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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JUNE 16, 2000
REGISTRATION NO. 333-36894
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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AMENDMENT NO. 1
TO
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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AMB PROPERTY CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
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MARYLAND 94-3281941
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NUMBER)
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505 MONTGOMERY STREET
SAN FRANCISCO, CALIFORNIA 94111
(415) 394-9000
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
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TAMRA D. BROWNE, ESQ.
VICE PRESIDENT AND GENERAL COUNSEL
AMB PROPERTY CORPORATION
505 MONTGOMERY STREET
SAN FRANCISCO, CALIFORNIA 94111
(415) 394-9000
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
COPIES TO:
JEFFREY T. PERO, ESQ.
LAURA L. GABRIEL, ESQ.
LATHAM & WATKINS
505 MONTGOMERY STREET, SUITE 1900
SAN FRANCISCO, CALIFORNIA 94111
(415) 391-0600
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
As soon as practicable after the effective date of this Registration Statement.
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. [ ]
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. [X]
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement of the same offering. [ ] ________
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ] ________
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933, AS AMENDED, OR UNTIL THE REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID
SECTION 8(a), MAY DETERMINE.
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THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED.
WE MAY NOT SELL THESE SECURITIES AND THE SELLING STOCKHOLDERS MAY NOT
RESELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS IS NOT
AN OFFER TO SELL THESE SECURITIES AND IT IS NOT SOLICITING AN OFFER TO
BUY THESE SECURITIES IN ANY STATE WHERE THE OFFER OR SALE IS NOT
PERMITTED.
SUBJECT TO COMPLETION, DATED JUNE 16, 2000
PROSPECTUS
604,433 Shares of Common Stock
AMB PROPERTY CORPORATION
$0.01 Par Value Per Share
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This prospectus relates to the possible issuance to, and resale by, selling
stockholders named in this prospectus of up to 603,399 shares of common stock
upon exchange, on a one for one basis, of their limited partnership units in AMB
Property, L.P. 390,633 of those units became exchangeable on April 30, 2000.
212,766 of those units become exchangeable on May 26, 2000. This prospectus also
relates to the possible resale from time to time by selling stockholders named
in this prospectus of an additional 1,034 shares of common stock upon exchange
of their limited partnership units in AMB Property, L.P. We are registering the
shares of common stock to provide the holders with freely tradable securities,
but this registration does not necessarily mean that we will issue any of these
shares to the selling stockholders or that the selling stockholders will offer
or sell the shares.
We are filing the registration statement of which this prospectus is a part
pursuant to contractual obligations. We will not receive any proceeds from any
issuance of the shares of common stock to the selling stockholders or from any
sale of the shares by the selling stockholders but we have agreed to pay certain
registration expenses. We will acquire limited partnership units in AMB
Property, L.P. in exchange for any shares that we may issue to limited
partnership unit holders pursuant to this prospectus.
Our common stock is listed on the New York Stock Exchange under the symbol
"AMB." On June 15, 2000, the last reported sales price of our common stock on
the New York Stock Exchange was $23 3/16 per share.
INVESTING IN OUR COMMON STOCK INVOLVES CERTAIN RISKS. SEE "RISK FACTORS"
BEGINNING ON PAGE 4.
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NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OF THESE SECURITIES OR DETERMINED THAT THIS PROSPECTUS
IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
The date of this Prospectus is June , 2000
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Neither AMB Property Corporation nor the selling stockholders have
authorized any person to give any information or to make any representation not
contained or incorporated by reference in this prospectus. You must not rely
upon any information or representation not contained or incorporated by
reference in this prospectus as if we had authorized it. This prospectus is not
an offer to sell or the solicitation of an offer to buy any securities other
than the registered securities to which it relates and this prospectus is not an
offer to sell or the solicitation of an offer to buy securities in any
jurisdiction where, or to any person to whom, it is unlawful to make such offer
or solicitation. You should not assume that the information contained in this
prospectus is correct on any date after the date of this prospectus, even though
this prospectus is delivered or shares are sold pursuant to this prospectus on a
later date.
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TABLE OF CONTENTS
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PAGE
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WHERE YOU CAN FIND MORE INFORMATION......................... 1
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE............. 1
FORWARD-LOOKING STATEMENTS.................................. 2
RISK FACTORS................................................ 4
THE COMPANY................................................. 5
DESCRIPTION OF CAPITAL STOCK................................ 6
DESCRIPTION OF CERTAIN PROVISIONS OF THE PARTNERSHIP
AGREEMENT OF THE OPERATING PARTNERSHIP.................... 29
REDEMPTION/EXCHANGE OF COMMON LIMITED PARTNERSHIP UNITS FOR
COMMON STOCK.............................................. 42
CERTAIN PROVISIONS OF MARYLAND LAW AND OF ARTICLES OF
INCORPORATION AND BYLAWS.................................. 49
FEDERAL INCOME TAX CONSIDERATIONS........................... 52
SELLING STOCKHOLDERS........................................ 68
PLAN OF DISTRIBUTION........................................ 70
LEGAL MATTERS............................................... 71
EXPERTS..................................................... 71
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WHERE YOU CAN FIND MORE INFORMATION
We file annual, quarterly and special reports, proxy statements and other
information with the Securities and Exchange Commission. You may read and copy
any document we file with the SEC at the SEC's public reference rooms at Room
1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549, and at
the SEC's regional offices at Seven World Trade Center, 13th Floor, New York,
New York 10048, and Citicorp Center, 500 West Madison Street, Suite 1400,
Chicago, Illinois 60661-2511. Please call the SEC at 1-800-SEC-0330 for further
information on the public reference rooms. The SEC also maintains a web site
that contains reports, proxy and information statements, and other information
regarding registrants that file electronically with the SEC
(http://www.sec.gov). You can inspect reports and other information we file at
the offices of the New York Stock Exchange, Inc., 20 Broad Street, New York, New
York 10005.
We have filed a registration statement of which this prospectus is a part
and related exhibits with the SEC under the Securities Act of 1933. The
registration statement contains additional information about us. You may inspect
the registration statement and exhibits without charge at the office of the SEC
at 450 Fifth Street, N.W., Washington, D.C. 20549, and you may obtain copies
from the SEC at prescribed rates.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The SEC allows us to "incorporate by reference" the information we file
with the SEC, which means that we can disclose important information to you by
referring to those documents. The information incorporated by reference is an
important part of this prospectus. Any statement contained in a document which
is incorporated by reference in this prospectus is automatically updated and
superseded if information contained in this prospectus, or information that we
later file with the SEC, modifies or replaces this information. We incorporate
by reference the following documents we filed with the SEC:
- Annual Report on Form 10-K for the year ended December 31, 1999;
- Quarterly Report on Form 10-Q for the quarterly period ended March 31,
2000;
- Current Report on Form 8-K filed on April 14, 2000;
- Current Report on Form 8-K filed on June 16, 2000;
- the reports, financial statements and pro forma financial statements for
the AMB Contributed Properties, the Boston Industrial Portfolio, the
Jamesburg Property, Orlando Central Park, Totem Lake Malls, Dallas
Warehouse Portfolio (Garland Industrial Portfolio), Twin Cities
Office/Showroom Portfolio (Minnetonka Industrial Portfolio), Crysen
Corridor Warehouse, Cabot Industrial Portfolio, Cabot Business Park,
Manhattan Village Shopping Center, Weslayan Plaza and Silicon Valley R&D
Portfolio from our Registration Statement on Form S-11 (No. 333-58107);
- the reports, financial statements and pro forma financial statements for
the Amberjack Portfolio, the Willow Lake Portfolio, the Willow Park
Portfolio, National Distribution Portfolio and the Mahwah Portfolio from
our Form 8-K filed on December 2, 1998;
- the proforma financial statements for the divestiture of 25 properties to
BPP Retail, LLC during 1999 from our 8-K filed on December 14, 1999;
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Woodway Collection, Riverview Plaza Shopping Center, Rockford Road Plaza and
Southwest Pavillion from our Form 8-K filed on August 19, 1999;
- the reports, financial statements and proforma financial statements for
the Manekin Portfolio, Technology Park II, WOCAC Portfolio, Junction
Industrial Park and the Miami Airport Business Center from our Form 8-K
on November 16, 1999;
- the proforma financial statements for the divestiture of Rancho San Diego
Village Shopping Center, Randall's Commons Memorial, Totem Lake Malls and
Weslayan Plaza from our Form 8-K filed on December 14, 1999;
- the description of our common stock contained in our Registration
Statement on Form 8-A filed with the SEC on October 28, 1997; and
- all documents filed by us with the SEC pursuant to Sections 13(a), 13(c),
14 or 15(d) of the Securities Exchange Act of 1934 after the date of this
prospectus and prior to the termination of the offering.
To receive a free copy of any of the documents incorporated by reference in
this prospectus (other than exhibits, unless they are specifically incorporated
by reference in the documents), call or write AMB Property Corporation, 505
Montgomery Street, San Francisco, CA, Attention: Secretary (415/394-9000).
Unless otherwise indicated or unless the context requires otherwise, all
references in this prospectus to "we," "us" or "our" mean AMB Property
Corporation and its subsidiaries, including AMB Property, L.P. and its
subsidiaries and, with respect to the period prior to AMB Property Corporation's
initial public offering, AMB Property Corporation's predecessor, AMB
Institutional Realty Advisors, Inc., and certain real estate investment funds,
trusts, corporations and partnerships that prior to AMB Property Corporation's
initial public offering owned properties that they contributed to AMB Property,
L.P. We refer to AMB Property, L.P., a Delaware limited partnership, as the
"operating partnership". As of March 31, 2000, we owed an approximate 93.4%
general partnership interest in the operating partnership, excluding preferred
units. The following marks are our registered trademarks: AMB(R); Customer
Alliance Program(R); Development Alliance Partners(R); Development Alliance
Program(R); Institutional Alliance Partners(R); Management Alliance Partners(R);
Management Alliance Program(R); UPREIT Alliance Partners(R); and UPREIT Alliance
Program(R). The following are our unregistered trademarks: Broker Alliance
Partners(TM); Broker Alliance Program(TM); Customer Alliance Partners(TM);
eSpace(TM); HTD(TM); High Throughput Distribution(TM); Institutional Alliance
Program(TM); iSpace(TM); Strategic Alliance Partners(TM); and Strategic Alliance
Programs(TM).
FORWARD-LOOKING STATEMENTS
Some of the information included and incorporated by reference in this
prospectus contains forward-looking statements, such as those pertaining to our
(including certain of our subsidiaries') capital resources, portfolio
performance and results of operations. Likewise, the pro forma financial
statements and other pro forma information incorporated by reference in this
prospectus also contain forward-looking statements. In addition, all statements
regarding anticipated growth in our 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 you should not rely on them as predictions of future events. There is no
assurance that the events or circumstances reflected in forward-looking
statements will be achieved or will occur. You can identify forward-looking
statements 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 of these
words and phrases or similar words or phrases. You can also
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identify forward looking statements by discussions of strategy, plans or
intentions. Forward-looking statements involve numerous risks and uncertainties
and you should not rely upon them as predictions of future events. There is no
assurance that the events or circumstances reflected in forward-looking
statements will be achieved or occur. Forward-looking statements are necessarily
dependent on assumptions, data or methods that may be incorrect or imprecise and
we may not be able to realize them. 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 on or non-renewal of
leases by tenants, increased interest rates and operating costs, our failure to
obtain necessary outside financing, difficulties in identifying properties to
acquire and in effecting acquisitions, our failure to successfully integrate
acquired properties and operations, our failure to divest of properties we have
contracted to sell or to timely reinvest proceeds from any such divestitures,
risks and uncertainties affecting property development and construction
(including construction delays, cost overruns, our inability to obtain necessary
permits and public opposition to these activities), our failure to qualify and
maintain our status as a real estate investment trust under the Internal Revenue
Code of 1986, as amended, environmental uncertainties, risks related to natural
disasters, financial market fluctuations, changes in real estate and zoning laws
and increases in real property tax rates. Our success also depends upon economic
trends generally, including interest rates, income tax laws, governmental
regulation, legislation, population changes and certain other matters discussed
below under "Risk Factors" and under "Business Risks" under Item 5 of our
Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2000,
which is incorporated by reference into this prospectus, as updated by our
subsequent Exchange Act filings, as well as other similar statements contained
in this prospectus. We caution you not to place undue reliance on
forward-looking statements, which reflect our analysis only.
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RISK FACTORS
Before you invest in our common stock, you should be aware that purchasing
or owning our common stock involves various risks, including those described
below and those described under "Business Risks" under Item 5 of our Quarterly
Report on Form 10-Q for the quarterly period ended March 31, 2000, which is
incorporated by reference into this prospectus, as updated by our subsequent
Exchange Act filings. You should consider carefully these risk factors together
with all of the other information included in this prospectus before you decide
to purchase shares of our common stock.
THE EXCHANGE OF COMMON LIMITED PARTNERSHIP UNITS FOR COMMON STOCK IS A TAXABLE
TRANSACTION
The exchange of the common limited partnership units held by a limited
partner of the operating partnership for shares of our common stock will be
treated for tax purposes as a sale of the common limited partnership units by
the limited partner. A limited partner will recognize gain or loss for income
tax purposes in an amount equal to the difference between the "amount realized"
by the limited partner in the exchange and the limited partner's adjusted tax
basis in the common limited partnership units exchanged. Generally, the amount
realized by a limited partner on an exchange will be the fair market value of
the exchanged shares received in the exchange, plus the amount of the operating
partnership's liabilities allocable to the common limited partnership units
being exchanged. The recognition of any loss resulting from an exchange of
common limited partnership units for shares of common stock is subject to a
number of limitations set forth in the Internal Revenue Code. It is possible
that the amount of gain recognized or even the tax liability resulting from the
gain could exceed the value of the shares of common stock received upon the
exchange. In addition, the ability of a limited partner to sell a substantial
number of shares of common stock in order to raise cash to pay tax liabilities
associated with the exchange of limited partnership units may be restricted and,
as a result of stock price fluctuations, the price the holder receives for the
shares of common stock may not equal the value of the limited partnership units
at the time of exchange.
AN INVESTMENT IN COMMON STOCK IS DIFFERENT FROM AN INVESTMENT IN LIMITED
PARTNERSHIP UNITS
If a limited partner exchanges his or her common limited partnership units
for shares of common stock, he or she will become one of our stockholders rather
than a limited partner in the operating partnership. Although the nature of an
investment in our common stock is similar to an investment in limited
partnership units, there are also differences between ownership of limited
partnership units and ownership of our common stock. These differences include:
- form of organization;
- permitted investments;
- policies and restrictions;
- management structure;
- compensation and fees;
- investor rights; and
- federal income taxation.
See "Redemption/Exchange of Common Limited Partnership Units for Common
Stock -- Comparison of Ownership of Common Limited Partnership Units and Common
Stock."
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THE COMPANY
AMB Property Corporation, a Maryland corporation, is one of the leading
owners and operators of industrial real estate nationwide. Our investment
strategy is to become a leading provider of High Throughput Distribution, or
HTD, properties located near key passenger and cargo airports, interstate
highways and ports in major metropolitan areas, such as Atlanta, Chicago,
Dallas/Fort Worth, northern New Jersey, the San Francisco Bay Area and Southern
California. Within each of our markets, we focus our investments in in-fill
submarkets. In-fill submarkets are characterized by supply constraints on the
availability of land for competing projects. High Throughput Distribution
facilities are designed to serve the high-speed, high-value freight handling
needs of today's supply chain, as opposed to functioning as long-term storage
facilities. We believe that the rapid growth of the air-freight business, the
outsourcing of supply chain management to third party logistics companies and
e-commerce are indicative of the changes that are occurring in the supply chain
and the manner in which goods are distributed. We intend to focus our investment
activities primarily on industrial properties that we believe will benefit from
these changes.
As of March 31, 2000, we owned and operated 725 industrial buildings and
nine retail centers, totaling approximately 67.5 million rentable square feet,
located in 26 markets nationwide. As of March 31, 2000, these properties were
96.3% leased. As of March 31, 2000, through our subsidiary, AMB Investment
Management, we also managed 43 industrial buildings and retail centers,
aggregating approximately 4.4 million rentable square feet, which were 97.8%
leased, on behalf of various institutional investors. In addition, we have
invested in 36 industrial buildings, totaling approximately 4.0 million rentable
square feet, through an unconsolidated joint venture.
As of March 31, 2000, we had six retail centers, aggregating approximately
1.3 million rentable square feet, and one land parcel, which were held for
divestiture. In addition, during the first quarter of 2000, we disposed of four
industrial buildings, aggregating approximately 0.3 million rentable square
feet, for an aggregate price of approximately $12.9 million. Over the next few
years, we currently intend to dispose of non-strategic assets and redeploy the
resulting capital into High Throughput Distribution properties that better fit
our current investment focus.
On September 24, 1999, December 22, 1999 and March 23, 2000, AMB
Institutional Alliance REIT I, Inc. issued and sold shares of its capital stock
to 15 third party investors. AMB Institutional Alliance REIT I, Inc. has elected
to be taxed as a real estate investment trust under the Internal Revenue Code,
commencing with its tax year ending December 31, 1999. AMB Institutional
Alliance REIT I, Inc. acquired a limited partnership interest in AMB
Institutional Alliance Fund I, L.P., which is engaged in the acquisition,
ownership, operation, management, renovation, expansion and development of
primarily industrial buildings in target industrial markets nationwide. In March
2000, the operating partnership contributed seven industrial buildings,
aggregating approximately 0.4 million square feet, to AMB Institutional Alliance
Fund I, L.P. at a cost basis of approximately $29.4 million. These contributions
resulted in no gain. The operating partnership is the managing general partner
of the AMB Institutional Alliance Fund I, L.P. and, together with one of our
other affiliates, owns, as of March 31, 2000, 38.8% of the partnership interests
in AMB Institutional Alliance Fund I, L.P. It is currently expected that we,
along with one of our affiliates, will own 20.0% of the Alliance Fund I by the
end of the second quarter of 2000. As of March 31, 2000, AMB Institutional
Alliance Fund I, L.P. had a total equity commitment from third party investors
totaling $167.0 million, which, when combined with anticipated debt financings
and our investment, creates a total committed capitalization of approximately
$410.0 million.
Through our subsidiary, AMB Property, L.P., a Delaware limited partnership,
we are engaged in the acquisition, ownership, operation, management, renovation,
expansion and development of primarily industrial properties in target
industrial markets nationwide. We refer to AMB Property, L.P. as the operating
partnership. As of March 31, 2000, we owned an approximate 93.4% general
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partnership interest in the operating partnership, excluding preferred units. As
the sole general partner of the operating partnership, we have the full,
exclusive and complete responsibility and discretion in the day-to-day
management and control of the operating partnership.
We are self-administered and self-managed and expect that we have qualified
and will continue to qualify as a real estate investment trust for federal
income tax purposes beginning with the year ending December 31, 1997. As a
self-administered and self-managed real estate investment trust, our own
employees perform our administrative and management functions, rather than our
relying on an outside manager for these services. The principal executive office
of AMB Property Corporation and the operating partnership is located at 505
Montgomery Street, San Francisco, California 94111, and our telephone number is
(415) 394-9000. We also maintain a regional office in Boston, Massachusetts.
DESCRIPTION OF CAPITAL STOCK
We have summarized certain terms and provisions of our capital stock in
this section. This summary is not complete. For more detail you should refer to
the Maryland General Corporation Law and our articles of incorporation and
bylaws, which are exhibits to the registration statement of which this
prospectus is a part. See "Where You Can Find More Information."
COMMON STOCK
Our articles of incorporation provide that we are authorized to issue
500,000,000 shares of common stock, $.01 par value per share. As of March 31,
2000, we had 83,835,290 shares of common stock issued and outstanding. Each
outstanding share of common stock entitles the holder to one vote on all matters
presented to stockholders generally for a vote, including the election of
directors. Except as otherwise required by law and except as provided in any
resolution adopted by the board of directors establishing any other class or
series of stock, the holders of common stock possess the exclusive voting power,
subject to the provisions of our articles of incorporation regarding the
ownership of shares of common stock in excess of the ownership limit or any
other limit specified in our articles of incorporation, or 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 of our securities or cumulative voting
rights in the election of directors. All shares of our 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 or classes of
stock, including the Series A Preferred Stock, the Series B Preferred Stock, the
Series C Preferred Stock, the Series D Preferred Stock, the Series E Preferred
Stock and the Series F Preferred Stock (see "-- Preferred Stock"), and to the
provisions of our articles of incorporation regarding ownership of shares of
common stock in excess of the ownership limit, or such other limit specified in
our articles of incorporation or as otherwise permitted by the board of
directors, we may pay distributions to the holders of shares of common stock if
and when authorized and declared by the board of directors out of funds legally
available for distribution. We intend to continue to make quarterly
distributions on outstanding shares of common stock.
Under the Maryland General Corporation Law, stockholders are generally not
liable for our debts or obligations. If we liquidate, subject to the right of
any holders of preferred stock, including the Series A Preferred Stock, the
Series B Preferred Stock, the Series C Preferred Stock, the Series D Preferred
Stock, the Series E Preferred Stock and the Series F Preferred Stock (see
"-- 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 of our known debts
and liabilities, including debts and liabilities arising out of our status as
general partner of the operating partnership.
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Subject to the provisions of our articles of incorporation regarding the
ownership of shares of common stock in excess of the ownership limit, or such
other limit specified in our articles of incorporation, or as otherwise
permitted by the board of directors as described below, all shares of common
stock have equal distribution, liquidation and voting rights, and have no
preference or exchange rights.
Under the Maryland General Corporation Law, a Maryland corporation
generally cannot dissolve, amend its charter, merge, sell all or substantially
all of its assets, engage in a share exchange or engage in similar transactions
outside the ordinary course of business unless approved by the affirmative vote
of at least two-thirds of the votes entitled to be cast 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
Maryland General Corporation Law, 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. Our articles of incorporation do
not provide for a lesser percentage in any of the above situations.
Our 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 class or series.
PREFERRED STOCK
Our articles of incorporation provide that we are authorized to issue
100,000,000 shares of preferred stock, $.01 par value per share, of which
4,600,000 shares are of a separate class designated as Series A Preferred Stock,
1,300,000 shares are of a separate class designated as Series B Preferred Stock,
2,200,000 shares are of a separate class designated as Series C Preferred Stock,
1,595,337 shares are of a separate class designated as Series D Preferred Stock,
220,440 shares are of a separate class designated as Series E Preferred Stock,
and 397,439 shares are of a separate class designated as Series F Preferred
Stock. The Series B Preferred Stock is issuable in exchange, on a one for one
basis, subject to adjustment, for Series B Preferred Units of the operating
partnership. The Series C Preferred Stock is issuable in exchange, on a one for
one basis, subject to adjustment, for Series C Preferred Units of AMB Property
II, L.P., a partnership in which our wholly owned subsidiary, AMB Property
Holding Corporation, owns an approximate 1% general partnership interest and the
operating partnership owns an approximate 99% common limited partnership
interest. The Series D Preferred Stock is issuable in exchange, on a one for one
basis, subject to adjustment, for Series D Preferred Units of AMB Property II,
L.P. The Series E Preferred Stock is issuable in exchange, on a one for one
basis, subject to adjustments, for Series E Preferred Units of AMB Property II,
L.P. The Series F Preferred Stock is issuable in exchange, on a one for one
basis, subject to adjustments, for Series F Preferred Units of AMB Property II,
L.P. We have 4,000,000 shares of Series A Preferred Stock issued and
outstanding. We have 1,300,000 shares of Series B Preferred Stock, 2,200,000
shares of Series C Preferred Stock, 1,595,337 shares of Series D Preferred
Stock, 220,440 shares of Series E Preferred Stock and 397,439 Series F Preferred
Stock reserved for issuance but not issued or outstanding. We may issue
additional shares of preferred stock from time to time, in one or more classes,
as authorized by the board of directors. Prior to the issuance of shares of each
class of preferred stock, the board of directors is required by the Maryland
General Corporation Law and our articles of incorporation to fix for each class
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 of preferred
stock, it may afford the holders of any
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class 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 that might involve a premium price for holders of shares of common stock
or otherwise be in their best interest.
SERIES A PREFERRED STOCK. The Series A Preferred Stock ranks, with respect
to dividends and in the event we voluntarily or involuntarily liquidate,
dissolve or wind up:
- senior to all classes or series of common stock and to all of our equity
securities that provide that they rank junior to the Series A Preferred
Stock;
- junior to all equity securities issued by us which rank senior to the
Series A Preferred Stock; and
- on a parity with all equity securities issued by us (including any Series
B Preferred Stock, Series C Preferred Stock, Series D Preferred Stock,
Series E Preferred Stock and Series F Preferred Stock) other than those
referred to in the bullet points above. The term "equity securities" does
not include convertible debt securities.
Holders of the Series A Preferred Stock are entitled to receive, when and
as authorized by the board of directors out of funds legally available for
dividends, cumulative preferential cash dividends at the rate of 8 1/2% of the
liquidation preference per annum (equivalent to $2.125 per annum per share of
Series A Preferred Stock). Dividends on the Series A Preferred Stock accumulate
on a daily basis and are payable quarterly in arrears on the 15th day of each
January, April, July and October. Except as provided below, unless full
cumulative dividends on the Series A Preferred Stock have been or at the same
time are declared and paid or declared and a sum sufficient for payment set
apart for payment for all past dividend periods and the then current dividend
period, no dividends (other than in common stock or other equity securities
ranking junior to the Series A Preferred Stock, nor may any common stock or any
other equity securities ranking junior to or on a parity with the Series A
Preferred Stock be redeemed, purchased or otherwise acquired for any
consideration (or any monies be paid to or made available for a sinking fund for
the redemption of any such securities) by us (except by conversion into or
exchange for other equity securities ranking junior to the Series A Preferred
Stock and pursuant to the provisions of our articles of incorporation providing
for limitations on ownership and transfer in order to ensure that we remain
qualified as a real estate investment trust). When dividends are not paid in
full (or a sum sufficient for such full payment is not so set apart) upon the
Series A Preferred Stock and any other equity securities ranking on a parity
with the Series A Preferred Stock, all dividends declared upon the Series A
Preferred Stock and any other equity securities ranking on a parity with the
Series A Preferred Stock will be declared pro rata so that the amount of
dividends declared per share of Series A Preferred Stock and each such other
equity securities shall bear to each other the same ratio that accumulated
dividends per share of Series A Preferred Stock and such other equity securities
(which shall not include any accumulation in respect of unpaid dividends for
prior dividend periods if such other equity securities do not have a cumulative
dividend) bear to each other. Dividends on the Series A Preferred Stock will
accumulate whether or not we have funds legally available for the payment of
dividends and whether or not we declare dividends. If we designate any portion
of a dividend as a "capital gain dividend," a holder's share of the capital gain
dividend will be an amount that bears the same ratio to the total amount of
dividends (as determined for federal income tax purposes) paid to the holder for
the year as the aggregate amount designated as a capital gain dividend bears to
the aggregate amount of all dividends (as determined for federal income tax
purposes) paid on all classes of shares for the year.
In the event that we voluntarily or involuntarily liquidate, dissolve or
wind up, the holders of the Series A Preferred Stock are entitled to receive out
of our assets legally available for distribution to
8
<PAGE> 12
our stockholders remaining after payment or provision for payment of all of our
debts and liabilities, a liquidation preference, in cash, of $25.00 per share,
plus an amount equal to any accumulated and unpaid dividends to the date of such
payment, before any distribution of assets is made to holders of common stock or
any other equity securities that rank junior to the Series A Preferred Stock.
After payment of the full amount of the liquidating distributions to which they
are entitled, the holders of the Series A Preferred Stock will have no right or
claim to any of our remaining assets. Our consolidation or merger with or into
any other entity, a merger of another entity with or into us, a statutory share
exchange or the sale, lease, transfer or conveyance of all or substantially all
of our property or business do not constitute a liquidation, dissolution or
winding up for purposes of triggering the liquidation preference.
