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Filed Pursuant to rule 424(b)(3)
Registration No. 333-68283 and
Registration No. 333-68283-01
PROSPECTUS SUPPLEMENT
(To Prospectus Dated December 17, 1998)
U.S. $400,000,000
AMB Property, L.P.
MEDIUM-TERM NOTES
Unconditionally Guaranteed by AMB Property Corporation
------------------------
AMB PROPERTY, L.P., A DELAWARE LIMITED PARTNERSHIP, MAY OFFER FROM TIME TO TIME
UP TO U.S.$400,000,000 (OR ITS EQUIVALENT IN FOREIGN CURRENCIES OR COMPOSITE
CURRENCIES) OF ITS MEDIUM-TERM NOTES. THE SPECIFIC TERMS OF ANY NOTES OFFERED
WILL BE INCLUDED IN A PRICING SUPPLEMENT. UNLESS THE PRICING SUPPLEMENT PROVIDES
OTHERWISE, THE NOTES WILL HAVE THE FOLLOWING GENERAL TERMS:
- THE NOTES WILL MATURE IN NINE MONTHS OR MORE FROM THE DATE OF ISSUE.
- THE NOTES WILL BEAR INTEREST AT EITHER A FIXED OR FLOATING RATE. THE FLOATING
INTEREST RATE WILL BE BASED ON:
- CD RATE
- CMT RATE
- COMMERCIAL PAPER RATE
- EURIBOR
- FEDERAL FUNDS RATE
- LIBOR
- PRIME RATE
- TREASURY RATE
- ANY OTHER RATE SPECIFIED IN THE APPLICABLE PRICING SUPPLEMENT
- WE MAY REDEEM A NOTE PRIOR TO ITS MATURITY DATE AND YOU MAY HAVE US REPAY A
NOTE PRIOR TO ITS MATURITY DATE ONLY IF THE APPLICABLE PRICING SUPPLEMENT SO
SPECIFIES.
- THE NOTES WILL BE DENOMINATED IN U.S. DOLLARS OR A FOREIGN OR COMPOSITE
CURRENCY AND BE ISSUED IN MINIMUM DENOMINATIONS OF $1,000, OR APPROPRIATE
DENOMINATIONS IN THE FOREIGN OR COMPOSITE CURRENCY.
- FIXED RATE INTEREST WILL BE PAID ON JUNE 30 AND DECEMBER 30, ACCRUING FROM THE
DATE OF ISSUE, UNLESS OTHERWISE SPECIFIED IN THE APPLICABLE PRICING
SUPPLEMENT.
- FLOATING RATE INTEREST WILL BE PAID ON THE DATES STATED IN THE APPLICABLE
PRICING SUPPLEMENT.
- THE NOTES WILL BE HELD IN GLOBAL FORM BY THE DEPOSITORY TRUST COMPANY, UNLESS
OTHERWISE SPECIFIED IN THE APPLICABLE PRICING SUPPLEMENT.
- THE NOTES WILL BE OUR SENIOR UNSECURED OBLIGATIONS, EFFECTIVELY SUBORDINATED
TO OUR MORTGAGES AND OTHER SECURED INDEBTEDNESS, AND TO ALL OF THE
INDEBTEDNESS OF OUR SUBSIDIARIES.
- THE NOTES WILL BE UNCONDITIONALLY GUARANTEED ON A SENIOR UNSECURED BASIS BY
AMB PROPERTY CORPORATION, A MARYLAND CORPORATION AND OUR GENERAL PARTNER. THE
GUARANTEES WILL BE EFFECTIVELY SUBORDINATED TO MORTGAGES AND OTHER SECURED
INDEBTEDNESS OF AMB PROPERTY CORPORATION AND TO ALL OF THE INDEBTEDNESS OF ITS
SUBSIDIARIES.
------------------------
INVESTING IN THE NOTES INVOLVES RISKS. SEE "RISK FACTORS" BEGINNING ON PAGE S-4
OF THIS PROSPECTUS SUPPLEMENT.
------------------------
<TABLE>
<CAPTION>
AGENTS' DISCOUNTS PROCEEDS TO THE
PRICE TO PUBLIC AND COMMISSIONS OPERATING PARTNERSHIP
--------------- ----------------- ---------------------
<S> <C> <C> <C>
Per note.................... 100% .125%-.750% 99.875%-99.250%
Total....................... $400,000,000 $500,000-$3,000,000 $399,500,000-$397,000,000
</TABLE>
The Securities and Exchange Commission and state securities regulators have not
approved or disapproved these securities, or determined if this prospectus
supplement or the accompanying prospectus are truthful or complete. Any
representation to the contrary is a criminal offense.
Offers to purchase the notes are being solicited from time to time by the agents
on our behalf. The agents have agreed to use their reasonable best efforts to
sell the notes. There is no established trading market for the notes and there
can be no assurance that a secondary market for the notes will develop.
MORGAN STANLEY DEAN WITTER
BANC OF AMERICA SECURITIES LLC
BANC ONE CAPITAL MARKETS, INC.
CHASE SECURITIES INC.
MERRILL LYNCH & CO.
J.P. MORGAN & CO.
SALOMON SMITH BARNEY
August 15, 2000
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TABLE OF CONTENTS
<TABLE>
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PAGE
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<S> <C>
PROSPECTUS SUPPLEMENT
About this Prospectus Supplement and
Pricing Supplements................. S-2
Forward-Looking Statements............ S-3
Risk Factors.......................... S-4
Description of Notes.................. S-8
Certain United States Federal Income
Tax Consequences.................... S-17
Supplemental Plan of Distribution..... S-30
Legal Opinions........................ S-31
Glossary.............................. S-32
</TABLE>
<TABLE>
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PAGE
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<S> <C>
PROSPECTUS
About This Prospectus................. 1
Where You Can Find More Information... 1
Incorporation of Certain Documents by
Reference........................... 2
Forward Looking Statements............ 3
The Company........................... 4
Use of Proceeds....................... 4
Ratio of Earnings to Fixed Charges and
Preferred Dividends and
Distributions....................... 4
Description of Debt Securities........ 5
Description of Common Stock........... 20
Description of Preferred Stock........ 21
Description of Depositary Shares...... 34
Description of Warrants............... 37
Restrictions on Ownership and Transfer
of Capital Stock.................... 38
Certain Provisions of Maryland Law and
of Our Charter and Bylaws........... 40
Description of Certain Provisions of
The Partnership Agreement of the
Operating Partnership............... 43
Certain Federal Income Tax
Considerations...................... 54
Plan of Distribution.................. 64
Legal Matters......................... 65
Experts............................... 65
</TABLE>
You should rely only on the information contained or incorporated by reference
in this prospectus supplement, the prospectus and any pricing supplement. We
have not authorized anyone else to provide you with different or additional
information. We are offering to sell these notes and seeking offers to buy these
notes only in jurisdictions where offers and sales are permitted.
