Trustee, at the
expense of the Operating Partnership, shall execute proper instruments
acknowledging the same), except for the following which shall survive until
otherwise terminated or discharged hereunder: (A) the rights of Holders of such
outstanding Notes to receive, solely from the trust fund described in Section
1204 and as more fully set forth in such Section, payments in respect of the
principal of (and premium, if any) and interest, on such Notes when such
payments are due, (B) the Operating Partnership's obligations with respect to
such Notes under Sections 304, 305, 306, 1002 and 1003, (C) the rights, powers,
trusts, duties and immunities of the Trustee hereunder (including, without
limitation, those in Section 606 hereof) and (D) this Article Twelve. Subject to
compliance with this Article Twelve, the Operating Partnership may exercise its
option under this Section notwithstanding the prior exercise of its option under
Section 1203 with respect to such Notes.
SECTION 1203. COVENANT DEFEASANCE. Upon the Operating Partnership's
exercise of the above option applicable to this Section with respect to any
Notes of or within a series, the Operating Partnership shall be released from
its obligations under Sections 1004 to 1012, inclusive, (except that the
Operating Partnership shall remain subject to the covenant set forth in Section
1008 to preserve and keep in full force and effect its corporate existence,
except as permitted under Article Eight) and its obligations under any other
covenant, with respect to such Outstanding Notes appertaining thereto on and
after the date the conditions set forth in Section 1204 are satisfied
(hereinafter, "covenant defeasance"), and such Notes shall thereafter be deemed
to be not "Outstanding" for the purposes of any direction, waiver, consent or
declaration or Act of Holders (and the consequences of any thereof) in
connection with Sections 1004 to 1012, inclusive, or such other covenant, but
shall continue to be deemed "Outstanding" for all other purposes hereunder. For
this purpose, such covenant defeasance means that, with respect to such
Outstanding Notes the Operating Partnership may omit to comply with and shall
have no liability in respect of any term, condition or limitation set forth in
any such Section or such other covenant, whether directly or indirectly, by
reason of any reference elsewhere herein to any such Section or such other
covenant or by reason of reference in any such Section or such other covenant to
any other provision herein or in any other document and such omission to comply
shall not constitute a default or an Event of Default under Section 501(3) or
otherwise, as the case may be, but, except as specified above, the remainder of
this Indenture and such Notes shall be unaffected thereby.
SECTION 1204. CONDITIONS TO DEFEASANCE OR COVENANT DEFEASANCE. The
following shall be the conditions to application of Section 1202 or Section 1203
to any Outstanding Notes of or within a series:
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(a) The Operating Partnership shall irrevocably have
deposited or caused to be deposited with the Trustee (or another
trustee satisfying the requirements of Section 607 who shall
agree to comply with the provisions of this Article Twelve
applicable to it) funds in trust for the purpose of making the
following payments, specifically pledged as security for, and
dedicated solely to, the benefit of the Holders of such Notes,
(1) an amount as is then specified as payable at Stated Maturity
or, if such defeasance or covenant defeasance is to be effected
in compliance with subsection (f) below, on the relevant
Redemption Date, as the case may be, (2) Government Obligations
applicable to such Notes which through the scheduled payment of
principal and interest in respect thereof in accordance with
their terms will provide, not later than one day before the due
date of any payment of principal of (and premium, if any) and
interest on such Notes money in an amount as is then specified as
payable at Stated Maturity or, if such defeasance or covenant
defeasance is to be effected in compliance with subsection (f)
below, on the relevant Redemption Date, as the case may be, or
(3) a combination thereof, in any case, in an amount sufficient,
without consideration of any reinvestment of such principal and
interest, in the opinion of a nationally recognized firm of
independent public accountants expressed in a written
certification thereof delivered to the Trustee, to pay and
discharge, and which shall be applied by the Trustee (or other
qualifying trustee) to pay and discharge the principal of (and
premium, if any) and interest on such Outstanding Notes on the
Stated Maturity of such principal or installment of principal or
interest on the applicable Redemption Date, as the case may be.
(b) Such defeasance or covenant defeasance shall not
result in a breach or violation of, or constitute, a default
under, this Indenture or any other material agreement or
instrument to which the Operating Partnership is a party or by
which it is bound.
(c) No Event of Default or event which with notice or
lapse of time or both would become an Event of Default with
respect to such Notes shall have occurred and be continuing on
the date of such deposit or, insofar as Sections 501(6) and
501(7) are concerned, at any time during the period ending on the
91st day after the date of such deposit (it being understood that
this condition shall not be deemed satisfied until the expiration
of such period).
(d) In the case of an election under Section 1202, the
Operating Partnership shall have delivered to the Trustee an
Opinion of Counsel stating that (i) the Operating Partnership has
received from, or there has been published by, the Internal
Revenue Service a ruling, or (ii) since the date of this
Indenture there has been a change in the applicable Federal
income tax law, in either case to the effect that, and based
thereon such opinion shall confirm that, the Holders of such
Outstanding Notes will not recognize income, gain or loss for
Federal income tax purposes as a result of such defeasance and
will be subject to Federal income tax on the same amounts, in the
same manner and at the same times as would have been the case if
such defeasance had not occurred.
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(e) In the case of an election under Section 1203, the
Operating Partnership shall have delivered to the Trustee an
Opinion of Counsel to the effect that the Holders of such
Outstanding Notes will not recognize income, gain or loss for
Federal income tax purposes as a result of such covenant
defeasance and will be subject to Federal income tax on the same
amounts, in the same manner and at the same times as would have
been the case if such covenant defeasance had not occurred.
(f) If the monies or Government Obligations or combination
thereof, as the case may be, deposited under subsection (a) above
are sufficient to pay the principal of, and premium, if any, and
interest on such Notes provided such Notes are redeemed on a
particular Redemption Date, the Operating Partnership shall have
given the Trustee irrevocable instructions to redeem such Notes
on such date and to provide notice of such redemption to Holders
as provided in or pursuant to this Indenture.
(g) The Operating Partnership shall have delivered to the
Trustee an Officers' Certificate and an Opinion of Counsel, each
stating that all conditions precedent to the defeasance under
Section 1202 or the covenant defeasance under Section 1203 (as
the case may be) have been complied with and an Opinion of
Counsel to the effect that, as a result of a deposit pursuant to
subsection (a) above and the related exercise of the Operating
Partnership's option under Section 1202 or Section 1203 (as the
case may be), registration is not required under the Investment
Company Act of 1940, as amended, by the Operating Partnership,
with respect to the trust funds representing such deposit or by
the Trustee for such trust funds.
SECTION 1205. DEPOSITED MONEY AND GOVERNMENT OBLIGATIONS TO BE HELD IN
TRUST; OTHER MISCELLANEOUS PROVISIONS. Subject to the provisions of the last
paragraph of Section 1003, all money and Government Obligations (including the
proceeds thereof) deposited with the Trustee (or other qualifying trustee,
collectively for purposes of this Section 1205, the "Trustee") pursuant to
Section 1204 in respect of any Outstanding Notes of any series shall be held in
trust and applied by the Trustee, in accordance with the provisions of such
Notes and this Indenture, to the payment, either directly or through any Paying
Agent (other than the Operating Partnership acting as its own Paying Agent) as
the Trustee may determine, to the Holders of such Notes of all sums due and to
become due thereon in respect of principal (and premium, if any) and interest,
but such money need not be segregated from other funds except to the extent
required by law.
The Operating Partnership shall pay and indemnify the Trustee against
any tax, fee or other charge imposed on or assessed against the Government
Obligations deposited pursuant to Section 1204 or the principal and interest
received in respect thereof other than any such tax, fee or other charge which
by law is for the account of the Holders of such Outstanding Notes.
Anything in this Article to the contrary notwithstanding, subject to
Section 606, the Trustee shall deliver or pay to the Operating Partnership from
time to time upon Operating Partnership Request any money or Government
Obligations (or other property and any proceeds
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therefrom) held by it as provided in Section 1204 which, in the opinion of a
nationally recognized firm of independent public accountants expressed in a
written certification thereof delivered to the Trustee, are in excess of the
amount thereof which would then be required to be deposited to effect a
defeasance or covenant defeasance, as applicable, in accordance with this
Article.
SECTION 1206. REINSTATEMENT. If the Trustee or Paying Agent is unable
to apply any cash or Government Obligations deposited pursuant to Section 1204
in accordance with this Indenture or the Notes of the applicable series by
reason of any legal proceeding or by reason of any order or judgment of any
court or governmental authority enjoining, restraining or otherwise prohibiting
such application, then the Operating Partnership's obligations under this
Indenture and the Notes of such series shall be revived and reinstated as though
no deposit had occurred pursuant to Section 1204 until such time as the Trustee
or Paying Agent is permitted to apply such money in accordance with this
Indenture and the Notes of such series; provided, however, that if the Operating
Partnership makes any payment of principal of, premium, if any, or interest on
any Note of such series following the reinstatement of its obligations, the
Operating Partnership shall be subrogated to the rights of the Holders of such
Notes to receive such payment from the cash and Government Obligations held by
the Trustee or Paying Agent.
ARTICLE THIRTEEN
MEETINGS OF HOLDERS OF NOTES
SECTION 1301. PURPOSES FOR WHICH MEETINGS MAY BE CALLED. A meeting of
Holders of any series may be called at any time and from time to time pursuant
to this Article to make, give or take any request, demand, authorization,
direction, notice, consent, waiver or other action provided by this Indenture to
be made, given or taken by Holders of such series.
SECTION 1302. CALL, NOTICE AND PLACE OF MEETINGS.
(a) The Trustee may at any time call a meeting of Holders
of any series for any purpose specified in Section 1301, to be
held at such time and at such place in The City of New York as
the Trustee shall determine. Notice of every meeting of Holders
of any series, setting forth the time and the place of such
meeting and in general terms the action proposed to be taken at
such meeting, shall be given, in the manner provided in Section
106, not less than 21 nor more than 180 days prior to the date
fixed for the meeting.
(b) In case at any time the Operating Partnership,
pursuant to a Board Resolution, or the Holders of at least 25% in
principal amount of the Outstanding Notes of any series shall
have requested the Trustee to call a meeting of the Holders of
such series for any purpose specified in Section 1301, by written
request setting forth in reasonable detail the action proposed to
be taken at the meeting, and the Trustee shall not have made the
first publication of the notice of such meeting within 21 days
after receipt of such request or shall not thereafter proceed to
cause the meeting to be held as provided herein, then the
Operating Partnership or the Holders of such series in the amount
above specified, as the
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case may be, may determine the time and the place in The City of
New York, for such meeting and may call such meeting for such
purposes by giving notice thereof as provided in subsection (a)
of this Section.
SECTION 1303. PERSONS ENTITLED TO VOTE AT MEETINGS. To be entitled to
vote at any meeting of Holders of any series, a Person shall be (1) a Holder of
one or more Outstanding Notes of such series, or (2) a Person appointed by an
instrument in writing as proxy for a Holder or Holders of one or more
Outstanding Notes of such series by such Holder or Holders. The only Persons who
shall be entitled to be present or to speak at any meeting of Holders of any
series shall be the Persons entitled to vote at such meeting and their counsel,
any representatives of the Trustee and its counsel, any representatives of the
Guarantors and their counsel and any representatives of the Operating
Partnership and its counsel.
SECTION 1304. QUORUM; ACTION. The Persons entitled to vote a majority
in principal amount of the Outstanding Notes of a series shall constitute a
quorum for a meeting of Holders of such series; provided, however, that if any
action is to be taken at such meeting with respect to a consent or waiver which
this Indenture expressly provides may be given by the Holders of not less than a
specified percentage in principal amount of the Outstanding Notes of a series,
the Persons entitled to vote such specified percentage which is less or more
than a majority in principal amount of the Outstanding Notes of such series
shall constitute a quorum. In the absence of a quorum within 30 minutes after
the time appointed for any such meeting, the meeting shall, if convened at the
request of Holders of such series, be dissolved. In any other case the meeting
may be adjourned for a period of not less than 10 days as determined by the
chairman of the meeting prior to the adjournment of such meeting. In the absence
of a quorum at any such adjourned meeting, such adjourned meeting may be further
adjourned for a period of not less than 10 days as determined by the chairman of
the meeting prior to the adjournment of such adjourned meeting. Notice of the
reconvening of any adjourned meeting shall be given as provided in Section
1302(a), except that such notice need be given only once not less than five days
prior to the date on which the meeting is scheduled to be reconvened. Notice of
the reconvening of any adjourned meeting shall state expressly the percentage,
as provided above, of the principal amount of the Outstanding Notes of such
series which shall constitute a quorum.
Except as limited by the proviso to Section 902, any resolution
presented to a meeting or adjourned meeting duly reconvened at which a quorum is
present as aforesaid may be adopted by the affirmative vote of the Holders of a
majority in principal amount of the Outstanding Notes of that series; provided,
however, that, except as limited by the proviso to Section 902, any resolution
with respect to any request, demand, authorization, direction, notice, consent,
waiver or other action which this Indenture expressly provides may be made,
given or taken by the Holders of a specified percentage, which is less or more
than a majority, in principal amount of the Outstanding Notes of a series may be
adopted at a meeting or an adjourned meeting duly reconvened and at which a
quorum is present as aforesaid by the affirmative vote of the Holders of such
specified percentage in principal amount of the Outstanding Notes of that
series.
Any resolution passed or decision taken at any meeting of Holders of any
series duly held in accordance with this Section shall be binding on all the
Holders of such series, whether or not present or represented at the meeting.
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Notwithstanding the foregoing provisions of this Section 1304, if any
action is to be taken at a meeting of Holders of any series with respect to any
request, demand, authorization, direction, notice, consent, waiver or other
action that this Indenture expressly provides may be made, given or taken by the
Holders of a specified percentage in principal amount of all Outstanding Notes
affected thereby, or by the Holders of a specified percentage in principal
amount of the Outstanding Notes of such series and each other series:
(i) there shall be no minimum quorum requirement for such
meeting; and
(ii) the principal amount of the Outstanding Notes of such series
that are entitled to vote in favor of such request, demand,
authorization, direction, notice, consent, waiver or other action shall
be taken into account in determining whether such request, demand,
authorization, direction, notice, consent, waiver or other action has
been made, given or taken under this Indenture.
SECTION 1305. DETERMINATION OF VOTING RIGHTS; CONDUCT AND ADJOURNMENT
OF MEETINGS.
(a) Notwithstanding any provisions of this Indenture, the
Trustee may make such reasonable regulations as it may deem
advisable for any meeting of Holders of a series in regard to
proof of the holding of Notes of such series and of the
appointment of proxies and in regard to the appointment and
duties of inspectors of votes, the submission and examination of
proxies, certificates and other evidence of the right to vote,
and such other matters concerning the conduct of the meeting as
it shall deem appropriate. Except as otherwise permitted or
required by any such regulations, the holding of Notes shall be
proved in the manner specified in Section 104 and the appointment
of any proxy shall be proved in the manner specified in Section
104.
(b) The Trustee shall, by an instrument in writing appoint
a temporary chairman of the meeting, unless the meeting shall
have been called by the Operating Partnership or by Holders as
provided in Section 1302(b), in which case the Operating
Partnership or the Holders of the series calling the meeting, as
the case may be, shall in like manner appoint a temporary
chairman. A permanent chairman and a permanent secretary of the
meeting shall be elected by vote of the Persons entitled to vote
a majority in principal amount of the Outstanding Notes of such
series represented at the meeting.
(c) At any meeting each Holder of such series or proxy
shall be entitled to one vote for each $1,000 principal amount of
the Outstanding Notes of such series held or represented by him;
provided, however, that no vote shall be cast or counted at any
meeting in respect of any Note challenged as not Outstanding and
ruled by the chairman of the meeting to be not Outstanding. The
chairman of the meeting shall have no right to vote, except as a
Holder of such series or proxy.
(d) Any meeting of Holders of any series duly called
pursuant to Section 1302 at which a quorum is present may be
adjourned from time to time by
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<PAGE> 67
Persons entitled to vote a majority in principal amount of the
Outstanding Notes of such series represented at the meeting, and
the meeting may be held as so adjourned without further notice.
SECTION 1306. COUNTING VOTES AND RECORDING ACTION OF MEETINGS. The vote
upon any resolution submitted to any meeting of Holders of any series shall be
by written ballots on which shall be subscribed the signatures of the Holders of
such series or of their representatives by proxy and the principal amounts and
serial numbers of the Outstanding Notes of such series held or represented by
them. The permanent chairman of the meeting shall appoint two inspectors of
votes who shall count all votes cast at the meeting for or against any
resolution and who shall make and file with the secretary of the meeting their
verified written reports in duplicate of all votes cast at the meeting. A
record, at least in duplicate, of the proceedings of each meeting of Holders of
any series shall be prepared by the secretary of the meeting and there shall be
attached to said record the original reports of the inspectors of votes on any
vote by ballot taken thereat and affidavits by one or more persons having
knowledge of the fact, setting forth a copy of the notice of the meeting and
showing that said notice was given as provided in Section 1302 and, if
applicable, Section 1304. Each copy shall be signed and verified by the
affidavits of the permanent chairman and secretary of the meeting and one such
copy shall be delivered to the Operating Partnership and another to the Trustee
to be preserved by the Trustee, the latter to have attached thereto the ballots
voted at the meeting. Any record so signed and verified shall be conclusive
evidence of the matters therein stated.
ARTICLE FOURTEEN
THE GUARANTEES
SECTION 1401. GUARANTEES. The provisions of this Article Fourteen shall
be applicable to the Notes and Guarantees. Each Guarantor (which term includes
any successor Person under this Indenture and any additional Subsidiary
Guarantor pursuant to Section 1013 of this Indenture) for consideration received
hereby jointly and severally unconditionally and irrevocably guarantees on a
senior basis (each a "Guarantee", and collectively, the "Guarantees") to the
Holders from time to time of the Notes (a) the full and prompt payment of the
principal of and any premium, if any, on any Note when and as the same shall
become due, whether at the maturity thereof, by acceleration, redemption or
otherwise and (b) the full and prompt payment of any interest on any Note when
and as the same shall become due and payable. Each and every default in the
payment of the principal of or interest or any premium on any Note shall give
rise to a separate cause of action hereunder, and separate suits may be brought
hereunder as each cause of action arises. The obligations of the Guarantors
hereunder shall be evidenced by Guarantees accompanying the Notes issued
hereunder.
An Event of Default under this Indenture or the Notes shall constitute
an event of default under the Guarantees, and shall entitle the Holders to
accelerate the obligations of the Guarantors hereunder in the same manner and to
the same extent as the obligations of the Company.
The obligations of the Guarantors hereunder shall be absolute and
unconditional and shall remain in full force and effect until the entire
principal and interest and any premium on the Notes shall have been paid or
provided for in accordance with provisions of this Indenture, and
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<PAGE> 68
such obligations shall not be affected, modified or impaired upon the happening
from time to time of any event, including without limitation any of the
following, whether or not with notice to, or the consent of, the Guarantors:
(a) the failure to give notice to the Guarantors of the
occurrence of an Event of Default;
(b) the waiver, surrender, compromise, settlement, release
or termination of the payment, performance or observance by the
Operating Partnership or the Guarantors of any or all of the
obligations, covenants or agreements of either of them contained
in this Indenture or the Notes;
(c) the acceleration, extension or any other changes in
the time for payment of any principal of or interest or any
premium on any Note or for any other payment under this Indenture
or of the time for performance of any other obligations,
covenants or agreements under or arising out of this Indenture or
the Notes;
(d) the modification or amendment (whether material or
otherwise) of any obligation, covenant or agreement set forth in
this Indenture or the Notes;
(e) the taking or the omission of any of the actions
referred to in this Indenture and in any of the actions under the
Notes;
(f) any failure, omission, delay or lack on the part of
the Trustee to enforce, assert or exercise any right, power or
remedy conferred on the Trustee in this Indenture, or any other
action or acts on the part of the Trustee or any of the Holders
from time to time of the Notes;
(g) the voluntary or involuntary liquidation, dissolution,
sale or other disposition of all or substantially all the assets,
marshaling of assets and liabilities, receivership, insolvency,
bankruptcy, assignment for the benefit of creditors,
reorganization, arrangement, composition with creditors or
readjustment of, or other similar proceedings affecting the
Guarantors or the Operating Partnership or any of the assets of
any of them, or any allegation or contest of the validity of the
Guarantee in any such proceeding;
(h) to the extent permitted by law, the release or
discharge by operation of law of the Guarantors from the
performance or observance of any obligation, covenant or
agreement contained in this Indenture;
(i) to the extent permitted by law, the release or
discharge by operation of law of the Operating Partnership from
the performance or observance of any obligation, covenant or
agreement contained in this Indenture;
(j) the default or failure of the Operating Partnership or
the Trustee fully to perform any of its obligations set forth in
this Indenture or the Notes;
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<PAGE> 69
(k) the invalidity, irregularity or unenforceability of
this Indenture or the Notes or any part of any thereof;
(l) any judicial or governmental action affecting the
Operating Partnership or any Notes or consent or indulgence
granted by the Operating Partnership by the Holders or by the
Trustee; or
(m) the recovery of any judgment against the Operating
Partnership or any action to enforce the same or any other
circumstance which might constitute a legal or equitable
discharge of a surety or guarantor.
The Guarantees shall remain in full force and effect and continue to be
effective should any petition be filed by or against the Operating Partnership
for liquidation or reorganization, should the Operating Partnership become
insolvent or make an assignment for the benefit of creditors or should a
receiver or trustee be appointed for all or any significant part of the
Operating Partnership's assets, and shall, to the fullest extent permitted by
law, continue to be effective or be reinstated, as the case may be, if at any
time any payment in respect of the Notes is, pursuant to applicable law,
rescinded or reduced in amount, or must otherwise be restored or returned by any
obligee on the Notes, whether as a "voidable preference," "fraudulent transfer"
or otherwise, all as though such payment had not been made. In the event that
any payment, or any part thereof, is rescinded, reduced, restored or returned,
the Notes shall, to the fullest extent permitted by law, be reinstated and
deemed reduced only by such amount paid and not so rescinded, reduced, restored
or returned.
For purposes of this Article 14, each Subsidiary Guarantor's liability
(a Subsidiary Guarantor's "Base Guaranty Liability") shall be that amount from
time to time equal to the aggregate liability of a Guarantor hereunder, but
shall be limited to the lesser of (A) the aggregate amount of the obligation as
stated in the second sentence of this Section 1401 with respect to the Notes,
and (B) the amount, if any, which would not have (i) rendered such Subsidiary
Guarantor "insolvent" (as such term is defined in Section 101(29) of the Federal
Bankruptcy Code and in Section 271 of the Debtor and Creditor Law of the State
of New York, as each is in effect at the date of this Indenture) or (ii) left it
with unreasonably small capital at the time its Guarantee of the Notes was
entered into, after giving effect to the incurrence of existing Debt immediately
prior to such time, provided that, it shall be a presumption in any lawsuit or
other proceeding in which a Subsidiary Guarantor is a party that the amount
guaranteed is the amount set forth in (A) above unless a creditor, or
representative of creditors of such Subsidiary Guarantor or a trustee in
bankruptcy of the Subsidiary Guarantor, as debtor in possession, otherwise
proves in such a lawsuit that the aggregate liability of the Subsidiary
Guarantor is limited to the amount set forth in (B). In making any determination
as to the solvency or sufficiency of capital of a Subsidiary Guarantor in
accordance with the previous sentence, the right of such Subsidiary Guarantor to
contribution from other Guarantors, to subrogation pursuant to the next
paragraph and any other rights such Subsidiary Guarantor may have, contractual
or otherwise, shall be taken into account.