If we voluntarily or involuntarily liquidate, dissolve or wind up and our
assets are insufficient to make full payment to holders of the Series A
Preferred Stock and the corresponding amounts payable on all shares of other
classes or series of equity securities ranking on a parity with the Series A
Preferred Stock, then the holders of the Series A Preferred Stock and all other
such classes or series of equity securities will share ratably in any such
distribution of assets in proportion to the full liquidating distributions to
which they would otherwise be entitled.
The Series A Preferred Stock has no stated maturity and is not subject to
mandatory redemption or any sinking fund. We cannot redeem the Series A
Preferred Stock prior to July 27, 2003. On and after July 27, 2003, we can
redeem the Series A Preferred Stock for cash at our option, in whole or from
time to time in part, at a redemption price of $25.00 per share, plus
accumulated and unpaid dividends, if any, to the redemption date. We must pay
the redemption price (other than the portion of the redemption price consisting
of accumulated and unpaid dividends) solely out of the sale proceeds of other
equity securities, which may include other classes or series of preferred stock.
In certain circumstances related to our maintenance of our ability to qualify as
a real estate investment trust for federal income tax purposes, we may redeem
shares of Series A Preferred Stock. See "-- Restrictions on Ownership and
Transfer of Capital Stock."
Holders of Series A Preferred Stock have no voting rights, except as
described below. If we do not pay dividends on the Series A Preferred Stock for
six or more quarterly periods (whether or not consecutive), holders of the
Series A Preferred Stock (voting separately as a class with all other classes or
series of equity securities upon which like voting rights have been conferred
and are exercisable) will be entitled to vote for the election of two additional
directors to serve on our board of directors until we have eliminated all
dividend arrearages with respect to the Series A Preferred Stock. So long as any
shares of Series A Preferred Stock remain outstanding, we may not, without the
affirmative vote or consent of at least two-thirds of the votes entitled to be
cast by the holders of outstanding shares of Series A Preferred Stock (the
Series A Preferred Stock voting separately as a class):
- authorize or create, or increase the authorized or issued amount of, any
class or series of stock ranking senior to the Series A Preferred Stock;
- reclassify any of our authorized stock into any class or series of stock
ranking senior to the Series A Preferred Stock;
- create, authorize or issue any obligation or security convertible into,
exchangeable or exercisable for, or evidencing the right to purchase, any
class or series of stock ranking senior to the Series A Preferred Stock;
or
- amend, alter or repeal the provisions of our articles of incorporation,
whether by merger or consolidation or otherwise, so as to materially and
adversely affect any right, preference, privilege or voting power of the
Series A Preferred Stock.
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<PAGE> 13
With respect to the occurrence of any of the events set forth in the fourth
bullet point above, so long as shares of Series A Preferred Stock (or shares
issued by a surviving entity in substitution for shares of the Series A
Preferred Stock) remain outstanding with the terms materially unchanged, taking
into account that upon the occurrence of such an event, we may not be the
surviving entity, the occurrence of any such event will not be considered to
materially and adversely affect rights, preferences, privileges or voting powers
of holders of Series A Preferred Stock. Any increase in the amount of the
authorized preferred stock, the creation or issuance of any other class or
series of preferred stock or any increase in the amount of authorized Series A
Preferred Stock or any other class or series of preferred stock, in each case
ranking on a parity with or junior to the Series A Preferred Stock will not be
considered to materially and adversely affect such rights, preferences,
privileges or voting powers.
In accordance with the terms of the operating partnership's partnership
agreement, we contributed the net proceeds of the sale of the Series A Preferred
Shares to the operating partnership and the operating partnership issued to us
Series A Preferred Units that mirror the rights, preferences and other terms of
the Series A Preferred Stock. The operating partnership is required to make all
required distributions on the Series A Preferred Units prior to any distribution
of cash or assets to the holders of any other units or any other equity
interests in the operating partnership, except for any other series of preferred
units ranking on a parity with the Series A Preferred Units as to dividends or
voluntary or involuntary liquidation, dissolution or winding up of the operating
partnership. The operating partnership has no preferred units, other than the
Series A Preferred Units and the Series B Preferred Units, outstanding or any
other equity interests ranking prior to any other units or any other equity
interests in the operating partnership.
SERIES B PREFERRED STOCK. We currently have no shares of Series B Preferred
Stock issued or outstanding. The Series B Preferred Stock is issuable upon
exchange of the operating partnership's Series B Preferred Units, as described
under "Description of Certain Provisions of the Partnership Agreement of the
Operating Partnership -- Series B Preferred Units -- Exchange Rights." The
Series B Preferred Stock ranks, with respect to dividends and in the event we
voluntarily or involuntarily liquidate, dissolve or wind up:
- senior to all classes or series of common stock and to all of our equity
securities that provide that they rank junior to the Series B Preferred
Stock;
- junior to all equity securities issued by us which rank senior to the
Series B Preferred Stock; and
- on a parity with all equity securities issued by us (including the Series
A Preferred Stock and any Series C Preferred Stock, Series D Preferred
Stock, Series E Preferred Stock and Series F Preferred Stock) other than
those referred to in the bullet points above. The term "equity
securities" does not include convertible debt securities.
If ever issued, the Series B Preferred Stock will entitle the holders to
receive, when and as authorized by the board of directors out of funds legally
available for dividends, cumulative preferential cash dividends at the rate of
8 5/8% of the liquidation preference per annum (equivalent to $4.3125 per annum
per share of Series B Preferred Stock). Dividends on the Series B Preferred
Stock accumulate on a daily basis and are payable quarterly in arrears on the
15th day of each January, April, July and October. Except as provided below,
unless full cumulative dividends on the Series B Preferred Stock have been or at
the same time are declared and paid or declared and a sum sufficient for payment
set apart for payment for all past dividend periods and the then current
dividend period, no distributions (other than in common stock or other equity
securities ranking junior to the Series B Preferred Stock) may be declared or
paid or set aside for payment or other dividend be declared or made upon the
common stock or any other equity securities ranking junior to
10
<PAGE> 14
or on a parity with the Series B Preferred Stock, nor may any common stock or
any other equity securities ranking junior to or on a parity with the Series B
Preferred Stock be redeemed, purchased or otherwise acquired for any
consideration (or any monies be paid to or made available for a sinking fund for
the redemption of any such securities) by us (except by conversion into or
exchange for other equity securities ranking junior to the Series B Preferred
Stock and pursuant to the provisions of our articles of incorporation providing
for limitations on ownership and transfer in order to ensure that we remain
qualified as a real estate investment trust). When dividends are not paid in
full (or a sum sufficient for such full payment is not so set apart) upon the
Series B Preferred Stock and any other equity securities ranking on a parity
with the Series B Preferred Stock, all dividends declared upon the Series B
Preferred Stock and any other equity securities ranking on a parity with the
Series B Preferred Stock will be declared pro rata so that the amount of
dividends declared per share of Series B Preferred Stock and each such other
equity securities shall bear to each other the same ratio that accumulated
dividends per share of Series B Preferred Stock and such other equity securities
(which shall not include any accumulation in respect of unpaid dividends for
prior dividend periods if such other equity securities do not have a cumulative
dividend) bear to each other. Dividends on the Series B Preferred Stock will
accumulate whether or not we have funds legally available for the payment of
dividends and whether or not we declare dividends. If we designate any portion
of a dividend as a "capital gain dividend," a holder's share of the capital gain
dividend will be an amount that bears the same ratio to the total amount of
dividends (as determined for federal income tax purposes) paid to the holder for
the year as the aggregate amount designated as a capital gain dividend bears to
the aggregate amount of all dividends (as determined for federal income tax
purposes) paid on all classes of shares for the year.
In the event that we voluntarily or involuntarily liquidate, dissolve or
wind up following the issuance of the Series B Preferred Stock, the holders of
the Series B Preferred Stock will be entitled to receive out of our assets
legally available for distribution to our stockholders remaining after payment
or provision for payment of all of our debts and liabilities, a liquidation
preference, in cash, of $50.00 per share, plus an amount equal to any
accumulated and unpaid dividends to the date of such payment, before any
distribution of assets is made to holders of common stock or any other equity
securities that rank junior to the Series B Preferred Stock. After payment of
the full amount of the liquidating distributions to which they are entitled, the
holders of the Series B Preferred Stock will have no right or claim to any of
our remaining assets. Our consolidation or merger with or into any other entity,
a merger of another entity with or into us, a statutory share exchange or the
sale, lease, transfer or conveyance of all or substantially all of our property
or business do not constitute a liquidation, dissolution or winding up for
purposes of triggering the liquidation preference.
If we voluntarily or involuntarily liquidate, dissolve or wind up following
the issuance of Series B Preferred Stock and our assets are insufficient to make
full payment to the holders of the Series B Preferred Stock and the
corresponding amounts payable on all shares of other classes or series of equity
securities ranking on a parity with the Series B Preferred Stock as to
liquidation rights then the holders of the Series B Preferred Stock and all
other such classes or series of equity securities will share ratably in any such
distribution of assets in proportion to the full liquidating distributions to
which they would otherwise be entitled.
The Series B Preferred Stock has no stated maturity and is not subject to
mandatory redemption or any sinking fund. If issued, we cannot redeem the Series
B Preferred Stock prior to November 12, 2003. On and after November 12, 2003, we
can redeem the Series B Preferred Stock for cash at our option, in whole or from
time to time in part, at a redemption price of $50.00 per share, plus
accumulated and unpaid dividends, if any, to the redemption date. We must pay
the redemption price (other than the portion of the redemption price consisting
of accumulated and unpaid dividends) solely out of the sale proceeds of other
equity securities, which may include other classes or series of preferred stock.
In certain circumstances related to our maintenance of our ability to qualify as
a real
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<PAGE> 15
estate investment trust for federal income tax purposes, we may redeem shares of
Series B Preferred Stock. See "-- Restrictions on Ownership and Transfer of
Capital Stock."
Holders of Series B Preferred Stock will have no voting rights, except as
described below. If we do not pay dividends on the Series B Preferred Stock for
six or more quarterly periods (whether or not consecutive), holders of the
Series B Preferred Stock (voting separately as a class with all other classes or
series of equity securities upon which like voting rights have been conferred
and are exercisable) will be entitled to vote for the election of two additional
directors to serve on our board of directors until we have eliminated all
dividend arrearages with respect to the Series B Preferred Stock. So long as any
shares of Series B Preferred Stock remain outstanding, we may not, without the
affirmative vote or consent of at least two-thirds of the votes entitled to be
cast by the holders of the outstanding shares of Series B Preferred Stock (the
Series B Preferred Stock voting separately as a class):
- authorize or create, or increase the authorized or issued amount of, any
class or series of stock ranking senior to the Series B Preferred Stock;
- reclassify any of our authorized stock into any class or series of stock
ranking senior to the Series B Preferred Stock;
- designate or create, or increase the authorized or issued amount of, or
reclassify, any authorized shares into, any preferred stock ranking on a
parity with the Series B Preferred Stock or create, authorize or issue
any obligations or securities convertible into any such shares, but only
to the extent such stock is issued to one of our affiliates; or
- either consolidate, merge into or with, or convey, transfer or lease our
assets substantially as an entirety, to any corporation or other entity,
or amend, alter or repeal the provisions of our articles of
incorporation, whether by merger or consolidation or otherwise, in each
case so as to materially and adversely affect the powers, special rights,
preferences, privileges or voting power of the Series B Preferred Stock.
With respect to the occurrence of any of the events set forth in the fourth
bullet point above, so long as we are either the surviving entity and shares of
Series B Preferred Stock remain outstanding with the terms materially unchanged
or the resulting, surviving or transferee entity is a corporation organized
under the laws of any state and substitutes for the Series B Preferred Stock
other preferred stock having substantially the same terms and rights as the
Series B Preferred Stock, the occurrence of any such event will not be
considered to materially and adversely affect rights, preferences, privileges or
voting powers of holders of Series B Preferred Stock. Any increase in the amount
of authorized preferred stock, the creation or issuance of any other class or
series of preferred stock or any increase in an amount of authorized shares of
each class or series, in each case ranking on a parity with or junior to the
Series B Preferred Stock will not be considered to materially and adversely
affect such rights, preferences, privileges or voting powers.
We have granted certain registration rights with respect to any shares of
Series B Preferred Stock that we may issue upon exchange of the Series B
Preferred Units. See "Description of Certain Provisions of the Partnership
Agreement of the Operating Partnership -- Series B Preferred Units --
Registration Rights."
SERIES C PREFERRED STOCK. We currently have no shares of Series C Preferred
Stock issued or outstanding. The Series C Preferred Stock is issuable upon
exchange of AMB Property II, L.P.'s Series C Preferred Units. The AMB Property
II, L.P. Series C Preferred Units are exchangeable in whole at any time on or
after November 24, 2008, at the option of 51% of the holders of all outstanding
Series C Preferred Units, on a one for one basis, subject to adjustment, for
shares of our Series C Preferred Stock. In addition, AMB Property II, L.P.'s
Series C Preferred Units are
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<PAGE> 16
exchangeable in whole at any time at the option of 51% of the holders of all
outstanding Series C Preferred Units of AMB Property II, L.P. if:
- any Series C Preferred Unit shall not have received full distributions
with respect to six prior quarterly distribution periods (whether or not
consecutive); or
- AMB Property Holding Corporation, the general partner of AMB Property II,
L.P., or one of its subsidiaries takes the position, and a holder or
holders of Series C Preferred Units receive an opinion of independent
counsel that AMB Property II, L.P. is, or upon the happening of a certain
event likely will be, a "publicly traded partnership" within the meaning
of the Internal Revenue Code.
The Series C Preferred Units of AMB Property II, L.P. are exchangeable in
whole for shares of our Series C Preferred Stock at any time after November 24,
2001 and prior to November 24, 2008 at the option of 51% of the holders of all
outstanding Series C Preferred Units of AMB Property II, L.P. if those holders
deliver to AMB Property Holding Corporation a private letter ruling or an
opinion of independent counsel to the effect that an exchange of the Series C
Preferred Units at that time would not cause the Series C Preferred Units to be
considered "stock and securities" within the meaning of the Internal Revenue
Code for purposes of determining whether the holder of the Series C Preferred
Units is an "investment company" under the Internal Revenue Code.
The Series C Preferred Units of AMB Property II, L.P. are also exchangeable
in whole at any time for shares of our Series C Preferred Stock, if initial
purchasers of the Series C Preferred Units holding 51% of all outstanding Series
C Preferred Units determine, (regardless of whether held by the initial
purchasers) if:
- AMB Property II, L.P. reasonably determines that its assets and income
for a taxable year after 1998 would not satisfy the income and assets
tests of the Internal Revenue Code for such taxable year if AMB Property
II, L.P. were a real estate investment trust; or
- any holder of the Series C Preferred Units delivers to AMB Property II,
L.P. and AMB Property Holding Corporation an opinion of independent
counsel to the effect that (based on the assets and income of AMB
Property II, L.P. for a taxable year after 1998) AMB Property II, L.P.
would not satisfy the income and assets tests of the Internal Revenue
Code for such taxable year if AMB Property II, L.P. were a real estate
investment trust and that such failure would create a meaningful risk
that a holder of the Series C Preferred Units would fail to maintain
qualification as a real estate investment trust.
In lieu of an exchange for our Series C Preferred Stock, AMB Property II,
L.P. may redeem the Series C Preferred Units for cash in an amount equal to the
original capital account balance of the holder of Series C Preferred Units. A
holder of Series C Preferred Units of AMB Property II, L.P. will not be entitled
to exchange the units for Series C Preferred Stock if the exchange would result
in a violation of the ownership limit. See "Description of Capital
Stock -- Restrictions on Ownership and Transfer of Capital Stock."
The Series C Preferred Stock ranks, with respect to dividends and in the
event we voluntarily or involuntarily liquidate, dissolve or wind up:
- senior to all classes or series of common stock and to all of our equity
securities that provide that they rank junior to the Series C Preferred
Stock;
- junior to all equity securities issued by us which rank senior to the
Series C Preferred Stock; and
- on a parity with all equity securities issued by us (including the Series
A Preferred Stock, any Series B Preferred Stock, Series D Preferred
Stock, Series E Preferred Stock and Series F
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<PAGE> 17
Preferred Stock) other than those referred to in the bullet points above.
The term "equity securities" does not include convertible debt securities
until converted into equity securities.
If ever issued, the Series C Preferred Stock will entitle the holders to
receive, when and as authorized by the board of directors out of funds legally
available for dividends, cumulative preferential cash dividends at the rate of
8.75% of the liquidation preference per annum (equivalent to $4.375 per annum
per share of Series C Preferred Stock). Dividends on the Series C Preferred
Stock accumulate on a daily basis and are payable quarterly in arrears on the
15th day of each January, April, July and October. Except as provided below,
unless full cumulative dividends on the Series C Preferred Stock have been or at
the same time are declared and paid or declared and a sum sufficient for payment
set apart for payment for all past dividend periods and the then current
dividend period, no distributions (other than in common stock or other equity
securities ranking junior to the Series C Preferred Stock) may be declared or
paid or set aside for payment or other dividend be declared or made upon the
common stock or any other equity securities ranking junior to or on a parity
with the Series C Preferred Stock, nor may any common stock or any other equity
securities ranking junior to or on a parity with the Series C Preferred Stock,
be redeemed, purchased or otherwise acquired for any consideration (or any
monies be paid to or made available for a sinking fund for the redemption of any
such securities) by us (except by conversion into or exchange for other equity
securities ranking junior to the Series C Preferred Stock and pursuant to the
provisions of our articles of incorporation providing for limitations on
ownership and transfer in order to ensure that we remain qualified as a real
estate investment trust). When dividends are not paid in full (or a sum
sufficient for such full payment is not so set apart) upon the Series C
Preferred Stock and any other equity securities ranking on a parity with the
Series C Preferred Stock, all dividends declared upon the Series C Preferred
Stock and any other equity securities ranking on a parity with the Series C
Preferred Stock will be declared pro rata so that the amount of dividends
declared per share of Series C Preferred Stock and each such other equity
securities shall bear to each other the same ratio that accumulated dividends
per share of Series C Preferred Stock and such other equity securities (which
shall not include any accumulation in respect of unpaid dividends for prior
dividend periods if such other equity securities do not have a cumulative
dividend) bear to each other. Dividends on the Series C Preferred Stock will
accumulate whether or not we have funds legally available for the payment of
dividends and whether or not we declare dividends. If we designate any portion
of a dividend as a "capital gain dividend," a holder's share of the capital gain
dividend will be an amount that bears the same ratio to the total amount of
dividends (as determined for federal income tax purposes) paid to the holder for
the year as the aggregate amount designated as a capital gain dividend bears to
the aggregate amount of all dividends (as determined for federal income tax
purposes) paid on all classes of shares for the year.
In the event that we voluntarily or involuntarily liquidate, dissolve or
wind up following the issuance of Series C Preferred Stock, the holders of the
Series C Preferred Stock will be entitled to receive out of our assets legally
available for distribution to our stockholders remaining after payment or
provision for payment of all of our debts and liabilities, a liquidation
preference, in cash, of $50.00 per share, plus an amount equal to any
accumulated or accrued and unpaid dividends to the date of such payment, before
any distribution of assets is made to holders of common stock or any other
equity securities that rank junior to the Series C Preferred Stock. After
payment of the full amount of the liquidating distributions to which they are
entitled, the holders of the Series C Preferred Stock will have no right or
claim to any of our remaining assets. Our consolidation or merger with or into
any other entity, a merger of another entity with or into us, a statutory share
exchange or the sale, lease, transfer or conveyance of all or substantially all
of our property or business do not constitute a liquidation, dissolution or
winding up for purposes of triggering the liquidation preference.
If we voluntarily or involuntarily liquidate, dissolve or wind up following
the issuance of Series C Preferred Stock and our assets are insufficient to make
full payment to holders of the Series C
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<PAGE> 18
Preferred Stock and the corresponding amounts payable on all shares of other
classes or series of equity securities ranking on a parity with the Series C
Preferred Stock as to liquidation rights, then the holders of the Series C
Preferred Stock and all other such classes or series of equity securities will
share ratably in any such distribution of assets in proportion to the full
liquidating distributions to which they would otherwise be entitled.
The Series C Preferred Stock has no stated maturity and is not subject to
mandatory redemption or any sinking fund. If issued, we cannot redeem the Series
C Preferred Stock prior to November 24, 2003. On and after November 24, 2003, we
can redeem the Series C Preferred Stock for cash at our option, in whole or from
time to time in part, at a redemption price of $50.00 per share, plus
accumulated and unpaid dividends, if any, to the redemption date. We must pay
the redemption price (other than the portion of the redemption price consisting
of accumulated and unpaid dividends) solely out of the sale proceeds of other
equity securities, which may include other classes or series of preferred stock.
In certain circumstances related to our maintenance of our ability to qualify as
a real estate investment trust for federal income tax purposes, we may redeem
shares of Series C Preferred Stock. See "Description of Capital
Stock -- Restrictions on Ownership and Transfer of Capital Stock."
Holders of Series C Preferred Stock will have no voting rights, except as
described below. If we do not pay dividends on the Series C Preferred Stock for
six or more quarterly periods (whether or not consecutive), holders of the
Series C Preferred Stock (voting separately as a class with all other classes or
series of equity securities upon which like voting rights have been conferred
and are exercisable) will be entitled to vote for the election of two additional
directors to serve on our board of directors until we have eliminated all
dividend arrearages with respect to the Series C Preferred Stock. So long as any
shares of Series C Preferred Stock remain outstanding, we may not, without the
affirmative vote or consent of at least two-thirds of the votes entitled to be
cast by the holders of the outstanding shares of Series C Preferred Stock (the
Series C Preferred Stock voting separately as a class):
- authorize or create, or increase the authorized or issued amount of, any
class or series of stock ranking senior to the Series C Preferred Stock;
- reclassify any of our authorized stock into any class or series of stock
ranking senior to the Series C Preferred Stock;
- designate or create, or increase the authorized or issued amount of, or
reclassify, any authorized shares into, any preferred stock ranking on a
parity with the Series C Preferred Stock or create, authorize or issue
any obligations or securities convertible into any such shares, but only
to the extent such stock is issued to one of our affiliates; or
- either consolidate, merge into or with, or convey, transfer or lease our
assets substantially, as an entirety, to any corporation or other entity,
or amend, alter or repeal the provisions of our articles of
incorporation, whether by merger or consolidation or otherwise, in each
case so as to materially and adversely affect the powers, special rights,
preferences, privileges or voting power of the Series C Preferred Stock.
With respect to the occurrence of any of the events set forth in the fourth
bullet point above, so long as we are either the surviving entity and shares of
Series C Preferred Stock remain outstanding with the terms materially unchanged
or the resulting, surviving or transferee entity is a corporation, business
trust or like entity organized under the laws of any state and substitutes for
the Series C Preferred Stock other preferred stock or preferred shares having
substantially the same terms and rights as the Series C Preferred Stock, the
occurrence of any such event will not be considered to materially and adversely
affect rights, preferences, privileges or voting powers of holders of Series C
Preferred Stock. Any increase in the amount of authorized preferred stock, the
creation or issuance of
15
<PAGE> 19
any other class or series of preferred stock or any increase in an amount of
authorized shares of each class or series, in each case ranking on a parity with
or junior to the Series C Preferred Stock will not be considered to materially
and adversely affect such rights, preferences, privileges or voting powers.
We have agreed to file a registration statement registering the resale of
the shares of Series C Preferred Stock issuable to the holders of AMB Property
II, L.P. Series C Preferred Units as soon as practicable but not later than 60
days after the date the AMB Property II, L.P. Series C Preferred Units are
exchanged for shares of Series C Preferred Stock. We have also agreed to use our
best efforts to cause the registration statement to be declared effective within
120 days after the date of the exchange.
SERIES D PREFERRED STOCK. We currently have no shares of Series D Preferred
Stock issued or outstanding. The Series D Preferred Stock is issuable upon
exchange of AMB Property II, L.P. Series D Preferred Units. The AMB Property II,
L.P. Series D Preferred Units are exchangeable in whole at any time on or after
May 5, 2009, at the option of 51% of the holders of all outstanding Series D
Preferred Units, on a one for one basis, subject to adjustment, for shares of
our Series D Preferred Stock. In addition, AMB Property II, L.P. Series D
Preferred Units are exchangeable in whole at any time at the option of 51% of
the holders of all outstanding Series D Preferred Units of AMB Property II, L.P.
if:
- any Series D Preferred Unit shall not have received full distributions
with respect to six prior quarterly distribution periods (whether or not
consecutive); or
- AMB Property Holding Corporation, the general partner of AMB Property II,
L.P., or one of its subsidiaries takes the position, and a holder or
holders of Series D Preferred Units receive an opinion of independent
counsel that AMB Property II, L.P. is, or upon the happening of a certain
event likely will be, a "publicly traded partnership" within the meaning
of the Internal Revenue Code.
The Series D Preferred Units of AMB Property II, L.P. are exchangeable in
whole for shares of our Series D Preferred Stock at any time after May 5, 2002
and prior to May 5, 2009 at the option of 51% of the holders of all outstanding
Series D Preferred Units if those holders deliver to AMB Property Holding
Corporation a private letter ruling or an opinion of independent counsel to the
effect that an exchange of the Series D Preferred Units at that time would not
cause the Series D Preferred Units to be considered "stock and securities"
within the meaning of the Internal Revenue Code for purposes of determining
whether the holder of the Series D Preferred Units is an "investment company"
under the Internal Revenue.
In lieu of an exchange for our Series D Preferred Stock, AMB Property II,
L.P. may redeem the Series D Preferred Units for cash in an amount equal to the
original capital account balance of the holder of AMB Property II, L.P. Series D
Preferred Units. A holder of Series D Preferred Units of AMB Property II, L.P.
will not be entitled to exchange the units for Series D Preferred Stock if the
exchange would result in a violation of the ownership limit. See "Description of
Capital Stock -- Restrictions on Ownership and Transfer of Capital Stock."
The Series D Preferred Stock ranks, with respect to dividends and in the
event we voluntarily or involuntarily liquidate, dissolve or wind up:
- senior to all classes or series of common stock and to all of our equity
securities that provide that they rank junior to the Series D Preferred
Stock;
- junior to all equity securities issued by us which rank senior to the
Series D Preferred Stock; and
- on a parity with all equity securities issued by us (including the Series
A Preferred Stock and any Series B Preferred Stock, Series C Preferred
Stock, Series E Preferred Stock and Series F
16
<PAGE> 20
Preferred Stock) other than those referred to in the bullet points above.
The term "equity securities" does not include convertible debt securities
until converted into equity securities.
If ever issued, the Series D Preferred Stock will entitle the holders to
receive, when and as authorized by the board of directors out of funds legally
available for dividends, cumulative preferential cash dividends at the rate of
7.75% of the liquidation preference per annum (equivalent to $3.875 per annum
per share of Series D Preferred Stock). Dividends on the Series D Preferred
Stock accumulate on a daily basis and are payable quarterly in arrears on the
15th day of each January, April, July and October. Except as provided below,
unless full cumulative dividends on the Series D Preferred Stock have been or at
the same time are declared and paid or declared and a sum sufficient for payment
set apart for payment for all past dividend periods and the then current
dividend period, no distributions (other than in common stock or other equity
securities ranking junior to the Series D Preferred Stock) may be declared or
paid or set aside for payment or other dividend be declared or made upon the
common stock or any other equity securities ranking junior to or on a parity
with the Series D Preferred Stock, nor may any common stock or any other equity
securities ranking junior to or on a parity with the Series D Preferred Stock be
redeemed, purchased or otherwise acquired for any consideration (or any monies
be paid to or made available for a sinking fund for the redemption of any such
securities) by us (except by conversion into or exchange for other equity
securities ranking junior to the Series D Preferred Stock and pursuant to the
provisions of our articles of incorporation providing for limitations on
ownership and transfer in order to ensure that we remain qualified as a real
estate investment trust). When dividends are not paid in full (or a sum
sufficient for such full payment is not so set apart) upon the Series D
Preferred Stock and any other equity securities ranking on a parity with the
Series D Preferred Stock, all dividends declared upon the Series D Preferred
Stock and any other equity securities ranking on a parity with the Series D
Preferred Stock will be declared pro rata so that the amount of dividends
declared per share of Series D Preferred Stock and each such other equity
securities shall bear to each other the same ratio that accumulated dividends
per share of Series D Preferred Stock and such other equity securities (which
shall not include any accumulation in respect of unpaid dividends for prior
dividend periods if such other equity securities do not have a cumulative
dividend) bear to each other. Dividends on the Series D Preferred Stock will
accumulate whether or not we have funds legally available for the payment of
dividends and whether or not we declare dividends. If we designate any portion
of a dividend as a "capital gain dividend," a holder's share of the capital gain
dividend will be an amount that bears the same ratio to the total amount of
dividends (as determined for federal income tax purposes) paid to the holder for
the year as the aggregate amount designated as a capital gain dividend bears to
the aggregate amount of all dividends (as determined for federal income tax
purposes) paid on all classes of shares for the year.