Neither we nor the agents claim that the information contained in this
prospectus supplement, the accompanying prospectus or the applicable pricing
supplement is accurate as of any date other than the dates on their respective
covers.
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ABOUT THIS PROSPECTUS SUPPLEMENT
AND PRICING SUPPLEMENTS
This prospectus supplement sets forth certain terms of the medium-term
notes that we may offer. This prospectus supplement supplements the accompanying
prospectus and supersedes the accompanying prospectus to the extent it contains
information that is different from the information in the accompanying
prospectus.
Each time we offer notes, we will attach a pricing supplement to this
prospectus supplement. The pricing supplement will contain the specific
description of the notes we are then offering and the terms of the offering. The
pricing supplement will supersede this prospectus supplement to the extent it
contains information that is different from the information contained in this
prospectus supplement.
It is important for you to read and consider all information contained in
this prospectus supplement, the accompanying prospectus and the applicable
pricing supplement in making your investment decision. You should also read and
consider the information contained in the documents identified in "Where You Can
Find More Information" in the accompanying prospectus.
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FORWARD-LOOKING STATEMENTS
Some of the information included and incorporated by reference in this
prospectus supplement and the accompanying 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 supplement and the
accompanying 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. The events or circumstances reflected in
forward-looking statements might not 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 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), AMB Property Corporation's
failure to qualify and maintain its 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 under the heading "Other
Information -- Business Risks" and elsewhere in the most recent annual report on
Form 10-K or quarterly report on Form 10-Q for each of us and AMB Property
Corporation and in our and AMB Property Corporation's other filings with the
Securities and Exchange Commission that are incorporated by reference in this
prospectus supplement and the accompanying prospectus, as well as the matters
discussed below under "Risk Factors." We caution you not to place undue reliance
on forward-looking statements, which reflect our analysis only and speak only as
of the date of this prospectus supplement or the accompanying prospectus, as
applicable, or the dates indicated in the statements.
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RISK FACTORS
An investment in the notes involves various material risks. You should
carefully consider the risk factors under the heading "Other
Information -- Business Risks" and elsewhere in the most recent annual report on
Form 10-K or quarterly report on Form 10-Q for each of us and AMB Property
Corporation, and in our and AMB Property Corporation's other filings with the
Securities and Exchange Commission that are incorporated by reference in this
prospectus supplement and the accompanying prospectus, as well as the following
risk factors before purchasing the notes.
RANKING OF THE NOTES
STRUCTURAL SUBORDINATION
The notes will be our direct, senior unsecured obligations and will rank
equally with all of our other unsecured and unsubordinated indebtedness from
time to time outstanding. However, the notes will be effectively subordinated to
our mortgages and other secured indebtedness, which encumber certain of our
assets, and to all of the indebtedness of our subsidiaries. In addition, the
guarantee of the notes by AMB Property Corporation will be effectively
subordinated to all of the mortgages and other secured indebtedness of AMB
Property Corporation and all of the indebtedness of its subsidiaries. As of June
30, 2000, the total outstanding indebtedness for us and our subsidiaries was
approximately $1.4 billion, of which approximately $750 million was secured. As
of June 30, 2000, AMB Property Corporation had no outstanding indebtedness
(excluding its guarantee of our unsecured $500 million credit facility with
Morgan Guaranty Trust Company of New York and a syndicate of other banks and our
7.10% Notes due 2008, 7.50% Notes due 2018 and 6.90% Reset Put Securities due
2015 -- Putable/Callable 2005), other than that of us and our subsidiaries.
Subject to certain limitations, we and AMB Property Corporation may each incur
additional indebtedness. Although AMB Property Corporation's board of directors
has adopted a policy of limiting the debt-to-total market capitalization ratio
to approximately 45% or less, neither AMB Property Corporation's nor our
organizational documents limit the amount of indebtedness that each of us may
incur. In addition, the aggregate amount of indebtedness that we and AMB
Property Corporation may incur under this policy varies directly with the
valuation of AMB Property Corporation's capital stock and the number of shares
of its capital stock outstanding. Accordingly, we and AMB Property Corporation
would be able to incur additional indebtedness as a result of increases in the
market price per share of AMB Property Corporation's capital stock.
GUARANTEES
AMB Property Corporation's obligations under its guarantee of each of the
notes may be subject to review under state or federal transfer laws in the event
of AMB Property Corporation's bankruptcy or other financial difficulty. Under
those laws, in a lawsuit by an unpaid creditor or representative of creditors of
AMB Property Corporation, such as a trustee in bankruptcy, if a court were to
find that when AMB Property Corporation entered into the guarantees, it:
- received less than fair consideration or reasonably equivalent value for
the guarantees and either:
- was insolvent,
- was rendered insolvent,
- was engaged in a business or transaction for which its remaining
unencumbered assets constituted unreasonably small capital,
- intended to incur or believed that it would incur debts beyond its
ability to pay as such debts matured, or
- entered into the guarantees with actual intent to hinder, delay or
defraud its creditors,
then the court could void the guarantees and AMB Property Corporation's
obligations under the guarantees, and direct the return of any amounts paid
under the guarantees to AMB Property Corporation or to a fund for the benefit of
its creditors. Furthermore, to the extent that AMB Property Corporation's
obligations under the
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guarantees of the notes exceeds the actual benefit that it receives from the
issuance of the notes, AMB Property Corporation may be deemed not to have
received fair consideration or reasonably equivalent value from the guarantees.