The Guarantors shall have the right to seek contribution from any
non-paying Guarantor so long as the exercise of such right does not impair the
rights of the Holders under the Guarantees.
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<PAGE> 70
The validity and enforceability of any Guarantee shall not be affected
by the fact that it is not affixed to any particular Note.
Each of the Guarantors hereby agrees that its Guarantee set forth in
Section 1401 shall remain in full force and effect notwithstanding any failure
to endorse on each Note a notation of such Guarantee.
If an officer of a Guarantor whose signature is on this Indenture or a
Note no longer holds that office at the time the Trustee authenticates such Note
or at any time thereafter, such Guarantor's Guarantee of such Note shall be
valid nevertheless.
The delivery of any Note by the Trustee, after the authentication
thereof hereunder, shall constitute due delivery of any Guarantee set forth in
this Indenture on behalf of the Guarantor.
SECTION 1402. PROCEEDINGS AGAINST THE GUARANTORS. In the event of a
default in the payment of principal of or any premium on any Note when and as
the same shall become due, whether at the Stated Maturity thereof, by
acceleration, call for redemption or otherwise, or in the event of a default in
the payment of any interest on any Note when and as the same shall become due,
the Trustee shall have the right to proceed first and directly against the
Guarantors under this Indenture without first proceeding against the Operating
Partnership or exhausting any other remedies which it may have and without
resorting to any other Note held by the Trustee.
The Trustee shall have the right, power and authority to do all things
it deems necessary or otherwise advisable to enforce the provisions of this
Indenture relating to the Guarantees and protect the interests of the Holders of
the Notes and, in the event of a default in payment of the principal of or any
premium on any Note when and as the same shall become due, whether at the Stated
Maturity thereof, by acceleration, call for redemption or otherwise, or in the
event of a default in the payment of any interest on any Note when and as the
same shall become due, the Trustee may institute or appear in such appropriate
judicial proceedings as the Trustee shall deem most effectual to protect and
enforce any of its rights and the rights of the Holders, whether for the
specific enforcement of any covenant or agreement in this Indenture relating to
the Guarantee or in aid of the exercise of any power granted herein, or to
enforce any other proper remedy. Without limiting the generality of the
foregoing, in the event of a default in payment of the principal of or interest
or any premium on any Note when due, the Trustee may institute a judicial
proceeding for the collection of the sums so due and unpaid, and may prosecute
such proceeding to judgment or final decree, and may enforce the same against
the Guarantors and collect the moneys adjudged or decreed to be payable in the
manner provided by law out of the property of the Guarantors, wherever situated.
SECTION 1403. GUARANTEES FOR BENEFIT OF HOLDERS OF NOTES. The
Guarantees contained in this Indenture are entered into by the Guarantors for
the benefit of the Holders from time to time of the Notes. Such provisions shall
not be deemed to create any right in, or to be in whole or in part for the
benefit of, any person other than the Trustee, the Guarantors, the Holders from
time to time of the Notes, and their permitted successors and assigns.
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<PAGE> 71
SECTION 1404. MERGER OR CONSOLIDATION OF GUARANTORS. Each Guarantor
will not, in any transaction or series of related transactions, consolidate
with, or sell, lease, assign, transfer or otherwise convey all or substantially
all of its assets to, or merge with or into, any other Person unless (i) either
such Guarantor shall be the continuing Person, or the successor Person (if other
than such Guarantor) formed by or resulting from any such consolidation or
merger or which shall have received the transfer of such assets is a
corporation, partnership, limited liability company or other entity organized
and existing under the laws of the United States of America or a State thereof
or the District of Columbia and shall expressly assume, by supplemental
indenture executed by such successor corporation and delivered by it to the
Trustee (which supplemental indenture shall comply with Article Nine hereof and
shall be reasonably satisfactory to the Trustee), all of such Guarantor's
obligations with respect to Outstanding Notes and the observance of all of the
covenants and conditions contained in this Indenture and its Guarantee to be
performed or observed by the Guarantor; (ii) immediately after giving effect to
such transaction, no Event of Default, and no event which, after notice or the
lapse of time, or both, would become an Event of Default, shall have occurred
and shall be continuing; and (iii) such Guarantor shall have delivered to the
Trustee the Officers' Certificate and Opinion of Counsel required pursuant to
below. In the event that such Guarantor is not the continuing corporation, then,
for purposes of clause (ii) of the preceding sentence, the successor corporation
shall be deemed to be such "Guarantor" referred to in such clause (ii). Any
consolidation, merger, sale, lease, assignment, transfer or conveyance permitted
under Section 1404 is also subject to the condition precedent that the Trustee
receive an Officers' Certificate and an Opinion of Counsel to the effect that
any such consolidation, merger, sale, lease, assignment, transfer or conveyance,
and the assumption by any successor corporation, complies with the provisions of
this Article and that all conditions precedent herein provided for relating to
such transaction have been complied with.
SECTION 1405. ADDITIONAL GUARANTORS. Any Person may become a Guarantor
by executing and delivering to the Trustee (a) a supplemental indenture in form
and substance satisfactory to the Trustee, which subjects such person to the
provisions of this Indenture as a Guarantor, and (b) an Opinion of Counsel to
the effect that such supplemental indenture has been duly authorized and
executed by such person and constitutes the legal, valid, binding and
enforceable obligation of such person (subject to such customary exceptions
concerning fraudulent conveyance laws, creditors' rights and equitable
principles as may be acceptable to the Trustee in its discretion).
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<PAGE> 72
IN WITNESS WHEREOF, the parties hereto have caused this Indenture to be
duly executed, all as of the day and year first above written.
AMB PROPERTY, L.P.
By: AMB PROPERTY CORPORATION,
as General Partner
By:
-------------------------
AMB PROPERTY CORPORATION.
By:
-------------------------
AMB PROPERTY II, L.P.
By: AMB PROPERTY CORPORATION,
as General Partner
By:
-------------------------
LONG GATE LLC.
By: AMB PROPERTY CORPORATION,
as Manager
By:
-------------------------
65
<PAGE> 73
STATE STREET BANK AND TRUST
COMPANY OF CALIFORNIA, N.A., as Trustee
By:
------------------------
Print Name:_________________
Title:______________________
66
<PAGE> 1
EXHIBIT 4.2
FIRST SUPPLEMENTAL INDENTURE
FIRST SUPPLEMENTAL INDENTURE, dated as of __________, 1998 (this "First
Supplemental Indenture"), among AMB PROPERTY, L.P., a Delaware limited
partnership (the "Operating Partnership"), AMB PROPERTY CORPORATION (the "Parent
Guarantor"), each of the Operating Partnership's Subsidiaries that either now or
in the future are parties hereto as guarantors (the "Subsidiary Guarantors" and
together with the Parent Guarantor, the "Guarantors") and STATE STREET BANK AND
TRUST COMPANY OF CALIFORNIA, N.A., as Trustee hereunder (the "Trustee").
W I T N E S S E T H:
WHEREAS, the Operating Partnership, the Guarantors and the Trustee
executed and delivered an Indenture, dated as of ___________, 1998 (as
supplemented hereby, the "Indenture"), to provide for the issuance by the
Operating Partnership of notes evidencing its unsecured indebtedness;
WHEREAS, pursuant to Board Resolution, the Operating Partnership has
authorized the issuance of $________ of its ______% Notes due________, 2008 (the
"2008 Notes");
WHEREAS, the Operating Partnership desires to establish the terms of the
2008 Notes in accordance with Section 301 of the Indenture and to establish the
form of the 2008 Notes in accordance with Section 201 of the Indenture.
ARTICLE 1
TERMS
SECTION 101. TERMS OF NOTES. The following terms relating to the 2008
Notes are hereby established:
(1) The 2008 Notes shall constitute a series of Notes having the title
"______% Notes due __________, 2008."
(2) The aggregate principal amount of the 2008 Notes that may be
authenticated and delivered under the Indenture (except for 2008 Notes
authenticated and delivered upon registration of transfer of, or exchange for,
or in lieu of, other 2008 Notes pursuant to Sections 304, 305, 306, 906, or 1107
of the Indenture) shall be up to $__________.
(3) The entire outstanding principal of the 2008 Notes will mature on
_________, 2008 (the "Stated Maturity Date").
(4) The rate at which the 2008 Notes shall bear interest shall be ___%
per annum; the date from which interest shall accrue shall be ________, 1998;
the Interest Payment Dates for the 2008 Notes on which interest will be payable
shall be _______ and ______ in each year, beginning _____, 1998; the Regular
Record Dates for the interest payable on the 2008 Notes on any Interest Payment
Date shall be the 15th calendar day preceding the applicable Interest Payment
Date.
<PAGE> 2
(5) The Place of Payment where the principal of and interest on the 2008
Notes shall be payable and 2008 Notes may be surrendered for the registration of
transfer or exchange shall be the Office of the Trustee's affiliate, State
Street Bank and Trust Company, at 61 Broadway, 15th Floor, New York, New York
10006. The place where notices or demands to or upon the Operating Partnership
in respect of the 2008 Notes and the Indenture may be served shall be the
Corporate Trust Office of the Trustee at 633 West Fifth Street, 12th Floor, Los
Angeles, California 90071.
(6) The 2008 Notes shall not be redeemable at the option of any Holder
thereof, upon the occurrence of any particular circumstances or otherwise.
(7) The Trustee shall also be the Security Registrar and Paying Agent
for the 2008 Notes.
(8) The Holders of the 2008 Notes shall have no special rights in
addition to those provided in the Indenture upon the occurrence of any
particular events.
(9) The 2008 Notes shall have no additional Events of Default in
addition to the Events of Default set forth in Article Five of the Indenture.
(10) Interest on any 2008 Note shall be payable only to the Person in
whose name that 2008 Note is registered at the close of business on the Regular
Record Date for such interest.
(11) The 2008 Notes shall not be subordinated to any other debt of the
Operating Partnership, and shall constitute senior unsecured obligations of the
Operating Partnership.
SECTION 102. FORM OF 2008 NOTE. The form of the 2008 Note is attached
hereto as Exhibit A.
ARTICLE II
MISCELLANEOUS
SECTION 201. DEFINITIONS. Capitalized terms used but not defined in this
First Supplemental Indenture shall have the meanings ascribed thereto in the
Indenture.
SECTION 202. CONFIRMATION OF INDENTURE. The Indenture, as heretofore
supplemented and amended by this First Supplemental Indenture, is in all
respects ratified and confirmed, and the Indenture, this First Supplemental
Indenture and all indentures supplemental thereto shall be read, taken and
construed as one and the same instrument.
SECTION 203. CONCERNING THE TRUSTEE. The Trustee assumes no duties,
responsibilities or liabilities by reason of this First Supplemental Indenture
other than as set forth in the Indenture and, in carrying out its
responsibilities hereunder, shall have all of the rights, protections and
immunities which it possesses under the Indenture.
SECTION 204. GOVERNING LAW. This First Supplemental Indenture, the
Indenture and the Notes shall be governed by and construed in accordance with
the law of the State of New York.
2
<PAGE> 3
SECTION 205. SEPARABILITY. In case any provision in this First
Supplemental Indenture shall for any reason be held to be invalid, illegal or
unenforceable, the validity, legality and enforceability of the remaining
provisions shall not in any way be affected or impaired thereby.
SECTION 206. COUNTERPARTS. This First Supplemental Indenture may be
executed in any number of counterparts each of which shall be an original, but
such counterparts shall together constitute but one and the same instrument.
3
<PAGE> 4
IN WITNESS WHEREOF, the parties hereto have caused this First
Supplemental Indenture to be duly executed, and the corporate seal of the
General Partner to be hereunto affixed and attested, as of the day and year
first above written.
AMB PROPERTY, L.P.
By: AMB PROPERTY CORPORATION,
as General Partner
By:
-------------------------
AMB PROPERTY CORPORATION.
By:
-------------------------
AMB PROPERTY II, L.P.
By: AMB PROPERTY CORPORATION,
as General Partner
By:
-------------------------
LONG GATE LLC.
By: AMB PROPERTY CORPORATION,
as Manager
By:
-------------------------
4
<PAGE> 5
STATE STREET BANK AND TRUST
COMPANY OF CALIFORNIA, N.A., as Trustee
By:
-------------------------
5
<PAGE> 6
EXHIBIT A
Form of Note
[LEGEND FOR INCLUSION IN GLOBAL NOTES-- THIS NOTE IS A GLOBAL NOTE WITHIN THE
MEANING OF THE INDENTURE HEREINAFTER REFERRED TO AND IS REGISTERED IN THE NAME
OF A DEPOSITARY OR A NOMINEE THEREOF. THIS NOTE IS EXCHANGEABLE FOR NOTES
REGISTERED IN THE NAME OF A PERSON OTHER THAN THE DEPOSITARY OR ITS NOMINEE ONLY
IN THE LIMITED CIRCUMSTANCES DESCRIBED IN THE INDENTURE AND, UNLESS AND UNTIL IT
IS EXCHANGED IN WHOLE OR IN PART FOR NOTES IN DEFINITIVE FORM, THIS NOTE MAY NOT
BE TRANSFERRED EXCEPT AS A WHOLE BY THE DEPOSITARY TO A NOMINEE OF THE
DEPOSITARY OR BY A NOMINEE OF THE DEPOSITARY TO THE DEPOSITARY OR ANOTHER
NOMINEE OF THE DEPOSITARY OR BY THE DEPOSITARY OR ANY SUCH NOMINEE TO A
SUCCESSOR DEPOSITARY OR A NOMINEE OF SUCH SUCCESSOR DEPOSITARY.]
[LEGEND FOR INCLUSION IN GLOBAL NOTES -- UNLESS THIS NOTE IS PRESENTED BY AN
AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY, A NEW YORK
CORPORATION ("DTC"), TO THE OPERATING PARTNERSHIP (AS DEFINED BELOW) OR ITS
AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY NOTE ISSUED IS
REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS REQUESTED BY AN
AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO. OR TO
SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC, ANY
TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON
IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST
HEREIN.]
No.:
CUSIP No.: Principal Amount: $___________
AMB PROPERTY, L.P.
______% Notes due 2008
AMB Property, L.P., a Delaware limited partnership (hereinafter called
the "Operating Partnership", which term includes any successor under the
Indenture referred to below), for value received, hereby promises to pay to
__________, or registered assigns, [the principal sum of ____________ DOLLARS
($_____________)][the principal amount then shown on Schedule A hereto] on
__________ 2008, and to pay interest thereon from _________ or from the most
recent date to which interest has been paid or duly provided for, semiannually
on __________ and __________ of each year (each, an "Interest Payment Date"),
commencing ___________, and at Maturity, at the rate of ______% per annum, until
the principal hereof is paid or duly made available for payment. Interest on
this Note shall be calculated on the basis of a 360-day year consisting of
twelve 30-day months. The interest so payable and punctually paid or duly
<PAGE> 7
provided for on any Interest Payment Date will, as provided in such Indenture,
be paid to the Person in whose name this Note (or one or more Predecessor Notes)
is registered at the close of business on the Regular Record Date for such
interest, which shall be the ________ or ________ (whether or not a Business
Day), as the case may be, next preceding such Interest Payment Date. Any such
interest which is payable, but is not punctually paid or duly provided for, on
any Interest Payment Date shall forthwith cease to be payable to the registered
Holder hereof on the relevant Regular Record Date by virtue of having been such
Holder, and may be paid to the Person in whose name this Note (or one or more
Predecessor Notes) is registered at the close of business on a Special Record
Date for the payment of such Defaulted Interest to be fixed by the Trustee,
notice whereof shall be given to the Holder of this Note not less than 10 days
prior to such Special Record Date, or may be paid at any time in any other
lawful manner not inconsistent with the requirements of any securities exchange
on which the Notes may be listed, and upon such notice as may be required by
such exchange, all as more fully provided in such Indenture.
Payment of the principal of and the interest on this Note will be made
at the office or agency of the Operating Partnership maintained for that purpose
in the Borough of Manhattan, The City of New York, in such coin or currency of
the United States of America as at the time of payment is legal tender for
payment of public and private debts; provided, however, that, at the option of
the Operating Partnership, interest may be paid by check mailed to the address
of the Person entitled thereto as such address shall appear in the Note Register
or by wire transfer to an account maintained by the payee located in the United
States of America.
This Note is one of a duly authorized issue of Notes of the Operating
Partnership (herein called the "Notes") issued and to be issued in multiple
series under an Indenture dated as of _______,1998 (herein called, together with
all indentures supplemental thereto, the "Indenture") among, the Operating
Partnership, AMB Property Corporation, each of the Operating Partnership's
Subsidiaries that either now or in the future is a party thereto as guarantors
and State Street Bank and Trust Company of California, N.A., as trustee (herein
called the "Trustee", which term includes any successor trustee under the
Indenture), to which Indenture and all indentures supplemental thereto reference
is hereby made for a statement of the respective rights, limitations of rights,
duties and immunities thereunder of the Operating Partnership, the Trustee and
the Holders of the Notes, and the terms upon which the Notes are, and are to be,
authenticated and delivered. This Note is one of the series designated on the
face hereof, limited in aggregate principal amount to $___________.
The Notes are subject to redemption prior to the Stated Maturity of the
principal thereof as provided in the Indenture.
If an Event of Default with respect to the Notes shall occur and be
continuing, the principal of the Notes may be declared due and payable in the
manner and with the effect provided in the Indenture.
The Indenture permits, with certain exceptions as therein provided, the
amendment thereof and the modification of the rights and obligations of the
Operating Partnership and the rights of the Holders of the Notes of each series
issued under the Indenture at any time by the Operating Partnership and the
Trustee with the consent of the Holders of not less than a majority
7
<PAGE> 8
in aggregate principal amount of the Notes at the time Outstanding of each
series affected thereby. The Indenture also contains provisions permitting the
Holders of specified percentages in aggregate principal amount of the Notes of
any series at the time Outstanding, on behalf of the Holders of all Notes of
such series, to waive compliance by the Operating Partnership with certain
provisions of the Indenture and certain past defaults under the Indenture and
their consequences. Any such consent or waiver by the holder of this Note shall
be conclusive and binding upon such Holder and upon all future Holders of this
Note and of any Notes issued upon the registration of transfer hereof or in
exchange herefor or in lieu hereof, whether or not notation of such consent or
waiver is made upon this Note.
No reference herein to the Indenture and no provision of this Note or of
the Indenture shall alter or impair the obligation of the Operating Partnership,
which is absolute and unconditional, to pay the principal of and interest on
this Note, at the time, place and rate, and in the coin or currency, herein and
in the Indenture prescribed.
As provided in the Indenture and subject to certain limitations set
forth therein, the transfer of this Note may be registered on the Note Register
upon surrender of this Note for registration of transfer at the office or agency
of the Operating Partnership maintained for the purpose in any place where the
principal of and interest on this Note are payable, duly endorsed, or
accompanied by a written instrument of transfer in form satisfactory to the
Operating Partnership and the Note Registrar duly executed by the Holder hereof
or by his attorney duly authorized in writing, and thereupon one or more new
Notes, of authorized denominations and for the same aggregate principal amount,
will be issued to the designated transferee or transferees. The Notes are
issuable only in registered form without coupons in the denominations of $1,000
and integral multiples of $1,000. As provided in the Indenture and subject to
certain limitations set forth therein, the Notes are exchangeable for a like
aggregate principal amount of Notes of authorized denominations as requested by
the Holders surrendering the same.
No service charge shall be made for any such registration of transfer or
exchange, but the Operating Partnership may require payment of a sum sufficient
to cover any tax or other governmental charge payable in connection therewith,
other than in certain cases provided in the Indenture.
Prior to due presentment of this Note for registration of transfer, the
Operating Partnership, the Trustee and any agent of the Operating Partnership or
the Trustee may treat the Person in whose name this Note is registered as the
owner hereof for all purposes, whether or not this Note be overdue, and neither
the Operating Partnership, the Trustee nor any such agent shall be affected by
notice to the contrary.
The Indenture contains provisions whereby (i) the Operating Partnership
may be discharged from its obligations with respect to the Notes (subject to
certain exceptions) or (ii) the Operating Partnership may be released from its
obligations under specified covenants and agreements in the Indenture, in each
case if the Operating Partnership irrevocably deposits with the Trustee money or
Government Obligations sufficient to pay and discharge the entire indebtedness
on all Notes, and satisfies certain other conditions, all as more fully provided
in the Indenture.
8
<PAGE> 9
This Note shall be governed by and construed in accordance with the laws
of the State of New York.
All terms used in this Note which are defined in the Indenture shall
have the meanings assigned to them in the Indenture.
Unless the certificate of authentication hereon has been executed by or
on behalf of the Trustee under the Indenture by the manual signature of one of
its authorized signatories, this Note shall not be entitled to any benefits
under the Indenture or be valid or obligatory for any purpose.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
9
<PAGE> 10
IN WITNESS WHEREOF, the Operating Partnership has caused this instrument
to be duly executed.
Dated:
AMB PROPERTY, L.P.
By AMB PROPERTY CORPORATION,
as General Partner
By:
-------------------------------
President
TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the Notes of the
series designated therein referred
to in the within-mentioned Indenture.