In the event that we voluntarily or involuntarily liquidate, dissolve or
wind up following the issuance of Series D Preferred Stock, the holders of the
Series D Preferred Stock will be entitled to receive out of our assets legally
available for distribution to our stockholders remaining after payment or
provision for payment of all of our debts and liabilities, a liquidation
preference, in cash, of $50.00 per share, plus an amount equal to any
accumulated or accrued and unpaid dividends to the date of such payment, before
any distribution of assets is made to holders of common stock or any other
equity securities that rank junior to the Series D Preferred Stock. After
payment of the full amount of the liquidating distributions to which they are
entitled, the holders of the Series D Preferred Stock will have no right or
claim to any of our remaining assets. Our consolidation or merger with or into
any other entity, a merger of another entity with or into us, a statutory share
exchange or the sale, lease, transfer or conveyance of all or substantially all
of our property or business do not constitute a liquidation, dissolution or
winding up for purposes of triggering the liquidation preference.
If we voluntarily or involuntarily liquidate, dissolve or wind up following
the issuance of Series D Preferred Stock and our assets are insufficient to make
full payment to holders of the Series D
17
<PAGE> 21
Preferred Stock and the corresponding amounts payable on all shares of other
classes or series of equity securities ranking on a parity with the Series D
Preferred Stock as to liquidation rights then the holders of the Series D
Preferred Stock and all other such classes or series of equity securities will
share ratably in any such distribution of assets in proportion to the full
liquidating distributions to which they would otherwise be entitled.
The Series D Preferred Stock has no stated maturity and is not subject to
mandatory redemption or any sinking fund. If issued, we cannot redeem the Series
D Preferred Stock prior to May 5, 2004. On and after May 5, 2004, we can redeem
the Series D Preferred Stock for cash at our option, in whole or from time to
time in part, at a redemption price of $50.00 per share, plus accumulated and
unpaid dividends, if any, to the redemption date. We must pay the redemption
price (other than the portion of the redemption price consisting of accumulated
and unpaid dividends) solely out of the sale proceeds of other equity
securities, which may include other classes or series of preferred stock. In
certain circumstances related to our maintenance of our ability to qualify as a
real estate investment trust for federal income tax purposes, we may redeem
shares of Series D Preferred Stock. See "Description of Capital
Stock -- Restrictions on Ownership and Transfer of Capital Stock."
Holders of Series D Preferred Stock will have no voting rights, except as
described below. If we do not pay dividends on the Series D Preferred Stock for
six or more quarterly periods (whether or not consecutive), holders of the
Series D Preferred Stock (voting separately as a class with all other classes or
series of equity securities upon which like voting rights have been conferred
and are exercisable) will be entitled to vote for the election of two additional
directors to serve on our board of directors until we have eliminated all
dividend arrearages with respect to the Series D Preferred Stock. So long as any
shares of Series D Preferred Stock remain outstanding, we may not, without the
affirmative vote or consent of at least two-thirds of the votes entitled to be
cast by the holders of the outstanding shares of Series D Preferred Stock (the
Series D Preferred Stock voting separately as a class):
- authorize or create, or increase the authorized or issued amount of, any
class or series of stock ranking senior to the Series D Preferred Stock;
- reclassify any of our authorized stock into any class or series of stock
ranking senior to the Series D Preferred Stock;
- designate or create, or increase the authorized or issued amount of, or
reclassify, any authorized shares into, any preferred stock ranking on a
parity with the Series D Preferred Stock or create, authorize or issue
any obligations or securities convertible into any such shares, but only
to the extent such stock is issued to one of our affiliates; or
- either consolidate, merge into or with, or convey, transfer or lease our
assets substantially, as an entirety, to any corporation or other entity,
or amend, alter or repeal the provisions of our articles of
incorporation, whether by merger or consolidation or otherwise, in each
case so as to materially and adversely affect the powers, special rights,
preferences, privileges or voting power of the Series D Preferred Stock.
With respect to the occurrence of any of the events set forth in the fourth
bullet point above, so long as we are either the surviving entity and shares of
Series D Preferred Stock remain outstanding with the terms materially unchanged
or the resulting, surviving or transferee entity is a corporation, business
trust or like entity organized under the laws of any state and substitutes for
the Series D Preferred Stock other preferred stock or preferred shares having
substantially the same terms and rights as the Series D Preferred Stock, the
occurrence of any such event will not be considered to materially and adversely
affect rights, preferences, privileges or voting powers of holders of Series D
Preferred Stock. Any increase in the amount of authorized preferred stock, the
creation or issuance of any other class or series of preferred stock or any
increase in an amount of authorized shares of each
18
<PAGE> 22
class or series, in each case ranking on a parity with or junior to the Series D
Preferred Stock will not be considered to materially and adversely affect such
rights, preferences, privileges or voting powers.
We have agreed to file a registration statement registering the resale of
the shares of Series D Preferred Stock issuable to the holders of AMB Property
II, L.P. Series D Preferred Units as soon as practicable but not later than 60
days after the date the AMB Property II, L.P. Series D Preferred Units are
exchanged for shares of Series D Preferred Stock. We have also agreed to use our
best efforts to cause the registration statement to be declared effective within
120 days after the date of the exchange.
SERIES E PREFERRED STOCK. We currently have no shares of Series E Preferred
Stock issued or outstanding. The Series E Preferred Stock is issuable upon
exchange of AMB Property II, L.P. Series E Preferred Units. The AMB Property II,
L.P. Series E Preferred Units are exchangeable in whole at any time on or after
August 31, 2009, at the option of 51% of the holders of all outstanding Series E
Preferred Units, on a one for one basis, subject to adjustment, for shares of
our Series E Preferred Stock. In addition, AMB Property II, L.P. Series E
Preferred Units are exchangeable in whole at any time at the option of 51% of
the holders of all outstanding Series E Preferred Units of AMB Property II, L.P.
if:
- any Series E Preferred Unit shall not have received full distributions
with respect to six prior quarterly distribution periods (whether or not
consecutive); or
- AMB Property Holding Corporation, the general partner of AMB Property II,
L.P., or one of its subsidiaries takes the position, and a holder or
holders of Series E Preferred Units receive an opinion of independent
counsel that AMB Property II, L.P. is, or upon the happening of a certain
event likely will be, a "publicly traded partnership" within the meaning
of the Internal Revenue Code.
The Series E Preferred Units of AMB Property II, L.P. are exchangeable in
whole for shares of our Series E Preferred Stock at any time after August 31,
2002 and prior to August 31, 2009 at the option of 51% of the holders of all
outstanding Series E Preferred Units if those holders deliver to AMB Property
Holding Corporation a private letter ruling or an opinion of independent counsel
to the effect that an exchange of the Series E Preferred Units at that time
would not cause the Series E Preferred Units to be considered "stock and
securities" within the meaning of the Internal Revenue Code for purposes of
determining whether the holder of the Series E Preferred Units is an "investment
company" under the Internal Revenue Code.
In lieu of an exchange for our Series E Preferred Stock, AMB Property II,
L.P. may redeem the Series E Preferred Units for cash in an amount equal to the
original capital account balance of the holder of AMB Property II, L.P. Series E
Preferred Units. A holder of Series E Preferred Units will not be entitled to
exchange the units for Series E Preferred Stock if the exchange would result in
a violation of the ownership limit. See "Description of Capital
Stock -- Restrictions on Ownership and Transfer of Capital Stock."
The Series E Preferred Stock ranks, with respect to dividends and in the
event we voluntarily or involuntarily liquidate, dissolve or wind up:
- senior to all classes or series of common stock and to all of our equity
securities that provide that they rank junior to the Series E Preferred
Stock;
- junior to all equity securities issued by us which rank senior to the
Series E Preferred Stock; and
- on a parity with all equity securities issued by us (including the Series
A Preferred Stock and any Series B Preferred Stock, Series C Preferred
Stock, Series D Preferred Stock and Series F
19
<PAGE> 23
Preferred Stock) other than those referred to in the bullet points above.
The term "equity securities" does not include convertible debt securities
until converted into equity securities.
If ever issued, the Series E Preferred Stock will entitle the holders to
receive, when and as authorized by the board of directors out of funds legally
available for dividends, cumulative preferential cash dividends at the rate of
7.75% of the liquidation preference per annum (equivalent to $3.875 per annum
per share of Series E Preferred Stock). Dividends on the Series E Preferred
Stock accumulate on a daily basis and are payable quarterly in arrears on the
15th day of each January, April, July and October. Except as provided below,
unless full cumulative dividends on the Series E Preferred Stock have been or at
the same time are declared and paid or declared and a sum sufficient for payment
set apart for payment for all past dividend periods and the then current
dividend period, no distributions (other than in common stock or other equity
securities ranking junior to the Series E Preferred Stock) may be declared or
paid or set aside for payment or other dividend be declared or made upon the
common stock or any other equity securities ranking junior to or on a parity
with the Series E Preferred Stock, nor may any common stock or any other equity
securities ranking junior to or on a parity with the Series E Preferred Stock be
redeemed, purchased or otherwise acquired for any consideration (or any monies
be paid to or made available for a sinking fund for the redemption of any such
securities) by us (except by conversion into or exchange for other equity
securities ranking junior to the Series E Preferred Stock and pursuant to the
provisions of our articles of incorporation providing for limitations on
ownership and transfer in order to ensure that we remain qualified as a real
estate investment trust). When dividends are not paid in full (or a sum
sufficient for such full payment is not so set apart) upon the Series E
Preferred Stock and any other equity securities ranking on a parity with the
Series E Preferred Stock, all dividends declared upon the Series E Preferred
Stock and any other equity securities ranking on a parity with the Series E
Preferred Stock will be declared pro rata so that the amount of dividends
declared per share of Series E Preferred Stock and each such other equity
securities shall bear to each other the same ratio that accumulated dividends
per share of Series E Preferred Stock and such other equity securities (which
shall not include any accumulation in respect of unpaid dividends for prior
dividend periods if such other equity securities do not have a cumulative
dividend) bear to each other. Dividends on the Series E Preferred Stock will
accumulate whether or not we have funds legally available for the payment of
dividends and whether or not we declare dividends. If we designate any portion
of a dividend as a "capital gain dividend," a holder's share of the capital gain
dividend will be an amount that bears the same ratio to the total amount of
dividends (as determined for federal income tax purposes) paid to the holder for
the year as the aggregate amount designated as a capital gain dividend bears to
the aggregate amount of all dividends (as determined for federal income tax
purposes) paid on all classes of shares for the year.
In the event that we voluntarily or involuntarily liquidate, dissolve or
wind up following the issuance of Series E Preferred Stock, the holders of the
Series E Preferred Stock will be entitled to receive out of our assets legally
available for distribution to our stockholders remaining after payment or
provision for payment of all of our debts and liabilities, a liquidation
preference, in cash, of $50.00 per share, plus an amount equal to any
accumulated or accrued and unpaid dividends to the date of such payment, before
any distribution of assets is made to holders of common stock or any other
equity securities that rank junior to the Series E Preferred Stock. After
payment of the full amount of the liquidating distributions to which they are
entitled, the holders of the Series E Preferred Stock will have no right or
claim to any of our remaining assets. Our consolidation or merger with or into
any other entity, a merger of another entity with or into us, a statutory share
exchange or the sale, lease, transfer or conveyance of all or substantially all
of our property or business do not constitute a liquidation, dissolution or
winding up for purposes of triggering the liquidation preference.
If we voluntarily or involuntarily liquidate, dissolve or wind up following
the issuance of Series E Preferred Stock and our assets are insufficient to make
full payment to holders of the Series E
20
<PAGE> 24
Preferred Stock and the corresponding amounts payable on all shares of other
classes or series of equity securities ranking on a parity with the Series E
Preferred Stock as to liquidation rights, then the holders of the Series E
Preferred Stock and all other such classes or series of equity securities will
share ratably in any such distribution of assets in proportion to the full
liquidating distributions to which they would otherwise be entitled.
The Series E Preferred Stock has no stated maturity and is not subject to
mandatory redemption or any sinking fund. If issued, we cannot redeem the Series
E Preferred Stock prior to August 31, 2004. On and after August 31, 2004, we can
redeem the Series E Preferred Stock for cash at our option, in whole or from
time to time in part, at a redemption price of $50.00 per share, plus
accumulated and unpaid dividends, if any, to the redemption date. We must pay
the redemption price (other than the portion of the redemption price consisting
of accumulated and unpaid dividends) solely out of the sale proceeds of other
equity securities, which may include other classes or series of preferred stock.
In certain circumstances related to our maintenance of our ability to qualify as
a real estate investment trust for federal income tax purposes, we may redeem
shares of Series E Preferred Stock. See "-- Restrictions on Ownership and
Transfer of Capital Stock."
Holders of Series E Preferred Stock will have no voting rights, except as
described below. If we do not pay dividends on the Series E Preferred Stock for
six or more quarterly periods (whether or not consecutive), holders of the
Series E Preferred Stock (voting separately as a class with all other classes or
series of equity securities upon which like voting rights have been conferred
and are exercisable) will be entitled to vote for the election of two additional
directors to serve on our board of directors until we have eliminated all
dividend arrearages with respect to the Series E Preferred Stock. So long as any
shares of Series E Preferred Stock remain outstanding, we may not, without the
affirmative vote or consent of at least two-thirds of the votes entitled to be
cast by the holders of the outstanding shares of Series E Preferred Stock (the
Series E Preferred Stock voting separately as a class):
- authorize or create, or increase the authorized or issued amount of, any
class or series of stock ranking senior to the Series E Preferred Stock;
- reclassify any of our authorized stock into any class or series of stock
ranking senior to the Series E Preferred Stock;
- designate or create, or increase the authorized or issued amount of, or
reclassify, any authorized shares into, any preferred stock ranking on a
parity with the Series E Preferred Stock or create, authorize or issue
any obligations or securities convertible into any such shares, but only
to the extent such stock is issued to one of our affiliates; or
- either consolidate, merge into or with, or convey, transfer or lease our
assets substantially, as an entirety, to any corporation or other entity,
or amend, alter or repeal the provisions of our articles of
incorporation, whether by merger or consolidation or otherwise, in each
case so as to materially and adversely affect the powers, special rights,
preferences, privileges or voting power of the Series E Preferred Stock.
With respect to the occurrence of any of the events set forth in the fourth
bullet point above, so long as we are either the surviving entity and shares of
Series E Preferred Stock remain outstanding with the terms materially unchanged
or the resulting, surviving or transferee entity is a corporation, business
trust or like entity organized under the laws of any state and substitutes for
the Series E Preferred Stock other preferred stock or preferred shares having
substantially the same terms and rights as the Series E Preferred Stock, the
occurrence of any such event will not be considered to materially and adversely
affect rights, preferences, privileges or voting powers of holders of Series E
Preferred Stock. Any increase in the amount of authorized preferred stock, the
creation or issuance of any other class or series of preferred stock or any
increase in an amount of authorized shares of each
21
<PAGE> 25
class or series, in each case ranking on a parity with or junior to the Series E
Preferred Stock will not be considered to materially and adversely affect such
rights, preferences, privileges or voting powers.
We have agreed to file a registration statement registering the resale of
the shares of Series E Preferred Stock issuable to the holders of AMB Property
II, L.P. Series E Preferred Units as soon as practicable but not later than 60
days after the date the AMB Property II, L.P. Series E Preferred Units are
exchanged for shares of Series E Preferred Stock. We have also agreed to use our
best efforts to cause the registration statement to be declared effective within
120 days after the date of the exchange.
SERIES F PREFERRED STOCK. We currently have no shares of Series F Preferred
Stock issued or outstanding. The Series F Preferred Stock is issuable upon
exchange of AMB Property II, L.P. Series F Preferred Units. The AMB Property II,
L.P. Series F Preferred Units are exchangeable in whole at any time on or after
March 22, 2010, at the option of 51% of the holders of all outstanding Series F
Preferred Units, on a one for one basis, subject to adjustment, for shares of
our Series F Preferred Stock. In addition, AMB Property II, L.P. Series F
Preferred Units are exchangeable in whole at any time at the option of 51% of
the holders of all outstanding Series F Preferred Units of AMB Property II, L.P.
if:
- any Series F Preferred Unit shall not have received full distributions
with respect to six prior quarterly distribution periods (whether or not
consecutive); or
- AMB Property Holding Corporation, the general partner of AMB Property II,
L.P., or one of its subsidiaries takes the position, and a holder or
holders of Series F Preferred Units receive an opinion of independent
counsel that AMB Property II, L.P. is, or upon the happening of a certain
event likely will be, a "publicly traded partnership" within the meaning
of the Internal Revenue Code.
The Series F Preferred Units of AMB Property II, L.P. are exchangeable in
whole for shares of our Series F Preferred Stock at any time after March 22,
2003 and prior to March 22, 2010 at the option of 51% of the holders of all
outstanding Series F Preferred Units of AMB Property II, L.P. if those holders
deliver to AMB Property Holding Corporation a private letter ruling or an
opinion of independent counsel to the effect that an exchange of the Series F
Preferred Units at that time would not cause the Series F Preferred Units to be
considered "stock and securities" within the meaning of the Internal Revenue
Code for purposes of determining whether the holder of the Series F Preferred
Units is an "investment company" under the Internal Revenue Code.
In addition, the Series F Preferred Units of AMB Property II, L.P. may be
exchanged, in whole but not in part, at the option of 51% of the holders, at any
time that there exists an imminent and substantial risk that such holders'
interest in AMB Property II, L.P. represents or will represent more than 19.0%
of the total profits of or capital interests in AMB Property II, L.P. for a
taxable year.
Furthermore, the AMB Property II, L.P. Series F Preferred Units may be
exchanged, in whole but not in part, at the option of 51% of the holders, if the
AMB Property II, L.P. Series F Preferred Units are held by a real estate
investment trust and excluding the effect of certain loans and advances for
purposes of the 5% test of Section 856(c)(4)(B) of the Internal Revenue Code,
either:
- AMB Property II, L.P. is advised by counsel that, based on the assets and
income of AMB Property II, L.P. for a taxable year after 1998, it would
not satisfy the income and assets tests of Section 856 of the Internal
Revenue Code for such taxable year if it were a real estate investment
trust; or
- the holder of the AMB Property II, L.P. Series F Preferred Units delivers
an opinion of independent counsel to the effect that, based on the assets
and income of AMB Property II, L.P. for a taxable year after 1999, AMB
Property II, L.P. would not satisfy the income and
22
<PAGE> 26
assets tests of Section 856 of the Internal Revenue Code for such taxable
year if it were a real estate investment trust and that such failure
would create a meaningful risk that the holder of the AMB Property II,
L.P. Series F Preferred Units would fail to maintain its qualification as
a real estate investment trust.
In lieu of an exchange for Series F Preferred Stock, AMB Property II, L.P.
may redeem the Series F Preferred Units for cash in an amount equal to the
original capital account balance of the holder of the Series F Preferred Units.
A holder of Series F Preferred Units of AMB Property II, L.P. will not be
entitled to exchange the units for Series F Preferred Stock if the exchange
would result in a violation of the ownership limit. See "Description of Capital
Stock -- Restrictions on Ownership and Transfer of Capital Stock."
The Series F Preferred Stock ranks, with respect to dividends and in the
event we voluntarily or involuntarily liquidate, dissolve or wind up:
- senior to all classes or series of common stock and to all of our equity
securities that provide that they rank junior to the Series F Preferred
Stock;
- junior to all equity securities issued by us which rank senior to the
Series F Preferred Stock; and
- on a parity with all equity securities issued by us (including the Series
A Preferred Stock and any Series B Preferred Stock, Series C Preferred
Stock, Series D Preferred Stock and Series E Preferred Stock) other than
those referred to in the bullet points above. The term "equity
securities" does not include convertible debt securities until converted
into equity securities.
If ever issued, the Series F Preferred Stock will entitle the holders to
receive, when and as authorized by the board of directors out of funds legally
available for dividends, cumulative preferential cash dividends at the rate of
7.95% of the liquidation preference per annum (equivalent to $3.975 per annum
per share of Series F Preferred Stock). Dividends on the Series F Preferred
Stock accumulate on a daily basis and are payable quarterly in arrears on the
15th day of each January, April, July and October. Except as provided below,
unless full cumulative dividends on the Series F Preferred Stock have been or at
the same time are declared and paid or declared and a sum sufficient for payment
set apart for payment for all past dividend periods and the then current
dividend period, no distributions (other than in common stock or other equity
securities ranking junior to the Series F Preferred Stock) may be declared or
paid or set aside for payment or other dividend be declared or made upon the
common stock or any other equity securities ranking junior to or on a parity
with the Series F Preferred Stock, nor may any common stock or any other equity
securities ranking junior to or on a parity with the Series F Preferred Stock be
redeemed, purchased or otherwise acquired for any consideration (or any monies
be paid to or made available for a sinking fund for the redemption of any such
securities) by us (except by conversion into or exchange for other equity
securities ranking junior to the Series F Preferred Stock and pursuant to the
provisions of our articles of incorporation providing for limitations on
ownership and transfer in order to ensure that we remain qualified as a real
estate investment trust). When dividends are not paid in full (or a sum
sufficient for such full payment is not so set apart) upon the Series F
Preferred Stock and any other equity securities ranking on a parity with the
Series F Preferred Stock, all dividends declared upon the Series F Preferred
Stock and any other equity securities ranking on a parity with the Series F
Preferred Stock will be declared pro rata so that the amount of dividends
declared per share of Series F Preferred Stock and each such other equity
securities shall bear to each other the same ratio that accumulated dividends
per share of Series F Preferred Stock and such other equity securities (which
shall not include any accumulation in respect of unpaid dividends for prior
dividend periods if such other equity securities do not have a cumulative
dividend) bear to each other.
23
<PAGE> 27
Dividends on the Series F Preferred Stock will accumulate whether or not we have
funds legally available for the payment of dividends and whether or not we
declare dividends. If we designate any portion of a dividend as a "capital gain
dividend," a holder's share of the capital gain dividend will be an amount that
bears the same ratio to the total amount of dividends (as determined for federal
income tax purposes) paid to the holder for the year as the aggregate amount
designated as a capital gain dividend bears to the aggregate amount of all
dividends (as determined for federal income tax purposes) paid on all classes of
shares for the year.
In the event that we voluntarily or involuntarily liquidate, dissolve or
wind up following the issuance of Series F Preferred Stock, the holders of the
Series F Preferred Stock will be entitled to receive out of our assets legally
available for distribution to our stockholders remaining after payment or
provision for payment of all of our debts and liabilities, a liquidation
preference, in cash, of $50.00 per share, plus an amount equal to any
accumulated or accrued and unpaid dividends to the date of such payment, before
any distribution of assets is made to holders of common stock or any other
equity securities that rank junior to the Series F Preferred Stock. After
payment of the full amount of the liquidating distributions to which they are
entitled, the holders of the Series F Preferred Stock will have no right or
claim to any of our remaining assets. Our consolidation or merger with or into
any other entity, a merger of another entity with or into us, a statutory share
exchange or the sale, lease, transfer or conveyance of all or substantially all
of our property or business do not constitute a liquidation, dissolution or
winding up for purposes of triggering the liquidation preference.
If we voluntarily or involuntarily liquidate, dissolve or wind up following
the issuance of Series F Preferred Stock and our assets are insufficient to make
full payment to holders of the Series F Preferred Stock and the corresponding
amounts payable on all shares of other classes or series of equity securities
ranking on a parity with the Series F Preferred Stock as to liquidation rights,
then the holders of the Series F Preferred Stock and all other such classes or
series of equity securities will share ratably in any such distribution of
assets in proportion to the full liquidating distributions to which they would
otherwise be entitled.
The Series F Preferred Stock has no stated maturity and is not subject to
mandatory redemption or any sinking fund. If issued, we cannot redeem the Series
F Preferred Stock prior to March 22, 2005. On and after March 22, 2005, we can
redeem the Series F Preferred Stock for cash at our option, in whole or from
time to time in part, at a redemption price of $50.00 per share, plus
accumulated and unpaid dividends, if any, to the redemption date. We must pay
the redemption price (other than the portion of the redemption price consisting
of accumulated and unpaid dividends) solely out of the sale proceeds of other
equity securities, which may include other classes or series of preferred stock.
In certain circumstances related to our maintenance of our ability to qualify as
a real estate investment trust for federal income tax purposes, we may redeem
shares of Series F Preferred Stock. See "-- Restrictions on Ownership and
Transfer of Capital Stock."
Holders of Series F Preferred Stock will have no voting rights, except as
described below. If we do not pay dividends on the Series F Preferred Stock for
six or more quarterly periods (whether or not consecutive), holders of the
Series F Preferred Stock (voting separately as a class with all other classes or
series of equity securities upon which like voting rights have been conferred
and are exercisable) will be entitled to vote for the election of two additional
directors to serve on our board of directors until we have eliminated all
dividend arrearages with respect to the Series F Preferred Stock. So long as any
shares of Series F Preferred Stock remain outstanding, we may not, without the
affirmative vote or consent of at least two-thirds of the votes entitled to be
cast by the holders of the outstanding shares of Series F Preferred Stock (the
Series F Preferred Stock voting separately as a class):
- authorize or create, or increase the authorized or issued amount of, any
class or series of stock ranking senior to the Series F Preferred Stock;
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- reclassify any of our authorized stock into any class or series of stock
ranking senior to the Series F Preferred Stock;
- designate or create, or increase the authorized or issued amount of, or
reclassify, any authorized shares into, any preferred stock ranking on a
parity with the Series F Preferred Stock or create, authorize or issue
any obligations or securities convertible into any such shares, but only
to the extent such stock is issued to one of our affiliates; or
- either consolidate, merge into or with, or convey, transfer or lease our
assets substantially, as an entirety, to any corporation or other entity,
or amend, alter or repeal the provisions of our articles of
incorporation, whether by merger or consolidation or otherwise, in each
case so as to materially and adversely affect the powers, special rights,
preferences, privileges or voting power of the Series F Preferred Stock.
With respect to the occurrence of any of the events set forth in the fourth
bullet point above, so long as we are either the surviving entity and shares of
Series F Preferred Stock remain outstanding with the terms materially unchanged
or the resulting, surviving or transferee entity is a corporation, business
trust or like entity organized under the laws of any state and substitutes for
the Series F Preferred Stock other preferred stock or preferred shares having
substantially the same terms and rights as the Series F Preferred Stock, the
occurrence of any such event will not be considered to materially and adversely
affect rights, preferences, privileges or voting powers of holders of Series F
Preferred Stock. Any increase in the amount of authorized preferred stock, the
creation or issuance of any other class or series of preferred stock or any
increase in an amount of authorized shares of each class or series, in each case
ranking on a parity with or junior to the Series F Preferred Stock will not be
considered to materially and adversely affect such rights, preferences,
privileges or voting powers.