As a result, the guarantees and AMB Property Corporation's obligations under the
guarantees may be void. The measure of insolvency for purposes of the factors
above will vary depending on the law of the jurisdiction being applied.
Generally, however, an entity would be considered insolvent if the sum of its
debts (including contingent or unliquidated debts) is greater than all of its
property at a fair valuation or if the present fair saleable value of its assets
is less than the amount that will be required to pay its probable liability on
its existing debts as they become absolute and matured.
ABSENCE OF MARKET FOR THE NOTES
The notes will be new securities for which there is currently no market.
Although the agents have informed us that they currently intend to make a market
in the notes, they are not obligated to do so and they may discontinue making a
market in the notes at any time without notice. If an active market does not
develop, the market price and liquidity of the notes may be materially and
adversely affected. We cannot assure you that all or any substantial portion of
the notes will be sold. Unless otherwise provided in the applicable pricing
supplement, neither we nor AMB Property Corporation intend to apply for listing
of the notes on any securities exchange or to seek approval for quotation
through any automated quotation system. There can be no assurance that an active
market for the notes will develop and no assurance can be given as to the prices
at which the notes might trade. In particular, there can be no assurance that
the market price for the notes will be at or above the purchase price of the
notes. The liquidity of, and trading market for, the notes may also be
materially and adversely affected by declines in the market for debt securities
generally. Such a decline may materially and adversely affect the liquidity and
trading of the notes independent of our financial performance and prospects.
RISKS RELATING TO INDEXED NOTES
An investment in indexed notes presents certain significant risks not
associated with other types of securities. Investors in indexed notes may lose
their entire investment. Risks associated with a particular indexed note may be
set forth more fully in the applicable Pricing Supplement.
LOSS OF PRINCIPAL, PREMIUM, IF ANY, AND INTEREST
Indexed notes are notes that may be issued by us with the principal amount
payable at maturity, and/or the amount of interest payable on an interest
payment date, to be determined by reference to currencies, currency units,
commodity prices, financial or nonfinancial indexes or other factors. The
direction and magnitude of the change in the value of the relevant index will
determine either or both the principal amount of an indexed note payable at
maturity or the amount of interest payable on an interest payment date. The
terms of a particular indexed note may or may not include a guaranteed return of
a percentage of the face amount at maturity or a minimum interest rate.
Accordingly, the holder of an indexed note may lose all or a portion of the
principal invested in an indexed note and may receive no interest on the indexed
note.
VOLATILITY
Certain indices are highly volatile. The expected principal amount payable
at maturity of, or the interest rate on, an indexed note based on a volatile
index may vary substantially from time to time. Because the principal amount
payable at the maturity of, or interest payable on, an indexed note is generally
calculated based on the value of the relevant index on a specified date or over
a limited period of time, volatility in the index increases the risk that the
return on the indexed notes may be adversely affected by a fluctuation in the
level of the relevant index.
The volatility of an index may be affected by political or economic events,
including governmental actions, or by the activities of participants in the
relevant markets, any of which could adversely affect the value of an indexed
note.
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TAX CONSIDERATIONS
The treatment of indexed notes for United States federal income tax
purposes is often unclear due to the absence of any authority specifically
addressing the issues presented by any particular indexed note. Accordingly,
investors in indexed notes should, in general, be capable of independently
evaluating the federal income tax consequences applicable in their particular
circumstances of purchasing an indexed note. See "Certain United States Federal
Income Tax Consequences" in this prospectus supplement.
AVAILABILITY AND COMPOSITION OF INDICES
Some indices reference several different currencies, commodities,
securities or other financial instruments. The compiler of such an index of this
type typically reserves the right to alter the composition of the index and the
manner in which the value of the index is calculated. An alteration may result
in a decrease in the value of or return on the indexed note.
An index may become unavailable due to factors including war, natural
disasters, cessation of publication of the index, or suspension of or disruption
in trading in the currency or currencies, commodity or commodities, security or
securities or other financial instrument or instruments comprising or underlying
the index. If an index becomes unavailable, the determination of principal of or
interest on an indexed note may be delayed or an alternative method may be used
to determine the value of the unavailable index. Alternative methods of
valuation are generally intended to produce a value similar to the value
resulting from reference to the relevant index. However, it is unlikely that
alternative methods of valuation will produce values identical to those which
would be produced were the relevant index to be used. An alternative method of
valuation may result in a decrease in the value of or return on an indexed note.
Indexed notes may be linked to indices which are not commonly utilized or
have been recently developed. A lack of a trading history may make it difficult
to anticipate the volatility or other risks to which a note is subject. In
addition, there may be less trading in indices of this type or instruments
underlying indices of this type, which could increase the volatility of the
indices and decrease the value of or return on the indexed notes.
FOREIGN CURRENCY RISKS
Foreign currency rates of exchange and other factors affecting the risks of
investing in securities denominated in foreign currencies change continuously.
This prospectus supplement summarizes some of the risks of investing in notes
denominated in a foreign currency. You should consult your own financial and
legal advisors about the risks of investing in these notes. The notes, when
denominated in a foreign currency, are not an appropriate investment for
investors who do not have experience with foreign currency transactions.
The information in this prospectus supplement is directed to prospective
purchasers who are United States residents. If you are a resident of a country
other than the United States, you should consult your own financial, tax and
legal advisors to discuss matters that may affect your purchase, holding or
receipt of payments of principal and interest on the notes. We, AMB Property
Corporation and the agents disclaim any responsibility for advising you on these
matters.