STATE STREET BANK AND TRUST
COMPANY OF CALIFORNIA, N.A., as Trustee
By:
------------------------------
Authorized Signatory
10
<PAGE> 11
PARENT GUARANTEE
FOR VALUE RECEIVED, the undersigned hereby, jointly and severally with
the Subsidiary Guarantors pursuant to the Subsidiary Guarantee of even date,
unconditionally guarantees to the Holder of the accompanying _____% Note Due
________, 2008 (the "2008 Note") issued by AMB Property, L.P. (the "Operating
Partnership") under an Indenture dated as of _________, 1998 (together with the
First Supplemental Indenture thereto, the "Indenture") among the Operating
Partnership, AMB Property Corporation, certain of the Operating Partnership's
subsidiaries and __________, as trustee (the "Trustee"), (a) the full and prompt
payment of the principal of and premium, if any, on such 2008 Note when and as
the same shall become due and payable, whether at Stated Maturity, by
acceleration, by redemption or otherwise, and (b) the full and prompt payment of
the interest on such 2008 Note when and as the same shall become due and
payable, according to the terms of such 2008 Note and of the Indenture. In case
of the failure of the Operating Partnership punctually to pay any such
principal, premium or interest, the undersigned hereby agrees to cause any such
payment to be made punctually when and as the same shall become due and payable,
whether at Stated Maturity, upon acceleration, by redemption or otherwise, and
as if such payment were made by the Operating Partnership. The undersigned
hereby agrees, jointly and severally with the Subsidiary Guarantors, that its
obligations hereunder shall be as principal and not merely as surety, and shall
be absolute and unconditional, and shall not be affected, modified or impaired
by the following: (a) the failure to give notice to the Guarantors of the
occurrence of an Event of Default under the Indenture; (b) the waiver,
surrender, compromise, settlement, release or termination of the payment,
performance or observance by the Operating Partnership or the Guarantors of any
or all of the obligations, covenants or agreements of either of them contained
in the Indenture or the 2008 Notes; (c) the acceleration, extension or any other
changes in the time for payment of any principal of or interest or any premium
on any 2008 Note or for any other payment under the Indenture or of the time for
performance of any other obligations, covenants or agreements under or arising
out of the Indenture or the 2008 Notes; (d) the modification or amendment
(whether material or otherwise) of any obligation, covenant or agreement set
forth in the Indenture or the 2008 Notes; (e) the taking or the omission of any
of the actions referred to in the Indenture and in any of the actions under the
2008 Notes; (f) any failure, omission, delay or lack on the part of the Trustee
to enforce, assert or exercise any right, power or remedy conferred on the
Trustee in the Indenture, or any other action or acts on the part of the Trustee
or any of the Holders from time to time of the 2008 Notes; (g) the voluntary or
involuntary liquidation, dissolution, sale or other disposition of all or
substantially all the assets, marshaling of assets and liabilities,
receivership, insolvency, bankruptcy, assignment for the benefit of creditors,
reorganization, arrangement, composition with creditors or readjustment of, or
other similar proceedings affecting the Guarantors or the Operating Partnership
or any of the assets of any of them, or any allegation or contest of the
validity of the Parent Guarantee in any such proceeding; (h) to the extent
permitted by law, the release or discharge by operation of law of the Guarantors
from the performance or observance of any obligation, covenant or agreement
contained in the Indenture; (i) to the extent permitted by law, the release or
discharge by operation of law of the Operating Partnership from the performance
or observance of any obligation, covenant or agreement contained in the
Indenture; (j) the default or failure of the Operating Partnership or the
Trustee fully to perform any of its obligations set forth in the Indenture or
the 2008 Notes; (k) the invalidity, irregularity or unenforceability of the
Indenture or the 2008 Notes or any part of any thereof; (l) any judicial or
governmental action affecting the
11
<PAGE> 12
Operating Partnership or any 2008 Notes or consent or indulgence granted by the
Operating Partnership by the Holders or by the Trustee; or (m) the recovery of
any judgment against the Operating Partnership or any action to enforce the same
or any other circumstance which might constitute a legal or equitable discharge
of a surety or guarantor. The undersigned hereby waives diligence, presentment,
demand of payment, filing of claims with a court in the event of merger, sale,
lease or conveyance of all or substantially all of its assets, insolvency or
bankruptcy of the Operating Partnership, any right to require a proceeding first
against the Operating Partnership, protest or notice with respect to such Notice
or the indebtedness evidenced thereby and all demands whatsoever, and covenants
that this Parent Guarantee will not be discharged except by complete performance
of the obligations contained in such 2008 Note and in this Parent Guarantee.
No reference herein to such Indenture and no provision of this Parent
Guarantee or of such Indenture shall alter or impair the guarantee of the
undersigned, which is absolute and unconditional, of the full and prompt payment
of the principal of and premium, if any, and interest on the 2008 Note.
THIS PARENT GUARANTEE SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE
WITH THE LAWS OF THE STATE OF NEW YORK.
This Parent Guarantee shall not be valid or obligatory for any purpose
until the certificate of authentication on the 2008 Note shall have been
executed by the Trustee under the Indenture referred to above by the manual
signature of one of its authorized officers. The validity and enforceability of
this Parent Guarantee shall not be affected by the fact that it is not affixed
to any particular 2008 Note.
An Event of Default under the Indenture or the 2008 Notes shall
constitute an event of default under this Parent Guarantee, and shall entitle
the Holders of 2008 Notes to accelerate the obligations of the undersigned
hereunder in the same manner and to the same extent as the obligations of the
Operating Partnership.
Notwithstanding any other provision of this Parent Guarantee to the
contrary, the undersigned hereby waives any claims or other rights which it may
now have or hereafter acquire against Operating Partnership that arise from the
existence or performance of its obligations under this Parent Guarantee or any
other agreement (all such claims and rights are referred to as "Guarantor's
Conditional Rights"), including, without limitation, any right of subrogation,
reimbursement, exoneration, contribution, or indemnification, any right to
participate in any claim or remedy against Operating Partnership, whether or not
such claim, remedy or right arises in equity or under contract, statute or
common law, by any payment made hereunder or otherwise, including without
limitation, the right to take or receive from Operating Partnership, directly or
indirectly, in cash or other property or by setoff or in any other manner,
payment or security on account of such claim or other rights. Guarantor hereby
agrees not to exercise any rights which may be acquired by way of contribution
under this Parent Guarantee or any other agreement, by any payment made
hereunder or otherwise, including, without limitation, the right to take or
receive from any other guarantor, directly or indirectly, in cash or other
property or by setoff or in any other manner, payment or security on account of
such contribution rights. If, notwithstanding the foregoing provisions, any
amount shall be paid to any of the undersigned on
12
<PAGE> 13
account of any such Guarantor's Conditional Rights and either (i) such amount is
paid to such undersigned party at any time when the indebtedness shall not have
been paid or performed in full, or (ii) regardless of when such amount is paid
to such undersigned party, any payment made by Operating Partnership to a Holder
that is at any time determined to be a Preferential Payment (as defined below),
then such amount paid to any of the undersigned shall be held in trust for the
benefit of Holder and shall forthwith be paid such Holder to be credited and
applied upon the indebtedness, whether matured or unmatured. Any such payment is
herein referred to as a "Preferential Payment" to the extent the Operating
Partnership makes any payment to Holder in connection with the Note, and any or
all of such payment is subsequently invalidated, declared to be fraudulent or
preferential, set aside or required to be repaid or paid over to a trustee,
receiver or any other entity, whether under any bankruptcy act or otherwise.
To the extent that any of the provisions of the immediately preceding
paragraph shall not be enforceable, each of the undersigned agrees that until
such time as the indebtedness has been paid and performed in full and the period
of time has expired during which any payment made by Operating Partnership or
the undersigned to a Holder may be determined to be a Preferential Payment,
Guarantor's Conditional Rights to the extent not validly waived shall be
subordinate to Holder's right to full payment and performance of the
indebtedness and each of the undersigned shall not enforce any of its respective
portion of the Guarantors' Conditional Rights until such time as the
indebtedness has been paid and performed in full and the period of time has
expired during which any payment made by Operating Partnership or the
undersigned to Holder may be determined to be a Preferential Payment.
The obligations of the undersigned to the Holders of the 2008 Notes and
to the Trustee pursuant to the Parent Guarantee and the Indenture are expressly
set forth in Article 14 of the Indenture and reference is hereby made to the
Indenture for the precise terms of the Parent Guarantee and all of the other
provisions of the Indenture to which this Parent Guarantee relates.
All terms in this Parent Guarantee which are defined in the Indenture
shall have the meanings assigned to them in the Indenture.
IN WITNESS WHEREOF, the undersigned has caused this Parent Guarantee to
be duly executed.
Dated: .__________, 1998
AMB PROPERTY CORPORATION
By:______________________________________
[Name]
Its:[title]
13
<PAGE> 14
SUBSIDIARY GUARANTEE
FOR VALUE RECEIVED, each of the undersigned hereby jointly and
severally, and jointly and severally with the Parent Guarantor pursuant to the
Parent Guarantee of even date, unconditionally guarantees to the Holder of the
accompanying _____% Note Due ________, 2008 (the "2008 Note") issued by AMB
Property, L.P. (the "Operating Partnership") under an Indenture dated as of
_________, 1998 (together with the First Supplemental Indenture thereto, the
"Indenture") among the Operating Partnership, AMB Property Corporation, certain
of the Operating Partnership's subsidiaries and __________, as trustee (the
"Trustee"), (a) the full and prompt payment of the principal of and premium, if
any, on such 2008 Note when and as the same shall become due and payable,
whether at Stated Maturity, by acceleration, by redemption or otherwise, and (b)
the full and prompt payment of the interest on such 2008 Note when and as the
same shall become due and payable, according to the terms of such 2008 Note and
of the Indenture. Each of the undersigned hereby agrees, jointly and severally,
and jointly and severally with the Parent Guarantor, that its obligations
hereunder shall be as principal and not merely as surety, and shall be absolute
and unconditional, and shall not be affected, modified or impaired by the
following: (a) the failure to give notice to the Guarantors of the occurrence of
an Event of Default under the Indenture; (b) the waiver, surrender, compromise,
settlement, release or termination of the payment, performance or observance by
the Operating Partnership or the Guarantors of any or all of the obligations,
covenants or agreements of either of them contained in the Indenture or the 2008
Notes; (c) the acceleration, extension or any other changes in the time for
payment of any principal of or interest or any premium on any 2008 Note or for
any other payment under the Indenture or of the time for performance of any
other obligations, covenants or agreements under or arising out of the Indenture
or the 2008 Notes; (d) the modification or amendment (whether material or
otherwise) of any obligation, covenant or agreement set forth in the Indenture
or the 2008 Notes; (e) the taking or the omission of any of the actions referred
to in the Indenture and in any of the actions under the 2008 Notes; (f) any
failure, omission, delay or lack on the part of the Trustee to enforce, assert
or exercise any right, power or remedy conferred on the Trustee in the
Indenture, or any other action or acts on the part of the Trustee or any of the
Holders from time to time of the 2008 Notes; (g) the voluntary or involuntary
liquidation, dissolution, sale or other disposition of all or substantially all
the assets, marshaling of assets and liabilities, receivership, insolvency,
bankruptcy, assignment for the benefit of creditors, reorganization,
arrangement, composition with creditors or readjustment of, or other similar
proceedings affecting the Guarantors or the Operating Partnership or any of the
assets of any of them, or any allegation or contest of the validity of the
Subsidiary Guarantee in any such proceeding; (h) to the extent permitted by law,
the release or discharge by operation of law of the Guarantors from the
performance or observance of any obligation, covenant or agreement contained in
the Indenture; (i) to the extent permitted by law, the release or discharge by
operation of law of the Operating Partnership from the performance or observance
of any obligation, covenant or agreement contained in the Indenture; (j) the
default or failure of the Operating Partnership or the Trustee fully to perform
any of its obligations set forth in the Indenture or the 2008 Notes; (k) the
invalidity, irregularity or unenforceability of the Indenture or the 2008 Notes
or any part of any thereof; (l) any judicial or governmental action affecting
the Operating Partnership or any 2008 Notes or consent or indulgence granted by
the Operating Partnership by the Holders or by the Trustee; or (m) the recovery
of any judgment against the Operating Partnership or any action to enforce the
same or any other circumstance which might
<PAGE> 15
constitute a legal or equitable discharge of a surety or guarantor. Each of the
undersigned hereby waive diligence, presentment, demand of payment, filing of
claims with a court in the event of merger, sale, lease or conveyance of all or
substantially all of its assets, insolvency or bankruptcy of the Operating
Partnership, any right to require a proceeding first against the Operating
Partnership, protest or notice with respect to such Notice or the indebtedness
evidenced thereby and all demands whatsoever, and covenants that this Subsidiary
Guarantee will not be discharged except by complete performance of the
obligations contained in such 2008 Note and in this Subsidiary Guarantee.
No reference herein to such Indenture and no provision of this
Subsidiary Guarantee or of such Indenture shall alter or impair the guarantee of
the undersigned, which is absolute and unconditional, of the full and prompt
payment of the principal of and premium, if any, and interest on the 2008 Note.
THIS SUBSIDIARY GUARANTEE SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.
This Subsidiary Guarantee shall not be valid or obligatory for any
purpose until the certificate of authentication on the 2008 Note shall have been
executed by the Trustee under the Indenture referred to above by the manual
signature of one of its authorized officers. The validity and enforceability of
this Subsidiary Guarantee shall not be affected by the fact that it is not
affixed to any particular 2008 Note.
An Event of Default under the Indenture or the 2008 Notes shall
constitute an event of default under this Subsidiary Guarantee, and shall
entitle the Holders of 2008 Notes to accelerate the obligations of the
undersigned hereunder in the same manner and to the same extent as the
obligations of the Operating Partnership.
Notwithstanding any other provision of this Subsidiary Guarantee to the
contrary, each of the undersigned hereby waives any claims or other rights which
it may now have or hereafter acquire against Operating Partnership that arise
from the existence or performance of its obligations under this Subsidiary
Guarantee or any other agreement (all such claims and rights are referred to as
"Guarantor's Conditional Rights"), including, without limitation, any right of
subrogation, reimbursement, exoneration, contribution, or indemnification, any
right to participate in any claim or remedy against Operating Partnership,
whether or not such claim, remedy or right arises in equity or under contract,
statute or common law, by any payment made hereunder or otherwise, including
without limitation, the right to take or receive from Operating Partnership,
directly or indirectly, in cash or other property or by setoff or in any other
manner, payment or security on account of such claim or other rights. Each
Guarantor hereby agrees not to exercise any rights which may be acquired by way
of contribution under this Subsidiary Guarantee or any other agreement, by any
payment made hereunder or otherwise, including, without limitation, the right to
take or receive from any other guarantor, directly or indirectly, in cash or
other property or by setoff or in any other manner, payment or security on
account of such contribution rights. If, notwithstanding the foregoing
provisions, any amount shall be paid to any of the undersigned on account of any
such Guarantor's Conditional Rights and either (i) such amount is paid to such
undersigned party at any time when the indebtedness shall not have been paid or
performed in full, or (ii) regardless of when such amount is paid to such
A-2
<PAGE> 16
undersigned party, any payment made by Operating Partnership to a Holder that is
at any time determined to be a Preferential Payment (as defined below), then
such amount paid to any of the undersigned shall be held in trust for the
benefit of Holder and shall forthwith be paid such Holder to be credited and
applied upon the indebtedness, whether matured or unmatured. Any such payment is
herein referred to as a "Preferential Payment" to the extent the Operating
Partnership makes any payment to Holder in connection with the Note, and any or
all of such payment is subsequently invalidated, declared to be fraudulent or
preferential, set aside or required to be repaid or paid over to a trustee,
receiver or any other entity, whether under any bankruptcy act or otherwise.
To the extent that any of the provisions of the immediately preceding
paragraph shall not be enforceable, each of the undersigned agrees that until
such time as the indebtedness has been paid and performed in full and the period
of time has expired during which any payment made by Operating Partnership or
the undersigned to a Holder may be determined to be a Preferential Payment,
Guarantor's Conditional Rights to the extent not validly waived shall be
subordinate to Holder's right to full payment and performance of the
indebtedness and each of the undersigned shall not enforce any of its respective
portion of the Guarantors' Conditional Rights until such time as the
indebtedness has been paid and performed in full and the period of time has
expired during which any payment made by Operating Partnership or the
undersigned to Holder may be determined to be a Preferential Payment.
Each of the undersigned's liability (an undersigned's "Base Guaranty
Liability") shall be that amount from time to time equal to the aggregate
liability of the undersigned hereunder, but shall be limited to the lesser of
(A) the aggregate amount of the obligation as stated in the second sentence of
Section 1401 of the Indenture, and (B) the amount, if any, which would not have
(i) rendered the undersigned "insolvent" (as such term is defined in Section
101(29) of the Federal Bankruptcy Code and in Section 271 of the Debtor and
Creditor Law of the State of New York, as each is in effect at the date of this
Indenture) or (ii) left the undersigned with unreasonably small capital at the
time its Guarantee was entered into, after giving effect to the incurrence of
existing Debt (as defined in the Indenture) immediately prior to such time,
provided that, it shall be a presumption in any lawsuit or other proceeding in
which the undersigned is a party that the amount guaranteed is the amount set
forth in (A) above unless a creditor, or representative of creditors of the
undersigned or a trustee in bankruptcy of the undersigned, as debtor in
possession, otherwise proves in such a lawsuit that the aggregate liability of
the undersigned is limited to the amount set forth in (B). In making any
determination as to the solvency or sufficiency of capital of the undersigned in
accordance with the previous sentence, the right of the undersigned to
contribution from other Guarantors, to subrogation and any other rights the
undersigned may have, contractual or otherwise, shall be taken into account.
The obligations of the undersigned to the Holders of the 2008 Notes and
to the Trustee pursuant to the Subsidiary Guarantee and the Indenture are
expressly set forth in Article 14 of the Indenture and reference is hereby made
to the Indenture for the precise terms of the Subsidiary Guarantee and all of
the other provisions of the Indenture to which this Subsidiary Guarantee
relates.
A-3
<PAGE> 17
All terms in this Subsidiary Guarantee which are defined in the
Indenture shall have the meanings assigned to them in the Indenture.
IN WITNESS WHEREOF, the undersigned has caused this Subsidiary Guarantee
to be duly executed.
Dated: .__________, 1998
AMB PROPERTY II, L.P.
LONG GATE LLC.
AMB PROPERTY CORPORATION, as general
partner and manager
By:______________________________________
[Name]
Its:[title]
A-4
<PAGE> 18
ABBREVIATIONS
The following abbreviations, when used in the inscription on the face of
this instrument, shall be construed as though they were written out in full
according to applicable laws or regulations:
TEN COM--as tenants in common UNIF GIFT MIN ACT--______ Custodian______
TEN ENT--as tenants by the entireties (Cust) (Minor)
JT TEN--as joint tenants with right of Under Uniform Gifts to Minors
survivorship and not as Act__________________________
tenants in common (State)
Additional abbreviations may also be used though not in the above list.
---------------------------
A-5
<PAGE> 19
FOR VALUE RECEIVED, the undersigned registered holder hereby sell(s), assign(s)
and transfer(s) unto
PLEASE INSERT SOCIAL SECURITY OR OTHER IDENTIFYING NUMBER OF ASSIGNEE
- -----------------------------------
- -----------------------------------
- --------------------------------------------------------------------------------
PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS OF ASSIGNEE
- --------------------------------------------------------------------------------
the within Note and all rights thereunder, hereby irrevocably constituting and
appointing
______________________________________________________________________ Attorney
to transfer said Note on the books of the Operating Partnership with full power
of substitution in the premises.
Dated:
---------------------------
Notice: The signature to this assignment must correspond with the name
as it appears upon the face of the within Note in every particular, without
alteration or enlargement or any change whatever.
A-6
<PAGE> 20
[FORM OF SCHEDULE FOR ENDORSEMENTS ON GLOBAL NOTE
TO REFLECT CHANGES IN PRINCIPAL AMOUNT]
Schedule A
Changes to Principal Amount of Global Note
<TABLE>
<CAPTION>
========================================================================================
Principal Amount of Notes
by which this Global Note
is to be Reduced or
Increased, and Reason for Remaining Principal Amount Notation
Date Reduction or Increase of this Global Notes Made by
- ------------ ------------------------- -------------------------- ----------
<S> <C> <C> <C>
- ------------ ------------------------- -------------------------- ----------
- ------------ ------------------------- -------------------------- ----------
- ------------ ------------------------- -------------------------- ----------
- ------------ ------------------------- -------------------------- ----------
- ------------ ------------------------- -------------------------- ----------
- ------------ ------------------------- -------------------------- ----------
- ------------ ------------------------- -------------------------- ----------
========================================================================================
</TABLE>
A-7
<PAGE> 1
EXHIBIT 4.3
SECOND SUPPLEMENTAL INDENTURE
SECOND SUPPLEMENTAL INDENTURE, dated as of __________, 1998 (this
"Second Supplemental Indenture"), among AMB PROPERTY, L.P., a Delaware limited
partnership (the "Operating Partnership"), AMB PROPERTY CORPORATION (the "Parent
Guarantor"), each of the Operating Partnership's Subsidiaries that either now or
in the future are parties hereto as guarantors (the "Subsidiary Guarantors" and
together with the Parent Guarantor, the "Guarantors") and State Street Bank and
Trust Company of California, N.A., as Trustee hereunder (the "Trustee").
W I T N E S S E T H:
WHEREAS, the Operating Partnership, the Guarantors and the Trustee
executed and delivered an Indenture, dated as of ___________, 1998 (as
supplemented hereby, the "Indenture"), to provide for the issuance by the
Operating Partnership of notes evidencing its unsecured indebtedness;
WHEREAS, pursuant to Board Resolution, the Operating Partnership has
authorized the issuance of $________ of its ______% Notes due________, 2018 (the
"2018 Notes");
WHEREAS, the Operating Partnership desires to establish the terms of the
2018 Notes in accordance with Section 301 of the Indenture and to establish the
form of the 2018 Notes in accordance with Section 201 of the Indenture.
ARTICLE 1
TERMS
SECTION 101. TERMS OF NOTES. The following terms relating to the 2018
Notes are hereby established:
(1) The 2018 Notes shall constitute a series of Notes having the title
"______% Notes due __________, 2018."
(2) The aggregate principal amount of the 2018 Notes that may be
authenticated and delivered under the Indenture (except for 2018 Notes
authenticated and delivered upon registration of transfer of, or exchange for,
or in lieu of, other 2018 Notes pursuant to Sections 304, 305, 306, 906, or 1107
of the Indenture) shall be up to $__________.
(3) The entire outstanding principal of the 2018 Notes will mature on
_________, 2018 (the "Stated Maturity Date").
(4) The rate at which the 2018 Notes shall bear interest shall be ___%
per annum; the date from which interest shall accrue shall be ________, 1998;
the Interest Payment Dates for the 2018 Notes on which interest will be payable
shall be _______ and ______ in each year, beginning _____, 1998; the Regular
Record Dates for the interest payable on the 2018 Notes on any Interest Payment
Date shall be the 15th calendar day preceding the applicable Interest Payment
Date.
<PAGE> 2
(5) The Place of Payment where the principal of and interest on the 2018
Notes shall be payable and 2018 Notes may be surrendered for the registration of
transfer or exchange shall be the office of the Trustee's affiliate, State
Street Bank and Trust Company, at 61 Broadway, 15th Floor, New York, New York
10006. The place where notices or demands to or upon the Operating Partnership
in respect of the 2018 Notes and the Indenture may be served shall be the
Corporate Trust Office of the Trustee at 633 West Fifth Street, 12th Floor, Los
Angles, California 90071.
(6) The 2018 Notes shall not be redeemable at the option of any Holder
thereof, upon the occurrence of any particular circumstances or otherwise.
(7) The Trustee shall also be the Security Registrar and Paying Agent
for the 2018 Notes.
(8) The Holders of the 2018 Notes shall have no special rights in
addition to those provided in the Indenture upon the occurrence of any
particular events.
(9) The 2018 Notes shall have no additional Events of Default in
addition to the Events of Default set forth in Article Five of the Indenture.
(10) Interest on any 2018 Note shall be payable only to the Person in
whose name that 2018 Note is registered at the close of business on the Regular
Record Date for such interest.
(11) The 2018 Notes shall not be subordinated to any other debt of the
Operating Partnership, and shall constitute senior unsecured obligations of the
Operating Partnership.
SECTION 102. FORM OF 2018 NOTE. The form of the 2018 Note is attached
hereto as Exhibit A.