We have agreed to file a registration statement registering the resale of
the shares of Series F Preferred Stock issuable to the holders of AMB Property
II, L.P. Series F Preferred Units as soon as practicable but not later than 60
days after the date the AMB Property II, L.P. Series F Preferred Units are
exchanged for shares of Series F Preferred Stock. We have also agreed to use our
best efforts to cause the registration statement to be declared effective within
120 days after the date of the exchange.
RESTRICTIONS ON OWNERSHIP AND TRANSFER OF CAPITAL STOCK
In order for us to qualify as a real estate investment trust under the
Internal Revenue Code, no more than 50% in value of all classes of our
outstanding shares of capital stock may be owned, actually or constructively, by
five or fewer individuals (as defined in the Internal Revenue Code to include
certain entities) during the last half of a taxable year (other than the first
year for which we have made an election to be treated as a real estate
investment trust). In addition, if we, or an owner of 10% or more of our capital
stock, actually or constructively own 10% or more of one of our tenants (or a
tenant of any partnership or limited liability company in which we are a partner
or member), the rent received by us (either directly or through the partnership
or limited liability company) from the tenant will not be qualifying income for
purposes of the gross income tests for real estate investment trusts contained
in the Internal Revenue Code. A real estate investment trust's stock also must
be beneficially owned by 100 or more persons during at least 335 days of a
taxable year of 12 months or during a proportionate part of a shorter taxable
year (other than the first year for which an election to be treated as a real
estate investment trust has been made).
Because our board of directors currently believes it is desirable for us to
qualify as a real estate investment trust, our articles of incorporation,
subject to certain exceptions as discussed below, provides that no person may
own, or be deemed to own by virtue of the attribution provisions of the Internal
Revenue Code, more than 9.8% (by value or number of shares, whichever is more
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restrictive) of either our issued and outstanding common stock or our issued and
outstanding Series A Preferred Stock. We also prohibit the ownership, actually
or constructively, of any shares of our Series B Preferred Stock, Series C
Preferred Stock, Series D Preferred Stock, Series E Preferred Stock and Series F
Preferred Stock by any single person so that no such person, taking into account
all of our stock so owned by such person, may own in excess of 9.8% in value of
our issued and outstanding capital stock. The constructive ownership rules under
the Internal Revenue Code are complex and may cause stock owned actually or
constructively by a group of related individuals and/or entities to be owned
constructively by one individual or entity. As a result, the acquisition of less
than 9.8% of our common stock, Series A Preferred Stock or capital stock (or the
acquisition of an interest in an entity that owns, actually or constructively,
common stock, Series A Preferred Stock or capital stock) by an individual or
entity, could, nevertheless cause that individual or entity, or another
individual or entity, to own constructively in excess of 9.8% of our outstanding
common stock, Series A Preferred Stock or capital stock, as the case may be, and
thereby subject the common stock, Series A Preferred Stock, Series B Preferred
Stock, Series C Preferred Stock, Series D Preferred Stock, Series E Preferred
Stock or Series F Preferred Stock to the applicable ownership limit. The board
of directors may, but in no event will be required to, waive the applicable
ownership limit with respect to a particular stockholder if it determines that
such ownership will not jeopardize our status as a real estate investment trust
and the board of directors otherwise decides such action would be in our best
interest. As a condition of such waiver, the board of directors may require an
opinion of counsel satisfactory to it and/or undertakings or representations
from the applicant with respect to preserving our real estate investment trust
status. The board of directors has waived the ownership limit applicable to our
common stock with respect to Ameritech Pension Trust, allowing it to own up to
14.9% of our common stock and, under some circumstances, allowing it to own up
to 19.6%. However, we conditioned this waiver upon the receipt of undertakings
and representations from Ameritech Pension Trust which we believed were
reasonably necessary in order for us to conclude that the waiver would not cause
us to fail to qualify as a real estate investment trust.
Our articles of incorporation also provide that:
- no person may actually or constructively own common stock, Series A
Preferred Stock, Series B Preferred Stock, Series C Preferred Stock,
Series D Preferred Stock, Series E Preferred Stock or Series F Preferred
Stock that would result in us being "closely held" under Section 856(h)
of the Internal Revenue Code or otherwise cause us to fail to qualify as
a real estate investment trust;
- no person may transfer common stock, Series A Preferred Stock, Series B
Preferred Stock, Series C Preferred Stock, Series D Preferred Stock,
Series E Preferred Stock or Series F Preferred Stock if a transfer would
result in shares of our capital stock being owned by fewer than 100
persons; and
- any person who acquires or attempts or intends to acquire actual or
constructive ownership of common stock, Series A Preferred Stock, Series
B Preferred Stock, Series C Preferred Stock, Series D Preferred Stock,
Series E Preferred Stock or Series F Preferred Stock that will or may
violate any of the foregoing restrictions on transferability and
ownership is required to notify us immediately and provide us with such
other information as we may request in order to determine the effect of
the transfer on our status as a real estate investment trust. The
foregoing restrictions on transferability and ownership will not apply if
our board of directors determines that it is no longer in our best
interest to attempt to qualify, or to continue to qualify, as a real
estate investment trust. Except as otherwise described above, any change
in the applicable ownership limit would require an amendment to our
articles of incorporation, which requires the affirmative vote of holders
owning at least two-thirds of the shares of our outstanding capital stock
entitled to vote on the amendment.
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Under our articles of incorporation, if any attempted transfer of shares of
stock or any other event would otherwise result in any person violating an
ownership limit, any other limit imposed by our board of directors or the other
restrictions in the articles of incorporation, then any such attempted transfer
will be void and of no force or effect with respect to the purported transferee
as to that number of shares that exceeds the applicable ownership limit or such
other limit (referred to as "excess shares"). Under those circumstances, the
prohibited transferee will acquire no right or interest (or, in the case of any
event other than an attempted transfer, the person or entity holding record
title to any shares in excess of the applicable ownership limit will cease to
own any right or interest) in the excess shares. Any excess shares described
above will be transferred automatically, by operation of law, to a trust, the
beneficiary of which will be a qualified charitable organization selected by us.
This automatic transfer will be considered to be effective as of the close of
business on the business day prior to the date of the violating transfer or
event. Within 20 days of receiving notice from us of the transfer of shares to
the trust, the trustee of the trust will be required to sell the excess shares
to a person or entity who could own the shares without violating the applicable
ownership limit, or any other limit imposed by our board of directors, and
distribute to the prohibited transferee an amount equal to the lesser of the
price paid by the prohibited transferee for the excess shares or the sales
proceeds received by the trust for the excess shares. In the case of any excess
shares resulting from any event other than a transfer, or from a transfer for no
consideration (such as a gift), the trustee will be required to sell excess
shares to a qualified person or entity and distribute to the prohibited owner an
amount equal to the lesser of the applicable market price of the excess shares
as of the date of the event or the sales proceeds received by the trust for the
excess shares. In either case, any proceeds in excess of the amount
distributable to the prohibited transferee or prohibited owner will be
distributed to the beneficiary. Prior to a sale of any excess shares by the
trust, the trustee will be entitled to receive, in trust for the beneficiary,
all dividends and other distributions paid by us with respect to the excess
shares, and also will be entitled to exercise all voting rights with respect to
the excess shares. Subject to Maryland law, effective as of the date that the
shares have been transferred to the trust, the trustee will have the authority
(at the trustee's sole discretion) to rescind as void any vote cast by a
prohibited transferee or prohibited owner prior to the time that we discover
that the shares have been automatically transferred to the trust and to recast
the vote in accordance with the desires of the trustee acting for the benefit of
the beneficiary. However, if we have already taken irreversible corporate
action, then the trustee will not have the authority to rescind and recast the
vote. If we pay the prohibited transferee or prohibited owner any dividend or
other distribution before we discover that the shares were transferred to the
trust, the prohibited transferee or prohibited owner will be required to repay
the trustee upon demand for distribution to the beneficiary. If the transfer to
the trust is not automatically effective (for any reason), to prevent violation
of the applicable ownership limit or any other limit provided in our articles of
incorporation or imposed by the board of directors, then our articles of
incorporation provide that the transfer of the excess shares will be void ab
initio.
In addition, shares of stock held in the trust will be considered to have
been offered for sale to us, or our designee, at a price per share equal to the
lesser of (1) the price per share in the transaction that resulted in the
transfer to the trust (or, in the case of a devise or gift, the market price at
the time of such devise or gift) and (2) the applicable market price on the date
that we, or our designee, accept the offer. We have the right to accept the
offer until the trustee has sold the shares held in the trust. Upon that sale to
us, the interest of the beneficiary in the shares sold will terminate and the
trustee will distribute the net proceeds of the sale to the prohibited
transferee or prohibited owner.
If any attempted transfer of shares would cause us to be beneficially owned
by fewer than 100 persons, our articles of incorporation provide that the
transfer will be null and void in its entirety and the intended transferee will
acquire no rights to the stock.
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All certificates representing shares will bear a legend referring to the
restrictions described above. The ownership limitations described above could
delay, defer or prevent a transaction or a change in control that might involve
a premium price for the shares or otherwise be in the best interest of
stockholders.
Under our articles of incorporation, owners of outstanding shares must,
upon our demand, provide us with a completed questionnaire containing
information regarding ownership of the shares, as set forth in the treasury
regulations. In addition, each stockholder must upon demand disclose to us in
writing such information that we may request in order to determine the effect,
if any, of the stockholder's actual and constructive ownership of shares of
common stock, Series A Preferred Stock, Series B Preferred Stock, Series C
Preferred Stock, Series D Preferred Stock, Series E Preferred Stock and/or
Series F Preferred Stock on our status as a real estate investment trust and to
ensure compliance with each ownership limit, or any other limit specified in our
articles of incorporation or required by the board of directors.
TRANSFER AGENT, REGISTRAR, CONVERSION AGENT AND DIVIDEND DISBURSING AGENT
The transfer agent, registrar and dividend disbursing agent for our common
stock, Series A Preferred Stock, Series B Preferred Stock, Series C Preferred
Stock, Series D Preferred Stock, Series E Preferred Stock and Series F Preferred
Stock is BankBoston, N.A., an affiliate of First National Bank of Boston.
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DESCRIPTION OF CERTAIN PROVISIONS OF THE
PARTNERSHIP AGREEMENT OF THE OPERATING PARTNERSHIP
Substantially all of our assets are held, and all of our operations are
conducted, by or through the operating partnership. We are the sole general
partner of the operating partnership and owned, as of March 31, 2000, an
approximate 93.4% common general partnership interest in the operating
partnership. As the sole general partner, we have the exclusive right and power
to manage the operating partnership. Our interest in the operating partnership
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 in this prospectus, the description in this section of common
limited partnership units is also applicable to performance units, and holders
of performance units will be treated as limited partners. We have summarized
certain terms and provisions of the operating partnership's partnership
agreement. This summary is not complete and is qualified by the provisions of
the partnership agreement. For more detail, you should refer to the partnership
agreement itself, which is as an exhibit to the registration statement of which
this prospectus is a part. See "Where You Can Find More Information."
GENERAL
Holders of limited partnership units hold limited partnership interests in
the operating partnership, and all holders of partnership interests (including
us in our 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 general partnership units held by us is approximately equal to the
total number of outstanding shares of our common stock and preferred stock.
Accordingly, the distributions that we pay per share of common stock are
expected to be equal to the distributions per unit that the operating
partnership pays on the common units, and the distributions that we pay per
share of Series A Preferred Stock, any Series B Preferred Stock, any Series C
Preferred Stock, any Series D Preferred Stock, any Series E Preferred Stock and
any Series F Preferred Stock are expected to be equal to the distributions per
unit that the operating partnership pays on the Series A Preferred Units, the
Series B Preferred Units, any Series C Preferred Units, any Series D Preferred
Units, any Series E Preferred Units and any Series F Preferred Units,
respectively. The units have not been registered pursuant to federal or state
securities laws, and they will not be listed on the New York Stock Exchange or
any other exchange or quoted on any national market system. However, the shares
of common stock, Series B Preferred Stock, Series C Preferred Stock, Series D
Preferred Stock, Series E Preferred Stock and Series F Preferred Stock that we
may issue upon exchange of the common units, Series B Preferred Units of the
operating partnership, Series C Preferred Units of AMB Property II, L.P., Series
D Preferred Units of AMB Property II, L.P., Series E Preferred Units of AMB
Property II, L.P. and Series F Preferred Units of AMB Property II, L.P. 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 Delaware Uniform Limited Partnership Act. The partnership agreement
imposes certain restrictions on the transfer of operating partnership 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. We are the sole general
partner of the operating partnership and conduct substantially all of our
business through the operating partnership, except for investment advisory
services (which we conduct through AMB Investment Management, Inc.) and certain
other activities we conduct through Headlands Realty Corporation.
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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 to those properties, and interests in those properties and
assets. The operating partnership is authorized to conduct any business that a
limited partnership formed under the Delaware Uniform Limited Partnership Act
may lawfully conduct, except that the partnership agreement requires of the
operating partnership to conduct its business in such a manner that will permit
us to be classified as a real estate investment trust under Section 856 of the
Internal Revenue Code, unless we cease to qualify as a real estate investment
trust 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.
As the general partner of the operating partnership we have 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.
We have the right to make all decisions and take all actions with respect
to the operating partnership's acquisition and operation of our properties and
all other assets and businesses of or related to the operating 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 as general partner, we are acting on behalf of the operating
partnership's limited partners and our stockholders, collectively, and are under
no obligation to consider the tax consequences to limited partners when making
decisions for the benefit of the operating partnership. We intend to make
decisions in our capacity as general partner of the operating partnership so as
to maximize our profitability and the profitability of the operating partnership
as a whole, independent of the tax effects on the limited partners. AMB Property
Corporation 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 our action or inaction as
general partner of the operating partnership as long as we acted in good faith.
Limited partners have no right or authority to act for or to bind the operating
partnership.
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
We 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 real estate
investment trust and activities that are incidental to these activities
(including ownership of any interest in AMB Property Holding Corporation, AMB
Property Holding II Corporation, AMB Property Holding III Corporation, AMB
Investment Management, Inc., Headlands Realty Corporation or a title holding,
management or finance subsidiary organized as a partnership, limited liability
company or corporation) without the consent of the holders of a majority of the
limited partnership interests. Unless they otherwise agree in writing, each
limited partner, and its affiliates, is free to engage in any business or
activity, even if the business or activity competes with or is enhanced by the
business of the operating partnership. The operating partnership's partnership
agreement does not prevent another person or entity that acquires control of us
in the future from conducting other businesses or owning other assets, even if
it would be in the best interests of the limited partners for the operating
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partnership to own those businesses or assets. In the exercise of our power and
authority under the partnership agreement, we may contract and otherwise deal
with or otherwise obligate the operating partnership to entities in which we or
any one or more of our officers, directors or stockholders may have an ownership
or other financial interest.
OUR REIMBURSEMENT; TRANSACTIONS WITH US AND OUR AFFILIATES
We do not receive any compensation for our services as general partner of
the operating partnership. However, as a partner in the operating partnership,
we have rights to allocations and distributions as a partner of the operating
partnership. In addition, the operating partnership reimburses us for all
expenses we incur relating to our activities as general partner, the continued
existence and our qualification as a real estate investment trust and all other
liabilities that we incur in connection with the pursuit of our business and
affairs. We may retain persons or entities that we select (including ourselves,
any entity in which we have an interest, or any entity with which we are
affiliated) to provide services to or on behalf of the operating partnership.
The operating partnership will reimburse us for all expenses incurred relating
to the ongoing operation of the operating partnership and any issuance of
additional partnership interests in the operating partnership. These expenses
include those incurred in connection with the administration and activities of
the operating partnership, such as the maintenance of the operating
partnership's books and records, management of the operating partnership's
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,
our affiliates will not engage in any transactions with the operating
partnership except on terms that are fair and reasonable to the operating
partnership and no less favorable to the operating partnership than it would
obtain from an unaffiliated third party.
OUR EXCULPATION AND INDEMNIFICATION
The partnership agreement generally provides that we, 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 that we may do or not do in connection with the business and
affairs of the operating partnership if we carry out our duties in good faith.
Our liability in any event is limited to our interest in the operating
partnership. We have no liability for the loss of any limited partner's capital.
In addition, we are not responsible for any misconduct, negligent act or
omission of any of our consultants, contractors or agents, or any of the
operating partnership's consultants, contractors or agents, and we have no
obligation other than to use good faith in the selection of all contractors,
consultants and agents. We may consult with counsel, accountants, appraisers,
management consultants, investment bankers, and other consultants and advisors
that we select. An opinion by a consultant on a matter that we believe is within
the consultant's professional or expert competence is considered to be complete
protection as to any action that we take or fail to take based on the opinion
and in good faith.
The partnership agreement also requires the operating partnership to
indemnify us, our directors and officers, and other persons that we may from
time to time designate against any loss or damage, including reasonable legal
fees and court costs incurred by the person by reason of anything the person may
do or not do for or on behalf of the operating partnership or in connection with
its business or affairs unless it is established that:
- the act or omission of the indemnified person was material to the matter
giving rise to the proceeding and either the indemnified person committed
the act or omission in bad faith or as the result of active and
deliberate dishonesty;
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- the indemnified person actually received an improper personal benefit in
money, property or services; or
- in the case of any criminal proceeding, the indemnified person had
reasonable cause to believe that the act or omission was unlawful. Any
indemnification claims must be satisfied solely out of the assets of the
operating partnership.
SALES OF ASSETS; LIQUIDATION
Under the partnership agreement, as general partner we generally have the
exclusive authority to determine whether, when and on what terms, the operating
partnership will sell its assets (including our properties, which we own through
the operating partnership). However, we have agreed, in connection with the
contribution of properties from taxable investors in our formation transactions
and certain property acquisitions for limited units in the operating
partnership, not to dispose of certain assets in a taxable sale or exchange for
a mutually agreed upon period and, thereafter, to use commercially reasonable or
best efforts to minimize the adverse tax consequences of any sale. We 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 partners (other than the preferred limited
partners) holding a majority of the outstanding percentage interest (including
the interest held directly or indirectly by us) of all partners other than
preferred limited partners, subject to certain consent rights of holders of
limited partnership 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, generally requires an affirmative vote of the limited
partners (other than the preferred limited partners) holding a majority of the
outstanding percentage interest of all limited partners other than preferred
limited partners.
CAPITAL CONTRIBUTION
The operating partnership's 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, we may borrow funds from a financial institution or other
lender or through public or private debt offerings and lend the funds to the
operating partnership on the same terms and conditions as are applicable to our
borrowing of the funds. As an alternative to borrowing funds required by the
operating partnership, we may contribute the amount of the required funds as an
additional capital contribution to the operating partnership. If we contribute
additional capital to the operating partnership, our 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 if we make additional capital contributions.
DISTRIBUTIONS; ALLOCATIONS OF INCOME AND LOSS
The partnership agreement generally provides that the operating partnership
will make quarterly distributions of available cash (as defined below), as
determined in the manner provided in the partnership agreement, to the partners
of the operating partnership in proportion to their percentage interests in the
operating partnership (which for any partner is determined by the number of
units it owns relative to the total number of units outstanding). If any
preferred units are outstanding, the operating partnership will pay
distributions to holders of preferred units in accordance with the rights of
each class of preferred units (and, within each such class, pro rata in
proportion to the respective percentage interest of each holder), with any
remaining available cash distributed in accordance with the previous sentence.
"Available cash" is generally defined as net cash flow from operations, plus
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any reduction in reserves, and minus interest and principal payments on debt,
capital expenditures, any additions to reserves and other adjustments. Other
than as described below, neither we nor the limited partners are currently
entitled to any preferential or disproportionate distributions of available cash
with respect to the units.
SERIES A PREFERRED UNITS
In connection with the sale of the Series A Preferred Stock, we received
Series A Preferred Units in the operating partnership that mirror the rights,
preferences and other terms of the Series A Preferred Stock. The Series A
Preferred Units rank, with respect to distribution rights and rights upon
liquidation, winding up or dissolution of the operating partnership:
- senior to the common units and to all units that provide that they rank
junior to the Series A Preferred Units;
- junior to all units which rank senior to the Series A Preferred Units;
and
- on a parity with the Series B Preferred Units, any Series C Preferred
Units, any Series D Preferred Units, any Series E Preferred Units and any
Series F Preferred Units that the operating partnership may issue to us
(see "-- Series C Preferred Units," "-- Series D Preferred Units,"
"-- Series E Preferred Units," and "-- Series F Preferred Units") and all
other units expressly designated by the operating partnership to rank on
a parity with the Series A Preferred Units.
We receive preferred distributions of cash and preferred allocations of
income on the Series A Preferred Units in an amount equal to the dividends
payable by us on the Series A Preferred Stock. If we acquire any Series B
Preferred Units from the holders pursuant to the exercise of their exchange
rights, or if the operating partnership issues any Series C Preferred Units,
Series D Preferred Units, Series E Preferred Units or Series F Preferred Units
to us, we will receive preferred distributions of cash and preferred allocations
of income on the Series B Preferred Units, Series C Preferred Units, Series D
Preferred Units, Series E Preferred Units or Series F Preferred Units in an
amount equal to the dividends payable by us on the Series B Preferred Stock,
Series C Preferred Stock or Series D Preferred Stock, Series E Preferred Stock,
or Series F Preferred Stock, as the case may be. See "-- Series C Preferred
Units," "-- Series D Preferred Units," "-- Series E Preferred Units," and
"-- Series F Preferred Units."
As a consequence, we will receive distributions from the operating
partnership sufficient to pay dividends on the Series A Preferred Stock and any
Series B Preferred Stock, Series C Preferred Stock, Series D Preferred Stock,
Series E Preferred Stock, or Series F Preferred Stock, before any other partner
in the operating partnership (other than holders of parity preferred units)
receives a distribution. In addition, if necessary, income will be specially
allocated to us and losses will be allocated to the other partners of the
operating partnership in amounts necessary to ensure that, to the extent
possible, the balance in our capital account will at all times be equal to or in
excess of the amount payable by us on the Series A Preferred Stock and any
Series B Preferred Stock, Series C Preferred Stock, Series D Preferred Stock,
Series E Preferred Stock, and Series F Preferred Stock upon liquidation or
redemption. See "Certain Federal Income Tax Considerations -- Tax Aspects of the
Operating Partnership and the Joint Ventures -- Allocations of Operating
Partnership Income, Gain, Loss and Deduction."
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SERIES B PREFERRED UNITS
General. The Series B Preferred Units of the operating partnership rank,
with respect to distribution rights and rights upon liquidation, winding up or
dissolution of the operating partnership:
- senior to the common units of the operating partnership and to all units
of the operating partnership that provide that they rank junior to the
Series B Preferred Units;
- junior to all units which rank senior to the Series B Preferred Units;
and
- on a parity with the Series A Preferred Units, any Series C Preferred
Units, any Series D Preferred Units, any Series E Preferred Units, any
Series F Preferred Units all other units expressly designated by the
operating partnership to rank on a parity with the Series B Preferred
Units.
Subject to the rights of holders of parity preferred units (including the
Series A Preferred Units, any Series C Preferred Units, any Series D Preferred
Units, any Series E Preferred Units and any Series F Preferred Units), holders
of the Series B Preferred Units are entitled to receive, when, as and if
declared by the operating partnership, acting through us as general partner,
cumulative preferential cash distributions in an amount equal to 8 5/8% per
annum on an amount equal to $50.00 per Series B Preferred Unit then outstanding
(equivalent to $4.3125 per annum). These distributions are payable on the 15th
day of January, April, July and October of each year.
Exchange Rights. The Series B Preferred Units are exchangeable in whole at
any time on or after November 12, 2008, at the option of 51% of the holders of
all outstanding Series B Preferred Units, on a one for one basis, subject to
adjustment, for shares of our Series B Preferred Stock. In addition, the Series
B Preferred Units are exchangeable in whole at any time at the option of 51% of
the holders of all outstanding Series B Preferred Units if:
- any Series B Preferred Unit shall not have received full distributions
with respect to six prior quarterly distribution periods (whether or not
consecutive); or
- we or one of our subsidiaries take the position, and a holder or holders
of Series B Preferred Units receive an opinion of independent counsel
that the operating partnership is, or upon the happening of a certain
event likely will be, a "publicly traded partnership" within the meaning
of the Internal Revenue Code.
The Series B Preferred Units are exchangeable in whole for shares of Series
B Preferred Stock at any time after November 12, 2001 and prior to November 12,
2008 at the option of 51% of the holders of all outstanding Series B Preferred
Units if those holders deliver to us as general partner a private letter ruling
or an opinion of independent counsel to the effect that an exchange of the
Series B Preferred Units at that time would not cause the Series B Preferred
Units to be considered "stock and securities" within the meaning of the Internal
Revenue Code for purposes of determining whether the holder of Series B
Preferred Units is an "investment company" under the Internal Revenue Code.
With certain limitations, the Series B Preferred Units are also
exchangeable in whole at any time for shares of Series B Preferred Stock
(regardless of whether held by the initial purchaser) if:
- the initial purchaser of the Series B Preferred Units reasonably
concludes that there exists an imminent and substantial risk that the
initial purchaser's interest in the operating partnership represents or
will represent more than 19.5% of the total profits or capital interests
in the operating partnership for a taxable year;
- the initial purchaser of the Series B Preferred Units delivers to us an
opinion to the effect that there is a substantial risk that the initial
purchaser's interest in the operating partnership
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represents or will represent more than 19.5% of the total profits or
capital interests in the operating partnership for a taxable year; and
- we, as the general partner, agree with the conclusions in the bullet
points above; provided, that we may not unreasonably withhold our
agreement.
In lieu of an exchange for Series B Preferred Stock, we may elect to cause
the operating partnership to redeem Series B Preferred Units for cash in an
amount equal to the original capital account balance of the Series B Preferred
Units plus all accrued and unpaid distributions to the date of redemption. A
holder of Series B Preferred Units will not be entitled to exchange the units
for Series B Preferred Stock if the exchange would result in a violation of the
ownership limit. See "Description of Capital Stock -- Restrictions on Ownership
and Transfer of Capital Stock."
Redemption. On or after November 12, 2003, the operating partnership has
the right to redeem the Series B Preferred Units, in whole or in part from time
to time, at a redemption price payable in cash equal to the capital account
balance of the holder, provided that the amount shall not be less than $50.00
per Series B Preferred Unit. The operating partnership must pay the redemption
price solely out of the sale proceeds of our capital stock or interests in the
operating partnership and from no other source. The operating partnership may
not redeem fewer than all of the Series B Preferred Units unless the operating
partnership has paid all accumulated and unpaid distributions on all Series B
Preferred Units for all quarterly distribution periods terminating on or prior
to the date of redemption.
Limited Approval Rights. For so long as any Series B Preferred Units are
outstanding, without the affirmative vote of the holders of at least two-thirds
of the Series B Preferred Units outstanding at the time, the operating
partnership may not:
- authorize, create or increase the authorized or issued amount of, or
reclassify, any class or series of partnership interests, or create,
authorize or issue any obligations or security convertible into or
evidencing the right to purchase any partnership interests, ranking prior
to the Series B Preferred Units;
- authorize, create or increase the authorized or issued amount of, or
reclassify, any class or series of partnership interests, or create,
authorize or issue any obligations or security convertible into or
evidencing a right to purchase any partnership interests, ranking equal
to the Series B Preferred Units, but only to the extent that such
securities are issued to an affiliate of the operating partnership, other
than AMB to the extent that the issuance is to allow us to issue
corresponding shares of Series B Preferred Stock to persons who are not
affiliates of the operating partnership; or
- either consolidate, merge into or with, or convey, transfer or lease its
assets substantially as an entirety to, any corporation or other entity
or amend, alter or repeal the provisions of the partnership agreement, in
a manner that would materially and adversely affect the powers, special
rights, preferences, privileges or voting power of the Series B Preferred
Units. So long as the operating partnership is the surviving entity and
the Series B Preferred Units remain outstanding on the same terms, or the
resulting, surviving or transferee entity is a partnership, limited
liability company or other pass-through entity and substitutes the Series
B Preferred Units for other interests in such entity, with substantially
the same terms and rights, then the occurrence of any of the events
listed above in this bullet point will not be considered to materially
and adversely affect such rights, privileges or voting powers.