EXCHANGE RATES AND EXCHANGE CONTROLS
Investments in securities denominated in foreign currencies have
significant risks that are not associated with investments denominated in U.S.
dollars. These risks include, without limitation, the possibility that rates of
exchange between the U.S. dollar and foreign currencies may change significantly
and the possibility that either the Unites States or foreign governments will
impose or modify foreign exchange controls. Economic and political events over
which we have no control also may increase foreign currency risks. In recent
years, rates of exchange between the U.S. dollar and certain foreign currencies
have been highly volatile, and you may expect that volatility to continue in the
future. Historical fluctuations in any particular exchange rate do not
necessarily indicate, however, the type of fluctuations in the rate that may
occur during the term of any note. If the currency specified by us in the
applicable pricing supplement for a particular note were to
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depreciate against the U.S. dollar, the effective yield of the note would
decrease below its coupon rate and in certain circumstances could result in a
loss to the investor.
Governments have imposed exchange controls in the past and may do so in the
future. Exchange controls could affect exchange rates and limit the availability
of a foreign currency specified in the applicable pricing supplement at the time
a payment on a note is due in that currency. Even if governments do not impose
exchange controls, it is possible that a foreign currency will not be available
at the time a payment is due in that currency. If the specified currency is a
foreign currency, in the event the foreign currency is unavailable due to the
imposition of exchange controls or other circumstances beyond our control, we
may make required payments in an equivalent amount of U.S. dollars, determined
by the exchange rate agent, on the basis of the market exchange rate for the
specified currency on the second business day prior to the payment date or, if
the market exchange rate is not then available, on the basis on the most
recently available market exchange rate; provided, however, that if the
specified currency is replaced by a single European currency, the payment of
principal of (and premium, if any) or interest, if any, on the note denominated
in the specified currency will be paid in the new single European currency in
conformity with legally applicable measures pursuant to the treaty establishing
the European Community, as amended by the treaty on European Unity. The market
exchange rate for the specified currency is the noon dollar buying rate in The
City of New York for cable transfers for the specified currency as certified for
customs purposes by (or if not so certified, as otherwise determined by) the
Federal Reserve Bank of New York.
Further, if the specified currency is a composite currency that is
unavailable due to circumstances beyond our control, then we may make payments
on the note in an equivalent amount of U.S. dollars. The amount of the U.S.
dollar payment shall be determined by the exchange rate agent by aggregating the
U.S. dollar equivalents of each of the component currencies. The component
currencies of the composite currency for this purpose will be the currency
amounts that were components of the composite currency as of the last day on
which the composite currency was used. The exchange rate agent shall determine
the U.S. dollar equivalent of each of the component currencies using the most
recently available market exchange rate for each component currency.
If the official unit of any component currency is altered by way of
combination or subdivision, the number of units of the currency as a component
currency shall be divided or multiplied in the same proportion. If two or more
component currencies are consolidated into a single currency, the amounts of
those currencies as component currencies shall be replaced by an amount in such
single currency equal to the sum of the amounts of the consolidated component
currencies expressed in such single currency. If any component currency is
divided into two or more currencies, the amount of the original component
currency shall be replaced by the amounts of such two or more currencies, the
sum of which shall be equal to the amount of the original component currency.
See "Description of Notes -- Payment Currency" in this prospectus supplement.
If we denominate notes in a foreign currency, the applicable pricing
supplement will contain information about the specified currency, including
information about any foreign exchange controls that apply to the foreign
currency as of the date of the applicable pricing supplement. We will furnish
that information for information purposes only and you should not regard it as
indicative of the range of, or trends in, fluctuations in currency exchange
rates that may occur in the future.
GOVERNING LAW AND JUDGMENTS
The notes will be governed by and construed in accordance with the laws of
the State of New York. If an action based on the notes resulted in a judgment
against us in a court in the United States, it is likely that the court would
grant judgment only in U.S. dollars. It is not clear, however, whether in
granting that judgment, the court would use the rate of conversion into U.S.
dollars that would be in effect on the date of default, the date the judgment
was rendered, or some other date.
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DESCRIPTION OF NOTES
The following description of the notes, which supplements the "Description
of Debt Securities" in the accompanying prospectus, will apply to each note
offered by this prospectus supplement unless we specify otherwise in the
applicable pricing supplement. The applicable pricing supplement for your notes
may specify different or additional terms.
GENERAL
We will issue the notes under the indenture dated as of June 30, 1998, as
supplemented by the First Supplemental Indenture dated as of June 30, 1998, the
Second Supplemental Indenture dated as of June 30, 1998, the Third Supplemental
Indenture dated as of June 30, 1998 and the Fourth Supplemental Indenture dated
as of August 15, 2000, among us, AMB Property Corporation and State Street Bank
and Trust Company of California, N.A., as trustee. We have filed a copy of the
indenture with the Securities and Exchange Commission; the indenture is
incorporated into this prospectus supplement, the accompanying prospectus and
the applicable pricing supplement by reference. The provisions in the
accompanying prospectus under the heading "Description of Debt Securities" apply
to the notes unless we specify otherwise in this prospectus supplement or the
applicable pricing supplement.
Unless the applicable pricing supplement indicates otherwise, each note
will have the following terms:
- Each note will mature in nine months or more from the date it is issued.
- We may only redeem a note and you may only have us repay a note before
its maturity date if it specifies that we or you, respectively, may do so
in the applicable pricing supplement.
- We may issue up to $400,000,000 (or its equivalent in one or more foreign
or composite currencies ) of medium-term notes, which will constitute a
single series of debt securities under the indenture, which amount may be
increased from time to time without the consent of the holders of the
notes; provided, however, that such amount is subject to reduction by the
amount of other debt securities issued by us pursuant to the accompanying
prospectus.
- The notes will be our senior unsecured and unsubordinated obligations and
will rank equally with all our other unsecured and unsubordinated
indebtedness from time to time outstanding, including our 7.10% Notes due
2008, 7.50% Notes due 2018 and 6.90% Reset Put Securities due
2015 -- Putable/ Callable 2005 and balances outstanding under our $500
million credit facility with Morgan Guaranty Trust Company of New York.
- Our obligations under each of the notes will be unconditionally
guaranteed on an unsecured basis by AMB Property Corporation. See
"-- Guarantees."
- The notes will be substantially identical except possibly for currency
denomination, interest, interest payment dates, maturity date, issue date
and applicable redemption and repayment provisions.