ARTICLE II
MISCELLANEOUS
SECTION 201. DEFINITIONS. Capitalized terms used but not defined in this
Second Supplemental Indenture shall have the meanings ascribed thereto in the
Indenture.
SECTION 202. CONFIRMATION OF INDENTURE. The Indenture, as heretofore
supplemented and amended by this Second Supplemental Indenture, is in all
respects ratified and confirmed, and the Indenture, this Second Supplemental
Indenture and all indentures supplemental thereto shall be read, taken and
construed as one and the same instrument.
SECTION 203. CONCERNING THE TRUSTEE. The Trustee assumes no duties,
responsibilities or liabilities by reason of this Second Supplemental Indenture
other than as set forth in the Indenture and, in carrying out its
responsibilities hereunder, shall have all of the rights, protections and
immunities which it possesses under the Indenture.
SECTION 204. GOVERNING LAW. This Second Supplemental Indenture, the
Indenture and the Notes shall be governed by and construed in accordance with
the law of the State of New York.
2
<PAGE> 3
SECTION 205. SEPARABILITY. In case any provision in this Second
Supplemental Indenture shall for any reason be held to be invalid, illegal or
unenforceable, the validity, legality and enforceability of the remaining
provisions shall not in any way be affected or impaired thereby.
SECTION 206. COUNTERPARTS. This Second Supplemental Indenture may be
executed in any number of counterparts each of which shall be an original, but
such counterparts shall together constitute but one and the same instrument.
3
<PAGE> 4
IN WITNESS WHEREOF, the parties hereto have caused this Second
Supplemental Indenture to be duly executed, as of the day and year first above
written.
AMB PROPERTY, L.P.
By: AMB PROPERTY CORPORATION,
as General Partner
By:
-------------------------
AMB PROPERTY CORPORATION.
By:
-------------------------
AMB PROPERTY II, L.P.
By: AMB PROPERTY CORPORATION,
as General Partner
By:
-------------------------
LONG GATE LLC.
By: AMB PROPERTY CORPORATION,
as Manager
By:
-------------------------
4
<PAGE> 5
STATE STREET BANK AND TRUST
COMPANY OF CALIFORNIA, N.A., as Trustee
By:
------------------------
5
<PAGE> 6
EXHIBIT A
Form of Note
[LEGEND FOR INCLUSION IN GLOBAL NOTES-- THIS NOTE IS A GLOBAL NOTE WITHIN THE
MEANING OF THE INDENTURE HEREINAFTER REFERRED TO AND IS REGISTERED IN THE NAME
OF A DEPOSITARY OR A NOMINEE THEREOF. THIS NOTE IS EXCHANGEABLE FOR NOTES
REGISTERED IN THE NAME OF A PERSON OTHER THAN THE DEPOSITARY OR ITS NOMINEE ONLY
IN THE LIMITED CIRCUMSTANCES DESCRIBED IN THE INDENTURE AND, UNLESS AND UNTIL IT
IS EXCHANGED IN WHOLE OR IN PART FOR NOTES IN DEFINITIVE FORM, THIS NOTE MAY NOT
BE TRANSFERRED EXCEPT AS A WHOLE BY THE DEPOSITARY TO A NOMINEE OF THE
DEPOSITARY OR BY A NOMINEE OF THE DEPOSITARY TO THE DEPOSITARY OR ANOTHER
NOMINEE OF THE DEPOSITARY OR BY THE DEPOSITARY OR ANY SUCH NOMINEE TO A
SUCCESSOR DEPOSITARY OR A NOMINEE OF SUCH SUCCESSOR DEPOSITARY.]
[LEGEND FOR INCLUSION IN GLOBAL NOTES -- UNLESS THIS NOTE IS PRESENTED BY AN
AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY, A NEW YORK
CORPORATION ("DTC"), TO THE OPERATING PARTNERSHIP (AS DEFINED BELOW) OR ITS
AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY NOTE ISSUED IS
REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS REQUESTED BY AN
AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO. OR TO
SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC, ANY
TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON
IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST
HEREIN.]
No.:
CUSIP No.: Principal Amount: $___________
AMB PROPERTY, L.P.
______% Notes due 2018
AMB Property, L.P., a Delaware limited partnership (hereinafter called
the "Operating Partnership", which term includes any successor under the
Indenture referred to below), for value received, hereby promises to pay to
__________, or registered assigns, [the principal sum of ____________ DOLLARS
($_____________)][the principal amount then shown on Schedule A hereto] on
__________ 2018, and to pay interest thereon from _________ or from the most
recent date to which interest has been paid or duly provided for, semiannually
on __________ and __________ of each year (each, an "Interest Payment Date"),
commencing ___________, and at Maturity, at the rate of ______% per annum, until
the principal hereof is paid or duly made available for payment. Interest on
this Note shall be calculated on the basis of a 360-day year consisting of
twelve 30-day months. The interest so payable and punctually paid or duly
<PAGE> 7
provided for on any Interest Payment Date will, as provided in such Indenture,
be paid to the Person in whose name this Note (or one or more Predecessor Notes)
is registered at the close of business on the Regular Record Date for such
interest, which shall be the ________ or ________ (whether or not a Business
Day), as the case may be, next preceding such Interest Payment Date. Any such
interest which is payable, but is not punctually paid or duly provided for, on
any Interest Payment Date shall forthwith cease to be payable to the registered
Holder hereof on the relevant Regular Record Date by virtue of having been such
Holder, and may be paid to the Person in whose name this Note (or one or more
Predecessor Notes) is registered at the close of business on a Special Record
Date for the payment of such Defaulted Interest to be fixed by the Trustee,
notice whereof shall be given to the Holder of this Note not less than 10 days
prior to such Special Record Date, or may be paid at any time in any other
lawful manner not inconsistent with the requirements of any securities exchange
on which the Notes may be listed, and upon such notice as may be required by
such exchange, all as more fully provided in such Indenture.
Payment of the principal of and the interest on this Note will be made
at the office or agency of the Operating Partnership maintained for that purpose
in the Borough of Manhattan, The City of New York, in such coin or currency of
the United States of America as at the time of payment is legal tender for
payment of public and private debts; provided, however, that, at the option of
the Operating Partnership, interest may be paid by check mailed to the address
of the Person entitled thereto as such address shall appear in the Note Register
or by transfer to an account maintained by the payee located in the United
States of America.
This Note is one of a duly authorized issue of Notes of the Operating
Partnership (herein called the "Notes") issued and to be issued in multiple
series under an Indenture dated as of _______,1998 (herein called, together with
all indentures supplemental thereto, the "Indenture") among, the Operating
Partnership, AMB Property Corporation, each of the Operating Partnership's
Subsidiaries that either now or in the future is a party thereto as guarantors
and State Street Bank and Trust Company of Caliofrnia, N.A., as trustee (herein
called the "Trustee", which term includes any successor trustee under the
Indenture), to which Indenture and all indentures supplemental thereto reference
is hereby made for a statement of the respective rights, limitations of rights,
duties and immunities thereunder of the Operating Partnership, the Trustee and
the Holders of the Notes, and the terms upon which the Notes are, and are to be,
authenticated and delivered. This Note is one of the series designated on the
face hereof, limited in aggregate principal amount to $___________.
The Notes are subject to redemption prior to the Stated Maturity of the
principal thereof as provided in the Indenture.
If an Event of Default with respect to the Notes shall occur and be
continuing, the principal of the Notes may be declared due and payable in the
manner and with the effect provided in the Indenture.
The Indenture permits, with certain exceptions as therein provided, the
amendment thereof and the modification of the rights and obligations of the
Operating Partnership and the rights of the Holders of the Notes of each series
issued under the Indenture at any time by the Operating Partnership and the
Trustee with the consent of the Holders of not less than a majority
7
<PAGE> 8
in aggregate principal amount of the Notes at the time Outstanding of each
series affected thereby. The Indenture also contains provisions permitting the
Holders of specified percentages in aggregate principal amount of the Notes of
any series at the time Outstanding, on behalf of the Holders of all Notes of
such series, to waive compliance by the Operating Partnership with certain
provisions of the Indenture and certain past defaults under the Indenture and
their consequences. Any such consent or waiver by the holder of this Note shall
be conclusive and binding upon such Holder and upon all future Holders of this
Note and of any Notes issued upon the registration of transfer hereof or in
exchange herefor or in lieu hereof, whether or not notation of such consent or
waiver is made upon this Note.
No reference herein to the Indenture and no provision of this Note or of
the Indenture shall alter or impair the obligation of the Operating Partnership,
which is absolute and unconditional, to pay the principal of and interest on
this Note, at the time, place and rate, and in the coin or currency, herein and
in the Indenture prescribed.
As provided in the Indenture and subject to certain limitations set
forth therein, the transfer of this Note may be registered on the Note Register
upon surrender of this Note for registration of transfer at the office or agency
of the Operating Partnership maintained for the purpose in any place where the
principal of and interest on this Note are payable, duly endorsed, or
accompanied by a written instrument of transfer in form satisfactory to the
Operating Partnership and the Note Registrar duly executed by the Holder hereof
or by his attorney duly authorized in writing, and thereupon one or more new
Notes, of authorized denominations and for the same aggregate principal amount,
will be issued to the designated transferee or transferees. The Notes are
issuable only in registered form without coupons in the denominations of $1,000
and integral multiples of $1,000. As provided in the Indenture and subject to
certain limitations set forth therein, the Notes are exchangeable for a like
aggregate principal amount of Notes of authorized denominations as requested by
the Holders surrendering the same.
No service charge shall be made for any such registration of transfer or
exchange, but the Operating Partnership may require payment of a sum sufficient
to cover any tax or other governmental charge payable in connection therewith,
other than in certain cases provided in the Indenture.
Prior to due presentment of this Note for registration of transfer, the
Operating Partnership, the Trustee and any agent of the Operating Partnership or
the Trustee may treat the Person in whose name this Note is registered as the
owner hereof for all purposes, whether or not this Note be overdue, and neither
the Operating Partnership, the Trustee nor any such agent shall be affected by
notice to the contrary.
The Indenture contains provisions whereby (i) the Operating Partnership
may be discharged from its obligations with respect to the Notes (subject to
certain exceptions) or (ii) the Operating Partnership may be released from its
obligations under specified covenants and agreements in the Indenture, in each
case if the Operating Partnership irrevocably deposits with the Trustee money or
Government Obligations sufficient to pay and discharge the entire indebtedness
on all Notes, and satisfies certain other conditions, all as more fully provided
in the Indenture.
8
<PAGE> 9
This Note shall be governed by and construed in accordance with the laws
of the State of New York.
All terms used in this Note which are defined in the Indenture shall
have the meanings assigned to them in the Indenture.
Unless the certificate of authentication hereon has been executed by or
on behalf of the Trustee under the Indenture by the manual signature of one of
its authorized signatories, this Note shall not be entitled to any benefits
under the Indenture or be valid or obligatory for any purpose.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
9
<PAGE> 10
IN WITNESS WHEREOF, the Operating Partnership has caused this instrument
to be duly executed.
Dated:
AMB PROPERTY, L.P.
By AMB PROPERTY CORPORATION,
as General Partner
By:
----------------------------
President
TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the Notes of the series
designated therein referred to in the
within-mentioned Indenture.
STATE STREET BANK AND TRUST
COMPANY OF CALIFORNIA, N.A., as Trustee
By:
------------------------------
Authorized Signatory
10
<PAGE> 11
PARENT GUARANTEE
FOR VALUE RECEIVED, the undersigned hereby, jointly and severally with
the Subsidiary Guarantors pursuant to the Subsidiary Guarantee of even date,
unconditionally guarantees to the Holder of the accompanying _____% Note Due
________, 2018 (the "2018 Note") issued by AMB Property, L.P. (the "Operating
Partnership") under an Indenture dated as of _________, 1998 (together with the
First Supplemental Indenture thereto, the "Indenture") among the Operating
Partnership, AMB Property Corporation, certain of the Operating Partnership's
subsidiaries and __________, as trustee (the "Trustee"), (a) the full and prompt
payment of the principal of and premium, if any, on such 2018 Note when and as
the same shall become due and payable, whether at Stated Maturity, by
acceleration, by redemption or otherwise, and (b) the full and prompt payment of
the interest on such 2018 Note when and as the same shall become due and
payable, according to the terms of such 2018 Note and of the Indenture. In case
of the failure of the Operating Partnership punctually to pay any such
principal, premium or interest, the undersigned hereby agrees to cause any such
payment to be made punctually when and as the same shall become due and payable,
whether at Stated Maturity, upon acceleration, by redemption or otherwise, and
as if such payment were made by the Operating Partnership. The undersigned
hereby agrees, jointly and severally with the Subsidiary Guarantors, that its
obligations hereunder shall be as principal and not merely as surety, and shall
be absolute and unconditional, and shall not be affected, modified or impaired
by the following: (a) the failure to give notice to the Guarantors of the
occurrence of an Event of Default under the Indenture; (b) the waiver,
surrender, compromise, settlement, release or termination of the payment,
performance or observance by the Operating Partnership or the Guarantors of any
or all of the obligations, covenants or agreements of either of them contained
in the Indenture or the 2018 Notes; (c) the acceleration, extension or any other
changes in the time for payment of any principal of or interest or any premium
on any 2018 Note or for any other payment under the Indenture or of the time for
performance of any other obligations, covenants or agreements under or arising
out of the Indenture or the 2018 Notes; (d) the modification or amendment
(whether material or otherwise) of any obligation, covenant or agreement set
forth in the Indenture or the 2018 Notes; (e) the taking or the omission of any
of the actions referred to in the Indenture and in any of the actions under the
2018 Notes; (f) any failure, omission, delay or lack on the part of the Trustee
to enforce, assert or exercise any right, power or remedy conferred on the
Trustee in the Indenture, or any other action or acts on the part of the Trustee
or any of the Holders from time to time of the 2018 Notes; (g) the voluntary or
involuntary liquidation, dissolution, sale or other disposition of all or
substantially all the assets, marshaling of assets and liabilities,
receivership, insolvency, bankruptcy, assignment for the benefit of creditors,
reorganization, arrangement, composition with creditors or readjustment of, or
other similar proceedings affecting the Guarantors or the Operating Partnership
or any of the assets of any of them, or any allegation or contest of the
validity of the Parent Guarnatee in any such proceeding; (h) to the extent
permitted by law, the release or discharge by operation of law of the Guarantors
from the performance or observance of any obligation, covenant or agreement
contained in the Indenture; (i) to the extent permitted by law, the release or
discharge by operation of law of the Operating Partnership from the performance
or observance of any obligation, covenant or agreement contained in the
Indenture; (j) the default or failure of the Operating Partnership or the
Trustee fully to perform any of its obligations set forth in the Indenture or
the 2018 Notes; (k) the invalidity, irregularity or unenforceability of the
Indenture or the 2018 Notes or any part of any thereof; (l) any judicial or
governmental action affecting the
11
<PAGE> 12
Operating Partnership or any 2018 Notes or consent or indulgence granted by the
Operating Partnership by the Holders or by the Trustee; or (m) the recovery of
any judgment against the Operating Partnership or any action to enforce the same
or any other circumstance which might constitute a legal or equitable discharge
of a surety or guarantor. The undersigned hereby waives diligence, presentment,
demand of payment, filing of claims with a court in the event of merger, sale,
lease or conveyance of all or substantially all of its assets, insolvency or
bankruptcy of the Operating Partnership, any right to require a proceeding first
against the Operating Partnership, protest or notice with respect to such Notice
or the indebtedness evidenced thereby and all demands whatsoever, and covenants
that this Parent Guarnatee will not be discharged except by complete performance
of the obligations contained in such 2018 Note and in this Parent Guarnatee.
No reference herein to such Indenture and no provision of this Parent
Guarnatee or of such Indenture shall alter or impair the guarantee of the
undersigned, which is absolute and unconditional, of the full and prompt payment
of the principal of and premium, if any, and interest on the 2018 Note.
THIS PARENT GUARANTEE SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE
WITH THE LAWS OF THE STATE OF NEW YORK.
This Parent Guarnatee shall not be valid or obligatory for any purpose
until the certificate of authentication on the 2018 Note shall have been
executed by the Trustee under the Indenture referred to above by the manual
signature of one of its authorized officers. The validity and enforceability of
this Parent Guarnatee shall not be affected by the fact that it is not affixed
to any particular 2018 Note.
An Event of Default under the Indenture or the 2018 Notes shall
constitute an event of default under this Parent Guarnatee, and shall entitle
the Holders of 2018 Notes to accelerate the obligations of the undersigned
hereunder in the same manner and to the same extent as the obligations of the
Operating Partnership.
Notwithstanding any other provision of this Parent Guarnatee to the
contrary, the undersigned hereby waives any claims or other rights which it may
now have or hereafter acquire against Operating Partnership that arise from the
existence or performance of its obligations under this Parent Guarnatee or any
other agreement (all such claims and rights are referred to as "Guarantor's
Conditional Rights"), including, without limitation, any right of subrogation,
reimbursement, exoneration, contribution, or indemnification, any right to
participate in any claim or remedy against Operating Partnership, whether or not
such claim, remedy or right arises in equity or under contract, statute or
common law, by any payment made hereunder or otherwise, including without
limitation, the right to take or receive from Operating Partnership, directly or
indirectly, in cash or other property or by setoff or in any other manner,
payment or security on account of such claim or other rights. Guarantor hereby
agrees not to exercise any rights which may be acquired by way of contribution
under this Parent Guarnatee or any other agreement, by any payment made
hereunder or otherwise, including, without limitation, the right to take or
receive from any other guarantor, directly or indirectly, in cash or other
property or by setoff or in any other manner, payment or security on account of
such contribution rights. If, notwithstanding the foregoing provisions, any
amount shall be paid to any of the undersigned on
12
<PAGE> 13
account of any such Guarantor's Conditional Rights and either (i) such amount is
paid to such undersigned party at any time when the indebtedness shall not have
been paid or performed in full, or (ii) regardless of when such amount is paid
to such undersigned party, any payment made by Operating Partnership to a Holder
that is at any time determined to be a Preferential Payment (as defined below),
then such amount paid to any of the undersigned shall be held in trust for the
benefit of Holder and shall forthwith be paid such Holder to be credited and
applied upon the indebtedness, whether matured or unmatured. Any such payment is
herein referred to as a "Preferential Payment" to the extent the Operating
Partnership makes any payment to Holder in connection with the Note, and any or
all of such payment is subsequently invalidated, declared to be fraudulent or
preferential, set aside or required to be repaid or paid over to a trustee,
receiver or any other entity, whether under any bankruptcy act or otherwise.
To the extent that any of the provisions of the immediately preceding
paragraph shall not be enforceable, each of the undersigned agrees that until
such time as the indebtedness has been paid and performed in full and the period
of time has expired during which any payment made by Operating Partnership or
the undersigned to a Holder may be determined to be a Preferential Payment,
Guarantor's Conditional Rights to the extent not validly waived shall be
subordinate to Holder's right to full payment and performance of the
indebtedness and each of the undersigned shall not enforce any of its respective
portion of the Guarantors' Conditional Rights until such time as the
indebtedness has been paid and performed in full and the period of time has
expired during which any payment made by Operating Partnership or the
undersigned to Holder may be determined to be a Preferential Payment.
The obligations of the undersigned to the Holders of the 2018 Notes and
to the Trustee pursuant to the Parent Guarnatee and the Indenture are expressly
set forth in Article 14 of the Indenture and reference is hereby made to the
Indenture for the precise terms of the Parent Guarnatee and all of the other
provisions of the Indenture to which this Parent Guarnatee relates.
All terms in this Parent Guarnatee which are defined in the Indenture
shall have the meanings assigned to them in the Indenture.
IN WITNESS WHEREOF, the undersigned has caused this Parent Guarnatee to
be duly executed.
Dated: .__________, 1998
AMB PROPERTY CORPORATION
By:______________________________________
[Name]
Its:[title]
13
<PAGE> 14
SUBSIDIARY GUARNATEE
FOR VALUE RECEIVED, each of the undersigned hereby jointly and
severally, and jointly and severally with the Parent Guarantor pursuant to the
Parent Guarantee of even date, unconditionally guarantees to the Holder of the
accompanying _____% Note Due ________, 2018 (the "2018 Note") issued by AMB
Property, L.P. (the "Operating Partnership") under an Indenture dated as of
_________, 1998 (together with the First Supplemental Indenture thereto, the
"Indenture") among the Operating Partnership, AMB Property Corporation, certain
of the Operating Partnership's subsidiaries and __________, as trustee (the
"Trustee"), (a) the full and prompt payment of the principal of and premium, if
any, on such 2018 Note when and as the same shall become due and payable,
whether at Stated Maturity, by acceleration, by redemption or otherwise, and (b)
the full and prompt payment of the interest on such 2018 Note when and as the
same shall become due and payable, according to the terms of such 2018 Note and
of the Indenture. Each of the undersigned hereby agrees, jointly and severally,
and jointly and severally with the Parent Guarantor, that its obligations
hereunder shall be as principal and not merely as surety, and shall be absolute
and unconditional, and shall not be affected, modified or impaired by the
following: (a) the failure to give notice to the Guarantors of the occurrence of
an Event of Default under the Indenture; (b) the waiver, surrender, compromise,
settlement, release or termination of the payment, performance or observance by
the Operating Partnership or the Guarantors of any or all of the obligations,
covenants or agreements of either of them contained in the Indenture or the 2018
Notes; (c) the acceleration, extension or any other changes in the time for
payment of any principal of or interest or any premium on any 2018 Note or for
any other payment under the Indenture or of the time for performance of any
other obligations, covenants or agreements under or arising out of the Indenture
or the 2018 Notes; (d) the modification or amendment (whether material or
otherwise) of any obligation, covenant or agreement set forth in the Indenture
or the 2018 Notes; (e) the taking or the omission of any of the actions referred
to in the Indenture and in any of the actions under the 2018 Notes; (f) any
failure, omission, delay or lack on the part of the Trustee to enforce, assert
or exercise any right, power or remedy conferred on the Trustee in the
Indenture, or any other action or acts on the part of the Trustee or any of the
Holders from time to time of the 2018 Notes; (g) the voluntary or involuntary
liquidation, dissolution, sale or other disposition of all or substantially all
the assets, marshaling of assets and liabilities, receivership, insolvency,
bankruptcy, assignment for the benefit of creditors, reorganization,
arrangement, composition with creditors or readjustment of, or other similar
proceedings affecting the Guarantors or the Operating Partnership or any of the
assets of any of them, or any allegation or contest of the validity of the
Subsidiary Guarnatee in any such proceeding; (h) to the extent permitted by law,
the release or discharge by operation of law of the Guarantors from the
performance or observance of any obligation, covenant or agreement contained in
the Indenture; (i) to the extent permitted by law, the release or discharge by
operation of law of the Operating Partnership from the performance or observance
of any obligation, covenant or agreement contained in the Indenture; (j) the
default or failure of the Operating Partnership or the Trustee fully to perform
any of its obligations set forth in the Indenture or the 2018 Notes; (k) the
invalidity, irregularity or unenforceability of the Indenture or the 2018 Notes
or any part of any thereof; (l) any judicial or governmental action affecting
the Operating Partnership or any 2018 Notes or consent or indulgence granted by
the Operating Partnership by the Holders or by the Trustee; or (m) the recovery
of any judgment against the Operating Partnership or any action to enforce the
same or any other circumstance which might
<PAGE> 15
constitute a legal or equitable discharge of a surety or guarantor. Each of the
undersigned hereby waive diligence, presentment, demand of payment, filing of
claims with a court in the event of merger, sale, lease or conveyance of all or
substantially all of its assets, insolvency or bankruptcy of the Operating
Partnership, any right to require a proceeding first against the Operating
Partnership, protest or notice with respect to such Notice or the indebtedness
evidenced thereby and all demands whatsoever, and covenants that this Subsidiary
Guarnatee will not be discharged except by complete performance of the
obligations contained in such 2018 Note and in this Subsidiary Guarnatee.