Other than as discussed above or elsewhere in this prospectus, the holders
of Series B Preferred Units have no voting rights other than with respect to
certain matters that would adversely affect them or as otherwise provided by
applicable law.
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Liquidation Preference. The distribution and income allocation provisions
of the partnership agreement have the effect of providing each Series B
Preferred Unit with a liquidation preference to each holder of Series B
Preferred Units equal to the holder's capital contributions, plus any accrued
but unpaid distributions, in preference to any other class or series of
partnership interest of the operating partnership, other than any Series A
Preferred Units, any Series C Preferred Units, any Series D Preferred Units, any
Series E Preferred Units and any Series F Preferred Units.
Registration Rights. We have agreed to file a registration statement
registering the resale of the shares of Series B Preferred Stock issuable to the
holders of Series B Preferred Units as soon as practicable but not later than 60
days after the date the Series B Preferred Units are exchanged for shares of
Series B Preferred Stock. We have also agreed to use its best efforts to cause
the registration statement to be declared effective within 120 days after the
date of the exchange.
SERIES C PREFERRED UNITS
As described under "Description of Capital Stock -- Preferred
Stock -- Series C Preferred Stock," holders of Series C Preferred Units of AMB
Property II, L.P. may exchange their units for shares of our Series C Preferred
Stock. If we issue Series C Preferred Stock, we will:
- contribute 99% of the Series C Preferred Units of AMB Property II, L.P.
to the operating partnership in exchange for Series C Preferred Units in
the operating partnership that mirror the rights, preferences and other
terms of the Series C Preferred Stock; and
- contribute 1% of the Series C Preferred Units of AMB Property II, L.P. to
AMB Property Holding Corporation.
Any Series C Preferred Units issued to us by the operating partnership, as
described in the first bullet point above, will rank on a parity with the
operating partnership's other preferred limited partnership units. As a
consequence, we would receive distributions from the operating partnership that
we would use to pay dividends on our preferred stock before any other partner in
the operating partnership (other than holders of parity preferred units).
SERIES D PREFERRED UNITS
As described under "Description of Capital Stock -- Preferred
Stock -- Series D Preferred Stock," holders of Series D Preferred Units of AMB
Property II, L.P. may exchange their units for shares of our Series D Preferred
Stock. If we issue Series D Preferred Stock, it will:
- contribute 99% of the Series D Preferred Units of AMB Property II, L.P.
to the operating partnership in exchange for Series D Preferred Units in
the operating partnership that mirror the rights, preferences and other
terms of the Series D Preferred Stock; and
- contribute 1% of the Series D Preferred Units of AMB Property II, L.P. to
AMB Property Holding Corporation.
Any Series D Preferred Units issued to us by the operating partnership, as
described in the first bullet point above, will rank on a parity with the Series
A Preferred Units and Series B Preferred Units. As a consequence, AMB would
receive distributions from the operating partnership that AMB would use to pay
dividends on any our preferred stock before any other partner in the operating
partnership (other than holders of parity preferred units).
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SERIES E PREFERRED UNITS
As described under "Description of Capital Stock -- Preferred
Stock -- Series E Preferred Stock," holders of AMB Property II, L.P. Series E
Preferred Units may exchange their units for shares of our Series E Preferred
Stock. If we issue Series E Preferred Stock, we will:
- contribute 99% of the Series E Preferred Units of AMB Property II, L.P.
to the operating partnership in exchange for Series E Preferred Units in
the operating partnership that mirror the rights, preferences and other
terms of the Series E Preferred Stock; and
- contribute 1% of the Series E Preferred Units to AMB Property Holding
Corporation.
Any Series E Preferred Units issued to us by the operating partnership, as
described in the first bullet point above, will rank on a parity with the Series
A Preferred Units and Series B Preferred Units. As a consequence, we would
receive distributions from the operating partnership that we would use to pay
dividends on any our preferred stock before any other partner in the operating
partnership (other than holders of parity preferred units).
SERIES F PREFERRED UNITS
As described under "Description of Capital Stock -- Preferred
Stock -- Series F Preferred Stock," holders of Series F Preferred Units of AMB
Property II, L.P. may exchange their units for shares of our Series F Preferred
Stock. If we issue Series F Preferred Stock, we will:
- contribute 99% of the Series F Preferred Units of AMB Property II, L.P.
to the operating partnership in exchange for Series F Preferred Units in
the operating partnership that mirror the rights, preferences and other
terms of the Series F Preferred Stock; and
- contribute 1% of the Series F Preferred Units of AMB Property II, L.P. to
AMB Property Holding Corporation.
Any Series F Preferred Units issued by us to the operating partnership, as
described in the first bullet point above, will rank on a parity with the Series
A Preferred Units and Series B Preferred Units. As a consequence, we would
receive distributions from the operating partnership that we would use to pay
dividends our preferred stock before any other partner in the operating
partnership (other than holders of parity preferred units).
COMMON LIMITED PARTNERSHIP UNITS
Redemption/Exchange Rights. Holders of common limited partnership units in
the operating partnership have the right, commencing generally on or before the
first anniversary of the holder becoming a limited partner of the operating
partnership (or such other date agreed to by the operating partnership and the
applicable unit holders), to require the operating partnership to redeem part or
all of their common units for cash (based upon the fair market value of an
equivalent number of shares of common stock at the time of redemption) or we
may, in our sole and absolute discretion (subject to the limits on ownership and
transfer of common stock set forth in our articles of incorporation) elect to
exchange those common 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). We
presently anticipate that we will generally elect to issue shares of common
stock in exchange for common units in connection with a redemption request;
however, the operating partnership has paid cash and may in the future pay cash
for a redemption of common units. With each redemption or exchange, our
percentage ownership interest in the operating partnership will increase. Common
limited partners may exercise this redemption/ exchange right from time to time,
in whole or in part, subject to the limitations that limited partners may not
exercise the right if exercise would result in any person actually or
constructively owning
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shares of common stock in excess of the ownership limit or any other amount
specified by the board of directors, assuming common stock was issued in the
exchange. Holders of performance units also have limited redemption/exchange
rights, as discussed under the caption "-- Performance Units" below.
Registration Rights. We have granted to common limited partners certain
registration rights with respect to the shares of stock issuable upon exchange
of common limited partnership units in the operating partnership or otherwise.
We have agreed to file and generally keep continuously effective generally
beginning on or as soon as practicable after one year after issuance of common
limited partnership units a registration statement covering the issuance of
shares of common stock upon exchange of the units and the resale of the shares.
We will bear expenses incident to our registration obligations upon exercise of
registration rights, including the payment of federal securities and state Blue
Sky registration fees, except that we will not bear any underwriting discounts
or commissions or transfer taxes relating to registration of the shares.
PERFORMANCE UNITS
Notwithstanding the foregoing discussion of distributions and allocations
of income or loss of the operating partnership, certain of our current and
former executive officers, in their capacity as limited partners of the
operating partnership, received an aggregate of 77,699 performance units on
January 7, 2000. The performance units are similar to common limited partnership
units in many respects, including the right to share in operating distributions,
and allocations of operating income and loss, of the operating partnership on a
pro rata basis with common limited partnership units, and certain redemption and
exchange rights, including limited rights to cause the operating partnership to
redeem the performance units for cash or, at our option, to exchange the
performance units for shares of common stock. Any redemption rights with respect
to performance units, 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) after the issuance of the
performance units. If there is no 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.
Immediately prior to our initial public offering, certain investors owned
assets that were subject to advisory agreements with AMB Institutional Realty
Advisors, Inc. containing an incentive fee provision or a "catch up adjustment."
We refer to these investors as "performance investors." When our current and
former executive officers received performance units, an equal number of general
partnership units allocable to us and units allocable to performance investors
who are limited partners in the operating partnership were transferred to the
operating partnership. If any of our general partnership units are transferred
to the operating partnership as a result of the issuance of performance units,
an equal number of shares of common stock (the "performance shares") will be
transferred to us by the applicable performance investors. Accordingly, no AMB
Property Corporation stockholder or limited partner in the operating partnership
(other than performance investors, to the extent of their obligations to
transfer performance shares to us or the operating partnership, as applicable)
will be diluted as a result of the issuance of performance units.
REMOVAL OF THE GENERAL PARTNER; TRANSFERABILITY OF OUR INTERESTS; TREATMENT OF
LIMITED PARTNERSHIP UNITS IN SIGNIFICANT TRANSACTIONS
The limited partners may not remove us as general partner of the operating
partnership, with or without cause, other than with our consent. The partnership
agreement provides that we may not withdraw from the operating partnership
(whether by sale, statutory merger, consolidation, liquidation or otherwise)
without the consent of a majority in interest of the limited partners other than
the
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preferred limited partners. However, except as set forth below, we may transfer
or assign our general partner interest in connection with a merger,
consolidation or sale of substantially all of our assets without limited partner
consent.
Neither AMB Property Corporation nor the operating partnership may engage
in any merger, consolidation or other combination, or effect any
reclassification, recapitalization or change of its outstanding equity
interests, and AMB Property Corporation may not sell all or substantially all of
its assets unless in connection with the termination transaction all holders of
limited partnership units other than preferred 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 limited partnership units other than
preferred units will receive, or will have the right to elect to receive, the
greatest amount of cash, securities or other property that the 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 the
purchase, tender or exchange offer and had accepted the purchase, tender or
exchange offer. Performance units also have the benefit of these provisions,
irrespective of the capital account then applicable to the performance units.
AMB Property Corporation and the operating partnership may also engage in a
merger, consolidation or other combination, or effect any reclassification,
recapitalization or change or our outstanding equity interests, and AMB Property
Corporation may also sell all or substantially all of its assets if the
following conditions are met:
- 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;
- the holders of common limited partnership units, including the holders of
any performance units 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 the transaction;
- the rights, preferences and privileges of the 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 in this
prospectus); and
- such rights of the common limited partners, including the holders of
performance units issued or to be issued, include at least one of the
following:
- the right to redeem their interests in the surviving partnership for the
consideration available to them pursuant to the preceding paragraph; or
- the right to redeem their units for cash on terms equivalent to those in
effect immediately prior to the consummation of the transaction, or, if
the ultimate controlling person of the surviving partnership has publicly
traded common equity securities, the common equity securities, with an
exchange ratio based on the relative fair market value of the securities
and the common stock.
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Our board of directors will reasonably determine fair market values and
rights, preferences and privileges of the common limited partners of the
operating partnership as of the time of the termination transaction and, to the
extent applicable, the values will be no less favorable to the holders of common
limited partnership 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 (as discussed under
"-- Performance Units") 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.
DUTIES AND CONFLICTS
Except as otherwise provided by our conflicts of interest policies with
respect to directors and officers and as provided in the non-competition
agreements that most of our executive officers have entered into with us, 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
As general partner, we may call meetings of the limited partners of the
operating partnership on our own motion, or upon written request of limited
partners owning at least 25% of the then outstanding limited partnership units.
Limited partners may vote either in person or by proxy at meetings. Limited
partners may take any action that they are required or permitted to take either
at a meeting of the limited partners or without a meeting if consents in writing
setting forth the action taken are signed by limited partners owning not less
than the minimum number of units that would be necessary to authorize or take
the action at a meeting of the limited partners at which all limited partners
entitled to vote on the 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 limited partnership
units who has not been admitted as a substituted limited partner with respect to
the units will have no voting rights with respect to the units, even if the
transferee holds other units as to which it has been admitted as a limited
partner. The partnership agreement does not provide for, and we do not
anticipate calling, annual meetings of the limited partners.
AMENDMENT OF THE PARTNERSHIP AGREEMENT
Amendments to the operating partnership's partnership agreement may be
proposed by us or by limited partners owning at least 25% of the then
outstanding limited partnership units entitled to vote. Generally, the
partnership agreement may be amended with our approval, as general partner, and
partners (including us but not including the preferred limited partners) holding
a majority of the percentage interest of all partners other than preferred
limited partners. Certain provisions regarding, among other things, our rights
and duties as general partner (e.g., restrictions on our power to conduct
businesses other than as denoted herein) or the dissolution of the operating
partnership, may not be amended without the approval of limited partners (other
than preferred limited partners) holding a majority of the percentage interests
of the limited partners other than preferred limited
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partners. As general partner, we have the power, without the consent of the
limited partners, to amend the partnership agreement as may be required to,
among other things:
- add to our obligations as general partner or surrender any right or power
granted to us as general partner;
- reflect the admission, substitution, termination or withdrawal of
partners in accordance with the terms of the partnership agreement;
- establish the rights, powers, duties and preferences of any additional
partnership interests issued in accordance with the terms of the
partnership agreement;
- 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
- satisfy any requirements of federal, state or local law.
We must approve, and each limited partner that would be adversely affected
must approve, certain amendments to the partnership agreement, including
amendments effected directly or indirectly through a merger or sale of assets of
the operating partnership or otherwise, that would, among other things,
- convert a limited partner's interest into a general partner's interest;
- modify the limited liability of a limited partner;
- 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 thereby altering
their interests in profits, losses and distributions); or
- alter the limited partner's redemption right.
These protections apply to both holders of common limited partnership 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 AMB Institutional Realty Advisors to receive performance units.
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 our sole discretion as
general partner. The limited partners have the right, subject to certain
limitations, to receive copies of the most recent SEC filings by us and the
operating partnership, 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 and certain information about the
capital contributions of the partners. We may keep confidential from the limited
partners any information that we believe to be in the nature of trade secrets or
other information the disclosure of which the we in good faith believe 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.
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We 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.
REDEMPTION/EXCHANGE OF COMMON LIMITED PARTNERSHIP UNITS
FOR COMMON STOCK
TERMS OF THE EXCHANGE
An aggregate of 212,766 limited partnership units of the operating
partnership held by Tiger Lafayette, L.L.C., Divco Western Commercial, L.L.C.
and ICCL East, L.L.C. become exchangeable, on a one for one basis, for our
common stock on May 26, 2000. An aggregate of 390,633 limited partnership units
of the operating partnership held by RA & DM, Inc., RA & FM, Inc., Richard
Alter, Donald Manekin, Bernard Manekin, Harold Manekin, Richard P. Manekin,
Robert Manekin, Charles H. Manekin, William H. Winstead, Sandye Manekin Sirota,
Francine U. Manekin, Vivian Manekin and Louis La Penna became exchangeable, on a
one for one basis, for our common stock on April 30, 2000. See "Selling
Stockholders." Beginning on those dates, the respective selling stockholders may
require the operating partnership to redeem their limited partnership units, in
whole or in part, for cash by delivering to us, as general partner of the
operating partnership, a notice of redemption. Upon receipt of the notice of
redemption, we may, in our sole and absolute discretion (subject to the
limitations on ownership and transfer of common stock set forth in our articles
of incorporation), elect to exchange those common limited partnership units for
shares of common stock on a one-for-one basis, subject to adjustment as
described under "Description of Certain Provisions of the Partnership Agreement
of the Operating Partnership -- Common Limited Partnership Units --
Redemption/Exchange Rights."
A tendering partner will have the right to receive, on the day of receipt
by us of a notice of redemption, the number of shares of common stock which
corresponds to the number of common limited partnership units that we have
elected to exchange in lieu of a cash redemption. Any shares of common stock
issued by us to a limited partner will be duly authorized, validly issued, fully
paid and nonassessable shares, free of any pledge, lien, encumbrance or
restriction other than those provided in the articles of incorporation, the
bylaws, the Securities Act, relevant state securities or blue sky laws and any
applicable registration rights agreement with respect to the shares entered into
by the tendering partner. Notwithstanding any delay in delivery, the tendering
partner will be considered to be the owner of shares and rights for all
purposes, including rights to vote or consent and receive dividends as of the
date we received the notice of redemption.
Each tendering partner will continue to own all limited partnership units
subject to any redemption or exchange, and be treated as a limited partner with
respect to the limited partnership units for all purposes, until the limited
partner transfers the limited partnership units to us and we pay for them or
exchange them, and until that time, the partner will have no rights as a
stockholder.
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CERTAIN CONDITIONS TO THE EXCHANGE
The consummation of a redemption or exchange as described above upon our
receipt of a notice of redemption from a tendering partner is subject to the
following conditions:
- in order to protect our status as a real estate investment trust, no
tendering partner will be entitled to effect a redemption for cash or an
exchange for common stock, if the ownership or right to acquire common
stock would cause the tendering partner or any other person to violate
the ownership limit;
- without our consent, no tendering partner may effect a redemption for
less than 10,000 limited partnership units, or if the tendering partner
holds less than 10,000 limited partnership units, all of the limited
partnership units held by the tendering partner;
- without our consent, no tendering partner may effect a redemption during
the period after the record date established by us for a distribution
from the operating partnership to the partners in the operating
partnership and before the record date established by us for a
distribution to our common stockholders of some or all of its portion of
such distribution; and
- the consummation of any redemption or exchange will be subject to the
expiration or termination of any waiting period under the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended.
COMPARISON OF OWNERSHIP OF COMMON LIMITED PARTNERSHIP UNITS AND COMMON STOCK
Generally, the nature of an investment in our common stock is similar in
several respects to an investment in common limited partnership units of the
operating partnership. Holders of common stock and holders of common limited
partnership units generally receive the same distributions and stockholders and
holders of common limited partnership units generally share in the risks and
rewards of ownership in the enterprise being conducted by through the operating
partnership. However, there are also differences between ownership of common
limited partnership units and ownership of common stock, some of which may be
material to investors.
The information below highlights a number of the significant differences
between the operating partnership and AMB Property Corporation relating to,
among other things, form of organization, management control, voting rights,
liquidity and federal income tax considerations. These comparisons are intended
to assist limited partners in understanding how their investment will be changed
if they exchange their common limited partnership units for shares of our common
stock. THIS DISCUSSION IS SUMMARY IN NATURE AND DOES NOT CONSTITUTE A COMPLETE
DISCUSSION OF THESE MATTERS, AND HOLDERS OF LIMITED PARTNERSHIP UNITS SHOULD
CAREFULLY REVIEW THE REST OF THIS PROSPECTUS AND THE REGISTRATION STATEMENT OF
WHICH THIS PROSPECTUS IS A PART FOR ADDITIONAL IMPORTANT INFORMATION ABOUT US.
FORM OF ORGANIZATION AND ASSETS OWNED
OPERATING PARTNERSHIP
The operating partnership is organized as a Delaware limited partnership.
The operating partnership owns substantially all of our assets and conducts
substantially all of our business. The operating partnership's purpose is to
conduct any business that may be lawfully conducted by a limited partnership
organized pursuant to the Delaware Revised Uniform Limited Partnership Act,
provided that the operating partnership must conduct its business in a manner
that permits us to be
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qualified as a real estate investment trust unless we cease to qualify as real
estate investment trust for reasons other than the conduct of the business of
the operating partnership.
AMB PROPERTY CORPORATION
We are a Maryland corporation. We have elected to be taxed as a real estate
investment trust under the Internal Revenue Code, commencing with our taxable
year ending December 31, 1997. Our only substantial asset is our interest in the
operating partnership, which gives us an indirect investment in the properties
owned by the operating partnership. Under our articles of incorporation, we may
engage in any lawful activity permitted by the Maryland General Corporation Law.
ADDITIONAL EQUITY
OPERATING PARTNERSHIP
The operating partnership is authorized to issue limited partnership units
and other partnership interests (including partnership interests of different
series or classes that may be senior to common limited partnership units) as
determined by us as its general partner, in our sole discretion. The operating
partnership may issue limited partnership units and other partnership interests
to us, as long as the operating partnership issues such interests in connection
with a comparable issuance of our shares and we contribute to the operating
partnership proceeds raised in connection with the issuance of such shares.
AMB PROPERTY CORPORATION
Our board of directors may issue, in its discretion, additional shares of
common stock or additional shares of preferred stock; provided, that the total
number of shares issued does not exceed the authorized number of shares of
capital stock set forth in our articles of incorporation. As long as the
operating partnership is in existence, we will contribute to the operating
partnership the proceeds of all equity capital raised by us in exchange for
limited partnership units in the operating partnership.
MANAGEMENT CONTROL
OPERATING PARTNERSHIP
All management powers over the business and affairs of the operating
partnership are exclusively vested in us as the general partner, and no limited
partner of the operating partnership has any right to participate in or exercise
control or management power over the business and affairs of the operating
partnership except as provided below under "-- Voting Rights." The general
partner may not be removed by the limited partners with or without cause.
AMB PROPERTY CORPORATION
Our board of directors has exclusive control over our business affairs
subject only to the restrictions in the our articles of incorporation and
bylaws. At each annual meeting of stockholders, our stockholders elect the
directors for one year terms. The board of directors may alter or eliminate our
policies without a vote of the stockholders. Accordingly, except for their vote
in the election of directors, stockholders have no control over our ordinary
business policies. We cannot change our policy of maintaining our status as a
real estate investment trust, however, without the approval of holders of
two-thirds of the shares of our capital stock outstanding and entitled to vote
on the change.
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DUTIES TO LIMITED PARTNERS AND STOCKHOLDERS
OPERATING PARTNERSHIP
Under Delaware law, the general partner of the operating partnership is
accountable to the operating partnership as a fiduciary and, consequently, is
required to exercise good faith and integrity in all of its dealings with
respect to partnership affairs. However, under the partnership agreement, the
general partner is not liable for monetary damages for losses sustained,
liabilities incurred or benefits not derived by partners as a result of errors
of judgment or mistakes of fact or law or any act or omission, provided that the
general partner has acted in good faith. Each limited partner expressly
acknowledged in the partnership agreement that as general partner, we are acting
on behalf of the operating partnership's limited partners and our stockholders,
collectively, and are under no obligation to consider the tax consequences to
limited partners when making decisions for the benefit of the operating
partnership. We intend to make decisions in our capacity as general partner of
the operating partnership so as to maximize our profitability and the
profitability of the operating partnership as a whole, independent of the tax
effects on the limited partners.
AMB PROPERTY CORPORATION
Under Maryland law, our directors must perform their duties in good faith,
in a manner that they reasonably believe to be in our best interests and with
the care of an ordinarily prudent person in a like position. Our directors who
act in such a manner generally will not be liable to us for monetary damages
arising from their activities.
VOTING RIGHTS
OPERATING PARTNERSHIP
Under the operating partnership's partnership agreement, the common limited
partners have voting rights only as to the dissolution of the operating
partnership, the sale of all or substantially all of the operating partnership's
assets or merger of the operating partnership, and amendments of the partnership
agreement, as described more fully below. Otherwise, all decisions relating to
the operation and management of the operating partnership are made by the
general partner. As of May 31, 1999, we owned an approximate 95.0% common
general partnership interest in the operating partnership. As limited
partnership units are redeemed or exchanged by limited partners, our percentage
ownership of the limited partnership units will increase. If additional limited
partnership units are issued to third parties, our percentage ownership of the
limited partnership units will decrease.
AMB PROPERTY CORPORATION
We are managed and controlled by a board of directors. Directors are
elected by the stockholders at our annual meetings. Maryland law requires that
certain major corporate transactions, including most amendments to our articles
of incorporation, may not be consummated without the approval of stockholders as
set forth below. All holders of common stock have one vote per share, and the
articles of incorporation permits the board of directors to classify and issue
preferred stock in one or more series or classes having voting power which may
differ from that of the common stock. See "Description of Capital Stock."
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The following is a comparison of the voting rights of the common limited
partners of the operating partnership and our common stockholders as they relate
to certain major transactions:
A. AMENDMENT OF THE PARTNERSHIP AGREEMENT OR THE ARTICLES OF INCORPORATION
OPERATING PARTNERSHIP
The operating partnership's partnership agreement may be amended through a
proposal by the general partner or any limited partners holding 25% or more of
the then outstanding limited partnership units entitled to vote. Generally, the
partnership agreement may be amended with the approval of us as general partner
and partners (including us but not including the preferred limited partners)
holding a majority of the percentage interest of all partners other than
preferred limited partners. Certain provisions regarding, among other things,
our rights and duties as general partner and the dissolution of the operating
partnership, may not be amended without the approval of the limited partners
(other than preferred limited partners) holding a majority of the percentage
interests of the limited partners other than preferred limited partners. Certain
amendments that affect the fundamental rights of a limited partner must be
approved by us and each limited partner that would be adversely affected. We
may, without the limited partners' consent, amend the partnership agreement to
establish rights, powers, duties and preferences of additional partnership
interests issued in accordance with the partnership agreement and to reflect
certain ministerial matters.
AMB PROPERTY CORPORATION
Amendments to our articles of incorporation must be advised by the board of
directors and approved by the vote of at least two-thirds of the votes entitled
to be cast on the matter at a meeting of stockholders.
B. VOTE REQUIRED TO DISSOLVE THE OPERATING PARTNERSHIP OR AMB PROPERTY
CORPORATION
OPERATING PARTNERSHIP
The general partner may not elect to dissolve the operating partnership
without the prior consent of limited partners (other than the preferred limited
partners) holding a majority of the outstanding percentage interest of all
limited partners other than preferred limited partners.
AMB PROPERTY CORPORATION
Under Maryland Law, our dissolution must be advised by the affirmative vote
of a majority of the entire board of directors and approved by the stockholders
by the affirmative vote of at least two-thirds of all the votes entitled to be
cast on the matter. The partnership agreement provides that we may not withdraw
from the operating partnership (whether by sale, statutory merger,
consolidation, liquidation or otherwise) without the consent of limited partners
(other than the preferred limited partners) holding a majority of the
outstanding percentage interest of all limited partners other than preferred
limited partners. However, as described below under "-- Vote Required to Sell
Assets or Merge," we may transfer or assign our general partner interest in
connection with a merger, consolidation or sale of substantially all of our
assets without limited partner consent, upon certain terms and conditions.
C. VOTE REQUIRED TO SELL ASSETS OR MERGE
OPERATING PARTNERSHIP
Under the operating partnership's partnership agreement, the sale,
exchange, transfer or other disposition of all or substantially all of the
operating partnership's assets requires the consent of the
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partners (other than the preferred limited partners) holding a majority of the
percentage interest of all partners other than preferred limited partners.
The merger, consolidation or other combination of the operating partnership
also requires the consent of the partners (other than the preferred limited
partners) holding a majority of the percentage interest of all partners other
than preferred limited partners.
AMB PROPERTY CORPORATION
Under Maryland law, the sale of all or substantially all of our assets, or
our merger or consolidation, must be advised by the board of directors and
approved by the stockholders by the affirmative vote of at least two-thirds of
all the votes entitled to be cast on the matter. The stockholders are not
required to approve the sale of less than all or substantially all of our
assets.
Pursuant to the partnership agreement, we may not withdraw from the
operating partnership and may not transfer all or any portion of our interest in
the operating partnership (whether by sale, statutory merger, consolidation,
liquidation or otherwise) without the consent of limited partners (other than
the preferred limited partners) holdings a majority of the outstanding
percentage interest of all limited partners other than preferred limited
partners. However, we may transfer or assign our general partner interest in
connection with a merger, consolidation or sale of substantially all of our
assets without limited partner consent if the conditions described under
"Description of Certain Provisions of the Partnership Agreement of the Operating
Partnership -- Removal of the General Partner; Transferability of Our Interests;
Treatment of Limited Partnership Units in Significant Transactions" are met.
These conditions generally relate to receipt by the common limited partners of
property that the partner would have received had it exchanged its common
limited partnership units for shares of common stock immediately prior to the
transaction.