- We will not have to deposit funds into a sinking fund before the maturity
date for any note.
- We will issue the notes in fully registered, book entry form without
coupons.
The covenant provisions and events of default described under the captions
"Description of Debt Securities -- Certain Covenants" and "-- Events of Default,
Notice and Waiver" in the accompanying prospectus will apply to the notes. The
legal defeasance and covenant defeasance provisions of the indenture described
under the caption "Description of Debt Securities -- Defeasance of Debt
Securities and Certain Covenants in Certain Circumstances" in the accompanying
prospectus will apply to the notes.
We will sell the notes in individual issues. We and the initial purchaser
of each note will mutually agree to, among other things, the interest rate,
maturity date and issue date for the note. Interest rates offered by us with
respect to the notes may differ depending upon, among other factors, the
aggregate principal amount of notes purchased in a single transaction. We will
only pay interest and principal on the notes on "business days" (as defined in
the Glossary).
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Unless we specify otherwise in the applicable pricing supplement, the place
of payment where the principal of (and premium, if any) and interest on the
notes will be payable and notes may be surrendered for the registration of
transfer or exchange shall be the office of the trustee's affiliate, State
Street Bank and Trust Company, at 61 Broadway, 15th Floor, New York, New York
10006; provided, however, that at our option, interest may be paid by check
mailed to the address of the person entitled to the payment as the person's
address appears in our security register or by wire transfer, if proper wire
instructions are on file with the trustee or are received at presentment, to an
account maintained by the payee located in the United States. The place where
notices or demands to or upon us with respect to the notes may be served will be
the Corporate Trust office of the trustee at 633 West Fifth Street, 12th Floor,
Los Angeles, California 90071.
INTEREST RATE
GENERAL
We will pay interest (other than defaulted interest) on the interest
payment dates to those who are registered holders of notes on the applicable
record date as described below in "-- Fixed Rate Notes" and "-- Floating Rate
Notes -- Interest Rate Reset Dates, Interest Payment Dates and Record Dates" in
this prospectus supplement, except that interest payable at maturity will be
payable to the person to whom principal is payable; provided that if we would
have made a regular interest payment on the maturity date, a redemption date or
a repayment date, we will make that regular interest payment to the holder as of
the regular record date, even if it is not the same person to whom we are paying
the principal amount. Cede & Co., as nominee for The Depository Trust Company,
the depositary for the notes, will be the initial registered holder of the
global notes. See "Description of Debt Securities -- Global Notes" in the
accompanying prospectus. We will pay interest due on a redemption date,
repayment date or maturity date to the same person to whom we are paying the
principal amount. However, if we would have made a regular interest payment on
the redemption, repayment or maturity date, we will make that regular interest
payment to the registered holder as of the applicable record date, even if it is
not the same person to whom we are paying the principal amount.
If we originally issue a note between a record date and an interest payment
date, we will make the first payment of interest on the interest payment date
following the next record date to the registered owner on that record date.
Unless the applicable pricing supplement specifies otherwise, payments of
interest on any note on any interest payment date, maturity date, redemption
date or repayment date will include interest accrued from and including the
immediately preceding interest payment date (or from and including the date of
issue if no interest has been paid or duly provided for), to, but excluding, the
interest payment date, maturity date or redemption date. However, in case the
interest rate on a note is reset daily or weekly, unless the applicable pricing
supplement specifies otherwise, the interest payments will include interest
accrued only from but excluding the record date through which interest has been
paid (or from and including the date of issue, if no interest has been paid)
through and including the record date next preceding the applicable interest
payment date, except that the interest payment on maturity, redemption or
repayment, as applicable, will include interest accrued to, but excluding, that
date. If any interest payment date, maturity date, repayment date or redemption
date falls on a day that is not a business day, we will make the required
payment of principal, premium, if any, and/or interest on the next succeeding
business day as if made on the date the payment was due, and no interest will
accrue on the payment for the period from and after the interest payment date,
maturity date or redemption date, or repayment date, as the case may be, to the
date of the payment on the next succeeding business day.
FIXED RATE NOTES
Fixed rate notes will bear interest at the rate specified in the applicable
pricing supplement.
Unless we specify otherwise in the applicable pricing supplement, the
interest payment dates for fixed rate notes will be June 30 and December 30 of
each year. If an interest payment date (or maturity or redemption date) for any
fixed rate note falls on a day that is not a business day, we will pay the
interest (or
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interest and principal) on the next business day. However, with respect to the
particular interest payment period, interest on the payment will not accrue for
the period from the original interest payment date (or maturity or redemption
date) to the date we make the payment. We will calculate the interest based on a
360-day year of twelve 30-day months.
Unless we specify otherwise in the applicable pricing supplement, the
record date for fixed rate notes is June 15 for a June 30 interest payment date,
December 15 for a December 30 interest payment date and the date that is 15
calendar days before any other interest payment date, whether or not those dates
are business days.
FLOATING RATE NOTES
General Information. Floating rate notes will bear interest based on an
index specified in the applicable pricing supplement. Unless we provide
otherwise in the applicable pricing supplement, State Street Bank and Trust
Company of California, N.A. will be the "calculation agent" that calculates the
interest on floating rate notes.
Each floating rate note will have the following terms, which will be set
forth in the applicable pricing supplement for that note:
- whether the floating rate note is a "regular floating rate note", a
"floating rate/fixed rate note" or an "inverse floating rate note;"
- the interest rate basis or index to be used to determine the note's
interest rate;
- the "index maturity," which means the period to maturity of the
instrument or obligation on which the interest rate formula is based (for
example, LIBOR may be different for one-month U.S. dollar deposits and
for three-month U.S. dollar deposits; if the applicable pricing
supplement for a note specifies LIBOR as the index and three months as
the index maturity, we would pay interest on the note based on LIBOR for
three-month U.S. dollar deposits);
- the frequency of changes of the interest rate on the note (i.e., daily,
weekly, monthly, quarterly, semi-annually or annually);
- the dates as of which the calculation agent will determine the new
interest rate, if these dates differ from those described in this
prospectus supplement;
- the dates on which the interest rate will change; and
- the calculation agent for the notes, if State Street Bank and Trust
Company of California, N.A. is not the calculation agent.