No reference herein to such Indenture and no provision of this
Subsidiary Guarnatee or of such Indenture shall alter or impair the guarantee of
the undersigned, which is absolute and unconditional, of the full and prompt
payment of the principal of and premium, if any, and interest on the 2018 Note.
THIS SUBSIDIARY GUARANTEE SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.
This Subsidiary Guarnatee shall not be valid or obligatory for any
purpose until the certificate of authentication on the 2018 Note shall have been
executed by the Trustee under the Indenture referred to above by the manual
signature of one of its authorized officers. The validity and enforceability of
this Subsidiary Guarnatee shall not be affected by the fact that it is not
affixed to any particular 2018 Note.
An Event of Default under the Indenture or the 2018 Notes shall
constitute an event of default under this Subsidiary Guarnatee, and shall
entitle the Holders of 2018 Notes to accelerate the obligations of the
undersigned hereunder in the same manner and to the same extent as the
obligations of the Operating Partnership.
Notwithstanding any other provision of this Subsidiary Guarnatee to the
contrary, each of the undersigned hereby waives any claims or other rights which
it may now have or hereafter acquire against Operating Partnership that arise
from the existence or performance of its obligations under this Subsidiary
Guarnatee or any other agreement (all such claims and rights are referred to as
"Guarantor's Conditional Rights"), including, without limitation, any right of
subrogation, reimbursement, exoneration, contribution, or indemnification, any
right to participate in any claim or remedy against Operating Partnership,
whether or not such claim, remedy or right arises in equity or under contract,
statute or common law, by any payment made hereunder or otherwise, including
without limitation, the right to take or receive from Operating Partnership,
directly or indirectly, in cash or other property or by setoff or in any other
manner, payment or security on account of such claim or other rights. Each
Guarantor hereby agrees not to exercise any rights which may be acquired by way
of contribution under this Subsidiary Guarnatee or any other agreement, by any
payment made hereunder or otherwise, including, without limitation, the right to
take or receive from any other guarantor, directly or indirectly, in cash or
other property or by setoff or in any other manner, payment or security on
account of such contribution rights. If, notwithstanding the foregoing
provisions, any amount shall be paid to any of the undersigned on account of any
such Guarantor's Conditional Rights and either (i) such amount is paid to such
undersigned party at any time when the indebtedness shall not have been paid or
performed in full, or (ii) regardless of when such amount is paid to such
A-2
<PAGE> 16
undersigned party, any payment made by Operating Partnership to a Holder that is
at any time determined to be a Preferential Payment (as defined below), then
such amount paid to any of the undersigned shall be held in trust for the
benefit of Holder and shall forthwith be paid such Holder to be credited and
applied upon the indebtedness, whether matured or unmatured. Any such payment is
herein referred to as a "Preferential Payment" to the extent the Operating
Partnership makes any payment to Holder in connection with the Note, and any or
all of such payment is subsequently invalidated, declared to be fraudulent or
preferential, set aside or required to be repaid or paid over to a trustee,
receiver or any other entity, whether under any bankruptcy act or otherwise.
To the extent that any of the provisions of the immediately preceding
paragraph shall not be enforceable, each of the undersigned agrees that until
such time as the indebtedness has been paid and performed in full and the period
of time has expired during which any payment made by Operating Partnership or
the undersigned to a Holder may be determined to be a Preferential Payment,
Guarantor's Conditional Rights to the extent not validly waived shall be
subordinate to Holder's right to full payment and performance of the
indebtedness and each of the undersigned shall not enforce any of its respective
portion of the Guarantors' Conditional Rights until such time as the
indebtedness has been paid and performed in full and the period of time has
expired during which any payment made by Operating Partnership or the
undersigned to Holder may be determined to be a Preferential Payment.
Each of the undersigned's liability (an undersigned's "Base Guaranty
Liability") shall be that amount from time to time equal to the aggregate
liability of the undersigned hereunder, but shall be limited to the lesser of
(A) the aggregate amount of the obligation as stated in the second sentence of
Section 1401 of the Indenture, and (B) the amount, if any, which would not have
(i) rendered the undersigned "insolvent" (as such term is defined in Section
101(29) of the Federal Bankruptcy Code and in Section 271 of the Debtor and
Creditor Law of the State of New York, as each is in effect at the date of this
Indenture) or (ii) left the undersigned with unreasonably small capital at the
time its Guarantee was entered into, after giving effect to the incurrence of
existing Debt (as defined in the Indenture) immediately prior to such time,
provided that, it shall be a presumption in any lawsuit or other proceeding in
which the undersigned is a party that the amount guaranteed is the amount set
forth in (A) above unless a creditor, or representative of creditors of the
undersigned or a trustee in bankruptcy of the undersigned, as debtor in
possession, otherwise proves in such a lawsuit that the aggregate liability of
the undersigned is limited to the amount set forth in (B). In making any
determination as to the solvency or sufficiency of capital of the undersigned in
accordance with the previous sentence, the right of the undersigned to
contribution from other Guarantors, to subrogation and any other rights the
undersigned may have, contractual or otherwise, shall be taken into account.
The obligations of the undersigned to the Holders of the 2018 Notes and
to the Trustee pursuant to the Subsidiary Guarnatee and the Indenture are
expressly set forth in Article 14 of the Indenture and reference is hereby made
to the Indenture for the precise terms of the Subsidiary Guarnatee and all of
the other provisions of the Indenture to which this Subsidiary Guarnatee
relates.
A-3
<PAGE> 17
All terms in this Subsidiary Guarnatee which are defined in the
Indenture shall have the meanings assigned to them in the Indenture.
IN WITNESS WHEREOF, the undersigned has caused this Subsidiary Guarnatee
to be duly executed.
Dated: .__________, 1998
AMB PROPERTY II, L.P.
LONG GATE LLC.
AMB PROPERTY CORPORATION, as general
partner and manager
By:______________________________________
[Name]
Its:[title]
A-4
<PAGE> 18
ABBREVIATIONS
The following abbreviations, when used in the inscription on the face of
this instrument, shall be construed as though they were written out in full
according to applicable laws or regulations:
TEN COM--as tenants in common UNIF GIFT MIN ACT--______ Custodian______
TEN ENT--as tenants by the entireties (Cust) (Minor)
JT TEN--as joint tenants with right of Under Uniform Gifts to Minors
survivorship and not as Act__________________________
tenants in common (State)
Additional abbreviations may also be used though not in the above list.
---------------------------
A-5
<PAGE> 19
FOR VALUE RECEIVED, the undersigned registered holder hereby sell(s), assign(s)
and transfer(s) unto
PLEASE INSERT SOCIAL SECURITY OR OTHER IDENTIFYING NUMBER OF ASSIGNEE
- -----------------------------------
- -----------------------------------
- --------------------------------------------------------------------------------
PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS OF ASSIGNEE
- --------------------------------------------------------------------------------
the within Note and all rights thereunder, hereby irrevocably constituting and
appointing
______________________________________________________________________ Attorney
to transfer said Note on the books of the Operating Partnership with full power
of substitution in the premises.
Dated:
---------------------------
Notice: The signature to this assignment must correspond with the name
as it appears upon the face of the within Note in every particular, without
alteration or enlargement or any change whatever.
A-6
<PAGE> 20
[FORM OF SCHEDULE FOR ENDORSEMENTS ON GLOBAL NOTE
TO REFLECT CHANGES IN PRINCIPAL AMOUNT]
Schedule A
Changes to Principal Amount of Global Note
<TABLE>
<CAPTION>
========================================================================================
Principal Amount of Notes
by which this Global Note
is to be Reduced or
Increased, and Reason for Remaining Principal Amount Notation
Date Reduction or Increase of this Global Notes Made by
- -------------- ------------------------- -------------------------- ----------
<S> <C> <C> <C>
- -------------- ------------------------- -------------------------- ----------
- -------------- ------------------------- -------------------------- ----------
- -------------- ------------------------- -------------------------- ----------
- -------------- ------------------------- -------------------------- ----------
- -------------- ------------------------- -------------------------- ----------
- -------------- ------------------------- -------------------------- ----------
- -------------- ------------------------- -------------------------- ----------
========================================================================================
</TABLE>
A-7
<PAGE> 1
EXHIBIT 4.4
THIRD SUPPLEMENTAL INDENTURE
THIRD SUPPLEMENTAL INDENTURE, dated as of __________, 1998 (this "Third
Supplemental Indenture"), among AMB PROPERTY, L.P., a Delaware limited
partnership (the "Operating Partnership"), AMB PROPERTY CORPORATION (the "Parent
Guarantor"), each of the Operating Partnership's Subsidiaries that either now or
in the future are parties hereto as guarantors (the "Subsidiary Guarantors" and
together with the Parent Guarantor, the "Guarantors") and State Street Bank and
Trust Company of California, N.A., as Trustee hereunder (the "Trustee").
W I T N E S S E T H:
WHEREAS, the Operating Partnership, the Guarantors and the Trustee
executed and delivered an Indenture, dated as of ___________, 1998 (as
supplemented hereby, the "Indenture"), to provide for the issuance by the
Operating Partnership of notes evidencing its unsecured indebtedness;
WHEREAS, pursuant to Board Resolution, the Operating Partnership has
authorized the issuance of $________ of its ______% Reset Put Securities ("REPS"
SM) due________, 2015-Putable/Callable 2005;
WHEREAS, the Operating Partnership desires to establish the terms of the
REPS in accordance with Section 301 of the Indenture and to establish the form
of the REPS in accordance with Section 201 of the Indenture.
ARTICLE 1
TERMS
SECTION 101. TERMS OF REPS. The following terms relating to the REPS are
hereby established:
(1) The REPS shall constitute a series of Notes having the title
"______% Reset Put Securities due ________, 2015-Putable/Callable 2005."
(2) The aggregate principal amount of the REPS that may be authenticated
and delivered under the Indenture (except for REPS authenticated and delivered
upon registration of transfer of, or exchange for, or in lieu of, other REPS
pursuant to Sections 304, 305, 306, 906, or 1107 of the Indenture) shall be up
to $__________.
(3) The entire outstanding principal of the REPS shall be payable on
_________, 2015 (the "Stated Maturity Date"). On the Coupon Reset Date (as
defined below), the Holders will be entitled to receive 100% of the principal
amount from either (i) the Callholder (as defined below), if the Callholder
purchases the REPS pursuant to the Call Option (as defined below), or (ii) the
Operating Partnership, by exercise of the Mandatory Put (as defined below) by
the Trustee for and on behalf of the Holders thereof, if the Callholder does not
purchase the REPS pursuant to the Call Option.
<PAGE> 2
(4) Subject to adjustment upon the exercise of the Call Option, the rate
at which the REPS shall bear interest shall be ___% per annum; the date from
which interest shall accrue shall be ________, 1998 and shall accrue until
__________, 2005 (the "Coupon Reset Date"); the Interest Payment Dates for the
REPS on which interest will be payable shall be _______ and ______ in each year,
beginning _____, 1998; the Regular Record Dates for the interest payable on the
REPS on any Interest Payment Date shall be the 15th calendar day preceding the
applicable Interest Payment Date. Beginning on the Coupon Reset Date (x) if all
of the REPS are purchased on such date by the Callholder pursuant to its Call
Option, the REPS shall bear interest from and including the Coupon Reset Date to
but excluding ______, 2015 (the "Final Maturity Date") at the Coupon Reset Rate
determined in accordance with the Coupon Reset Process described below, or (y)
the REPS shall be purchased by the Operating Partnership pursuant to the
exercise of the Mandatory Put by the Trustee on behalf of the holders of the
REPS. If the Callholder (as defined below) elects to purchase the REPS pursuant
to the Call Option (as defined below), the Calculation Agent (as defined below)
will reset the interest rate for the REPS effective on the Coupon Reset Date,
pursuant to the Coupon Reset Process described below. In such circumstances, (i)
the REPS will be purchased by the Callholder at 100% of the principal amount
hereof on the Coupon Reset Date, on the terms and subject to the conditions
described herein (interest accrued to but excluding the Coupon Reset Date will
be paid by the Operating Partnership on such date to the Holder hereof on the
most recent Regular Record Date), and (ii) from and including the Coupon Reset
Date, the REPS will bear interest at the rate determined by the Calculation
Agent in accordance with the procedures set forth below.
(5) The Place of Payment where the principal of and interest on the REPS
shall be payable and REPS may be surrendered for the registration of transfer or
exchange shall be the office of the Trustee's affiliate, State Street Bank and
Trust Company, at 61 Broadway, 15th Floor, New York, New York 10006. The place
where notices or demands to or upon the Operating Partnership in respect of the
REPS and the Indenture may be served shall be the Corporate Trust Office of the
Trustee at 633 West Fifth Street, 12th Floor, Los Angles, California 90071.
(6) Subject to the Call Option and the Mandatory Put described below,
the REPS are not redeemable prior to maturity.
The Callholder, by giving notice to the Trustee (the "Call Notice"), has
the right to purchase the aggregate principal amount of REPS outstanding, in
whole but not in part (the "Call Option"), on the Coupon Reset Date, at a price
equal to 100% of the principal amount thereof (the "Call Price") (interest
accrued to but excluding the Coupon Reset Date will be paid by the Operating
Partnership on such date to the Holders thereof on the most recent Regular
Record Date). The Call Notice shall be given to the Trustee, in writing, prior
to 4:00 p.m., New York time, no later than 15 calendar days prior to the Coupon
Reset Date. The Call Notice must contain the requisite delivery details,
including the identity of the Callholder's DTC account. The Call Notice may be
revoked by the Callholder at any time prior to 2:00 p.m., New York time, on the
Business Day prior to the Coupon Reset Date.
For the purposes hereof, the "Callholder" means the Operating
Partnership. The Callholder may at any time assign its rights and obligations
under its Call Option; provided, however, that (i) such rights and obligations
are assigned in whole and not in part and (ii) it
2
<PAGE> 3
provides the Trustee and the Operating Partnership with notice of such
assignment contemporaneously with such assignment.
Morgan Stanley & Co. International Limited, a corporation organized
under the laws of England ("Morgan Stanley"), has made a payment to the
Operating Partnership on the date hereof, which amount represents a reasonable
payment for Morgan Stanley's acquiring the Call Option from the Operating
Partnership. To this end, the Operating Partnership hereby assigns all its
right, title and interest in, to and under the Call Option to Morgan Stanley and
Morgan Stanley hereby assumes all the obligations and liabilities of the
Operating Partnership under the Call Option.
Upon receipt of notice of assignment, the Trustee will treat the
assignee as Callholder for all purposes hereunder. The Callholder may assign its
rights under the Call Option without notice to, or consent of, the holders of
the REPS (including, if applicable, the Holder hereof).
If the Callholder exercises the Call Option, unless terminated in
accordance with its terms, (i) not later than 2:00 p.m., New York Time, on the
Business Day prior to the Coupon Reset Date, the Callholder will deliver the
Call Price in immediately available funds to the Trustee for payment thereof to
the Holders of the REPS on the Coupon Reset Date and (ii) the Holders will be
required to deliver and will be deemed to have delivered the REPS to the
Callholder against payment therefor on the Coupon Reset Date through the
facilities of DTC. The Callholder is not required to exercise the Call Option,
and no holder of the REPS or any interest therein shall have any right or claim
against the Callholder as a result of the Callholder's decision whether or not
to exercise the Call Option or performance or non-performance of its obligations
with respect thereto.
If the Calculation Agent determines that (i) at any time prior to the
sale of the REPS on the Bid Date, an Event of Default has occurred and is
continuing under Sections 501(1), (2), (3), (4) or (5) of the Indenture (in such
event termination is at the Callholder's option), (ii) at any time prior to the
sale of the REPS on the Bid Date, an Event of Default has occurred and is
continuing under Sections 501(6) or (7) of the Indenture , (iii) a Market
Disruption Event (as defined below) has occurred and is continuing following the
exercise of the Call Option, (iv) the Callholder fails to deliver the Call
Notice to the Trustee prior to 4:00 p.m., New York time, on the fifteenth
calendar day prior to the Coupon Reset Date or revokes the Call Notice, (v) the
Callholder fails to pay the Call Price by 2:00 p.m., New York time, on the
Business Day prior to the Coupon Reset Date, (vi) a defeasance or a convent
defeasance pursuant to Article 12 of the Indenture shall have occurred, or (vii)
two or more of the Dealers have failed to provide Bids in a timely manner
substantially as provided herein, such Call Option shall automatically be
revoked, provided that with respect to clause (i) above, the Callholder can
elect to waive any such Event of Default and prevent the Call Option from
terminating. For purposes of the foregoing, "Market Disruption Event" shall mean
any of the following if such events occur and are continuing on any day from and
including the date of the Call Notice to and including the Bid Date if in the
judgment of the Calculation Agent: (i) a suspension or material limitation in
trading in securities generally on the New York Stock Exchange or the
establishment of minimum prices on such exchange; (ii) a general moratorium on
commercial banking activities declared by either federal or New York State
authorities, (iii) any material adverse change in the existing financial,
political or economic conditions in the United States of America; (vi) an
outbreak or escalation of major
3
<PAGE> 4
hostilities involving the United States of America or the declaration of a
national emergency or war by the United States of America; or (v) any material
disruption of the U.S. government securities market, U.S. corporate bond market
or U.S. federal wire system; provided, in each case that in the judgment of the
Calculation Agent the effect of the foregoing makes it impractical to conduct
the Coupon Reset Process.
If the Call Option is not exercised or if the Call Option otherwise
terminates, the Trustee will be obligated to exercise the right of the holders
of the REPS to require the Operating Partnership to purchase the aggregate
principal amount of REPS, in whole but not in part, (the "Mandatory Put") on the
Coupon Reset Date at a price equal to 100% of the principal amount thereof (the
"Put Price"), plus accrued but unpaid interest to but excluding the Coupon Reset
Date, in each case, to be paid by the Operating Partnership to the Holders of
the REPS as of the immediately preceding Regular Record Date in immediately
available funds on the Coupon Reset Date. In such event, the Operating
Partnership shall deliver the Put Price in immediately available funds to the
Trustee by no later than 10:00 a.m., New York time, on the Coupon Reset Date and
the holders of the REPS will be required to deliver and will be deemed to have
delivered the REPS to the Operating Partnership against payment therefor on the
Coupon Reset Date through the facilities of DTC. By its purchase of the REPS,
each Holder shall be deemed to have irrevocably agreed that the Trustee shall
exercise the Mandatory Put relating to the REPS for or on behalf of the holders
of the REPS as provided herein and in the REPS. By purchasing REPS, each Holder
of any REPS or any interest therein will be deemed to waived the right to
consent or object to the exercise of the Trustee's duties under the Mandatory
Put.
In anticipation of the exercise of the Call Option or the Mandatory Put
on the Coupon Reset Date, the Trustee will notify the Holders of the REPS, not
less than 30 days nor more than 60 days prior to the Coupon Reset Date, that all
REPS will be delivered on the Coupon Reset Date through the facilities of DTC
against payment of the Call Price by the Callholder under the Call Option or
payment of the Put Price by the Operating Partnership under the Mandatory Put.
The Trustee shall notify the Holders once it is determined whether the Call
Price or the Put Price will be delivered in accordance with the provisions
hereof.
Pursuant to and subject to the terms of a calculation agency agreement,
dated as of ________, 1998, between the Operating Partnership and Morgan Stanley
& Co. Incorporated, Morgan Stanley & Co. Incorporated (or its successors or
assigns) will be the Calculation Agent. If the Callholder timely exercises the
Call Option and the Call Option does not otherwise terminate in accordance with
the terms of this Third Supplemental Indenture, then the Operating Partnership
and the Calculation Agent shall complete the following steps (the "Coupon Reset
Process") in order to determine the interest rate ("Coupon Reset Rate") to be
paid on the REPS from and including the Coupon Reset Date to but excluding the
Final Maturity Date:
(i) no later than five Business Days prior to the Coupon Reset Date, the
Operating Partnership shall provide the Calculation Agent with (a) a list (a
"Dealer List"), containing the names and addresses of three dealers (one of
which shall be Morgan Stanley & Co. Incorporated) from whom the Operating
Partnership desires the Calculation Agent to obtain the Bids for the purchase of
the REPS and (b) such other material as may reasonably be requested by the
Calculation Agent to facilitate a successful Coupon Reset Process.
4
<PAGE> 5
(ii) Within one Business Day following receipt by the Calculation Agent
of the Dealer List, the Calculation Agent shall provide to each dealer
("Dealer") on the Dealer List (a) a copy of the Prospectus relating to the REPS,
(b) a copy of the form of the REPS and (c) a written request that each such
Dealer submit a Bid to the Calculation Agent by 12:00 noon, New York time, on
the third Business Day prior to the Coupon Reset Date (the "Bid Date"). The time
on the Bid Date upon which Bids will be requested may be changed by the
Calculation Agent to as late as 3:00 p.m., New York Time. As used herein and in
the REPS, "Bid" shall mean an irrevocable written offer given by a Dealer for
the purchase of all of the REPS, settling on the Coupon Reset Date, and shall be
quoted by such Dealer as a stated yield to maturity on the REPS ("Yield to
Maturity"). Each Dealer shall be provided with (a) the name of the Operating
Partnership, (b) an estimate of the Purchase Price (which shall be stated as a
U.S. dollar amount and be calculated by the Calculation Agent in accordance with
clause (iii) below), (c) the principal amount and maturity of the REPS and (d)
the method by which interest will be calculated on the REPS.
(iii) The purchase price to be paid by any Dealer for the REPS (the
"Purchase Price") shall be equal to (a) the principal amount of the REPS plus
(b) a premium (the "Notes Premium") which shall be equal to the excess on the
Coupon Reset Date, if any, of (x) the discounted present value to the Coupon
Reset Date of a bond with a maturity of ___________, 2015 which has an interest
rate equal to ________%, semi-annual interest payments on each ________ and
________, commencing ________, 2005, and a principal amount equal to the
principal amount of the REPS, and assuming a discount rate equal to the Call
Option Treasury Rate over (y) such principal amount of REPS. For the purposes
hereof, "Call Option Treasury Rate" means the per annum rate equal to the offer
side yield to maturity of the current on-the-run 10-year United States Treasury
Security per Telerate page 500 (or any successor or substitute page as may
replace such page on such service) at 11:00 a.m., New York time, on the Bid Date
(or such other date or time that may be agreed upon by the Operating Partnership
and the Calculation Agent) or, if such rate does not appear on Telerate page 500
(or any successor or substitute page as may replace such page on such service)
at such time, the rates on GovPX End-of-Day Pricing at 3:00 p.m., New York time,
on the Bid Date (or such other date that may be agreed upon by the Operating
Partnership and the Calculation Agent).