COMPENSATION, FEES AND DISTRIBUTIONS
OPERATING PARTNERSHIP
We do not receive any compensation for our services as general partner of
the operating partnership. As a partner in the operating partnership, however,
we have the same right to allocations and distributions as other partners of the
operating partnership. In addition, the operating partnership will reimburse us
for all expenses we incur relating to our activities as general partner, our
continued existence and qualification as a real estate investment trust and all
other liabilities that we incur in connection with the pursuit of our business
and affairs. The operating partnership will reimburse us for all expenses
incurred relating to our ongoing operation and any issuance of additional
partnership interests in the operating partnership. These expenses include those
incurred in connection with the administration and activities of the operating
partnership, such as the maintenance of the operating partnership's books and
records, management of the operating partnership's 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, our affiliates will not engage
in any transactions with the operating partnership except on terms that are fair
and reasonable to the operating partnership and no less favorable to the
operating partnership than it would obtain from an unaffiliated third party.
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AMB PROPERTY CORPORATION
Our outside directors and officers receive compensation for their services.
LIABILITY OF INVESTORS
OPERATING PARTNERSHIP
Under the operating partnership's partnership agreement and applicable
Delaware law, the liability of the limited partners for the operating
partnership's debts and obligations is generally limited to the amount of their
investment in the operating partnership.
AMB PROPERTY CORPORATION
Under Maryland law, stockholders are generally not personally liable for
our debts or obligations.
LIQUIDITY
OPERATING PARTNERSHIP
Subject to certain conditions, limited partners may generally transfer
their limited partnership units to accredited investors, provided that we have a
right of first refusal for any proposed transfer. Limited partners may transfer
their limited partnership units without our consent in the following situations:
- transfers to the general partner;
- transfers to an affiliate controlled by the limited partner or to
immediate family members;
- transfers to a trust for the benefit of a charitable beneficiary or to a
charitable foundation; or
- transfers pursuant to a pledge to an unaffiliated lending institution as
collateral or security for a loan or other extension of credit.
AMB PROPERTY CORPORATION
A limited partner is entitled to freely transfer the shares of common stock
received by that partner in exchange for limited partnership units, subject to
prospectus delivery and other requirements for registered securities. The common
stock is listed on the New York Stock Exchange. The breadth and strength of this
secondary market will depend, among other things, upon the number of shares
outstanding, our financial results and prospects, the general interest in our
and other real estate investments, and our dividend yield compared to that of
other debt and equity securities.
TAXES
OPERATING PARTNERSHIP
The operating partnership itself is not subject to federal income taxes.
Instead, each holder of limited partnership units includes its allocable share
of the operating partnership's taxable income or loss in determining its
individual federal income tax liability. Cash distributions from the operating
partnership are generally not taxable to a holder of limited partnership units
except to the extent they exceed the holder's basis in its interest in the
operating partnership (which will include such holder's allocable share of the
operating partnership's nonrecourse debt).
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Income and loss from the operating partnership generally is subject to the
"passive activity" limitations. Under the "passive activity" rules, partners can
generally offset income and loss from the operating partnership that is
considered "passive income" against income and loss from other investments that
constitute "passive activities." However, this offset will not be available if
the operating partnership becomes a publicly traded partnership (as defined in
the Internal Revenue Code).
Holders of limited partnership units are required, in some cases, to file
state income tax returns and/or pay state income taxes in the states in which
the operating partnership owns property, even if they are not residents of those
states.
AMB PROPERTY CORPORATION
Distributions made by us to our taxable domestic stockholders out of
current or accumulated earnings and profits will be taken into account by them
as ordinary income. Distributions that are designated as capital gain dividends
generally will be taxed as gains from the sale or disposition of a capital
asset. Distributions in excess of current or accumulated earnings and profits
will be treated as a nontaxable return of basis to the extent of a stockholder's
adjusted basis in our common stock, with the excess taxed as capital gain. See
"Certain Federal Income Tax Considerations -- Taxation of Taxable U.S.
Stockholders."
Dividends paid by us will be treated as "portfolio" income and stockholders
cannot offset these dividends with losses from "passive activities."
Stockholders who are individuals generally will not be required to file
state income tax returns and/or pay state income taxes outside of their state of
residence with respect to our operations and distributions. We may be required
to pay state income taxes in certain states.
CERTAIN PROVISIONS OF MARYLAND LAW AND OF
ARTICLES OF INCORPORATION AND BYLAWS
We have summarized certain terms and provisions of the Maryland General
Corporation Law and our articles of incorporation and bylaws. This summary is
not complete and is qualified by the provisions of our articles of incorporation
and bylaws and the Maryland General Corporation Law. For more detail, you should
refer to our articles of incorporation and bylaws, which are exhibits to the
registration statement of which this prospectus is a part. See "Where You Can
Find More Information."
BOARD OF DIRECTORS
Our articles of incorporation provide that the number of our directors
shall be established by the bylaws, but cannot be less than the minimum number
required by the Maryland General Corporation Law, which in the case is three.
Our bylaws currently provide that the our board of directors consists of not
fewer than five nor more than 13 members who are elected to a one-year term at
each annual meeting of stockholders. A majority of the entire board of directors
may fill any vacancy (except for a vacancy caused by removal). Our bylaws
provide that a majority of the board of directors must be "independent
directors." An "independent director" is a director who is not:
- an employee, officer or affiliate of us or one of our subsidiaries or
divisions;
- a relative of a principal executive officer; or
- an individual member of an organization acting as advisor, consultant or
legal counsel, receiving compensation on a continuing basis from us in
addition to director's fees.
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Although the board of directors has no present intention of doing so, under
the Maryland General Corporation Law, the board of directors has the power to
elect without stockholder vote to divide the board of directors into three
classes of directors having staggered terms of office. The staggered terms of
directors may reduce the possibility of a tender offer or a change of control,
even though that may be in the best interests of stockholders.
REMOVAL OF DIRECTORS
While our articles of incorporation and the Maryland General Corporation
Law empower our stockholders to fill vacancies in the board of directors that
are caused by the removal of a director, our articles of incorporation preclude
stockholders from removing incumbent directors except upon a substantial
affirmative vote. Specifically, our articles of incorporation provide that
stockholders may remove a director 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, subject to the rights of the holders of shares of our preferred stock
to elect and remove directors elected by such holders under certain
circumstances. The Maryland General Corporation Law does not define the term
"cause." As a result, removal for "cause" is 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 our 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 removal
with their own nominees.
OPT OUT OF BUSINESS COMBINATIONS AND CONTROL SHARE ACQUISITION STATUTES
We have elected in our bylaws not to be governed by the "control share
acquisition" provisions of the Maryland General Corporation Law (Sections 3-701
through 3-709), and the board of directors has determined, by irrevocable
resolution, that we will not be governed by the "business combination" provision
of the Maryland General Corporation Law (Section 3-602), each of which could
have the effect of delaying or preventing a change of control. Our bylaws
provide that we cannot at a future date determine to be governed by either
provision without the approval of a majority of the outstanding shares entitled
to vote. In addition, the 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 OUR ARTICLES OF INCORPORATION AND BYLAWS
Our articles of incorporation may not be amended without the amendment
being declared advisable by the board of directors and approved by the
stockholders by the affirmative vote of at least two-thirds of all votes
entitled to be cast on the matter. Our bylaws may be amended by the vote of a
majority of the board of directors or by the affirmative vote of a majority of
the shares of our capital stock entitled to vote on the amendment, except with
respect to the following bylaw provisions (each of which may not be amended
without the approval of a majority of the shares of capital stock entitled to
vote on the amendment):
- provisions opting out of the control share acquisition statute and the
business combination statute;
- the requirement in our bylaws that our independent directors approve
certain transactions involving our executive officers or directors or any
limited partners of the operating partnership and their affiliates;
- provisions governing amendment of our bylaws.
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MEETINGS OF STOCKHOLDERS
Our bylaws provide for annual meetings of stockholders to elect the board
of directors and transact other business as may properly be brought before the
meeting. The President, the board of directors and the Chairman of the Board may
call a special meeting of stockholders. The holders of 50% or more of our
outstanding stock entitled to vote may also make a written request to call a
special meeting of stockholders.
The Maryland General Corporation Law provides that stockholders may act by
unanimous written consent without a meeting with respect to any action that they
are required or permitted to take at a meeting, if each stockholder entitled to
vote on the matter signs the consent setting forth the action and each
stockholder entitled to notice of the meeting but not entitled to vote at the
meeting signs a written waiver of any right to dissent.
ADVANCE NOTICE OF DIRECTOR NOMINATIONS AND NEW BUSINESS
Our bylaws provide that 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:
- pursuant to the notice of the meeting;
- by or at the direction of our board of directors; or
- by a stockholder who is entitled to vote at the meeting and has complied
with the advance notice procedures set forth in our bylaws.
Our bylaws also provide that with respect to special meetings of
stockholders, only the business specified in the notice of meeting may be
brought before the meeting.
The provisions in our articles of incorporation regarding amendments to our
articles of incorporation and the advance notice provisions of our 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 over the then prevailing market price or which holders might
believe to be otherwise in their best interests.
DISSOLUTION OF THE COMPANY
Under the Maryland General Corporation Law, our dissolution must be advised
by a majority of the entire board of directors and approved by the stockholders
by the affirmative vote of at least two-thirds of all the votes entitled to be
cast on the matter.
LIMITATION OF DIRECTORS' AND OFFICERS' LIABILITY
Our officers and directors are indemnified under the Maryland General
Corporation Law, our articles of incorporation and the operating partnership's
partnership agreement against certain liabilities. Our articles of incorporation
and bylaws require us to indemnify our directors and officers to the fullest
extent permitted from time to time by the Maryland General Corporation Law.
The Maryland General Corporation Law 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:
- 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;
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- the director or officer actually received an improper personal benefit in
money, property or services; or
- in the case of any criminal proceeding, the director or officer had
reasonable cause to believe that the act or omission was unlawful.
A corporation may indemnify a director or officer against judgments,
penalties, fines, settlements and reasonable expenses that the director or
officer actually incurs in connection with the proceeding unless the proceeding
is one by or in the right of the corporation and the director or officer has
been adjudged to be liable to the corporation. In addition, a corporation may
not indemnify a director or officer 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 Maryland General Corporation Law permits the charter 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. our articles of incorporation contain this provision.
The Maryland General Corporation Law does not, however, permit the liability of
directors and officers to the corporation or its stockholders to be limited to
the extent that:
- it is proved that the person actually received an improper personal
benefit in money, property or services;
- 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
- 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 our ability or the ability of our
stockholders to obtain other relief, such as an injunction or rescission. The
operating partnership's partnership agreement also provides for our
indemnification, as general partner, and our officers and directors to the same
extent indemnification is provided to our officers and directors in our articles
of incorporation, and limits our liability and the liability of our officers and
directors to the operating partnership and the partners of the operating
partnership to the same extent liability of our officers and directors to us and
our stockholders is limited under our articles of incorporation. See
"Description of Certain Provisions of the Partnership Agreement of the Operating
Partnership -- Our Exculpation and Indemnification."
Insofar as the foregoing provisions permit indemnification for liability
arising under the Securities Act of directors, officers or persons controlling
us, we have been informed that, in the opinion of the SEC, this indemnification
is against public policy as expressed in the Securities Act and is therefore
unenforceable.
FEDERAL INCOME TAX CONSIDERATIONS
The following summary of federal income tax considerations regarding AMB
Property Corporation and the common stock we are registering is based on current
law, is for general information only and is not tax advice. The information set
forth below, to the extent that it constitutes matters of law, summaries of
legal matters or legal conclusions, is the opinion of Latham & Watkins. Your tax
treatment will vary depending on your particular situation, and this
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discussion does not purport to deal with all aspects of taxation that may be
relevant to a holder of common stock or common units in light of his or her
personal investment or tax circumstances, or to stockholders who receive special
treatment under the federal income tax laws except to the extent discussed under
the headings "-- Taxation of Tax-Exempt Stockholders" and "-- Taxation of Non-
U.S. Stockholders." Stockholders receiving special treatment include, without
limitation:
- insurance companies;
- financial institutions or broker-dealers;
- tax-exempt organizations;
- stockholders holding securities as part of a conversion transaction, or a
hedge or hedging transaction or as a position in a straddle for tax
purposes;
- foreign corporations or partnerships; and
- persons who are not citizens or residents of the United States.
In addition, this summary does not purport to deal with aspects of taxation
that may be relevant to a limited partner of the operating partnership except to
the extent described in "-- Tax Consequences of an Exchange of Common Units for
Common Stock." Furthermore, the summary below does not consider the effect of
any foreign, state, local or other tax laws that may be applicable to you as a
holder of common units or our common stock.
The information in this section is based on:
- the Internal Revenue Code;
- current, temporary and proposed treasury regulations promulgated under
the Internal Revenue Code;
- the legislative history of the Internal Revenue Code;
- current administrative interpretations and practices of the Internal
Revenue Service; and
- court decisions;
in each case, as of the date of this prospectus. In addition, the administrative
interpretations and practices of the Internal Revenue Service include its
practices and policies as expressed in certain private letter rulings which are
not binding on the Internal Revenue Service except with respect to the
particular taxpayers who requested and received such rulings. Future
legislation, treasury regulations, administrative interpretations and practices
and/or court decisions may adversely affect the tax considerations described in
this prospectus. Any such change could apply retroactively to transactions
preceding the date of the change. The statements in this prospectus are not
binding on the Internal Revenue Service or a court. Thus, we can provide no
assurance that the tax considerations contained in this summary will not be
challenged by the Internal Revenue Service or sustained by a court if challenged
by the Internal Revenue Service.
YOU ARE URGED TO CONSULT YOUR TAX ADVISOR REGARDING THE SPECIFIC TAX
CONSEQUENCES TO YOU OF (1) A DISPOSITION OF COMMON UNITS, (2) THE ACQUISITION,
OWNERSHIP AND SALE OR OTHER DISPOSITION OF OUR COMMON STOCK, INCLUDING THE
FEDERAL, STATE, LOCAL, FOREIGN AND OTHER TAX CONSEQUENCES OF SUCH ACQUISITION,
OWNERSHIP AND SALE OR OTHER DISPOSITION, (3) OUR ELECTION TO BE TAXED AS A REAL
ESTATE INVESTMENT TRUST FOR FEDERAL INCOME TAX PURPOSES AND (4) POTENTIAL
CHANGES IN APPLICABLE TAX LAWS.
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TAX CONSEQUENCES OF AN EXCHANGE OF COMMON UNITS FOR COMMON STOCK
If you exercise your right to require the operating partnership to acquire
all or part of your common units, and we elect to acquire some or all of your
common units in exchange for our common stock, the exchange will be a fully
taxable transaction. You will generally recognize gain in an amount equal to the
value of our common stock received, plus the amount of liabilities of the
operating partnership allocable to your common units being exchanged, less your
tax basis in those common units. The recognition of any loss is subject to a
number of limitations set forth in the Internal Revenue Code. The character of
any gain or loss as capital or ordinary will depend on the nature of the assets
of the operating partnership at the time of the exchange. The tax treatment of
any acquisition of your common units by the operating partnership in exchange
for cash may be similar, depending on your circumstances.
TAXATION OF AMB PROPERTY CORPORATION
General. We elected to be taxed as a real estate investment trust under
Sections 856 through 860 of the Internal Revenue Code, commencing with our
taxable year ended December 31, 1997. We believe we have been organized and have
operated in a manner which allows us to qualify for taxation as a real estate
investment trust under the Internal Revenue Code commencing with our taxable
year ended December 31, 1997. We currently intend to continue to operate in this
manner. However, qualification and taxation as a real estate investment trust
depends upon our ability to meet, through actual annual operating results, asset
diversification, distribution levels and diversity of stock ownership, the
various qualification tests imposed under the Internal Revenue Code.
Accordingly, no assurance can be given that we have operated or will continue to
operate in a manner so as to qualify or remain qualified as a real estate
investment trust. See "-- Failure to Qualify."
The sections of the Internal Revenue Code that relate to the qualification
and operation as a real estate investment trust are highly technical and
complex. The following sets forth the material aspects of the sections of the
Internal Revenue Code that govern the federal income tax treatment of a real
estate investment trust and its stockholders. This summary is qualified in its
entirety by the applicable Internal Revenue Code provisions, relevant rules and
regulations promulgated under the Internal Revenue Code, and administrative and
judicial interpretations of the Internal Revenue Code and these rules and
regulations.
If we qualify for taxation as a real estate investment trust, we generally
will not be required to pay federal corporate income taxes on our net income
that is currently distributed to our stockholders. This treatment substantially
eliminates the "double taxation" that generally results from investment in a
corporation. Double taxation generally means taxation that occurs once at the
corporate level when income is earned and once again at the stockholder level
when the income is distributed. We will be required to pay federal income tax,
however, as follows:
- First, we will be required to pay tax at regular corporate rates on any
undistributed real estate investment trust taxable income, including
undistributed net capital gains.
- Second, we may be required to pay the "alternative minimum tax" on our
items of tax preference.
- Third, if we have (1) net income from the sale or other disposition of
"foreclosure property" which is held primarily for sale to customers in
the ordinary course of business or (2) other nonqualifying income from
foreclosure property, we will be required to pay tax at the highest
corporate rate on this income. Foreclosure property is generally defined
as property we acquired through foreclosure or after a default on a loan
secured by the property or a lease of the property.
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- Fourth, we will be required to pay a 100% tax on any net income from
prohibited transactions. Prohibited transactions are, in general, sales
or other taxable dispositions of property, other than foreclosure
property, held primarily for sale to customers in the ordinary course of
business.
- Fifth, if we fail to satisfy the 75% or 95% gross income test, as
described below, but have otherwise maintained our qualification as a
real estate investment trust, we will be required to pay a 100% tax on an
amount equal to (1) the gross income attributable to the greater of the
amount by which we fail the 75% or 95% gross income test multiplied by
(2) a fraction intended to reflect our profitability.
- Sixth, we will be required to pay a 4% excise tax on the excess of the
required distribution over the amounts actually distributed if we fail to
distribute during each calendar year at least the sum of (1) 85% of our
real estate investment trust ordinary income for the year, (2) 95% of our
real estate investment trust capital gain net income for the year, and
(3) any undistributed taxable income from prior periods.
- Seventh, if we acquire any asset from a corporation which is or has been
a C corporation, generally a corporation required to pay full
corporate-level tax, in a transaction in which the basis of the asset in
our hands is determined by reference to the basis of the asset in the
hands of the C corporation, and we subsequently recognize gain on the
disposition of the asset during the ten-year period beginning on the date
on which we acquired the asset, then under temporary treasury
regulations, we will be required to pay tax at the highest regular
corporate tax rate on this gain to the extent of the excess of (1) the
fair market value of the asset over (2) our adjusted basis in the asset,
in each case determined as of the date on which we acquired the asset.
The results described in this paragraph with respect to the recognition
of such gain assume that we will make an election pursuant to the
temporary treasury regulations described above.
Requirements for Qualification as a Real Estate Investment Trust. The
Internal Revenue Code defines a real estate investment trust as a corporation,
trust or association:
(1) that is managed by one or more trustees or directors;
(2) that issues transferable shares or transferable certificates to
evidence its beneficial ownership;
(3) that would be taxable as a domestic corporation, but for Sections
856 through 860 of the Internal Revenue Code;
(4) that is not a financial institution or an insurance company within
the meaning of the Internal Revenue Code;
(5) that is beneficially owned by 100 or more persons;
(6) not more than 50% in value of the outstanding stock of which is
owned, actually or constructively, by five or fewer individuals, as defined
in the Internal Revenue Code to include certain entities, during the last
half of each taxable year; and
(7) that meets other tests, described below, regarding the nature of
its income and assets and the amount of its distributions.
The Internal Revenue Code provides that conditions (1) to (4), inclusive,
must be met during the entire taxable year and that condition (5) must be met
during at least 335 days of a taxable year of twelve months, or during a
proportionate part of a taxable year of less than twelve months. Conditions (5)
and (6) do not apply until after the first taxable year for which an election is
made to be taxed as a real estate investment trust. For purposes of condition
(6), pension funds and certain
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other tax-exempt entities generally are treated as individuals, subject to a
"look-through" exception with respect to pension funds.
We believe that we have satisfied conditions (1) through (7) inclusive. In
addition, our charter provides for restrictions regarding ownership and transfer
of shares. These restrictions are intended to assist us in continuing to satisfy
the share ownership requirements described in (5) and (6) above. These stock
ownership and transfer restrictions are described in "Description of Capital
Stock -- Restrictions on Ownership and Transfer of Capital Stock." These
restrictions, however, may not ensure that we will, in all cases, be able to
satisfy the share ownership requirements described in (5) and (6) above. If we
fail to satisfy these share ownership requirements, except as provided in the
next sentence, our status as a real estate investment trust will terminate.
However, if we comply with the rules contained in applicable treasury
regulations that require us to ascertain the actual ownership of our shares and
we do not know, or would not have known through the exercise of reasonable
diligence, that we failed to meet the requirement described in condition (6)
above, we will be treated as having met this requirement. See the section below
entitled "-- Failure to Qualify."
In addition, we may not maintain our status as a real estate investment
trust unless our taxable year is the calendar year. We have and will continue to
have a calendar taxable year.
Termination of S Status. Prior to its merger into us in connection with our
formation transactions, AMB Institutional Realty Advisors, Inc. believed that it
validly elected to be taxed as an S corporation and that its election had not
been revoked or otherwise terminated (except as provided below). In order to
allow us to become a real estate investment trust, AMB Institutional Realty
Advisors, Inc. revoked its S election shortly before its merger into us. If AMB
Institutional Realty Advisors, Inc. was not an S corporation in 1997 (the
calendar year in which our formation transactions occurred), we likely would not
have qualified as a real estate investment trust for our taxable year ended
December 31, 1997 and perhaps subsequent years. See "-- Failure to Qualify." In
connection with our initial public offering, Latham & Watkins rendered an
opinion regarding AMB Institutional Realty Advisors, Inc.'s federal income tax
status as an S corporation, which opinion was based upon representations made by
AMB Institutional Realty Advisors, Inc. as to factual matters and upon the
opinion of counsel for some of the shareholders of AMB Institutional Realty
Advisors, Inc., with respect to matters relating to the tax status of those
shareholders.
Ownership of Interests in Partnerships and Qualified Real Estate Investment
Trust Subsidiaries. Treasury regulations provide that, in the case of a real
estate investment trust which is a partner in a partnership, the real estate
investment trust will be deemed to own its proportionate share of the assets of
the partnership. Also, the real estate investment trust will be deemed to be
entitled to its proportionate share of the partnership's income. The character
of the assets and gross income of the partnership retains the same character in
the hands of the real estate investment trust for purposes of Section 856 of the
Internal Revenue Code, including satisfying the gross income tests and the asset
tests. In addition, for these purposes, a partnership's assets and items of
income include its share of the assets and items of income of any partnership or
limited liability company in which it owns an interest. We have included a brief
summary of the rules governing the federal income taxation of partnerships and
their partners below in "-- Tax Aspects of the Operating Partnerships and the
Joint Ventures." We have direct control of the operating partnership and will
continue to operate it in a manner consistent with the requirements for
qualification as a real estate investment trust. However, we are a limited
partner or non-managing member in some of our joint ventures. If a joint venture
takes or expects to take actions which could jeopardize our status as a real
estate investment trust or require us to pay tax, we may be forced to dispose of
our interest in such joint venture. In addition, it is possible that a joint
venture could take an action which could cause us to fail a real estate
investment trust income or asset test, and that we would not become aware of
such action in a time
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frame which would allow us to dispose of our interest in the joint venture or
take other corrective action on a timely basis. In such a case, we could fail to
qualify as a real estate investment trust.
We own 100% of the stock of two subsidiaries that are qualified real estate
investment trust subsidiaries and may acquire stock of one or more new corporate
subsidiaries. A corporation will qualify as a qualified real estate investment
trust subsidiary if we own 100% of the corporation's stock. A qualified real
estate investment trust subsidiary will not be treated as a separate
corporation. All assets, liabilities and items of income, deduction and credit
of a qualified real estate investment trust subsidiary we own will be treated as
our assets, liabilities and such items, for all purposes of the Internal Revenue
Code, including the real estate investment trust qualification tests. For this
reason, references under "Federal Income Tax Considerations" to our income and
assets shall include the income and assets of any qualified real estate
investment trust subsidiary. A qualified real estate investment trust subsidiary
will not be required to pay federal income tax, and our ownership of the voting
stock of a qualified real estate investment trust subsidiary will not violate
the restrictions against ownership of securities of any one issuer which
constitute more than 10% of such issuer's voting securities or more than 5% of
the value of our total assets, as described below under "-- Asset Tests."
Income Tests. We must satisfy two gross income requirements annually to
maintain our qualification as a real estate investment trust. First, in each
taxable year we must derive directly or indirectly at least 75% of our gross
income, excluding gross income from prohibited transactions, from investments
relating to real property or mortgages on real property, including "rents from
real property" and, in certain circumstances, interest, or from certain types of
temporary investments. Second, in each taxable year we must derive at least 95%
of our gross income, excluding gross income from prohibited transactions, from
these real property investments, dividends, interest and gain from the sale or
disposition of stock or securities, or from any combination of the foregoing.
For these purposes, the term "interest" generally does not include any amount
received or accrued, directly or indirectly, if the determination of the amount
depends in whole or in part on the income or profits of any person. However, an
amount received or accrued generally will not be excluded from the term
"interest" solely by reason of being based on a fixed percentage or percentages
of receipts or sales.
Rents we receive will qualify as "rents from real property" for the purpose
of satisfying the gross income requirements for a real estate investment trust
described above only if the following conditions are met:
- The amount of rent is not based in whole or in part on the income or
profits of any person. However, an amount we receive or accrue generally
will not be excluded from the term "rents from real property" solely by
reason of being based on a fixed percentage or percentages of receipts or
sales;
- We, or an actual or constructive owner of 10% or more of our capital
stock, do not actually or constructively own 10% or more of the interests
in the tenant;
- Rent attributable to personal property, leased in connection with a lease
of real property, is not greater than 15% of the total rent received
under the lease. If this requirement is not met, then the portion of rent
attributable to personal property will not qualify as "rents from real
property"; and
- We generally must not operate or manage the property or furnish or render
services to the tenants of the property (subject to a 1% de minimis
exception), other than through an independent contractor from whom we
derive no revenue. We may, however, directly perform certain services
that are "usually or customarily rendered" in connection with the rental
of space for occupancy only and are not otherwise considered "rendered to
the occupant" of the
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property. Examples of such services include the provision of light, heat,
or other utilities, trash removal and general maintenance of common
areas. Under recently enacted legislation, described in greater detail
below, beginning in 2001, we may employ a "taxable REIT subsidiary" which
may be wholly or partially owned by us, to provide both customary and
noncustomary services to our tenants without causing the rent we receive
from those tenants to fail to qualify as "rents from real property."
We generally do not intend to receive rent which fails to qualify as "rents
from real property." However, we may have failed to satisfy, and may continue to
fail to satisfy, some of the conditions described above to the extent these
actions will not, based on the advice of our tax counsel, jeopardize our status
as a real estate investment trust.
AMB Investment Management, Inc. is the sole general partner of, and
conducts its operations through, AMB Investment Management Limited Partnership.
AMB Investment Management Limited Partnership conducts the asset management
business and receives fees, including incentive fees, in exchange for the
provision of certain services to asset management clients. In addition,
Headlands Realty Corporation may provide certain services in exchange for a fee
or derive other income which would not qualify under the real estate investment
trust gross income tests. Such fees and other income do not accrue to us, but we
derive our allocable share of dividend income from AMB Investment Management,
Inc. and Headlands Realty through our interest in the operating partnership.
Such dividend income qualifies under the 95%, but not the 75%, real estate
investment trust gross income test. The operating partnership may provide
certain management or administrative services to AMB Investment Management
Limited Partnership and Headlands Realty Corporation. The fees derived by the
operating partnership as a result of the provision of such services will be
nonqualifying income to us under both the 95% and 75% real estate investment
trust income tests. The amount of such dividend and fee income will depend on a
number of factors which cannot be determined with certainty, including the level
of services provided by AMB Investment Management Limited Partnership, Headlands
Realty Corporation and the operating partnership. We will monitor the amount of
the dividend income from AMB Investment Management, Inc. and Headlands Realty
Corporation and the fee income described above, and will take actions intended
to keep this income, and any other nonqualifying income, within the limitations
of the real estate investment trust income tests. However, we cannot guarantee
that such actions will in all cases prevent us from violating a real estate
investment trust income test.