Each floating rate note may also have the following terms, which will also
be set forth in the applicable pricing supplement for that note, if applicable:
- the "spread," which is the number of basis points that the calculation
agent will add to or subtract from the interest rate determined for a
particular date on which a new interest rate is determined (for example,
if a note bears interest at LIBOR plus .01%, and the calculation agent
determines that LIBOR is 5.00% per year, the note will bear interest at
5.01% per year until the next date on which the interest rate changes);
- the "spread multiplier," which is the number by which the calculation
agent will multiply the interest rate determined for a particular date on
which a new interest rate is determined (for example, if a note bears
interest at 90% of LIBOR, and the calculation agent determines that LIBOR
is 5.00% per year, the note will bear interest at 4.50% per year until
the next date on which the interest rate changes);
- the "maximum interest rate," or the ceiling on the rate of interest that
may accrue on the note during any interest period; and
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<PAGE> 12
- the "minimum interest rate," or the floor on the rate of interest that
may accrue during any interest period.
Unless the applicable pricing supplement indicates otherwise, the interest
rate borne by floating rate notes will be determined as follows:
- Unless the floating rate note is designated as a "floating rate/fixed
rate note" or an "inverse floating rate note" or as having an addendum
attached or having "Other/Additional Provisions" (as set forth in the
note or the applicable pricing supplement) apply, the floating rate note
will be designated as a "regular floating rate note" and, except as
described below or in the applicable pricing supplement, will bear
interest at the rate determined by reference to the applicable interest
rate basis or bases (1) plus or minus the applicable spread, if any,
and/or (2) multiplied by the applicable spread multiplier, if any.
Commencing on the initial date on which the interest rate changes, the
rate at which interest on such regular floating rate note shall be
payable shall be reset as of each date on which the interest rate
changes; provided, however, that the interest rate in effect for the
period, if any, from the date of issue to the initial date on which the
interest rate changes will be the initial interest rate.
- If the floating rate note is designated as a "floating rate/fixed rate
note", then, except as described below or in the applicable pricing
supplement, the floating rate note will bear interest at the rate
determined by reference to the applicable interest rate basis or bases
(1) plus or minus the applicable spread, if any, and/or (2) multiplied by
the applicable spread multiplier, if any. Commencing on the initial date
on which the interest rate changes, the rate at which interest on such
floating rate/fixed rate note shall be payable shall be reset as of each
date on which the interest rate changes; provided, however, that (1) the
interest rate in effect for the period, if any, from the date of issue to
the initial date on which the interest rate changes will be the initial
interest rate and (2) the interest rate in effect for the period
commencing on the date the fixed rate commences to the maturity date
shall be the fixed interest rate, if such rate is specified in the
applicable pricing supplement or, if no such fixed interest rate is
specified, the interest rate in effect thereon on the day immediately
preceding the date the fixed rate commences.
- If the floating rate note is designated as an "inverse floating rate
note", then, except as described below or in the applicable pricing
supplement, the floating rate note will bear interest at the fixed
interest rate specified in the applicable pricing supplement minus the
rate determined by reference to the applicable interest rate basis or
bases (1) plus or minus the applicable spread, if any, and/or (2)
multiplied by the applicable spread multiplier, if any; provided,
however, that, unless otherwise specified in the applicable pricing
supplement, the interest rate thereon will not be less than zero.
Commencing on the initial date on which the interest rate changes, the
rate at which interest on such inverse floating rate note shall be
payable shall be reset as of each date on which the interest rate
changes; provided, however, that the interest rate in effect for the
period, if any, from the date of issue to the initial date on which the
interest rate changes will be the initial interest rate.
Notwithstanding the foregoing, if a floating rate note is designated as having
an addendum attached as specified on its face, the floating rate note shall bear
interest in accordance with the terms described in the addendum and the
applicable pricing supplement. See "-- Addendum and/or Other/Additional
Provisions" in this prospectus supplement.
The calculation agent will round all percentages resulting from any
interest rate calculations to the nearest one hundred-thousandth of a percentage
point, if necessary, with five millionths of a percentage point rounded upward
(for example, the calculation agent will round 9.876545% to 9.87655%). The
calculation agent will also round all U.S. dollar amounts used in or resulting
from such calculations to the nearest cent, or in the case of foreign currency
or composite currency, to the nearest unit (with one-half cent or unit being
rounded upward).
If you own a floating rate note, you may ask the calculation agent to
provide you with the current interest rate at any time. You may also ask the
calculation agent to provide you with the interest rate that will apply as
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of the next date on which the interest rate changes if the calculation agent has
determined the rate. All interest rate determinations made by the calculation
agent will, in the absence of manifest error, be conclusive and binding for all
purposes.
The following table sets forth the most common interest rate indexes that
we may use, the source in which we expect the index rate to be published, the
date on which a new interest rate is determined and calculation basis for notes
with interest rates based on each index. The Glossary to this prospectus
supplement sets out with greater specificity the procedures to determine
interest rates based on each index, and we encourage you to review the Glossary
provisions that describe how the calculation agent will determine the interest
rate for your note.