(iv) The Calculation Agent shall provide written notice to the Operating
Partnership by 12:30 p.m., New York time (or within 30 minutes of such later
time at which the last Bid is received by the Calculation Agent, but in no event
later than 3:30 p.m.) on the Bid Date, setting forth, (a) the names of each of
the Dealers from whom the Calculation Agent received Bids on the Bid Date, (b)
the Bid submitted by each such Dealer and (c) the Purchase Price as determined
pursuant to clause (iii) hereof. Unless the Call Option has terminated in
accordance with the terms of the Indenture, the Calculation Agent shall
thereafter select from the Bids received the Bid with the lowest Yield to
Maturity (the "Selected Bid") and set the Coupon Reset Rate equal to the
interest rate which would amortize the Notes Premium fully over the term of the
REPS at the Yield to Maturity indicated by the Selected Bid, provided, however,
that if the Calculation Agent has not received a timely Bid from a Dealer, the
Selected Bid shall be the lowest of all Bids received by such time and provided,
further that if any two or more of the lowest Bids submitted are equivalent, the
Operating Partnership shall in its sole discretion select any of such equivalent
Bids (and such selected Bid shall be the Selected Bid). In all cases, Morgan
Stanley & Co. Incorporated, in its capacity as a Dealer has the right to match
the Bid with the lowest
5
<PAGE> 6
Yield to Maturity, whereby Morgan Stanley & Co. Incorporated's Bid becomes the
Selected Bid. The Calculation Agent shall notify the Dealer that submitted the
Selected Bid by 4:00 p.m., New York time, on the Bid Date.
(v) Immediately after calculating the Coupon Reset Rate for the REPS,
the Calculation Agent shall provide written notice to the Operating Partnership
and the Trustee, setting forth the Coupon Reset Rate. At the request of holders
of the REPS as of the immediately preceding Record Date, the Calculation Agent
will provide such holders the Coupon Reset Rate. Thereafter, the Coupon Reset
Rate shall be the new interest Rate on the REPS, effective from and including
the Coupon Reset Date and shall be established by the delivery of an Officer's
Certificate to the Trustee.
(vi) The Callholder will sell the REPS to the Dealer that made the
Selected Bid at the Purchase Price, such sale to be settled on the Coupon Reset
Date in immediately available funds.
(7) The Trustee shall also be the Security Registrar and Paying Agent
for the REPS.
(8) The Holders of the REPS shall have no special rights in addition to
those provided in the Indenture upon the occurrence of any particular events.
(9) The REPS shall have no additional Events of Default in addition to
the Events of Default set forth in Article Five of the Indenture.
(10) Interest on any REPS shall be payable only to the Person in whose
name any such REPS are registered at the close of business on the Regular Record
Date for such interest.
(11) The REPS shall not be subordinated to any other debt of the
Operating Partnership, and shall constitute senior unsecured obligations of the
Operating Partnership.
SECTION 102. FORM OF REPS. The form of the REPS is attached hereto as
Exhibit A.
ARTICLE II
MISCELLANEOUS
SECTION 201. DEFINITIONS. Capitalized terms used but not defined in this
Third Supplemental Indenture shall have the meanings ascribed thereto in the
Indenture.
SECTION 202. CONFIRMATION OF INDENTURE. The Indenture, as heretofore
supplemented and amended by this Third Supplemental Indenture, is in all
respects ratified and confirmed, and the Indenture, this Third Supplemental
Indenture and all indentures supplemental thereto shall be read, taken and
construed as one and the same instrument.
SECTION 203. CONCERNING THE TRUSTEE. The Trustee assumes no duties,
responsibilities or liabilities by reason of this Third Supplemental Indenture
other than as set forth in the Indenture and, in carrying out its
responsibilities hereunder, shall have all of the rights, protections and
immunities which it possesses under the Indenture.
6
<PAGE> 7
SECTION 204. GOVERNING LAW. This Third Supplemental Indenture, the
Indenture and the Notes shall be governed by and construed in accordance with
the law of the State of New York.
SECTION 205. SEPARABILITY. In case any provision in this Third
Supplemental Indenture shall for any reason be held to be invalid, illegal or
unenforceable, the validity, legality and enforceability of the remaining
provisions shall not in any way be affected or impaired thereby.
SECTION 206. COUNTERPARTS. This Third Supplemental Indenture may be
executed in any number of counterparts each of which shall be an original, but
such counterparts shall together constitute but one and the same instrument.
7
<PAGE> 8
IN WITNESS WHEREOF, the parties hereto have caused this First
Supplemental Indenture to be duly executed, and the corporate seal of the
General Partner to be hereunto affixed and attested, as of the day and year
first above written.
AMB PROPERTY, L.P.
By: AMB PROPERTY CORPORATION,
as General Partner
By:
-------------------------
AMB PROPERTY CORPORATION.
By:
-------------------------
AMB PROPERTY II, L.P.
By: AMB PROPERTY CORPORATION,
as General Partner
By:
-------------------------
LONG GATE LLC.
By: AMB PROPERTY CORPORATION,
as Manager
By:
-------------------------
8
<PAGE> 9
STATE STREET BANK AND TRUST
COMPANY OF CALIFORNIA, N.A., as Trustee
By:
-------------------------
9
<PAGE> 10
EXHIBIT A
Form of REPS
[LEGEND FOR INCLUSION IN GLOBAL NOTES-- THIS NOTE IS A GLOBAL NOTE WITHIN THE
MEANING OF THE INDENTURE HEREINAFTER REFERRED TO AND IS REGISTERED IN THE NAME
OF A DEPOSITARY OR A NOMINEE THEREOF. THIS NOTE IS EXCHANGEABLE FOR NOTES
REGISTERED IN THE NAME OF A PERSON OTHER THAN THE DEPOSITARY OR ITS NOMINEE ONLY
IN THE LIMITED CIRCUMSTANCES DESCRIBED IN THE INDENTURE AND, UNLESS AND UNTIL IT
IS EXCHANGED IN WHOLE OR IN PART FOR NOTES IN DEFINITIVE FORM, THIS NOTE MAY NOT
BE TRANSFERRED EXCEPT AS A WHOLE BY THE DEPOSITARY TO A NOMINEE OF THE
DEPOSITARY OR BY A NOMINEE OF THE DEPOSITARY TO THE DEPOSITARY OR ANOTHER
NOMINEE OF THE DEPOSITARY OR BY THE DEPOSITARY OR ANY SUCH NOMINEE TO A
SUCCESSOR DEPOSITARY OR A NOMINEE OF SUCH SUCCESSOR DEPOSITARY.]
[LEGEND FOR INCLUSION IN GLOBAL NOTES -- UNLESS THIS NOTE IS PRESENTED BY AN
AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY, A NEW YORK
CORPORATION ("DTC"), TO THE OPERATING PARTNERSHIP (AS DEFINED BELOW) OR ITS
AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY NOTE ISSUED IS
REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS REQUESTED BY AN
AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO. OR TO
SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC, ANY
TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON
IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST
HEREIN.]
No.:
CUSIP No.: Principal Amount: $___________
AMB PROPERTY, L.P.
______% Reset Put Securities (REPS (SM)) Due________,
2015-Putable/Callable 2005
AMB Property, L.P., a Delaware limited partnership (hereinafter called
the "Operating Partnership", which term includes any successor under the
Indenture referred to below), for value received, hereby promises to pay to
__________, or registered assigns, [the principal sum of ____________ DOLLARS
($_____________)][the principal amount then shown on Schedule A hereto] on
__________ 2015, and to pay interest thereon from _________ or from the most
recent date to which interest has been paid or duly provided for, semiannually
on __________ and __________ of each year (each, an "Interest Payment Date"),
commencing ___________ to but excluding __________, 2005 (the "Coupon Reset
Date"), at the rate of ______% per annum, until the principal hereof is paid or
duly made available for payment, whereupon (x) if all of the REPS are purchased
on such date by the Callholder pursuant to its Call Option, the REPS shall
<PAGE> 11
bear interest from and including the Coupon Reset Date to but excluding ______,
2015 (the "Final Maturity Date") at the Coupon Reset Rate determined in
accordance with the Coupon Reset Process described below, or (y) the REPS shall
be purchased by the Operating Partnership pursuant to the exercise of the
Mandatory Put by the Trustee on behalf of the holders of the REPS. If the
Callholder (as defined below) elects to purchase the REPS pursuant to the Call
Option (as defined below), the Calculation Agent (as defined below) will reset
the interest rate for the REPS effective on the Coupon Reset Date, pursuant to
the Coupon Reset Process described below. In such circumstances, (i) the REPS
will be purchased by the Callholder at 100% of the principal amount hereof on
the Coupon Reset Date, on the terms and subject to the conditions described
herein (interest accrued to but excluding the Coupon Reset Date will be paid by
the Operating Partnership on such date to the Holder hereof on the most recent
Regular Record Date), and (ii) from and including the Coupon Reset Date, the
REPS will bear interest at the rate determined by the Calculation Agent in
accordance with the procedures set forth below. Interest on this security shall
be calculated on the basis of a 360-day year consisting of twelve 30-day months.
The interest so payable and punctually paid or duly provided for on any Interest
Payment Date will, as provided in such Indenture, be paid to the Person in whose
name this security (or one or more Predecessor Notes) is registered at the close
of business on the Regular Record Date for such interest, which shall be the
________ or ________ (whether or not a Business Day), as the case may be, next
preceding such Interest Payment Date. Any such interest which is payable, but is
not punctually paid or duly provided for, on any Interest Payment Date shall
forthwith cease to be payable to the registered Holder hereof on the relevant
Regular Record Date by virtue of having been such Holder, and may be paid to the
Person in whose name this security (or one or more Predecessor Notes) is
registered at the close of business on a Special Record Date for the payment of
such Defaulted Interest to be fixed by the Trustee, notice whereof shall be
given to the Holder of this Security not less than 10 days prior to such Special
Record Date, or may be paid at any time in any other lawful manner not
inconsistent with the requirements of any securities exchange on which the REPS
may be listed, and upon such notice as may be required by such exchange, all as
more fully provided in such Indenture. On the Coupon Reset Date, the Holder
hereof will be entitled to receive 100% of the principal amount hereof from
either (i) the Callholder, if the Callholder purchases the REPS pursuant to the
Call Option, or (ii) the Operating Partnership, by exercise of the Mandatory Put
(as defined below) by the Trustee for and on behalf of the Holder hereof, if the
Callholder does not purchase the REPS pursuant to the Call Option.
Payment of the principal of and the interest on this security will be
made at the office or agency of the Operating Partnership maintained for that
purpose in the Borough of Manhattan, The City of New York, in such coin or
currency of the United States of America as at the time of payment is legal
tender for payment of public and private debts; provided, however, that, at the
option of the Operating Partnership, interest may be paid by check mailed to the
address of the Person entitled thereto as such address shall appear in the Note
Register or by wire transfer to an account maintained by the payee located in
the United States of America.
This security is one of a duly authorized issue of Notes of the
Operating Partnership (herein called the "REPS") issued and to be issued in
multiple series under an Indenture dated as of _______,1998 (herein called,
together with all indentures supplemental thereto, the "Indenture") among, the
Operating Partnership, AMB Property Corporation, each of the Operating
Partnership's Subsidiaries that either now or in the future is a party thereto
as
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<PAGE> 12
guarantors and State Street Bank and Trust Company of California, N.A., as
trustee (herein called the "Trustee", which term includes any successor trustee
under the Indenture), to which Indenture and all indentures supplemental thereto
reference is hereby made for a statement of the respective rights, limitations
of rights, duties and immunities thereunder of the Operating Partnership, the
Trustee and the Holders of the REPS, and the terms upon which the REPS are, and
are to be, authenticated and delivered. This Security is one of the series
designated on the face hereof, limited in aggregate principal amount to
$___________. Subject to the Call Option and the Mandatory Put described below,
the REPS are not redeemable prior to maturity.
For the purposes hereof, the "Callholder" means the Operating
Partnership. The Callholder may at any time assign its rights and obligations
under its Call Option; provided, however, that (i) such rights and obligations
are assigned in whole and not in part and (ii) it provides the Trustee and the
Operating Partnership with notice of such assignment contemporaneously with such
assignment.
Morgan Stanley & Co. International Limited, a corporation organized
under the laws of England ("Morgan Stanley"), has made a payment to the
Operating Partnership on the date hereof, which amount represents a reasonable
payment for Morgan Stanley's acquiring the Call Option from the Operating
Partnership. To this end, the Operating Partnership hereby assigns all its
right, title and interest in, to and under the Call Option to Morgan Stanley and
Morgan Stanley hereby assumes all the obligations and liabilities of the
Operating Partnership under the Call Option.
The Callholder, by giving notice to the Trustee (the "Call Notice"), has
the right to purchase the aggregate principal amount of this security, in whole
but not in part (the "Call Option"), on the Coupon Reset Date, at a price equal
to 100% of the principal amount hereof (the "Call Price") (interest accrued to
but excluding the Coupon Reset Date will be paid by the Operating Partnership on
such date to the Holder hereof on the most recent Regular Record Date). The Call
Notice shall be given to the Trustee, in writing, prior to 4:00 p.m., New York
time, no later than fifteen calendar days prior to the Coupon Reset Date. The
Call Notice must contain the requisite delivery details, including the identity
of the Callholder's DTC account. The Call Notice may be revoked by the
Callholder at any time prior to 2:00 p.m., New York time, on the Business Day
prior to the Coupon Reset Date.
If the Callholder exercises the Call Option, unless terminated in
accordance with its terms, (i) not later than 2:00 p.m., New York Time, on the
Business Day prior to the Coupon Reset Date, the Callholder will deliver the
Call Price in immediately available funds to the Trustee for payment thereof to
the holders of the REPS (including, if applicable, the Holder hereof) on the
Coupon Reset Date and (ii) the Holder hereof will be required to deliver and
will be deemed to have delivered this security to the Callholder against payment
therefor on the Coupon Reset Date through the facilities of DTC. The Callholder
is not required to exercise the Call Option, and no holder of the REPS or any
interest therein shall have any right or claim against the Callholder as a
result of the Callholder's decision whether or not to exercise the Call Option
or performance or non-performance of its obligations with respect thereto.
The Callholder may at any time assign its rights and obligations under
its Call Option; provided, however, that (i) such rights and obligations are
assigned in whole and not in part and
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<PAGE> 13
(ii) it provides the Trustee and the Operating Partnership with notice of such
assignment contemporaneously with such assignment.
Upon receipt of notice of assignment, the Trustee will treat the
assignee as Callholder for all purposes hereunder. The Callholder may assign its
rights under the Call Option without notice to, or consent of, the holders of
the REPS (including, if applicable, the Holder hereof).
The Indenture sets forth certain circumstances in which the Call Option
will automatically be terminated.
If the Call Option is not exercised or if the Call Option otherwise
terminates, the Trustee will exercise the right of the holders of the REPS
(including, if applicable, the Holder hereof) to require the to purchase the
aggregate principal amount of REPS, in whole but not in part (the "Mandatory
Put"), on the Coupon Reset Date at a price equal to 100% of the principal amount
thereof (the "Put Price"), plus accrued but unpaid interest to but excluding the
Coupon Reset Date, in each case, to be paid by the to the Holders of the REPS
(including the Holder hereof) in immediately available funds on the Coupon Reset
Date. If the Trustee exercises the Mandatory Put then the Operating Partnership
will deliver the Put Price in immediately available funds to the Trustee by no
later than 10:00 a.m., New York time, on the Coupon Reset Date and the holders
of the REPS will be required to deliver and will be deemed to have delivered the
REPS to the Operating Partnership against payment therefor on the Coupon Reset
Date through the facilities of DTC. By its purchase of the REPS, each Holder
irrevocably agrees that the Trustee shall exercise the Mandatory Put relating to
such REPS for or on behalf of the holders of the REPS as provided herein. No
holder of any REPS or any interest therein has the right to consent or object to
the exercise of the Trustee's duties under the Mandatory Put.
In anticipation of the exercise of the Call Option or the Mandatory Put
on the Coupon Reset Date, the Trustee will notify the Holder hereof, not less
than 30 days nor more than 60 days prior to the Coupon Reset Date, that all REPS
will be delivered on the Coupon Reset Date through the facilities of DTC against
payment of the Call Price by the Callholder under the Call Option or payment of
the Put Price by the Operating Partnership under the Mandatory Put. The Trustee
will notify the Holder hereof once it is determined whether the Call Price or
the Put Price will be delivered in accordance with the provisions hereof.
Pursuant to and subject to the terms of a calculation agency agreement,
dated as of ________, 1998, between the Operating Partnership and Morgan Stanley
& Co. Incorporated, Morgan Stanley & Co. Incorporated (or its successors or
assigns) will be the Calculation Agent. If the Callholder timely exercises its
Call Option and the Call Option does not otherwise terminate in accordance with
the terms of the Indenture, then the Operating Partnership and the Calculation
Agent shall complete the following steps (the "Coupon Reset Process") in order
to determine the interest rate ("Coupon Reset Rate") to be paid on the REPS from
and including the Coupon Reset Date to but excluding the Final Maturity Date:
(i) The Operating Partnership shall provide the Calculation Agent with
(a) a list (a "Dealer List"), no later than five Business Days prior to the
Coupon Reset Date, containing the names and addresses of three dealers (one of
which shall be Morgan Stanley & Co. Incorporated) from whom the Operating
Partnership desires the Calculation Agent to obtain the Bids for the
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<PAGE> 14
purchase of the REPS and (b) such other material as may reasonably be requested
by the Calculation Agent to facilitate a successful Coupon Reset Process.
(ii) Within one Business Day following receipt by the Calculation Agent
of the Dealer List, the Calculation Agent shall provide to each dealer
("Dealer") on the Dealer List (a) a copy of the Prospectus relating to the REPS,
(b) a copy of the form of the REPS and (c) a written request that each such
Dealer submit a Bid to the Calculation Agent at 12:00 noon, New York time, on
the third Business Day prior to the Coupon Reset Date (the "Bid Date"). The time
on the Bid Date upon which Bids will be requested may be changed by the
Calculation Agent to as late as 3:00 p.m., New York Time. As used herein, "Bid"
shall mean an irrevocable written offer given by a Dealer for the purchase of
the REPS, settling on the Coupon Reset Date, and shall be quoted by such Dealer
as a stated yield to maturity on the REPS ("Yield to Maturity"). Each Dealer
shall be provided with (a) the name of the Operating Partnership, (b) an
estimate of the Purchase Price (which shall be stated as a U.S. dollar amount
and be calculated by the Calculation Agent in accordance with clause (iii)
below), (c) the principal amount and maturity of the REPS and (d) the method by
which interest will be calculated on the REPS.
(iii) The purchase price to be paid by any Dealer for the REPS (the
"Purchase Price") shall be equal to (a) the principal amount of the REPS plus
(b) a premium (the "Notes Premium") which shall be equal to the excess on the
Coupon Reset Date, if any, of (x) the discounted present value to the Coupon
Reset Date of a bond with a maturity of ___________, 2015 which has an interest
rate equal to ________%, semi-annual interest payments on each ________ and
________, commencing ________, 2005, and a principal amount of $____________,
and assuming a discount rate equal to the Treasury Rate over (y) $_________. For
the purposes hereof, "Treasury Rate" means the per annum rate equal to the offer
side yield to maturity of the current on-the-run ten-year United States Treasury
Security per Telerate page 500 (or any successor or substitute page as may
replace such page on such service) at 11:00 a.m., New York time, on the Bid Date
(or such other date or time that may be agreed upon by the Operating Partnership
and the Calculation Agent) or, if such rate does not appear on Telerate page 500
(or any successor or substitute page as may replace such page on such service)
at such time, the rates on GovPx End-of-Day Pricing at 3:00 p.m., New York time,
on the Bid Date (or such other date that may be agreed upon by the Operating
Partnership and the Calculation Agent).
(iv) The Calculation Agent shall provide written notice to the Operating
Partnership by 12:30 p.m., New York time (or within 30 minutes of such later
time at which the last Bid is received by the Calculation Agent, but in no event
later than 3:30 p.m.) on the Bid Date, setting forth, (a) the names of each of
the Dealers from whom the Calculation Agent received Bids on the Bid Date, (b)
the Bid submitted by each such Dealer and (c) the Purchase Price as determined
pursuant to clause (iii) hereof. Unless the Call Option has terminated in
accordance with the terms of the Indenture, the Calculation Agent shall
thereafter select from the Bids received the Bid with the lowest Yield to
Maturity (the "Selected Bid") and set the Coupon Reset Rate equal to the
interest rate which would amortize the Notes Premium fully over the term of the
REPS at the Yield to Maturity indicated by the Selected Bid, provided, however,
that if the Calculation Agent has not received a timely Bid from a Dealer, the
Selected Bid shall be the lowest of all Bids received by such time and provided,
further that if any two or more of the lowest Bids submitted are equivalent, the
Operating Partnership shall in its sole discretion select any of such equivalent
Bids (and such selected Bid shall be the Selected Bid). In all cases, Morgan
Stanley
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<PAGE> 15
& Co. Incorporated, in its capacity as a Dealer has the right to match the Bid
with the lowest Yield to Maturity, whereby Morgan Stanley & Co. Incorporated's
Bid becomes the Selected Bid. The Calculation Agent shall notify the Dealer that
submitted the Selected Bid by 4:00 p.m., New York time, on the Bid Date.
If an Event of Default with respect to the REPS shall occur and be
continuing, the principal of the REPS may be declared due and payable in the
manner and with the effect provided in the Indenture.
The Indenture permits, with certain exceptions as therein provided, the
amendment thereof and the modification of the rights and obligations of the
Operating Partnership and the rights of the Holders of the REPS of each series
issued under the Indenture at any time by the Operating Partnership and the
Trustee with the consent of the Holders of not less than a majority in aggregate
principal amount of the REPS at the time Outstanding of each series affected
thereby. The Indenture also contains provisions permitting the Holders of
specified percentages in aggregate principal amount of the REPS of any series at
the time Outstanding, on behalf of the Holders of all REPS of such series, to
waive compliance by the Operating Partnership with certain provisions of the
Indenture and certain past defaults under the Indenture and their consequences.
Any such consent or waiver by the holder of this security shall be conclusive
and binding upon such Holder and upon all future Holders of this security and of
any REPS issued upon the registration of transfer hereof or in exchange herefor
or in lieu hereof, whether or not notation of such consent or waiver is made
upon this security.
No reference herein to the Indenture and no provision of this security
or of the Indenture shall alter or impair the obligation of the Operating
Partnership, which is absolute and unconditional, to pay the principal of and
interest on this security, at the time, place and rate, and in the coin or
currency, herein and in the Indenture prescribed.