If we fail to satisfy one or both of the 75% or 95% gross income tests for
any taxable year, we may nevertheless qualify as a real estate investment trust
for the year if we are entitled to relief under certain provisions of the
Internal Revenue Code. Generally, we may avail ourselves of the relief
provisions if:
- our failure to meet these tests was due to reasonable cause and not due
to willful neglect;
- we attach a schedule of the sources of our income to any federal income
tax return; and
- any incorrect information on the schedule was not due to fraud with
intent to evade tax.
It is not possible, however, to state whether in all circumstances we would
be entitled to the benefit of these relief provisions. For example, if we fail
to satisfy the gross income tests because nonqualifying income that we
intentionally accrue or receive exceeds the limits on nonqualifying income, the
Internal Revenue Service could conclude that our failure to satisfy the tests
was not due to reasonable cause. If these relief provisions do not apply to a
particular set of circumstances, we will not qualify as a real estate investment
trust. As discussed above in "-- Taxation of AMB -- General," even if these
relief provisions apply, and we retain our status as a real estate investment
trust, a tax would be imposed with respect to our non-qualifying income. We may
not always be able
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to comply with the gross income tests for real estate investment trust
qualification despite periodic monitoring of our income.
Asset Tests. At the close of each quarter of our taxable year, we must
satisfy three tests relating to the nature and diversification of our assets.
First, at least 75% of the value of our total assets must be represented by real
estate assets, cash, cash items and government securities. For purposes of this
test, real estate assets include stock or debt instruments that are purchased
with the proceeds of a stock offering or a long-term (at least five years)
public debt offering, but only for the one year period beginning on the date we
receive such proceeds. Second, not more than 25% of our total assets may be
represented by securities, other than those securities includable in the 75%
asset test. Third, of the investments included in the 25% asset class, the value
of any one issuer's securities may not exceed 5% of the value of our total
assets and we may not own more than 10% of any one issuer's outstanding voting
securities.
The operating partnership owns 100% of the non-voting preferred stock of
AMB Investment Management, Inc. and Headlands Realty Corporation. We are
considered to own our pro rata share of that stock because we own interests in
the operating partnership. The stock of AMB Investment Management, Inc. and
Headlands Realty Corporation we hold is not a qualifying real estate asset. The
operating partnership does not and will not own any of the voting securities of
AMB Investment Management, Inc. or Headlands Realty Corporation. Therefore we
will not be considered to own more than 10% of the voting securities of either
corporation. In addition, we believe that the value of our pro rata share of the
securities of AMB Investment Management, Inc. and Headlands Realty Corporation
held by the operating partnership does not, in either case, exceed 5% of the
total value of our assets, and will not exceed such amount in the future. No
independent appraisals have been obtained to support this conclusion. We cannot
assure you that the Internal Revenue Service will not contend that the value of
the securities of one or both of AMB Investment Management, Inc. and Headlands
Realty Corporation we own exceeds the 5% value limitation. We must satisfy the
5% value test not only on the date that we, directly or through the operating
partnership, acquire securities in AMB Investment Management, Inc. or Headlands
Realty Corporation, as applicable, but also each time we increase our ownership
of securities of AMB Investment Management, Inc. and Headlands Realty
Corporation, including as a result of increasing our interest in the operating
partnership. For example, our indirect ownership of securities of AMB Investment
Management, Inc. and Headlands Realty Corporation will increase as a result of
our capital contributions to the operating partnership or as limited partners
exercise their redemption/exchange rights. Although we believe that we presently
satisfy the 5% value test and plan to take steps to ensure that we satisfy such
test for any quarter with respect to which retesting is to occur, we cannot
assure you that such steps will always be successful, or will not require a
reduction in the operating partnership's overall interest in either or both of
AMB Investment Management, Inc. and Headlands Realty Corporation.
After initially meeting the asset tests at the close of any quarter, we
will not lose our status as a real estate investment trust for failure to
satisfy the asset tests at the end of a later quarter solely by reason of
changes in asset values. If we fail to satisfy the asset tests because we
acquire securities or other property during a quarter, including an increase in
our interests in the operating partnership, we can cure this failure by
disposing of sufficient nonqualifying assets within 30 days after the close of
that quarter. We believe we have maintained and intend to continue to maintain
adequate records of the value of our assets to ensure compliance with the asset
tests and to take such other actions within the 30 days after the close of any
quarter as may be required to cure any noncompliance. If we fail to cure
noncompliance with the asset tests within this time period, we would cease to
qualify as a real estate investment trust.
In addition, from time to time, we may invest in early-stage companies. We
believe that we have structured these investments so that they will not
adversely affect our status as a real estate
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investment trust. However, if the value of these investments, either
individually or in the aggregate, appreciates significantly, these investments
could affect our ability to continue to meet the 5%, 10% and 25% asset tests
described above, and our ability to qualify as a real estate investment trust,
unless we are able to restructure or dispose of our holdings on a timely basis.
As discussed above, a real estate investment trust cannot currently own
more than 10% of the outstanding voting securities of any one issuer. Recently,
legislation was enacted that, beginning in 2001, limits a real estate investment
trust's ability to own more than 10% by vote or value of the securities of any
single issuer. This legislation, however, allows a real estate investment trust
to own up to 100% of the vote and/or value of a corporation which jointly elects
with the real estate investment trust to be treated as a "taxable REIT
subsidiary," provided that, in the aggregate, a real estate investment trust's
total investment in its taxable REIT subsidiaries does not exceed 20% of the
real estate investment trust's total assets, and at least 75% of the real estate
investment trust's total assets are real estate or other qualifying assets. In
addition, dividends from taxable REIT subsidiaries will be nonqualifying income
for purposes of the 75%, but not the 95%, gross income test. Other than certain
activities relating to lodging and health care facilities, a taxable REIT
subsidiary may generally engage in any business, including the provision of
customary or noncustomary services to tenants of its parent real estate
investment trust.
This new legislation contains provisions generally intended to insure that
transactions between a real estate investment trust and its taxable REIT
subsidiary occur "at arm's length" and on commercially reasonable terms. These
requirements include a provision that prevents a taxable REIT subsidiary from
deducting interest on direct or indirect indebtedness to its parent real estate
investment trust if, under a specified series of tests, the taxable REIT
subsidiary is considered to have an excessive interest expense level or debt to
equity ratio. In some cases the new legislation also imposes a 100% tax on the
real estate investment trust if its rental, service and/or other agreements with
its taxable REIT subsidiary are not on arm's length terms.
This new legislation may require us to restructure our investment in AMB
Investment Management, Inc. and Headlands Realty Corporation, possibly by
jointly electing to treat them as taxable REIT subsidiaries. It will also be
necessary for us to monitor our investments in other entities and, in some
circumstances, modify those investments if we own more than 10% of the voting
power or value of another entity. The legislation concerning taxable REIT
subsidiaries is generally effective only for taxable years beginning after
December 31, 2000.
In connection with property acquisitions, we acquired partnership interests
and may have inadvertently acquired the voting securities of shell corporations
in violation of the 10% asset test at March 31, 1999. However, while no
assurance can be given, based on the advice of counsel in the relevant
jurisdiction and other factors, we do not believe that we have, in fact,
violated this test or that we would lose our status as a real estate investment
trust as a result of this matter.
Annual Distribution Requirements. To maintain our qualification as a real
estate investment trust, we are required to distribute dividends, other than
capital gain dividends, to our stockholders in an amount at least equal to the
sum of:
- 95% of our "real estate investment trust taxable income"; and
- 95% of our after tax net income, if any, from foreclosure property; minus
- the excess of the sum of certain items of noncash income over 5% of the
"real estate investment trust taxable income."
Our "real estate investment trust taxable income" is computed without
regard to the dividends paid deduction and our net capital gain. In addition,
for purposes of this test, non-cash income means
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income attributable to leveled stepped rents, original issue discount on
purchase money debt, or a like-kind exchange that is later determined to be
taxable.
We must pay these distributions in the taxable year to which they relate,
or in the following taxable year if they are declared before we timely file our
tax return for such year and if paid on or before the first regular dividend
payment after such declaration. Except as provided in "-- Taxation of Taxable
U.S. Stockholders" below, these distributions are taxable to stockholders, other
than tax-exempt entities, as discussed below, in the year in which paid. This is
so even though these distributions relate to the prior year for purposes of our
95% distribution requirement. To avoid being preferential, these distributions
must be made such that every stockholder of the class of stock to which a
distribution is made must be treated the same as every other stockholder of that
class, and no class of stock may be treated otherwise than in accordance with
its dividend rights as a class. To the extent that we do not distribute all of
our net capital gain or distribute at least 95%, but less than 100%, of our
"real estate investment trust taxable income," as adjusted, we will be required
to pay tax on that amount at regular corporate tax rates. We believe we have
made, and intend to continue to make, timely distributions sufficient to satisfy
these annual distribution requirements. In this regard, the partnership
agreement authorizes us, as general partner of the operating partnership, to
take such steps as may be necessary to cause the operating partnership to
distribute to its partners an amount sufficient to permit us to meet these
distribution requirements.
We expect that our real estate investment trust taxable income will be less
than our cash flow due to the allowance of depreciation and other non-cash
charges in computing real estate investment trust taxable income. Accordingly,
we anticipate that we will generally have sufficient cash or liquid assets to
enable us to satisfy the distribution requirements described above. However,
from time to time, we may not have sufficient cash or other liquid assets to
meet these distribution requirements due to timing differences between the
actual receipt of income and actual payment of deductible expenses, and the
inclusion of income and deduction of expenses in arriving at our taxable income.
If these timing differences occur, we may need to arrange for short-term, or
possibly long-term, borrowings or need to pay dividends in the form of taxable
stock dividends in order to meet the distribution requirements. In addition,
pursuant to recently enacted legislation, the 95% distribution requirement
discussed above will be reduced to 90%, effective for taxable years beginning
after December 31, 2000.
We may be able to rectify an inadvertent failure to meet the distribution
requirement for a year by paying "deficiency dividends" to our stockholders in a
later year, which may be included in our deduction for dividends paid for the
earlier year. Thus, we may be able to avoid being taxed on amounts distributed
as deficiency dividends. However, we will be required to pay interest based upon
the amount of any deduction claimed for deficiency dividends.
Furthermore, we will be required to pay a 4% excise tax on the excess of
the required distribution over the amounts actually distributed if we fail to
distribute during each calendar year, or in the case of distributions with
declaration and record dates falling in the last three months of the calendar
year, by the end of January immediately following such year, at least the sum of
85% of our real estate investment trust ordinary income for such year, 95% of
our real estate investment trust capital gain income for the year and any
undistributed taxable income from prior periods. Any real estate investment
trust taxable income and net capital gain on which this excise tax is imposed
for any year is treated as an amount distributed during that year for purposes
of calculating such tax.
Earnings and Profits Distribution Requirement. In order to qualify as a
real estate investment trust, we cannot have at the end of any taxable year any
undistributed "earnings and profits" that are attributable to a "C corporation"
taxable year. A C corporation's taxable year is a year in which a corporation is
neither a real estate investment trust nor an S corporation. If the mergers of
AMB Current Income Fund, Inc. and VAF into AMB Institutional Realty Advisors,
Inc. were treated as
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reorganizations under the Internal Revenue Code, in connection with our
formation transactions, we succeeded to various tax attributes of AMB
Institutional Realty Advisors, Inc., AMB Current Income Fund, Inc. and AMB Value
Added Fund, Inc., including any undistributed C corporation earnings and profits
of these corporations. If either AMB Current Income Fund, Inc. or AMB Value
Added Fund, Inc. failed to qualify as a real estate investment trust throughout
the duration of its existence, or AMB Institutional Realty Advisors, Inc. failed
to qualify as an S corporation for any year in which its activities would have
created earnings and profits, then we would have acquired undistributed C
corporation earnings and profits that, if not distributed by us prior to the end
of our first taxable year, would prevent us from qualifying as a real estate
investment trust. We do not believe that any of these corporations had
corporation earnings and profits. However, the Internal Revenue Service may
contend otherwise on a subsequent audit of AMB Institutional Realty Advisors,
Inc., AMB Current Income Fund, Inc. or AMB Value Added Fund, Inc.
Property Transfer. Any gain realized by us on the sale of any property
held as inventory or other property held primarily for sale to customers in the
ordinary course of business, including our share of any such gain realized by
the operating partnership, either directly or through our subsidiary
partnerships, will be treated as income from a prohibited transaction that is
subject to a 100% penalty tax. This prohibited transaction income may adversely
affect our ability to satisfy the income tests for qualification as a real
estate investment trust. Under existing law, whether property is held as
inventory or primarily for sale to customers in the ordinary course of a trade
or business is a question of fact that depends on all the facts and
circumstances surrounding the particular transaction. The operating partnership
intends to hold its properties for investment with a view to long-term
appreciation, to engage in the business of acquiring, developing and owning its
properties and to make occasional sales of the properties as are consistent with
the operating partnership's investment objectives. However, the Internal Revenue
Service may successfully contend that some or all of the sales made by the
operating partnership or its subsidiary partnerships are prohibited
transactions. We would be required to pay the 100% penalty tax on our allocable
share of the gains resulting from any such sales.
FAILURE TO QUALIFY
If we fail to qualify for taxation as a real estate investment trust in any
taxable year, and the relief provisions of the Internal Revenue Code do not
apply, we will be required to pay tax, including any applicable alternative
minimum tax, on our taxable income at regular corporate rates. Distributions to
stockholders in any year in which we fail to qualify as a real estate investment
trust will not be deductible by us, and we will not be required to distribute
any amounts to our stockholders. As a result, we anticipate that our failure to
qualify as a real estate investment trust would reduce the cash available for
distribution by us to our stockholders. In addition, if we fail to qualify as a
real estate investment trust, all distributions to stockholders will be taxable
as ordinary income to the extent of our current and accumulated earnings and
profits, and subject to certain limitations of the Internal Revenue Code,
corporate distributees may be eligible for the dividends received deduction.
Unless entitled to relief under specific statutory provisions, we will also be
disqualified from taxation as a real estate investment trust for the four
taxable years following the year during which we lost our qualification. It is
not possible to state whether in all circumstances we would be entitled to this
statutory relief.
TAX ASPECTS OF THE OPERATING PARTNERSHIP AND THE JOINT VENTURES
General. Substantially all of our investments are held indirectly through
the operating partnership. In addition, the operating partnership holds certain
of its investments indirectly through joint ventures. In general, partnerships
are "pass-through" entities which are not required to pay federal income tax.
Rather, partners are allocated their proportionate shares of the items of
income,
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gain, loss, deduction and credit of a partnership, and are potentially required
to pay tax thereon, without regard to whether the partners receive a
distribution of cash from the partnership. We will include in our income our
proportionate share of the foregoing partnership items for purposes of the
various real estate investment trust income tests and in the computation of our
real estate investment trust taxable income. Moreover, for purposes of the real
estate investment trust asset tests, we will include our proportionate share of
assets held by the operating partnership and joint ventures. See "-- Taxation of
AMB Property Corporation."
Entity Classification. Our interests in the operating partnership and the
joint ventures involve special tax considerations, including the possibility
that the Internal Revenue Service might challenge the status of these entities
as a partnership, as opposed to an association taxable as a corporation for
federal income tax purposes. If the operating partnership or a partnership were
treated as an association, it would be taxable as a corporation and would be
required to pay an entity-level tax on its income. In this situation, the
character of our assets and items of gross income would change and preclude us
from satisfying the asset tests and possibly the income tests (see "-- Taxation
of AMB Property Corporation -- Asset Tests" and "-- Income Tests"). This, in
turn, would prevent us from qualifying as a real estate investment trust. See
"-- Failure to Qualify" for a discussion of the effect of our failure to meet
these tests for a taxable year. In addition, a change in the operating
partnership's or a partnership's status for tax purposes might be treated as a
taxable event. If so, we might incur a tax liability without any related cash
distributions.
Treasury regulations that apply for tax periods beginning on or after
January 1, 1997 provide that a domestic business entity not otherwise organized
as a corporation and which has at least two members is eligible to be treated as
a partnership for federal income tax purposes. Unless it elects otherwise, an
eligible entity in existence prior to January 1, 1997 will have the same
classification for federal income tax purposes that it claimed under the entity
classification treasury regulations in effect prior to this date. In addition,
an eligible entity which did not exist, or did not claim a classification, prior
to January 1, 1997, will be classified as a partnership for federal income tax
purposes unless it elects otherwise. The operating partnership and each of our
joint ventures intend to claim classification as a partnership under the final
regulations. As a result, we believe these partnerships will be classified as
partnerships for federal income tax purposes.
Allocations of Operating Partnership Income, Gain, Loss and Deduction. The
partnership agreement provides for preferred distributions of cash and preferred
allocations of income to AMB Property Corporation with respect to its Series A
Preferred Units and to the holders of Series B Preferred Units. In addition, to
the extent we issue Series C Preferred Stock in exchange for Series C Preferred
Units of AMB Property II, Series D Preferred Stock in exchange for Series D
Preferred Units of AMB Property II, Series E Preferred Stock in exchange for
Series E Preferred Units of AMB Property II or Series F Preferred Stock in
exchange for Series F Preferred Units of AMB Property II, the operating
partnership will issue Series C Preferred Units, Series D Preferred Units,
Series E Preferred Units or Series F Preferred Units to us, and the partnership
agreement will be amended to provide for similar preferred distributions of cash
and preferred allocations of income to us with respect to the operating
partnership's Series C Preferred Units, its Series D Preferred Units, its Series
E Preferred Units or its Series F Preferred Units. As a consequence, we will
receive distributions from the operating partnership that we would use to pay
dividends on shares of Series A Preferred Stock and any shares of Series B
Preferred Stock, Series C Preferred Stock, Series D Preferred Stock, Series E
Preferred Stock, or Series F Preferred Stock issued by us before any other
partner in the operating partnership (other than a holder of Series B Preferred
Units, if the units are not then held by us) receives a distribution. In
addition, if necessary, income will be specially allocated to us, and losses
will be allocated to the other partners of the operating partnership, in amounts
necessary to ensure that the balance in our capital account will at all times be
equal to or in excess of the amount payable by us upon liquidation or redemption
of the Series A Preferred Stock
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and any Series B Preferred Stock, Series C Preferred Stock, Series D Preferred
Stock, Series E Preferred Stock, or Series F Preferred Stock then issued by us.
As long as we do not hold the Series B Preferred Units, similar preferred
distributions and allocations will be made for the benefit of the holders of
those units. All remaining items of operating income and loss will be allocated
to the holders of common units in proportion to the number of units or
performance units held by each such unitholder. All remaining items of gain or
loss relating to the disposition of the operating partnership's assets upon
liquidation will be allocated first to the partners in the amounts necessary, in
general, to equalize our and the limited partners' per unit capital accounts,
with any special allocation of gain to the holders of performance units being
offset by a reduction in the gain allocation to us and unitholders which were
performance investors. There are limited partners who have agreed to guarantee
debt of the operating partnership, either directly or indirectly through an
agreement to make capital contributions to the operating partnership under
limited circumstances. As a result of these guarantees or contribution
agreements, and notwithstanding the foregoing discussion of allocations of
income and loss of the operating partnership to holders of common units, limited
partners who have guaranteed debt of the operating partnership could under
limited circumstances be allocated a disproportionate amount of net loss upon a
liquidation of the operating partnership, which net loss would have otherwise
been allocable to us.
If an allocation is not recognized for federal income tax purposes, the
item subject to the allocation will be reallocated in accordance with the
partners' interests in the partnership. This reallocation will be determined by
taking into account all of the facts and circumstances relating to the economic
arrangement of the partners with respect to such item. The operating
partnership's allocations of taxable income and loss are intended to comply with
the requirements of Section 704(b) of the Internal Revenue Code and the treasury
regulations promulgated under this section of the Internal Revenue Code.
Tax Allocations with Respect to the Properties. Under Section 704(c) of the
Internal Revenue Code, income, gain, loss and deduction attributable to
appreciated or depreciated property that is contributed to a partnership in
exchange for an interest in the partnership, must be allocated in a manner so
that the contributing partner is charged with the unrealized gain or benefits
from the unrealized loss associated with the property at the time of the
contribution. The amount of the unrealized gain or unrealized loss is generally
equal to the difference between the fair market value or book value and the
adjusted tax basis of the property at the time of contribution. These
allocations are solely for federal income tax purposes and do not affect the
book capital accounts or other economic or legal arrangements among the
partners. The operating partnership was formed by way of contributions of
appreciated property. Moreover, subsequent to the formation of the operating
partnership, additional appreciated property has been contributed to the
operating partnership in exchange for interests in the operating partnership.
The partnership agreement requires that these allocations be made in a manner
consistent with Section 704(c) of the Internal Revenue Code.
In general, the partners of the operating partnership, including us, which
contributed assets having an adjusted tax basis less than their fair market
value at the time of contribution will be allocated depreciation deductions for
tax purposes which are lower than such deductions would have been if determined
on a pro rata basis. In addition, in the event of the disposition of any of the
contributed assets which have such a book-tax difference, all income
attributable to such book-tax difference generally will be allocated to the
contributing partners. These allocations will tend to eliminate the book-tax
difference over the life of the operating partnership. However, the special
allocation rules of Section 704(c) do not always entirely eliminate the book-tax
difference on an annual basis or with respect to a specific taxable transaction
such as a sale. Thus, the carryover basis of the contributed assets in the hands
of the operating partnership may cause us or other partners to be allocated
lower depreciation and other deductions, and possibly an amount of taxable
income in the event of a sale of such contributed assets in excess of the
economic or book income allocated to
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us or other partners as a result of the sale. Such an allocation might cause us
or other partners to recognize taxable income in excess of cash proceeds, which
might adversely affect our ability to comply with the real estate investment
trust distribution requirements. See "-- Taxation of AMB Property
Corporation -- Requirements for Qualification" and "-- Annual Distribution
Requirements."
Treasury regulations issued under Section 704(c) of the Internal Revenue
Code provide partnerships with a choice of several methods of accounting for
book-tax differences, including retention of the "traditional method" or the
election of certain methods which would permit any distortions caused by a
book-tax difference to be entirely rectified on an annual basis or with respect
to a specific taxable transaction such as a sale. We and the operating
partnership have determined to use the "traditional method" for accounting for
book-tax differences for the properties initially contributed to the operating
partnership and for certain assets contributed subsequently. We and the
operating partnership have not yet decided what method will be used to account
for book-tax differences for properties acquired by the operating partnership in
the future.
Any property acquired by the operating partnership in a taxable transaction
will initially have a tax basis equal to its fair market value, and Section
704(c) of the Internal Revenue Code will not apply.
TAXATION OF TAXABLE U.S. STOCKHOLDERS
When we use the term "U.S. stockholder," we mean a holder of shares of
common stock who, for United States federal income tax purposes:
- is a citizen or resident of the United States;
- is a corporation, partnership, or other entity created or organized in or
under the laws of the United States or of any state thereof or in the
District of Columbia, unless, in the case of a partnership, treasury
regulations provide otherwise;
- is an estate the income of which is subject to United States federal
income taxation regardless of its source; or
- is a trust whose administration is subject to the primary supervision of
a United States court and which has one or more United States persons who
have the authority to control all substantial decisions of the trust.
Notwithstanding the preceding sentence, to the extent provided in the
treasury regulations, certain trusts in existence on August 20, 1996, and
treated as United States persons prior to this date that elect to continue to be
treated as United States persons, shall also be considered U.S. stockholders.
Distributions Generally. As long as we qualify as a real estate investment
trust, distributions out of our current or accumulated earnings and profits,
other than capital gain dividends discussed below, will constitute dividends
taxable to our taxable U.S. stockholders as ordinary income. As long as we
qualify as a real estate investment trust, these distributions will not be
eligible for the dividends-received deduction in the case of U.S. stockholders
that are corporations. For purposes of determining whether distributions to
holders of common stock are out of current or accumulated earnings and profits,
our earnings and profits will be allocated first to the outstanding preferred
stock, if any, and then to the common stock.
To the extent that we make distributions, other than capital gain dividends
discussed below, in excess of our current and accumulated earnings and profits,
these distributions will be treated first as a tax-free return of capital to
each U.S. stockholder. This treatment will reduce the adjusted tax basis which
each U.S. stockholder has in his shares of stock for tax purposes by the amount
of the distribution, but not below zero. Distributions in excess of a U.S.
stockholder's adjusted tax basis in
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his shares will be taxable as capital gains, provided that the shares have been
held as a capital asset, and will be taxable as long-term capital gain if the
shares have been held for more than one year. Dividends we declare in October,
November, or December of any year and payable to a stockholder of record on a
specified date in any of these months shall be treated as both paid by us and
received by the stockholder on December 31 of that year, provided we actually
pay the dividend on or before January 31 of the following calendar year.
Stockholders may not include in their own income tax returns any of our net
operating losses or capital losses.
Capital Gain Distributions. Distributions that we properly designate as
capital gain dividends will be taxable to taxable U.S. stockholders as gains
from the sale or disposition of a capital asset, to the extent that such gains
do not exceed our actual net capital gain for the taxable year. Depending on the
characteristics of the assets which produced these gains, and on certain
designations, if any, which we may make, these gains may be taxable to
non-corporate U.S. stockholders at a 20% or 25% rate. U.S. stockholders that are
corporations may, however, be required to treat up to 20% of certain capital
gain dividends as ordinary income. For a discussion of the manner in which that
portion of any dividends designated as capital gain dividends will be allocated
among the holders of our preferred stock, if any, and common stock, see
"Description of Capital Stock."
Passive Activity Losses and Investment Interest Limitations. Distributions
we make and gain arising from the sale or exchange by a U.S. stockholder of our
shares will not be treated as passive activity income. As a result, U.S.
stockholders generally will not be able to apply any "passive losses" against
this income or gain. Distributions we make, to the extent they do not constitute
a return of capital, generally will be treated as investment income for purposes
of computing the investment interest limitation. Gain arising from the sale or
other disposition of our shares, however, will not be treated as investment
income under certain circumstances.
Retention of Net Long-Term Capital Gains. We may elect to retain, rather
than distribute as a capital gain dividend, our net long-term capital gains. If
we make this election, we would pay tax on our retained net long-term capital
gains. In addition, to the extent we designate, a U.S. stockholder generally
would:
- include its proportionate share of our undistributed long-term capital
gains in computing its long-term capital gains in its return for its
taxable year in which the last day of our taxable year falls, subject to
certain limitations as to the amount that is includable;
- be deemed to have paid the capital gains tax imposed on us on the
designated amounts included in the U.S. stockholder's long-term capital
gains;
- receive a credit or refund for the amount of tax deemed paid by it;
- increase the adjusted basis of its common stock by the difference between
the amount of includable gains and the tax deemed to have been paid by
it; and
- in the case of a U.S. stockholder that is a corporation, appropriately
adjust its earnings and profits for the retained capital gains in
accordance with treasury regulations to be prescribed by the Internal
Revenue Service.
Dispositions of Common Stock. If you are a U.S. stockholder and you sell or
dispose of your shares of common stock, you will recognize gain or loss for
federal income tax purposes in an amount equal to the difference between the
amount of cash and the fair market value of any property you receive on the sale
or other disposition and your adjusted basis in the shares for tax purposes.
This gain or loss will be capital if you have held the common stock as a capital
asset. This gain or loss will be long-term capital gain or loss if you have held
the common stock for more than one year. In general, if you are a U.S.
stockholder and you recognize loss upon the sale or other disposition of common
stock that you have held for six months or less, after applying certain holding
period rules,
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the loss you recognize will be treated as a long-term capital loss, to the
extent you received distributions from us which were required to be treated as
long-term capital gains.