<TABLE>
<CAPTION>
INDEX PRIMARY SOURCE OF RATE INTEREST RATE DETERMINATION DATE CALCULATION BASIS*
----- ---------------------- -------------------------------- ------------------
<S> <C> <C> <C>
CD Rate................ H.15(519)** under the Second business day preceding Actual/360
heading "CDs (Secondary the date on which the interest
Market)" rate changes
CMT Rate............... The page of the Dow Jones Second business day preceding Actual/Actual
Telerate Service specified the date on which the interest
in the applicable pricing rate changes
supplement under the caption
". . . Treasury Constant
Maturities . . . Federal
Reserve Board Release
H.15 . . . Mondays Approxi-
mately 3:45 p.m." under the
column for the Designated
CMT Maturity Index***
Commercial Paper H.15(519) under the heading Second business day preceding Actual/360
Rate................. "Commercial Paper -- Non- the date on which the interest
financial" rate changes
EURIBOR................ On page 248 of Bridge Second day on which the Trans- Actual/360
Telerate, Inc. (or any European Automated Real-time
successor service) or any Gross Settlement Transfer System
other page as may replace is open preceding the date on
page 248 on that service which the interest rate changes
Federal Funds Rate..... H.15(519) under the heading Second business day preceding Actual/360
"Federal Funds (Effective)" the date on which the interest
rate changes
LIBOR.................. Page 3750 of the Dow Jones Second business day preceding Actual/360
Telerate Service the date on which the interest
rate changes
Prime Rate............. H.15(519) under the heading Second business day preceding Actual/360
"Bank Prime Loan" the date on which the interest
rate changes
Treasury Rate.......... On page 56 or page 57 of The day the federal government Actual/Actual
Bridge Telerate, Inc. (or auctions Treasury Bills for the
any successor service) under week in which the date on which
the caption "INVESTMENT the interest rate change falls
RATE" (generally Monday, but may be
either the following Tuesday or
the preceding Friday if Monday
is a legal holiday)
</TABLE>
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------------
* The calculation agent will compute the interest for each day in the
applicable interest period by dividing the interest rate applicable to each
such day by
- 360 ("Actual/360"), in the case of floating rate notes for which an
applicable interest rate basis is the CD rate, the commercial paper rate,
the federal funds rate, LIBOR, EURIBOR or the prime rate; or
- the actual number of days in the year ("Actual/Actual"), in the case of
floating rate notes for which an applicable interest rate basis is the CMT
rate or the Treasury rate.
** "Statistical Release H.15(519), Selected Interest Rates" or any successor
publication of the Board of Governors of the Federal Reserve System.
*** "Designated CMT Maturity Index" means the original period to maturity of the
U.S. Treasury securities, which is either 1, 2, 3, 5, 7, 10, 20 or 30 years,
specified in an applicable pricing supplement for which the CMT rate will be
calculated. If no maturity is specified in the applicable pricing
supplement, the Designated CMT Maturity Index will be two years.
Interest Rate Reset Dates, Interest Payment Dates and Record Dates. The
calculation agent will generally determine the initial interest rate as if the
issue date of the note were a date on which the interest rate changes. Unless we
specify otherwise in the applicable pricing supplement, the record date for
floating rate notes is the close of business on the date that is 15 calendar
days before the interest payment date, whether or not that date is a business
day. The dates when the interest rate changes and interest payment dates are
determined by the frequency with which we reset the interest rate, as follows:
<TABLE>
<CAPTION>
FREQUENCY OF INTEREST RESET INTEREST RATE RESET DATE* INTEREST PAYMENT DATE**
--------------------------- ------------------------- -----------------------
<S> <C> <C>
Daily Each business day Third Wednesday of each month
or third Wednesday of March,
June, September and December of
each year, as indicated in the
applicable pricing supplement
Weekly (other than Treasury Wednesday of each week Third Wednesday of each month
rate-based notes) or third Wednesday of March,
June, September and December of
each year, as indicated in the
applicable pricing supplement
Weekly (Treasury rate-based Tuesday of each week Third Wednesday of each month
notes) or third Wednesday of March,
June, September and December of
each year, as indicated in the
applicable pricing supplement
Monthly Third Wednesday of each month Third Wednesday of each month
or third Wednesday of March,
June, September and December of
each year, as indicated in the
applicable pricing supplement
Quarterly Third Wednesday of March, June, Third Wednesday of March, June,
September and December of each September and December of each
year year
Semi Annually Third Wednesday of the two Third Wednesday of the two
months of each year that we months of each year that we
specify in the applicable specify in the applicable
pricing supplement pricing supplement
Annually Third Wednesday of the month of Third Wednesday of the month of
each year that we specify in each year that we specify in
the applicable pricing the applicable pricing
supplement supplement
</TABLE>
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<PAGE> 15
------------
* If a date on which the interest rate changes falls on a day that is not a
business day, we will postpone the date on which the interest rate changes to
the next business day. However, if the postponement would cause the date on
which the interest rate changes for a LIBOR-based note or a EURIBOR-based
note to be in the next calendar month, we will move the date on which the
interest rate changes to the immediately preceding business day. For Treasury
rate-based notes, if an auction date falls on the day that would be a date on
which the interest rate changes, the date on which the interest rate changes
will be the first business day after the auction.
** We will also pay interest on each note on the maturity date or redemption
date of that note. If an interest payment date (other than the maturity date
or redemption date) for a floating rate note falls on a day that is not a
business day, we will postpone the interest payment date to the next business
day. However, if the postponement would cause the interest payment date for a
LIBOR-based note to be in the next calendar month, we will move the interest
payment date to the immediately preceding business day. If the maturity date
or redemption date for a floating rate note falls on a day that is not a
business day, we will pay the principal and interest on the next business
day, and the calculation agent will not include the interest payment date in
calculating the interest due on that date.
GUARANTEES
AMB Property Corporation will unconditionally guarantee our full and prompt
payment of the principal of, premium, if any, and interest on each of the notes
when they become due and payable. The guarantees of each of the notes by AMB
Property Corporation will be effectively subordinated to all of the mortgages
and other secured indebtedness of AMB Property Corporation and to all of the
indebtedness of its subsidiaries. See "Risk Factors -- Ranking of the Notes" in
this prospectus supplement; "Description of Debt Securities -- Guarantees" and
"Description of Debt Securities -- Merger, Consolidation or Sale of Assets" in
the accompanying prospectus.
REDEMPTION AND REPAYMENT
REDEMPTION AT OUR OPTION
We may not redeem any note prior to its maturity date unless, in the
applicable pricing supplement for the note, it either:
- identifies a redemption commencement date after which we may redeem the
note at our option at any time; or
- identifies a stated redemption date or dates on which we may redeem the
notes at our option.