As provided in the Indenture and subject to certain limitations set
forth therein, the transfer of this security may be registered on the Note
Register upon surrender of this security for registration of transfer at the
office or agency of the Operating Partnership maintained for the purpose in any
place where the principal of and interest on this security are payable, duly
endorsed, or accompanied by a written instrument of transfer in form
satisfactory to the Operating Partnership and the Note Registrar duly executed
by the Holder hereof or by his attorney duly authorized in writing, and
thereupon one or more new REPS, of authorized denominations and for the same
aggregate principal amount, will be issued to the designated transferee or
transferees. The REPS are issuable only in registered form without coupons in
the denominations of $1,000 and integral multiples of $1,000. As provided in the
Indenture and subject to certain limitations set forth therein, the REPS are
exchangeable for a like aggregate principal amount of REPS of authorized
denominations as requested by the Holders surrendering the same.
No service charge shall be made for any such registration of transfer or
exchange, but the Operating Partnership may require payment of a sum sufficient
to cover any tax or other governmental charge payable in connection therewith,
other than in certain cases provided in the Indenture.
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<PAGE> 16
Prior to due presentment of this security for registration of transfer,
the Operating Partnership, the Trustee and any agent of the Operating
Partnership or the Trustee may treat the Person in whose name this security is
registered as the owner hereof for all purposes, whether or not this security be
overdue, and neither the Operating Partnership, the Trustee nor any such agent
shall be affected by notice to the contrary.
The Indenture contains provisions whereby (i) the Operating Partnership
may be discharged from its obligations with respect to the REPS (subject to
certain exceptions) or (ii) the Operating Partnership may be released from its
obligations under specified covenants and agreements in the Indenture, in each
case if the Operating Partnership irrevocably deposits with the Trustee money or
Government Obligations sufficient to pay and discharge the entire indebtedness
on all Notes (including the REPS), and satisfies certain other conditions, all
as more fully provided in the Indenture.
This security shall be governed by and construed in accordance with the
laws of the State of New York.
All terms used in this security which are defined in the Indenture shall
have the meanings assigned to them in the Indenture.
Unless the certificate of authentication hereon has been executed by or
on behalf of the Trustee under the Indenture by the manual signature of one of
its authorized signatories, this security shall not be entitled to any benefits
under the Indenture or be valid or obligatory for any purpose.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
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<PAGE> 17
IN WITNESS WHEREOF, the Operating Partnership has caused this instrument
to be duly executed.
Dated:
AMB PROPERTY, L.P.
[Seal] By AMB PROPERTY CORPORATION,
as General Partner
Attest: By:
----------------------------------
President
TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the Notes of the series
designated therein referred to in the
within-mentioned Indenture.
STATE STREET BANK AND TRUST
COMPANY OF CALIFORNIA, N.A., as Trustee
By:
------------------------------
Authorized Signatory
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<PAGE> 18
PARENT GUARANTEE
FOR VALUE RECEIVED, the undersigned hereby, jointly and severally with
the Subsidiary Guarantors pursuant to the Subsidiary Guarantee of even date,
unconditionally guarantees to the Holder of the accompanying ______% Reset Put
Securities ("REPS" SM) due________, 2015-Putable/Callable 2005 (the "REPS")
issued by AMB Property, L.P. (the "Operating Partnership") under an Indenture
dated as of _________, 1998 (together with the First Supplemental Indenture
thereto, the "Indenture") among the Operating Partnership, AMB Property
Corporation, certain of the Operating Partnership's subsidiaries and __________,
as trustee (the "Trustee"), (a) the full and prompt payment of the principal of
and premium, if any, on such REPS when and as the same shall become due and
payable, whether at Stated Maturity, by acceleration, by redemption or
otherwise, and (b) the full and prompt payment of the interest on such REPS when
and as the same shall become due and payable, according to the terms of such
REPS and of the Indenture. In case of the failure of the Operating Partnership
punctually to pay any such principal, premium or interest, the undersigned
hereby agrees to cause any such payment to be made punctually when and as the
same shall become due and payable, whether at Stated Maturity, upon
acceleration, by redemption or otherwise, and as if such payment were made by
the Operating Partnership. The undersigned hereby agrees, jointly and severally
with the Subsidiary Guarantors, that its obligations hereunder shall be as
principal and not merely as surety, and shall be absolute and unconditional, and
shall not be affected, modified or impaired by the following: (a) the failure to
give notice to the Guarantors of the occurrence of an Event of Default under the
Indenture; (b) the waiver, surrender, compromise, settlement, release or
termination of the payment, performance or observance by the Operating
Partnership or the Guarantors of any or all of the obligations, covenants or
agreements of either of them contained in the Indenture or the REPSs; (c) the
acceleration, extension or any other changes in the time for payment of any
principal of or interest or any premium on any REPS or for any other payment
under the Indenture or of the time for performance of any other obligations,
covenants or agreements under or arising out of the Indenture or the REPSs; (d)
the modification or amendment (whether material or otherwise) of any obligation,
covenant or agreement set forth in the Indenture or the REPSs; (e) the taking or
the omission of any of the actions referred to in the Indenture and in any of
the actions under the REPSs; (f) any failure, omission, delay or lack on the
part of the Trustee to enforce, assert or exercise any right, power or remedy
conferred on the Trustee in the Indenture, or any other action or acts on the
part of the Trustee or any of the Holders from time to time of the REPSs; (g)
the voluntary or involuntary liquidation, dissolution, sale or other disposition
of all or substantially all the assets, marshaling of assets and liabilities,
receivership, insolvency, bankruptcy, assignment for the benefit of creditors,
reorganization, arrangement, composition with creditors or readjustment of, or
other similar proceedings affecting the Guarantors or the Operating Partnership
or any of the assets of any of them, or any allegation or contest of the
validity of the Parent Guarantee in any such proceeding; (h) to the extent
permitted by law, the release or discharge by operation of law of the Guarantors
from the performance or observance of any obligation, covenant or agreement
contained in the Indenture; (i) to the extent permitted by law, the release or
discharge by operation of law of the Operating Partnership from the performance
or observance of any obligation, covenant or agreement contained in the
Indenture; (j) the default or failure of the Operating Partnership or the
Trustee fully to perform any of its obligations set forth in the Indenture or
the REPSs; (k) the invalidity, irregularity or unenforceability of the Indenture
or the REPSs or any part of any thereof; (l) any judicial or governmental action
affecting the Operating Partnership or any REPSs or consent or
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<PAGE> 19
indulgence granted by the Operating Partnership by the Holders or by the
Trustee; or (m) the recovery of any judgment against the Operating Partnership
or any action to enforce the same or any other circumstance which might
constitute a legal or equitable discharge of a surety or guarantor. The
undersigned hereby waives diligence, presentment, demand of payment, filing of
claims with a court in the event of merger, sale, lease or conveyance of all or
substantially all of its assets, insolvency or bankruptcy of the Operating
Partnership, any right to require a proceeding first against the Operating
Partnership, protest or notice with respect to such Notice or the indebtedness
evidenced thereby and all demands whatsoever, and covenants that this Parent
Guarantee will not be discharged except by complete performance of the
obligations contained in such REPS and in this Parent Guarantee.
No reference herein to such Indenture and no provision of this Parent
Guarantee or of such Indenture shall alter or impair the guarantee of the
undersigned, which is absolute and unconditional, of the full and prompt payment
of the principal of and premium, if any, and interest on the REPS.
THIS PARENT GUARANTEE SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE
WITH THE LAWS OF THE STATE OF NEW YORK.
This Parent Guarantee shall not be valid or obligatory for any purpose
until the certificate of authentication on the REPS shall have been executed by
the Trustee under the Indenture referred to above by the manual signature of one
of its authorized officers. The validity and enforceability of this Parent
Guarantee shall not be affected by the fact that it is not affixed to any
particular REPS.
An Event of Default under the Indenture or the REPSs shall constitute an
event of default under this Parent Guarantee, and shall entitle the Holders of
REPSs to accelerate the obligations of the undersigned hereunder in the same
manner and to the same extent as the obligations of the Operating Partnership.
Notwithstanding any other provision of this Parent Guarantee to the
contrary, the undersigned hereby waives any claims or other rights which it may
now have or hereafter acquire against Operating Partnership that arise from the
existence or performance of its obligations under this Parent Guarantee or any
other agreement (all such claims and rights are referred to as "Guarantor's
Conditional Rights"), including, without limitation, any right of subrogation,
reimbursement, exoneration, contribution, or indemnification, any right to
participate in any claim or remedy against Operating Partnership, whether or not
such claim, remedy or right arises in equity or under contract, statute or
common law, by any payment made hereunder or otherwise, including without
limitation, the right to take or receive from Operating Partnership, directly or
indirectly, in cash or other property or by setoff or in any other manner,
payment or security on account of such claim or other rights. Guarantor hereby
agrees not to exercise any rights which may be acquired by way of contribution
under this Parent Guarantee or any other agreement, by any payment made
hereunder or otherwise, including, without limitation, the right to take or
receive from any other guarantor, directly or indirectly, in cash or other
property or by setoff or in any other manner, payment or security on account of
such contribution rights. If, notwithstanding the foregoing provisions, any
amount shall be paid to any of the undersigned on account of any such
Guarantor's Conditional Rights and either (i) such amount is paid to such
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<PAGE> 20
undersigned party at any time when the indebtedness shall not have been paid or
performed in full, or (ii) regardless of when such amount is paid to such
undersigned party, any payment made by Operating Partnership to a Holder that is
at any time determined to be a Preferential Payment (as defined below), then
such amount paid to any of the undersigned shall be held in trust for the
benefit of Holder and shall forthwith be paid such Holder to be credited and
applied upon the indebtedness, whether matured or unmatured. Any such payment is
herein referred to as a "Preferential Payment" to the extent the Operating
Partnership makes any payment to Holder in connection with the Note, and any or
all of such payment is subsequently invalidated, declared to be fraudulent or
preferential, set aside or required to be repaid or paid over to a trustee,
receiver or any other entity, whether under any bankruptcy act or otherwise.
To the extent that any of the provisions of the immediately preceding
paragraph shall not be enforceable, each of the undersigned agrees that until
such time as the indebtedness has been paid and performed in full and the period
of time has expired during which any payment made by Operating Partnership or
the undersigned to a Holder may be determined to be a Preferential Payment,
Guarantor's Conditional Rights to the extent not validly waived shall be
subordinate to Holder's right to full payment and performance of the
indebtedness and each of the undersigned shall not enforce any of its respective
portion of the Guarantors' Conditional Rights until such time as the
indebtedness has been paid and performed in full and the period of time has
expired during which any payment made by Operating Partnership or the
undersigned to Holder may be determined to be a Preferential Payment.
The obligations of the undersigned to the Holders of the REPSs and to
the Trustee pursuant to the Parent Guarantee and the Indenture are expressly set
forth in Article 14 of the Indenture and reference is hereby made to the
Indenture for the precise terms of the Parent Guarantee and all of the other
provisions of the Indenture to which this Parent Guarantee relates.
All terms in this Parent Guarantee which are defined in the Indenture
shall have the meanings assigned to them in the Indenture.
IN WITNESS WHEREOF, the undersigned has caused this Parent Guarantee to
be duly executed.
Dated: .__________, 1998
AMB PROPERTY CORPORATION
By:______________________________________
[Name]
Its:[title]
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<PAGE> 21
SUBSIDIARY GUARANTEE
FOR VALUE RECEIVED, each of the undersigned hereby jointly and
severally, and jointly and severally with the Parent Guarantor pursuant to the
Parent Guarantee of even date, unconditionally guarantees to the Holder of the
accompanying ______% Reset Put Securities ("REPS" SM) due________,
2015-Putable/Callable 2005 (the "REPS") issued by AMB Property, L.P. (the
"Operating Partnership") under an Indenture dated as of _________, 1998
(together with the First Supplemental Indenture thereto, the "Indenture") among
the Operating Partnership, AMB Property Corporation, certain of the Operating
Partnership's subsidiaries and __________, as trustee (the "Trustee"), (a) the
full and prompt payment of the principal of and premium, if any, on such REPS
when and as the same shall become due and payable, whether at Stated Maturity,
by acceleration, by redemption or otherwise, and (b) the full and prompt payment
of the interest on such REPS when and as the same shall become due and payable,
according to the terms of such REPS and of the Indenture. Each of the
undersigned hereby agrees, jointly and severally, and jointly and severally with
the Parent Guarantor, that its obligations hereunder shall be as principal and
not merely as surety, and shall be absolute and unconditional, and shall not be
affected, modified or impaired by the following: (a) the failure to give notice
to the Guarantors of the occurrence of an Event of Default under the Indenture;
(b) the waiver, surrender, compromise, settlement, release or termination of the
payment, performance or observance by the Operating Partnership or the
Guarantors of any or all of the obligations, covenants or agreements of either
of them contained in the Indenture or the REPSs; (c) the acceleration, extension
or any other changes in the time for payment of any principal of or interest or
any premium on any REPS or for any other payment under the Indenture or of the
time for performance of any other obligations, covenants or agreements under or
arising out of the Indenture or the REPSs; (d) the modification or amendment
(whether material or otherwise) of any obligation, covenant or agreement set
forth in the Indenture or the REPSs; (e) the taking or the omission of any of
the actions referred to in the Indenture and in any of the actions under the
REPSs; (f) any failure, omission, delay or lack on the part of the Trustee to
enforce, assert or exercise any right, power or remedy conferred on the Trustee
in the Indenture, or any other action or acts on the part of the Trustee or any
of the Holders from time to time of the REPSs; (g) the voluntary or involuntary
liquidation, dissolution, sale or other disposition of all or substantially all
the assets, marshaling of assets and liabilities, receivership, insolvency,
bankruptcy, assignment for the benefit of creditors, reorganization,
arrangement, composition with creditors or readjustment of, or other similar
proceedings affecting the Guarantors or the Operating Partnership or any of the
assets of any of them, or any allegation or contest of the validity of the
Subsidiary Guarantee in any such proceeding; (h) to the extent permitted by law,
the release or discharge by operation of law of the Guarantors from the
performance or observance of any obligation, covenant or agreement contained in
the Indenture; (i) to the extent permitted by law, the release or discharge by
operation of law of the Operating Partnership from the performance or observance
of any obligation, covenant or agreement contained in the Indenture; (j) the
default or failure of the Operating Partnership or the Trustee fully to perform
any of its obligations set forth in the Indenture or the REPSs; (k) the
invalidity, irregularity or unenforceability of the Indenture or the REPSs or
any part of any thereof; (l) any judicial or governmental action affecting the
Operating Partnership or any REPSs or consent or indulgence granted by the
Operating Partnership by the Holders or by the Trustee; or (m) the recovery of
any judgment against the Operating Partnership or any action to enforce the same
or any other circumstance
<PAGE> 22
which might constitute a legal or equitable discharge of a surety or guarantor.
Each of the undersigned hereby waive diligence, presentment, demand of payment,
filing of claims with a court in the event of merger, sale, lease or conveyance
of all or substantially all of its assets, insolvency or bankruptcy of the
Operating Partnership, any right to require a proceeding first against the
Operating Partnership, protest or notice with respect to such Notice or the
indebtedness evidenced thereby and all demands whatsoever, and covenants that
this Subsidiary Guarantee will not be discharged except by complete performance
of the obligations contained in such REPS and in this Subsidiary Guarantee.
No reference herein to such Indenture and no provision of this
Subsidiary Guarantee or of such Indenture shall alter or impair the guarantee of
the undersigned, which is absolute and unconditional, of the full and prompt
payment of the principal of and premium, if any, and interest on the REPS.
THIS SUBSIDIARY GUARANTEE SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.
This Subsidiary Guarantee shall not be valid or obligatory for any
purpose until the certificate of authentication on the REPS shall have been
executed by the Trustee under the Indenture referred to above by the manual
signature of one of its authorized officers. The validity and enforceability of
this Subsidiary Guarantee shall not be affected by the fact that it is not
affixed to any particular REPS.
An Event of Default under the Indenture or the REPSs shall constitute an
event of default under this Subsidiary Guarantee, and shall entitle the Holders
of REPSs to accelerate the obligations of the undersigned hereunder in the same
manner and to the same extent as the obligations of the Operating Partnership.
Notwithstanding any other provision of this Subsidiary Guarantee to the
contrary, each of the undersigned hereby waives any claims or other rights which
it may now have or hereafter acquire against Operating Partnership that arise
from the existence or performance of its obligations under this Subsidiary
Guarantee or any other agreement (all such claims and rights are referred to as
"Guarantor's Conditional Rights"), including, without limitation, any right of
subrogation, reimbursement, exoneration, contribution, or indemnification, any
right to participate in any claim or remedy against Operating Partnership,
whether or not such claim, remedy or right arises in equity or under contract,
statute or common law, by any payment made hereunder or otherwise, including
without limitation, the right to take or receive from Operating Partnership,
directly or indirectly, in cash or other property or by setoff or in any other
manner, payment or security on account of such claim or other rights. Each
Guarantor hereby agrees not to exercise any rights which may be acquired by way
of contribution under this Subsidiary Guarantee or any other agreement, by any
payment made hereunder or otherwise, including, without limitation, the right to
take or receive from any other guarantor, directly or indirectly, in cash or
other property or by setoff or in any other manner, payment or security on
account of such contribution rights. If, notwithstanding the foregoing
provisions, any amount shall be paid to any of the undersigned on account of any
such Guarantor's Conditional Rights and either (i) such amount is paid to such
undersigned party at any time when the indebtedness shall not have been paid or
performed in full, or (ii) regardless of when such amount is paid to such
2
<PAGE> 23
undersigned party, any payment made by Operating Partnership to a Holder that is
at any time determined to be a Preferential Payment (as defined below), then
such amount paid to any of the undersigned shall be held in trust for the
benefit of Holder and shall forthwith be paid such Holder to be credited and
applied upon the indebtedness, whether matured or unmatured. Any such payment is
herein referred to as a "Preferential Payment" to the extent the Operating
Partnership makes any payment to Holder in connection with the Note, and any or
all of such payment is subsequently invalidated, declared to be fraudulent or
preferential, set aside or required to be repaid or paid over to a trustee,
receiver or any other entity, whether under any bankruptcy act or otherwise.
To the extent that any of the provisions of the immediately preceding
paragraph shall not be enforceable, each of the undersigned agrees that until
such time as the indebtedness has been paid and performed in full and the period
of time has expired during which any payment made by Operating Partnership or
the undersigned to a Holder may be determined to be a Preferential Payment,
Guarantor's Conditional Rights to the extent not validly waived shall be
subordinate to Holder's right to full payment and performance of the
indebtedness and each of the undersigned shall not enforce any of its respective
portion of the Guarantors' Conditional Rights until such time as the
indebtedness has been paid and performed in full and the period of time has
expired during which any payment made by Operating Partnership or the
undersigned to Holder may be determined to be a Preferential Payment.
Each of the undersigned's liability (an undersigned's "Base Guaranty
Liability") shall be that amount from time to time equal to the aggregate
liability of the undersigned hereunder, but shall be limited to the lesser of
(A) the aggregate amount of the obligation as stated in the second sentence of
Section 1401 of the Indenture, and (B) the amount, if any, which would not have
(i) rendered the undersigned "insolvent" (as such term is defined in Section
101(29) of the Federal Bankruptcy Code and in Section 271 of the Debtor and
Creditor Law of the State of New York, as each is in effect at the date of this
Indenture) or (ii) left the undersigned with unreasonably small capital at the
time its Guarantee was entered into, after giving effect to the incurrence of
existing Debt (as defined in the Indenture) immediately prior to such time,
provided that, it shall be a presumption in any lawsuit or other proceeding in
which the undersigned is a party that the amount guaranteed is the amount set
forth in (A) above unless a creditor, or representative of creditors of the
undersigned or a trustee in bankruptcy of the undersigned, as debtor in
possession, otherwise proves in such a lawsuit that the aggregate liability of
the undersigned is limited to the amount set forth in (B). In making any
determination as to the solvency or sufficiency of capital of the undersigned in
accordance with the previous sentence, the right of the undersigned to
contribution from other Guarantors, to subrogation and any other rights the
undersigned may have, contractual or otherwise, shall be taken into account.
The obligations of the undersigned to the Holders of the REPSs and to
the Trustee pursuant to the Subsidiary Guarantee and the Indenture are expressly
set forth in Article 14 of the Indenture and reference is hereby made to the
Indenture for the precise terms of the Subsidiary Guarantee and all of the other
provisions of the Indenture to which this Subsidiary Guarantee relates.
3
<PAGE> 24
All terms in this Subsidiary Guarantee which are defined in the
Indenture shall have the meanings assigned to them in the Indenture.
IN WITNESS WHEREOF, the undersigned has caused this Subsidiary Guarantee
to be duly executed.
Dated: .__________, 1998
AMB PROPERTY II, L.P.
LONG GATE LLC.
AMB PROPERTY CORPORATION, as general
partner and manager
By:_____________________________________
[Name]
Its:[title]
4
<PAGE> 25
ABBREVIATIONS
The following abbreviations, when used in the inscription on the face of
this instrument, shall be construed as though they were written out in full
according to applicable laws or regulations:
TEN COM--as tenants in common UNIF GIFT MIN ACT--______ Custodian______
TEN ENT--as tenants by the entireties (Cust) (Minor)
JT TEN--as joint tenants with right of Under Uniform Gifts to Minors
survivorship and not as Act__________________________
tenants in common (State)
Additional abbreviations may also be used though not in the above list.
---------------------------
5
<PAGE> 26
FOR VALUE RECEIVED, the undersigned registered holder hereby sell(s), assign(s)
and transfer(s) unto
PLEASE INSERT SOCIAL SECURITY OR OTHER IDENTIFYING NUMBER OF ASSIGNEE
- -----------------------------------
- -----------------------------------
- --------------------------------------------------------------------------------
PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS OF ASSIGNEE
- --------------------------------------------------------------------------------
the within security and all rights thereunder, hereby irrevocably constituting
and appointing
______________________________________________________________________ Attorney
to transfer said security on the books of the Operating Partnership with full
power of substitution in the premises.
Dated:
---------------------------
Notice: The signature to this assignment must correspond with the name
as it appears upon the face of the within security in every particular, without
alteration or enlargement or any change whatever.
6
<PAGE> 27
[FORM OF SCHEDULE FOR ENDORSEMENTS ON GLOBAL REPS
TO REFLECT CHANGES IN PRINCIPAL AMOUNT]
Schedule A
Changes to Principal Amount of Global REPS
<TABLE>
<CAPTION>
========================================================================================
Principal Amount of REPS
by which this Global REPS
is to be Reduced or
Increased, and Reason for Remaining Principal Amount Notation
Date Reduction or Increase of this Global REPS Made by
- -------------- ------------------------- -------------------------- ----------
<S> <C> <C> <C>
- -------------- ------------------------- -------------------------- ----------
- -------------- ------------------------- -------------------------- ----------
- -------------- ------------------------- -------------------------- ----------
- -------------- ------------------------- -------------------------- ----------
- -------------- ------------------------- -------------------------- ----------
- -------------- ------------------------- -------------------------- ----------
- -------------- ------------------------- -------------------------- ----------
========================================================================================
</TABLE>
7
<PAGE> 1
EXHIBIT 8.1
[LATHAM & WATKINS LETTERHEAD]
May ___, 1998
AMB Property Corporation
505 Montgomery Street
San Francisco, California 94111
AMB Property, L.P.