BACKUP WITHHOLDING
We report to our U.S. stockholders and the Internal Revenue Service the
amount of dividends paid during each calendar year, and the amount of any tax
withheld. Under the backup withholding rules, a stockholder may be subject to
backup withholding at the rate of 31% with respect to dividends paid unless the
holder is a corporation or comes within certain other exempt categories and,
when required, demonstrates this fact, or provides a taxpayer identification
number, certifies as to no loss of exemption from backup withholding, and
otherwise complies with applicable requirements of the backup withholding rules.
A U.S. stockholder that does not provide us with his correct taxpayer
identification number may also be subject to penalties imposed by the Internal
Revenue Service. Backup withholding is not an additional tax. Any amount paid as
backup withholding will be creditable against the stockholder's income tax
liability. In addition, we may be required to withhold a portion of capital gain
distributions to any stockholders who fail to certify their non-foreign status.
See "-- Taxation of Non-U.S. Stockholders."
TAXATION OF TAX-EXEMPT STOCKHOLDERS
The Internal Revenue Service has ruled that amounts distributed as
dividends by a qualified real estate investment trust do not constitute
unrelated business taxable income when received by a tax-exempt entity. Based on
that ruling, provided that a tax-exempt stockholder, except certain tax-exempt
stockholders described below, has not held its shares as "debt financed
property" within the meaning of the Internal Revenue Code and the shares are not
otherwise used in a trade or business, dividend income from us will not be
unrelated business taxable income to a tax-exempt stockholder. Similarly, income
from the sale of shares will not constitute unrelated business taxable income
unless a tax-exempt stockholder has held its shares as "debt financed property"
within the meaning of the Internal Revenue Code or has used the shares in its
trade or business. Generally, debt financed property is property, the
acquisition or holding of which was financed through a borrowing by the tax
exempt stockholder.
For tax-exempt stockholders which are social clubs, voluntary employee
benefit associations, supplemental unemployment benefit trusts, and qualified
group legal services plans exempt from federal income taxation under Internal
Revenue Code Sections 501(c)(7), (c)(9), (c)(17) and (c)(20), respectively,
income from an investment in our shares will constitute unrelated business
taxable income unless the organization is able to properly claim a deduction for
amounts set aside or placed in reserve for certain purposes so as to offset the
income generated by its investment in our shares. These prospective investors
should consult their own tax advisors concerning these "set aside" and reserve
requirements.
Notwithstanding the above, however, a portion of the dividends paid by a
"pension held REIT" shall be treated as unrelated business taxable income as to
certain types of trusts which hold more than 10%, by value, of the interests in
the real estate investment trust. A real estate investment trust will not be a
"pension held REIT" if it is able to satisfy the "not closely held" requirement
without relying upon the "look-through" exception with respect to certain
trusts. As a result of certain limitations on the transfer and ownership of
stock contained in our charter, we do not expect to be classified as a
"pension-held REIT," and as a result, the tax treatment described above should
be inapplicable to our stockholders.
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TAXATION OF NON-U.S. STOCKHOLDERS
The preceding discussion does not address the rules governing United States
federal income taxation of the ownership and disposition of common stock by
persons that are not U.S. stockholders. In general, non-U.S. stockholders may be
subject to special tax withholding requirements on distributions from us with
respect to their sale or other disposition of our common stock, except to the
extent reduced or eliminated by an income tax treaty between the United States
and the non-U.S. stockholder's country. A non-U.S. stockholder who is a
stockholder of record and is eligible for reduction or elimination of
withholding must file an appropriate form with us in order to claim such
treatment. Non-U.S. stockholders should consult their own tax advisors
concerning the federal income tax consequences to them of an acquisition of
shares of common stock, including the federal income tax treatment of
dispositions of interests in, and the receipt of distributions from, us.
OTHER TAX CONSEQUENCES
We may be required to pay tax in various state or local jurisdictions,
including those in which we transact business, and our stockholders and the
operating partnership's limited partners may be required to pay tax in various
state or local jurisdictions, including those in which they reside. Our state
and local tax treatment may not conform to the federal income tax consequences
discussed above. In addition, your state and local tax treatment may not conform
to the federal income tax consequences discussed above. Consequently, you should
consult your tax advisors regarding the effect of state and local tax laws on an
investment in our shares or a disposition of common units.
SELLING STOCKHOLDERS
Selling stockholders may receive shares of our common stock upon exchange
of AMB Property, L.P.'s common limited partnership units. This prospectus
relates to a total of 604,433 shares of our common stock, as follows:
- We are registering the issuance and resale of up to 603,399 shares of the
common stock upon exchange, on a one for one basis, of limited
partnership units in AMB Property, L.P. 212,766 of those units become
exchangeable for common stock on May 26, 2000 and are held by Tiger
Lafayette, L.L.C. (138,536 shares), Divco Western Commercial, L.L.C.
(37,115 shares) and ICCL East, L.L.C. (37,115 shares). 390,633 of those
units became exchangeable on April 30, 2000 and are held by the following
stockholders: RA & DM, Inc. (3,880 shares), RA & FM, Inc. (5,072 shares),
Richard Alter (115,742 shares), Donald Manekin (61,654 shares), Bernard
Manekin (43,612 shares), Harold Manekin (40,275 shares), Richard P.
Manekin (23,746 shares), Robert Manekin (23,746 shares), Charles H.
Manekin (10,282 shares), William H. Winstead (37,016 shares), Sandye
Manekin Sirota (14,317 shares), Francine U. Manekin (2,328 shares),
Vivian Manekin (2,328 shares) and Louis LaPenna (6,635 shares).
- We are registering the resale only of up to 1,034 shares of the common
stock upon exchange, on a one for one basis, of limited partnership units
in AMB Property, L.P. These units are held by the following selling
stockholders: RA & DM, Inc. (4 shares), RA & FM, Inc. (37 shares),
Richard Alter (295 shares), Donald Manekin (169 shares), Bernard Manekin
(117 shares), Harold Manekin (108 shares), Richard P. Manekin (64
shares), Robert Manekin (45 shares), Charles H. Manekin (28 shares),
William H. Winstead (99 shares), Sandye Manekin Sirota (38 shares),
Francine U. Manekin (6 shares), Vivian Manekin (6 shares) and Louis
LaPenna (18 shares).
The following table assumes that each selling stockholder tenders all of
its units for redemption and that we elect to redeem all of those units for
shares of our common stock instead of cash. The table provides the names of each
of the selling stockholders, the number of shares of common stock
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that they own prior to the exchange of their limited partnership units in AMB
Property, L.P., the maximum number of shares of common stock issuable in
exchange for their limited partnership units and the percentage of our
outstanding common stock owned by each of them following the exchange of their
limited partnership units.
Because the selling stockholders may sell all, some or none of their
shares, we cannot estimate the aggregate number of shares of common stock that
the selling stockholders will offer pursuant to this prospectus or that each
selling stockholder will own upon completion of the offering to which this
prospectus relates.
The selling stockholders named below may from time to time offer the shares
of common stock offered by this prospectus:
<TABLE>
<CAPTION>
MAXIMUM NUMBER OF
SHARES OF COMMON STOCK PERCENTAGE OF OUTSTANDING
NUMBER SHARES OF COMMON ISSUABLE IN THE EXCHANGE COMMON STOCK OWNED
STOCK OWNED PRIOR TO THE OF LIMITED PARTNERSHIP FOLLOWING THE EXCHANGE OF
EXCHANGE OF LIMITED UNITS AND AVAILABLE LIMITED PARTNERSHIP UNITS AND
NAME PARTNERSHIP UNITS(1) FOR RESALE PRIOR TO RESALE(1)
---- ------------------------ ------------------------ -----------------------------
<S> <C> <C> <C>
RA & DM, Inc......... -- 3,884 *
RA & FM, Inc......... -- 5,109 *
Richard Alter........ -- 116,037 *
Donald Manekin....... -- 61,823 *
Bernard Manekin...... -- 43,729 *
Harold Manekin....... -- 40,383 *
Richard P. Manekin... -- 23,810 *
Robert Manekin....... -- 23,791 *
Charles H. Manekin... -- 10,310 *
William H.
Winstead........... -- 37,115 *
Sandye Manekin
Sirota............. -- 14,355 *
Francine U.
Manekin............ -- 2,334 *
Vivian Manekin....... -- 2,334 *
Louis La Penna....... -- 6,653 *
Tiger Lafayette,
L.L.C. ............ -- 138,536 *
Divco Western
Commercial,
L.C.C. ............ -- 37,115 *
ICCL East, L.L.C. ... 37,115 *
-- ------- -------
Total...... 604,433 *
=======
</TABLE>
-------------------------
* Less than 1%.
(1) Based on 83,835,290 shares of our common stock outstanding as of March 31,
2000.
The selling stockholders received the limited partnership units that are
exchangeable into the common stock listed above in connection with our purchase
of properties. Headlands Realty Corporation owns a 50% non-managing membership
interest in Manekin, LLC. Manekin, LLC manages certain of our properties, in
exchange for which we pay it customary compensation. Richard Alter and Louis
LaPenna are officers of Manekin, LLC and stockholders of the managing member of
Manekin, LLC. Donald Manekin is an employee of and an authorized signatory for
Manekin, LLC and a stockholder of the managing member of Manekin, LLC.
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PLAN OF DISTRIBUTION
This prospectus relates to:
- the possible issuance by us and possible offer and sale from time to time
by certain of the selling stockholders of up to an aggregate of 603,399
shares of common stock if they tender their common limited partnership
units in AMB Property, L.P. for cash redemption and we elect, in our
discretion, to exchange the limited partnership units for common stock in
lieu of a cash redemption; and
- the possible offer and sale from time to time by certain of the selling
stockholders of up to an additional aggregate of 1,034 shares of common
stock if certain of the selling stockholders tender their common limited
partnership units in AMB Property, L.P. for cash redemption and we elect,
in our discretion, to exchange the units for common stock in lieu of a
cash redemption.
We are registering the shares of common stock to provide the selling
stockholders with freely tradable securities, but the registration of these
shares does not necessarily mean that we will issue any of these shares to the
selling stockholders or that the selling stockholders will offer or sell the
shares.
Pursuant to the terms and conditions of the registration rights agreements
between us, the operating partnership and the entity that transferred its units
in AMB Property, L.P. to Tiger Lafayette, L.L.C., Divco Western Commercial,
L.L.C. and ICCL East, L.L.C., prior to the date upon which the limited
partnership units of those three entities would be eligible for resale under
Rule 144(k) under the Securities Act, each of those selling stockholders
generally is limited to resales of any shares of common stock issued pursuant to
this prospectus to the number of shares which otherwise would be eligible for
resale by that selling stockholder pursuant to Rule 144, assuming the shares
were issued on the same date as the respective limited partnership units were
issued. The other selling stockholders under this prospectus are not subject to
this restriction.
We will not receive any proceeds from the issuance of the shares of common
stock to the selling stockholders or from the sale of the shares by the selling
stockholders, but we have agreed to pay certain expenses of the registration of
the shares. The selling stockholders may from time to time sell the shares
directly to purchasers. Alternatively, the selling stockholders may from time to
time offer the shares through dealers or agents, who may receive compensation in
the form of commissions from the selling stockholders and for the purchasers of
the shares for whom they may act as agent. The selling stockholders and any
dealers or agents that participate in the distribution of the shares may be
deemed to be "underwriters" within the meaning of the Securities Act and any
profit on the sale of the common stock by them and any commissions received by
any such dealers or agents might be deemed to be underwriting commissions under
the Securities Act.
In connection with distribution of the shares of common stock covered by
this prospectus, the selling stockholders may enter into hedging transactions
with broker-dealers, and the broker-dealers may engage in short sales of the
common stock in the course of hedging the positions they assume with the selling
stockholders. The selling stockholders also may sell the common stock short and
deliver the common stock to close out such short positions. The selling
stockholders also may enter into option or other transactions with
broker-dealers that involve the delivery of the shares to the broker-dealers,
who may then resell or otherwise transfer the shares.
The selling stockholders may transfer the shares to a donee and any donee
would become a selling stockholder under this prospectus. The selling
stockholders also may loan or pledge the shares. If a selling stockholder
defaults on a loan secured by the shares, the pledgee could obtain ownership of
the shares and would then become a selling stockholder under this prospectus.
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LEGAL MATTERS
Ballard, Spahr, Andrews & Ingersoll, LLP, Baltimore, Maryland will issue an
opinion to us regarding certain matters of Maryland law. Latham & Watkins will
issue an opinion to us regarding certain tax matters described under "Certain
Federal Income Tax Considerations."
EXPERTS
The audited financial statements and schedules incorporated by reference in
this prospectus and elsewhere in the registration statement have been audited by
Arthur Andersen LLP, independent public accountants, as indicated in their
reports with respect thereto, and are included herein in reliance upon the
authority of said firm as experts in accounting and auditing in giving said
reports.
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PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table itemizes the expenses incurred by the Registrant in
connection with the issuance and registration of the securities being registered
hereunder. All amounts shown are estimates except the Securities and Exchange
Commission registration fee.
<TABLE>
<S> <C>
SEC Registration Fee........................................ $ 3,656
NYSE Listing Fee............................................ $ 1,500
Printing and Engraving Expenses............................. $ 5,000
Legal Fees and Expenses..................................... $40,000
Accounting and Fees and Expenses............................ $10,000
Miscellaneous............................................... $ 4,844
-------
Total............................................. $65,000
=======
</TABLE>
All of the costs identified above will be paid for by the Registrant.
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 2-418 of the Maryland General Corporation Law 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 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 Maryland General Corporation Law 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.
Our articles of incorporation and bylaws provide in effect for the
indemnification by us of our directors and officers to the fullest extent
permitted by applicable law. We have purchased directors' and officers'
liability insurance for the benefit of our directors and officers.
II-1
<PAGE> 76
We have entered into indemnification agreements with each of our executive
officers and directors. The indemnification agreements require, among other
matters, that we indemnify our executive officers and directors to the fullest
extent permitted by law and 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.
ITEM 16. EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT INDEX
------- -------------
<C> <S>
*4.1 Articles of Incorporation of the Registrant (incorporated by
reference to Exhibit 3.1 of the Registrant's Registration
Statement on Form S-11 (No. 333-35915)).
*4.2 Articles Supplementary establishing and fixing the rights
and preferences of the 8 1/2% Series A Cumulative Redeemable
Preferred Stock (incorporated by reference to Exhibit 3.4(4)
of the Registrant's Quarterly Report on Form 10-Q for the
quarterly period ended June 30, 1998).
*4.3 Certificate of Correction of the Registrant's Articles
Supplementary establishing and fixing the rights and
preferences of the 8 1/2% Series A Cumulative Redeemable
Preferred Stock (incorporated by reference to Exhibit 3.2 of
the Registrant's Annual Report on Form 10-K for the year
ended December 31, 1998).
*4.4 Articles Supplementary establishing and fixing the rights
and preferences of the 8 5/8% Series B Cumulative Redeemable
Preferred Stock (incorporated by reference to Exhibit 3.1 of
the Registrant's current report on Form 8-K filed on January
7, 1999).
*4.5 Articles Supplementary establishing and fixing the rights
and preferences of the 8.75% Series C Cumulative Redeemable
Preferred Stock (incorporated by reference to Exhibit 3.2 of
the Registrant's current report on Form 8-K filed on January
7, 1999).
*4.6 Articles Supplementary establishing and fixing the rights
and preferences of the 7.75% Series D Cumulative Redeemable
Preferred Stock (incorporated by reference to Exhibit 3.1 of
the Registrant's Quarterly Report on Form 10-Q for the
quarterly period ended March 31, 1999).
*4.7 Articles Supplementary establishing and fixing the rights
and preferences of the 7.75% Series E Cumulative Redeemable
Preferred Stock (incorporated by reference to Exhibit 3.1 of
the Registrant's Current Report on Form 8-K filed on
September 14, 1999).
*4.8 Articles Supplementary establishing and fixing the rights
and preferences of the 7.95% Series F Cumulative Redeemable
Preferred Stock (incorporated by reference to Exhibit 3.1 of
the Registrant's Current Report on Form 8-K filed on April
14, 2000).
*4.9 First Amended and Restated Bylaws of the Registrant
(incorporated by reference to Exhibit 3.5 of the
Registrant's Annual Report for the year ended December 31,
1998).
*4.10 Specimen common stock certificate (incorporated by reference
to Exhibit 3.3 of the Registrant's Registration Statement on
Form S-11 (No. 333-35915)).
*4.11 Indenture dated as of June 30, 1998 by and among the
Operating Partnership, the Registrant and State Street Bank
and Trust Company of California, N.A., as trustee
(incorporated by reference to Exhibit 4.1 of the
Registrant's Registration Statement on Form S-11 (No.
333-49163)).
*4.12 First Supplemental Indenture dated as of June 30, 1998 by
and among the Operating Partnership, the Registrant and
State Street Bank and Trust Company of California, N.A., as
trustee (incorporated by reference to Exhibit 4.2 to the
Registrant's Registration Statement on Form S-11 (No.
333-49163)).
</TABLE>
II-2
<PAGE> 77
<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT INDEX
------- -------------
<C> <S>
*4.13 Second Supplemental Indenture dated as of June 30, 1998 by
and among the Operating Partnership, the Registrant and
State Street Bank and Trust Company of California, N.A., as
trustee (incorporated by reference to Exhibit 4.3 to the
Registrant's Registration Statement on Form S-11 (No.
333-49163)).
*4.14 Third Supplemental Indenture dated as of June 30, 1998 by
and among the Operating Partnership, the Registrant and
State Street Bank and Trust Company of California, N.A., as
trustee (incorporated by reference to Exhibit 4.4 to the
Registrant's Registration Statement on Form S-11 (No.
333-49163)).
*4.15 Specimen of 7.10% Notes due 2008 (included in the First
Supplemental Indenture incorporated by reference as Exhibit
4.2 to the Registrant's Registration Statement on Form S-11
(No. 333-49163)).
*4.16 Specimen of 7.50% Notes due 2018 (included in the Second
Supplemental Indenture incorporated by reference as Exhibit
4.3 to the Registrant's Registration Statement on Form S-11
(No. 333-49163)).
*4.17 Specimen of 6.90% Reset Put Securities due 2015 (included in
the Third Supplemental Indenture incorporated by reference
as Exhibit 4.4 to the Registrant's Registration Statement on
Form S-11 (No. 333-49163)).
*5.1 Opinion of Ballard, Spahr, Andrews & Ingersoll, LLP
regarding the validity of the common stock being registered.
*8.1 Opinion of Latham & Watkins regarding certain federal income
tax matters.
23.1 Consent of Arthur Andersen, LLP.
*23.2 Consent of Ballard, Spahr, Andrews & Ingersoll, LLP
(included in Exhibit 5.1).
*23.3 Consent of Latham & Watkins (included in Exhibit 8.1).
*24.1 Power of Attorney (included on signature page).
</TABLE>
---------------
* Previously filed.
ITEM 17. UNDERTAKINGS
The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this registration statement:
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after
the effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth
in the registration statement;
(iii) To include any material information with respect to the plan
of distribution not previously disclosed in the registration statement
or any material change to such information in the registration
statement;
provided, however, that paragraphs (a)(i) and (a)(ii) do not apply if the
information required to be included in a post-effective amendment by those
paragraphs is contained in periodic reports filed by the Registrant
pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 that
are incorporated by reference in the registration statement.
II-3
<PAGE> 78
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed
to be a new registration statement relating
II-4
<PAGE> 79
to the securities offered therein, and the offering of such securities at
that time shall be deemed to be the initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
The undersigned Registrant:
hereby undertakes that, for purposes of determining any liability
under the Securities Act of 1933, each filing of the Registrant's annual
report pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of
1934 (and, where applicable, each filing of an employee benefit plan's
annual report pursuant to Section 15(d) of the Securities Exchange Act of
1934) that is incorporated by reference in the Registration statement shall
be deemed to be a new registration statement relating to the securities
offered herein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
The undersigned Registrant:
hereby undertakes to deliver or cause to be delivered with the
prospectus, to each person to whom the prospectus is sent or given, the
latest annual report to security holders that is incorporated by reference
in the prospectus and furnished pursuant to and meeting the requirements of
Rule 14a-3 or Rule 14c-3 under the Securities Exchange Act of 1934; and,
where interim financial information required to be presented by Article 3
of Regulation S-X are not set forth in the prospectus, to deliver, or cause
to be delivered to each person to whom the prospectus is sent or given the
latest quarterly report that is specifically incorporated by reference in
the prospectus to provide such interim financial information.
The undersigned Registrant hereby further undertakes that:
(1) For purposes of determining any liability under the Securities Act
of 1933, the information omitted from the form of prospectus filed as part
of this registration statement in reliance under Rule 430A and contained in
a form of prospectus filed by the Registrant pursuant to Rule 424(b)(1) or
(4), or 497(h) under the Securities Act of 1933 shall be deemed to be part
of this registration statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities
Act of 1933, 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.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933, as amended, may be permitted to directors, officers and controlling
persons of the Registrant pursuant to the foregoing provisions, or otherwise,
the Registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Securities Exchange Act of 1934, and is, therefore, unenforceable. In the
event that a claim for indemnification against such liabilities (other than the
payment by the Registrant of expenses incurred or paid by a director, officer or
controlling person of the Registrant in the successful defense of any action,
suit or proceeding) is asserted by such director, officer or controlling person
in connection with the securities being registered, the Registrant will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the
Securities Exchange Act of 1934, and will be governed by the final adjudication
of such issue.
II-5
<PAGE> 80
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3 and has duly caused this Amendment No. 1 to
the 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 16th day of June, 2000.
AMB PROPERTY CORPORATION
By: /s/ TAMRA D. BROWNE
------------------------------------
Tamra D. Browne
Vice President and
General Counsel
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Amendment No. 1 to the Registration Statement has been signed below by the
following persons on behalf of the Registrant and in the capacities and on the
dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <C> <S>
* Chairman of the Board and Chief June 16, 2000
--------------------------------------------- Executive Officer (Principal
Hamid R. Moghadam Executive Officer)
* Managing Director and Chief June 16, 2000
--------------------------------------------- Financial Officer (Principal
Michael A. Coke Financial Officer)
* Vice President June 16, 2000
--------------------------------------------- (Principal Accounting Officer)
Nina A. Tran
* Director June 16, 2000
---------------------------------------------
David A. Cole
* Director June 16, 2000
---------------------------------------------
Douglas D. Abbey
* Director June 16, 2000
---------------------------------------------
T. Robert Burke
Director
---------------------------------------------
Thomas W. Tusher
Director
---------------------------------------------
Daniel H. Case III
Director
---------------------------------------------
Lynn M. Sedway
</TABLE>
II-6
<PAGE> 81
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <C> <S>
* Director June 16, 2000
---------------------------------------------
Jeffrey L. Skelton, Ph.D.
* Director June 16, 2000
---------------------------------------------
Caryl B. Welborn
</TABLE>
*By: /s/ TAMRA D. BROWNE
---------------------------
Tamra D. Browne
Attorney-in-Fact
II-7
<PAGE> 82
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT INDEX
------- -------------
<C> <S>
*4.1 Articles of Incorporation of the Registrant (incorporated by
reference to Exhibit 3.1 of the Registrant's Registration
Statement on Form S-11 (No. 333-35915)).
*4.2 Articles Supplementary establishing and fixing the rights
and preferences of the 8 1/2% Series A Cumulative Redeemable
Preferred Stock (incorporated by reference to Exhibit 3.4(4)
of the Registrant's Quarterly Report on Form 10-Q for the
quarterly period ended June 30, 1998).
*4.3 Certificate of Correction of the Registrant's Articles
Supplementary establishing and fixing the rights and
preferences of the 8 1/2% Series A Cumulative Redeemable
Preferred Stock (incorporated by reference to Exhibit 3.2 of
the Registrant's Annual Report on Form 10-K for the year
ended December 31, 1998).
*4.4 Articles Supplementary establishing and fixing the rights
and preferences of the 8 5/8% Series B Cumulative Redeemable
Preferred Stock (incorporated by reference to Exhibit 3.1 of
the Registrant's current report on Form 8-K filed on January
7, 1999).
*4.5 Articles Supplementary establishing and fixing the rights
and preferences of the 8.75% Series C Cumulative Redeemable
Preferred Stock (incorporated by reference to Exhibit 3.2 of
the Registrant's current report on Form 8-K filed on January
7, 1999).
*4.6 Articles Supplementary establishing and fixing the rights
and preferences of the 7.75% Series D Cumulative Redeemable
Preferred Stock (incorporated by reference to Exhibit 3.1 of
the Registrant's Quarterly Report on Form 10-Q for the
quarterly period ended March 31, 1999).
*4.7 Articles Supplementary establishing and fixing the rights
and preferences of the 7.75% Series E Cumulative Redeemable
Preferred Stock (incorporated by reference to Exhibit 3.1 of
the Registrant's Current Report on Form 8-K filed on
September 14, 1999).
*4.8 Articles Supplementary establishing and fixing the rights
and preferences of the 7.95% Series F Cumulative Redeemable
Preferred Stock (incorporated by reference to Exhibit 3.1 of
the Registrant's Current Report on Form 8-K filed on April
14, 2000.)
*4.9 First Amended and Restated Bylaws of the Registrant
(incorporated by reference to Exhibit 3.5 the Registrant's
Annual Report for the year ended December 31, 1998).
*4.10 Specimen common stock certificate (incorporated by reference
to Exhibit 3.3 of the Registrant's Registration Statement on
Form S-11 (No. 333-35915)).
*4.11 Indenture dated as of June 30, 1998 by and among the
Operating Partnership, the Registrant and State Street Bank
and Trust Company of California, N.A., as trustee
(incorporated by reference to Exhibit 4.1 of the
Registrant's Registration Statement on Form S-11 (No.
333-49163)).
*4.12 First Supplemental Indenture dated as of June 30, 1998 by
and among the Operating Partnership, the Registrant and
State Street Bank and Trust Company of California, N.A., as
trustee (incorporated by reference to Exhibit 4.2 to the
Registrant's Registration Statement on Form S-11 (No.
333-49163)).
*4.13 Second Supplemental Indenture dated as of June 30, 1998 by
and among the Operating Partnership, the Registrant and
State Street Bank and Trust Company of California, N.A., as
trustee (incorporated by reference to Exhibit 4.3 to the
Registrant's Registration Statement on Form S-11 (No.
333-49163)).
*4.14 Third Supplemental Indenture dated as of June 30, 1998 by
and among the Operating Partnership, the Registrant and
State Street Bank and Trust Company of California, N.A., as
trustee (incorporated by reference to Exhibit 4.4 to the
Registrant's Registration Statement on Form S-11 (No.
333-49163)).
</TABLE>
<PAGE> 83
<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT INDEX
------- -------------
<C> <S>
*4.15 Specimen of 7.10% Notes due 2008 (included in the First
Supplemental Indenture incorporated by reference as Exhibit
4.2 to the Registrant's Registration Statement on Form S-11
(No. 333-49163)).
*4.16 Specimen of 7.50% Notes due 2018 (included in the Second
Supplemental Indenture incorporated by reference as Exhibit
4.3 to the Registrant's Registration Statement on Form S-11
(No. 333-49163)).
*4.17 Specimen of 6.90% Reset Put Securities due 2015 (included in
the Third Supplemental Indenture incorporated by reference
as Exhibit 4.4 to the Registrant's Registration Statement on
Form S-11 (No. 333-49163)).
*5.1 Opinion of Ballard, Spahr, Andrews & Ingersoll, LLP
regarding the validity of the common stock being registered.
*8.1 Opinion of Latham & Watkins regarding certain federal income
tax matters.
23.1 Consent of Arthur Andersen, LLP.
*23.2 Consent of Ballard, Spahr, Andrews & Ingersoll, LLP
(included in Exhibit 5.1).
*23.3 Consent of Latham & Watkins (included in Exhibit 8.1).
*24.1 Power of Attorney (included on signature page).
</TABLE>
---------------
* Previously filed.