505 Montgomery Street
San Francisco, California 94111
Re: Registration Statement on Form S-11 of AMB Property Corporation,
AMB Property, L.P., AMB Property II, L.P., and Long Gate LLC;
Federal Income Tax Considerations
Ladies and Gentlemen:
We have acted as tax counsel to AMB Property, L.P., a Delaware
limited partnership (the "Operating Partnership") of which AMB Property
Corporation, a Maryland corporation (the "Company"), is the sole general
partner, and the Company in connection with the sale by the Operating
Partnership of up to 350,000,000 aggregate principal amount of ___% Notes due
2008, ___% Notes due 2018, and ___ Reset Put Securities (REPSSM) due 2015,
pursuant to a registration statement on Form S-11, filed with the Securities and
Exchange Commission on April 2, 1998 (file number 333-_________) by the Company,
the Operating Partnership, and Long Gate LLC, a Delaware limited liability
company in which AMB Property Holding Corporation, a Delaware corporation and
wholly-owned subsidiary of the Company, is the sole managing member and in which
the Operating Partnership is the sole non-managing member (as amended as of the
date hereof and including each document incorporated by reference therein, the
"Registration Statement").
<PAGE> 2
AMB Property Corporation
AMB Property, L.P.
May ___, 1998
Page 2
You have requested our opinion concerning certain of the Federal
income tax consequences to the purchasers of the securities described above in
connection with the sale described above. This opinion is based on various facts
and assumptions, including the facts set forth in the Registration Statement
concerning the business, properties and governing documents of the Company, the
Operating Partnership, and their subsidiaries.
In our capacity as tax counsel to the Operating Partnership, we
have made such legal and factual examinations and inquiries, including an
examination of originals or copies certified or otherwise identified to our
satisfaction of such documents, corporate records and other instruments as we
have deemed necessary or appropriate for purposes of this opinion. In our
examination, we have assumed the authenticity of all documents submitted to us
as originals, the genuineness of all signatures thereon, the legal capacity of
natural persons executing such documents and the conformity to authentic
original documents of all documents submitted to us as copies.
We are opining herein as to the effect on the subject transaction
only of the Federal income tax laws of the United States and we express no
opinion with respect to the applicability thereto, or the effect thereon, of
other Federal laws, the laws of any state or other jurisdiction or as to any
matters of municipal law or the laws of any other local agencies within any
state.
Based on such facts, assumptions and representations, it is our
opinion that the information in the Registration Statement set forth under the
caption "Certain Federal Income Tax Considerations Relating To The REPS," to the
extent that it constitutes matters of law, summaries of legal matters or legal
conclusions, has been reviewed by us and is accurate in all material respects.
No opinion is expressed as to any matter not discussed herein.
This opinion is only being rendered to you as of the date of this
letter, and we undertake no obligation to update this opinion if there are
changes in the law subsequent to the date hereof. This opinion is based on
various statutory provisions, regulations promulgated thereunder and
interpretations thereof by the Internal Revenue Service and the courts having
jurisdiction over such matters, all of which are subject to change either
prospectively or retroactively. Also, any variation or difference in the facts
from those set forth in the Registration Statement may affect the conclusions
stated herein.
This opinion is rendered only to you, and is solely for your use
and the use of your shareholders or partners (as the case may be) in connection
with the transactions set forth in the Registration Statement. This opinion may
not be relied upon by you or your shareholders or partners (as the case may be)
for any other purpose, or furnished to, quoted to,
<PAGE> 3
AMB Property Corporation
AMB Property, L.P.
May ___, 1998
Page 3
or relied upon by any other person, firm or corporation, for any purpose,
without our prior written consent. We hereby consent to the filing of this
opinion as an exhibit to the Registration Statement and to the use of our name
under the caption "Legal Matters" in the Registration Statement.
Very truly yours,
<PAGE> 1
EXHIBIT 10.6
CALCULATION AGENCY AGREEMENT
BETWEEN
MORGAN STANLEY & CO. INCORPORATED
AND
AMB PROPERTY, L.P.
This Calculation Agency Agreement (the "Agreement"), dated as of
___________, 1998, is made between AMB Property, L.P. (the "Operating
Partnership") and Morgan Stanley & Co. Incorporated (the "Calculation Agent").
The Operating Partnership proposes to issue and sell its Reset Put
Securities ("REPS(SM)") (the "Notes"), constituting a series of Notes, described
in the Prospectus dated __________, 1998 (the "Prospectus") and issued pursuant
to an indenture dated as of ________, 1998, as supplemented and amended from
time to time (the "Indenture"), among the Operating Partnership, AMB Property
Corporation, certain of the Operating Partnership's subsidiaries and __________,
as trustee, in an aggregate principal amount of $___________. The Notes will be
issued and the terms thereof established in accordance with the Indenture, the
form of note attached hereto as Appendix A (the "Form of Note") and the
Prospectus, ________, 1998, included in the registration statement on Form S-11
filed with the Securities and Exchange Commission (the "Commission")
(Registration No. _________). The interest rate on the Notes will be___% upon
issuance and may be reset in accordance with Section 3 hereof and the Form of
Note. Capitalized terms used but not defined herein shall have the same meanings
as in the Indenture.
SECTION 1. Appointment of Calculation Agent. The Operating Partnership
hereby appoints Morgan Stanley & Co. Incorporated as the Calculation Agent for
the purpose of calculating the Coupon Reset Rate (as defined below).
SECTION 2. Status of Calculation Agent. Any acts taken by the
Calculation Agent under this Agreement or in connection with any Notes,
including, specifically, but without limitation, the calculation of any interest
rate for the Notes, shall be deemed to have been taken by the Calculation Agent
solely in its capacity as an agent acting on behalf of the Operating Partnership
and shall not create or imply any obligation to, or any agency or trust
relationship with, any of the owners or holders of the Notes.
SECTION 3. Coupon Reset Process. If the Call Option is exercised in
accordance with the terms of the Form of Note and the Indenture, then the
following steps (the "Coupon Reset Process") shall be taken in order to
determine the interest rate to be paid on the Notes from and including the
Coupon Reset Date to the Stated Maturity Date (the "Coupon Reset Rate"). The
Operating Partnership and the Calculation Agent shall use reasonable efforts to
cause the actions contemplated below to be completed in as timely a manner as
possible.
(i) The Operating Partnership shall provide the Calculation Agent
with (a) a list (the "Dealer List"), no later than five Business Days
prior to the Coupon Reset Date, containing the names and addresses of
three dealers, one of which shall be Morgan
<PAGE> 2
Stanley & Co. Incorporated, from whom the Operating Partnership desires
the Calculation Agent to obtain the Bids (as defined below) for the
purchase of the Notes, and (b) such other material as may reasonably be
requested by the Calculation Agent to facilitate a successful Coupon
Reset Process.
(ii) Within one Business Day following receipt by the Calculation
Agent of the Dealer List, the Calculation Agent shall provide to each
dealer ("Dealer") on the Dealer List (a) a copy of the Prospectus
relating to the offering of the Notes, (b) a copy of the Form of Note
and (c) a written request that each such Dealer submit a Bid to the
Calculation Agent by 12:00 noon, New York time, on the third Business
Day prior to the Coupon Reset Date (the "Bid Date"). The time on the Bid
Date upon which Bids will be requested may be changed by the Calculation
Agent, acting in its sole and absolute discretion to as late as 3:00
p.m. New York time. "Bid" shall mean an irrevocable written offer given
by a Dealer for the purchase of all of the Notes settling on the Coupon
Reset Date, and shall be quoted by such Dealer as a stated yield to
maturity on the Notes ("Yield to Maturity"). Each Dealer shall also be
provided with (a) the name of the Operating Partnership, (b) an estimate
of the Purchase Price (which shall be stated as a US Dollar amount and
be calculated by the Calculation Agent in accordance with clause (iii)
below), (c) the principal amount and Stated Maturity Date of the Notes
and (d) the method by which interest will be calculated on the Notes.
(iii) The purchase price to be paid by any Dealer for the Notes
(the "Purchase Price") shall be equal to (a) the total principal amount
of the Notes, plus (b) a premium (the "Notes Premium") which shall be
equal to the excess, if any, on the Coupon Reset Date of (1) the
discounted present value to the Coupon Reset Date of a bond with a
maturity of ________, 2015 which has an interest rate of ____%,
semi-annual interest payments on each _______ and _______, commencing
_______, 2005, and a principal amount equal to the principal amount of
the Notes, and assuming a discount rate equal to the Call Option
Treasury Rate over (2) the principal amount of Notes. The "Call Option
Treasury Rate" means the per annum rate equal to the offer side yield to
maturity of the current on-the-run 10-year United States Treasury
Security per Telerate page 500, or any successor page at 11:00 am., New
York time, on the Bid Date (or such other date and time that may be
agreed upon by the Operating Partnership and the Calculation Agent) or,
if such rate does not appear on Telerate page 500, or any successor page
at such time, the rates on GovPX End-of-Day Pricing at 3:00 p.m., New
York time, on the Bid Date (or such other date and time that may be
agreed upon by the Operating Partnership and the Calculation Agent).
(iv) The Calculation Agent shall provide written notice to the
Operating Partnership by 12:30 p.m., New York time (or within 30 minutes
of such later time at which the last Bid is permitted to be received by
the Calculation Agent, but in no event later than 3:30 p.m. New York
time), on the Bid Date setting forth (a) the names of each of the
Dealers from whom such Calculation Agent received Bids on the Bid Date,
(b) the Bid submitted by each such Dealer and (c) the Purchase Price as
determined pursuant to paragraph (iii) hereof. Except as provided below,
the Calculation Agent shall thereafter select from the Bids received the
Bid with the lowest Yield to Maturity (the "Selected Bid"); provided,
however, that if such Calculation Agent has not received a timely Bid
2
<PAGE> 3
from a Dealer on or before the Bid Date, the Selected Bid shall be the
lowest of all Bids received by such time; and provided further that if
any two or more of the lowest Bids submitted are equivalent, the
Operating Partnership shall in its sole discretion select any of such
equivalent Bids (and such selected Bid shall be the Selected Bid). In
all cases, Morgan Stanley & Co. Incorporated in its capacity as a Dealer
has the right to match the Bid with the lowest Yield to Maturity,
whereby Morgan Stanley & Co. Incorporated's Bid becomes the Selected
Bid. The Calculation Agent shall set the Coupon Reset Rate equal to the
interest rate which would amortize the Notes Premium fully over the term
of the Notes at the Yield to Maturity indicated by the Selected Bid. The
Calculation Agent will notify the Dealer that submitted the Selected Bid
by 4:00 p.m. New York time, on the Bid Date that its Bid was determined
to be the Selected Bid.
(v) Immediately after calculating the Coupon Reset Rate, the
Calculation Agent shall provide written notice to the Operating
Partnership and the Trustee, setting forth such Coupon Reset Rate. At
the request of the Holders, the Calculation Agent will provide to the
Holders the Coupon Reset Rate. The Coupon Reset Rate for such Notes will
be effective from and including the Coupon Reset Date.
(vi) The Callholder (as such term is defined in the Form of Note)
shall sell such Notes to the Dealer that made the Selected Bid at the
Purchase Price; such sale is to be settled on the Coupon Reset Date in
immediately available funds.
(vii) In the event that the Call Option is terminated in
accordance with its terms, the Coupon Reset Process shall also
terminate.
SECTION 4. Rights and Liabilities of the Calculation Agent. The
Calculation Agent shall incur no liability for, or in respect of, any action
taken, omitted to be taken or suffered by it in reliance upon any certificate,
affidavit, instruction, notice, request, direction, order, statement or other
paper, document or communication reasonably believed by it to be genuine. Any
order, certificate, affidavit, instruction, notice, request, direction,
statement or other communication from the Operating Partnership made or given by
it and sent, delivered or directed to the Calculation Agent under, pursuant to,
or as permitted by, any provision of this Agreement shall be sufficient for
purposes of this Agreement if such communication is in writing and signed by any
officer of the Operating Partnership's General Partner or attorney-in-fact of
the Operating Partnership. The Calculation Agent may consult with counsel
satisfactory to it and the advice of such counsel shall constitute full and
complete authorization and protection of such Calculation Agent with respect to
any action taken, omitted to be taken or suffered by it hereunder in good faith
and in accordance with and in reliance upon the advice of such counsel.
SECTION 5. Right of Calculation Agent to Own Notes. The Calculation
Agent, in its individual capacity, and its officers, employees and shareholders,
may buy, sell, hold and deal in the Notes and may exercise any vote or join in
any action which any holder of the Notes may be entitled to exercise or take as
if it were not the Calculation Agent. The Calculation Agent, in its individual
capacity as such, may also engage in or have an interest in any transaction with
the Operating Partnership or its affiliates as if it were not the Calculation
Agent.
3
<PAGE> 4
SECTION 6. Duties of Calculation Agent. In acting under this Agreement
in connection with the Notes, the Calculation Agent shall be obligated only to
perform such duties as are specifically set forth herein and no other duties or
obligations on the part of such Calculation Agent, in its capacity as such,
shall be implied by this Agreement. In acting under this Agreement, the
Calculation Agent (in its capacity as such) assumes no obligation towards, or
any relationship of agency or trust for or with, the holders of the Notes.
SECTION 7. Resignation of the Calculation Agent. The Calculation Agent
may resign at any time as Calculation Agent, such resignation to be effective
ten Business Days after the delivery to the Operating Partnership and the
Trustee of notice of such resignation. The Operating Partnership may appoint a
new Calculation Agent other than the incumbent Calculation Agent if the
incumbent Calculation Agent resigns. If a new Calculation Agent is appointed
pursuant to this Section 7, the Operating Partnership shall provide the Trustee
with notice thereof.
SECTION 8. Appointment of Successor Calculation Agent. Any successor
Calculation Agent appointed by the Operating Partnership shall execute and
deliver to the incumbent Calculation Agent and to the Operating Partnership an
instrument accepting such appointment and thereupon such successor Calculation
Agent shall, without any further act or instrument, become vested with all the
rights, immunities, duties and obligations of the incumbent Calculation Agent,
with like effect as if originally named as initial Calculation Agent hereunder,
and the incumbent Calculation Agent shall thereupon be obligated to transfer and
deliver, and such successor Calculation Agent shall be entitled to receive and
accept, copies of any available records maintained by the incumbent Calculation
Agent in connection with the performance of its obligations hereunder.
SECTION 9. Indemnification. The Operating Partnership shall indemnify
and hold harmless Morgan Stanley & Co. Incorporated, or any successor
Calculation Agent thereof, and their respective officers and employees from and
against all actions, claims, damages, liabilities and losses, and costs and
expenses related thereto (including but not limited to reasonable legal fees and
costs) relating to or arising out of actions or omissions in any capacity
hereunder, except actions, claims, damages, liabilities, losses, costs and
expenses caused by the bad faith, gross negligence or willful misconduct of
Morgan Stanley & Co. Incorporated or any successor Calculation Agent, or their
respective Officers or employees. This Section 9 shall survive the termination
of the Agreement and the payment in full of all obligations under the Notes,
whether by redemption, repayment or otherwise.
SECTION 10. Merger, Consolidation or Sale of Business by Calculation
Agent. Any corporation or other entity into which the Calculation Agent may be
merged, converted or consolidated, or any corporation or other entity resulting
from any merger, conversion or consolidation to which such Calculation Agent may
be a party, or any corporation or other entity to which such Calculation Agent
may sell or otherwise transfer all or substantially all of its business, shall,
to the extent permitted by applicable law, become the Calculation Agent under
this Agreement without the execution of any document or any further act by the
parties hereto.
SECTION 11. Notices. Any notice or other communication required to be
given hereunder shall be delivered in person, sent by letter, telecopy or
facsimile or communicated by
4
<PAGE> 5
telephone (subject, in the case of communication by telephone, to written
confirmation dispatched within twenty-four (24) hours) to the addresses given
below or such other address as each party hereto may subsequently designate in
writing,
To the Operating Partnership: AMB Property, L.P.
505 Montgomery Street
San Francisco, CA 94111
Attn.: ___________
Telephone No.: (415) 394-9000
Telecopy No.: (415) 394-9001
To the Trustee:
Attn.: ___________
Telephone No.: ( ) _______
Telecopy No.: ( ) _______
To the Calculation Agent: Morgan Stanley & Co. Incorporated
1585 Broadway, 3rd Floor
New York, New York 10036
Attention:
Telephone No.: (212) 76l-2566
Telecopy No.: (212) 76l-0580
Any notice hereunder given by telecopy shall be deemed to have been given when
transmitted. Any notice hereunder given by letter shall be deemed to have been
given five Business Days after mailing such notice.
SECTION 12. Benefit of Agreement. Except as provided herein, this
Agreement is solely for the benefit of the parties hereto and their successors
and assigns, and no other person shall acquire or have any rights under or by
virtue hereof. The terms "successors" and "assigns" shall not include any
purchasers of any Notes merely because of such purchase.
SECTION 13. Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of New York applicable to
agreements entered into and performed in such State.
SECTION 14. Severability. If any provision of this Agreement shall be
held or deemed to be or shall, in fact, be invalid, inoperative or unenforceable
as applied in any particular case in any or all jurisdictions because it
conflicts with any provision of any constitution, statute, rule or public policy
or for any other reason, such circumstances shall not have the effect of
rendering the provision in question invalid, inoperative or unenforceable in any
other case, circumstances or jurisdictions or of rendering any other provision
or provisions of this Agreement invalid, inoperative or unenforceable to any
extent whatsoever.
SECTION 15. Counterparts. This Agreement may be executed in several
counterparts, each of which shall be regarded as an original and all of which
shall constitute one and the same instrument.
5
<PAGE> 6
SECTION 16. Amendments. This Agreement may be amended by any instrument
in writing executed and delivered by each of the parties hereto.
IN WITNESS WHEREOF, this Agreement has been entered into as of the
___________ day of ____________, 1998.
AMB PROPERTY, L.P.
By: AMB PROPERTY CORPORATION,
as General Partner
By: _______________________________________
Name:
Title:
MORGAN STANLEY & CO. INCORPORATED
By: _______________________________________
Name:
Title:
6
<PAGE> 7
Appendix A
(Form of Note)
<PAGE> 1
EXHIBIT 12.1
AMB PROPERTY, L.P.
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
(IN THOUSANDS, EXCEPT RATIOS)
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31,
-------------------------------------------------------------------------------
1997 1997 1997
1993 1994 1995 1996 HISTORICAL(1) AS ADJUSTED(2) PRO FORMA(3)
---- ------ ------ ------ ------------- -------------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Earnings:
Income (loss) from operations
before minority interests... $798 $2,925 $3,296 $7,140 $18,885 $103,903 $107,345
Interest expense.............. -- -- 4 -- 3,528 45,429 65,809
Amortization of capitalized
interest.................... -- -- -- -- 8 56 77
---- ------ ------ ------ ------- -------- --------
Total earnings.......... $798 $2,925 $3,300 $7,140 $22,421 $149,388 $173,231
==== ====== ====== ====== ======= ======== ========
Fixed charges:
Interest expense(4)........... $ -- $ -- $ 4 $ -- $ 3,528 $ 45,429 $ 65,809
Capitalized interest(5)....... -- -- -- -- 448 2,979 3,623
---- ------ ------ ------ ------- -------- --------
Total fixed charges..... $ -- $ -- $ 4 $ -- $ 3,976 $ 48,408 $ 69,432
==== ====== ====== ====== ======= ======== ========
Ratio of earnings to fixed
charges(6).................... N/A N/A 825x N/A 5.6x 3.1x 2.5x
==== ====== ====== ====== ======= ======== ========
<CAPTION>
FOR THE THREE MONTHS ENDED
MARCH 31,
------------------------------------
1998
1997 1998 PRO
HISTORICAL HISTORICAL FORMA(3)
---------- ---------- ----------
<S> <C> <C> <C>
Earnings:
Income (loss) from operations
before minority interests... $1,239 $29,188 $29,973
Interest expense.............. -- 11,841 16,243
Amortization of capitalized
interest.................... -- 24 77
------ ------- -------
Total earnings.......... $1,239 $41,053 $46,293
====== ======= =======
Fixed charges:
Interest expense(4)........... $ -- $11,841 $16,243
Capitalized interest(5)....... -- 1,253 1,253
------ ------- -------
Total fixed charges..... $ -- $13,094 $17,496
====== ======= =======
Ratio of earnings to fixed
charges(6).................... N/A 3.1x 2.6x
====== ======= =======
</TABLE>
- ---------------
(1) Historical ratio of earnings to fixed charges includes the results of the
Predecessor for the period from January 1, 1997 through November 25, 1997,
and the results of the Company subsequent to November 25, 1997, the date of
acquisition by the Company.
(2) As adjusted ratio of earnings to fixed charges has been prepared as if the
Formation Transactions, the IPO and certain 1997 property acquisitions and
dispositions had occurred on January 1, 1997.
(3) Pro forma ratio of earnings to fixed charges has been prepared as if the
1998 property acquisitions and the Offering had occurred on January 1, 1997.
(4) Includes amortization of debt premiums and deferred financing fees.
(5) Historical capitalized interest represents construction interest incurred
subsequent to November 25, 1997, the date of acquisition by the Company.
(6) The ratio of earnings to fixed charges is not applicable for periods during
which the Predecessor incurred no interest expense.
<PAGE> 1
EXHIBIT 21.1
SUBSIDIARIES
<TABLE>
<CAPTION>
Name of Subsidiary Jurisdiction
- ------------------ ------------
<S> <C>
AMB Property II, L.P. Delaware
Long Gate, LLC Delaware
American Beauty Partnership California
Dark Starr Limited Partnership Delaware
Met Phase I 95, Ltd. Texas
St. Stephen Limited Partnership Delaware
Met 4/12, Ltd. Texas
CH-VAF Orlando Joint Venture Florida
Fairway Drive Venture LLC California
Manhattan Village, LLC California
AMB/Erie, L.P. Delaware
Terrapin Station Limited Partnership Delaware
Built to Last Limited Partnership Delaware
Hamilton Lakes / AMB II F, L.P. Delaware
</TABLE>
<PAGE> 1
EXHIBIT 23.2
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the use of our
reports, AMB Property, L.P. and AMB Property Corporation, both dated January 27,
1998; AMB Contributed Properties, Boston Industrial Portfolio, The Jamesburg
Property; Orlando Central Park; Totem Lake Malls, all dated March 27, 1998;
Cabot Industrial Portfolio, dated October 29, 1997; and Cabot Business Park,
Manhattan Village Shopping Center, Weslayan Plaza, and Silicon Valley R&D
Portfolio, all dated October 17, 1997, included in Amendment No. 1 to
Registration Statement on Form S-11 (File No. 333-49163) of AMB Property, L.P.,
AMB Property Corporation, AMB Property II, L.P. and Long Gate LLC, dated May 15,
1998.
/s/ ARTHUR ANDERSEN LLP
May 14, 1998