If we specify in the applicable pricing supplement that we have the right
to redeem your note on or after a certain redemption commencement date, then we
may redeem the note, in whole or in part, at any time after that date by giving
the registered holder of the note at least 30 but not more than 60 calendar
days' notice. The note's redemption date will be the date on which the note is
actually redeemed. We will redeem the note at the applicable redemption price,
plus accrued and unpaid interest to the redemption date. The redemption price
will be an amount equal to the initial redemption percentage specified in the
applicable pricing supplement (as adjusted by the annual redemption percentage
reduction, if applicable) multiplied by the unpaid principal amount to be
redeemed. The initial redemption percentage, if any, applicable to a note shall
decline at each anniversary of the redemption commencement date by an amount
equal to the applicable annual redemption percentage reduction, if any, until
the redemption price is equal to 100% of the unpaid principal amount to be
redeemed.
If we specify in the applicable pricing supplement for your note that we
have the right to redeem that note on a specified date or dates, then the note
may be redeemed or repurchased in whole or in part on the specified date or
dates if we give the registered holder at least 30 but not more than 60 calendar
days' notice. We will redeem global notes in accordance with the applicable
depository procedures, and any notices will also be given in accordance with
those procedures. Any feature allowing us to redeem the notes might affect the
market value of the notes. Since we may be expected to redeem the notes when
prevailing interest rates are relatively low, an investor might not be able to
reinvest the proceeds at an effective interest rate as high as the interest rate
on the note.
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REPAYMENT AT THE OPTION OF THE HOLDER
You may not require us to repay your note prior to its maturity date
unless, in the applicable pricing supplement for the note, we identify a
specific optional repayment date or dates on which you may require us to repay
your note at your option.
If we specify in the applicable pricing supplement for your note that you
have the right to require us to repay that note on a specified date or dates,
then the note may be repaid in whole or in part in increments of $1,000 or other
increments specified in the applicable pricing supplement (as long as any
remaining principal is at least $1,000 or another specified minimum
denomination) on the specified date or dates if the registered holder gives us
at least 30 but not more than 60 calendar days' notice. The repayment price will
be equal to 100% of the unpaid principal amount to be repaid, together with
unpaid interest accrued to the date of repayment. We will repay global notes in
accordance with the applicable depository procedures, and any notices will also
be given in accordance with those procedures. Only the Depository Trust Company
may exercise the repayment option in respect of global notes representing
book-entry notes. Accordingly, owners of beneficial interests in global notes
that desire to have all or any portion of the book-entry notes represented by
the global notes repaid must instruct the participant through which they own
their interest to direct the Depository Trust Company to exercise the repayment
option on their behalf.
PAYMENT CURRENCY
You must pay for the notes in the currency that we specify in the
applicable pricing supplement. Currently, the United States has limited
facilities to convert U.S. dollars into foreign currencies, and vice versa.
However, you may establish non-U.S. dollar denominated checking or savings
accounts at U.S. banks in the United States. Principal, any premium and interest
on the notes is payable to you in the currency we specify in the applicable
pricing supplement unless that currency is unavailable due to circumstances
beyond our control. In such event, we may make payments on the note in an
equivalent amount of U.S. dollars. The exchange rate agent will determine the
amount of the U.S. dollar payment by using the market exchange rate for that
currency on the second business day prior to the payment date or, if the market
exchange rate is not then available, using the most recently available market
exchange rate; provided, however, that if the specified currency is replaced by
a single European currency, the payment of principal of (and premium, if any) or
interest, if any, on the note denominated in the specified currency will be paid
in the new single European currency in conformity with legally applicable
measures taken pursuant to, or by virtue of, the treaty establishing the
European Community, as amended by the treaty on European Unity. The market
exchange rate for a specified currency is the noon dollar buying rate in The
City of New York for cable transfers for the specified currency as certified for
customs purposes by (or if not so certified, as otherwise determined by) the
Federal Reserve Bank of New York. Payments under these circumstances in U.S.
dollars or a new single European currency will satisfy our payment obligations
on the note and will not constitute a default under the indenture.
If the specified currency is a composite currency that is unavailable due
to circumstances beyond our control, then we may make payments on the note in an
equivalent amount of U.S. dollars. The amount of the U.S. dollar payment shall
be determined by the exchange rate agent by aggregating the U.S. dollar
equivalents of each of the component currencies. The component currencies of the
composite currency for this purpose will be the currency amounts that were
components of the composite currency as of the last day on which the composite
currency was used. The U.S. dollar equivalent of each of the component
currencies shall be determined by the exchange rate agent on the basis of the
most recently available market exchange rate for each component currency.
If the official unit of any component currency is altered by way of
combination or subdivision, the number of units of the currency as a component
currency shall be divided or multiplied in the same proportion. If two or more
component currencies are consolidated into a single currency, the amounts of
those currencies as component currencies shall be replaced by an amount in such
single currency equal to the sum of the amounts of the consolidated component
currencies expressed in such single currency. If any component currency is
divided into two or more currencies, the amount of the original component
currency shall be replaced by the
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<PAGE> 17
amounts of such two or more currencies, the sum of which shall be equal to the
amount of the original component currency.
All determinations referred to above made by the exchange rate agent shall
be at its sole discretion and shall, in the absence of manifest error, be
conclusive for all purposes and binding on the holders of the notes. See "Risk
Factors -- Foreign Currency Risks" in this prospectus supplement. Unless we
provide otherwise in the applicable pricing supplement, State Street Bank and
Trust Company of California, N.A. will be the exchange rate agent.
Unless we specify otherwise in the applicable pricing supplement, we will
issue the notes:
- in a minimum denomination of U.S. $1,000, or in integral multiples of
U.S. $1,000, if the notes are denominated in U.S. dollars; or
- in a minimum denomination equivalent to U.S. $1,000, rounded to an
integral multiple of 1,000 units of the currency in which the notes are
denominated, and in any larger amount in integral multiples of 1,000
units of that currency, if the notes are denominated in a currency other
than U.S. dollars.
To determine whether holders of the requisite principal amount of notes
have consented to a modification or alteration of the indenture, in addition to
the notes denominated in U.S. dollars, the trustee will calculate the U.S.
dollar equivalent of the principal amount of notes denominated in foreign
currencies. This U.S. dollar equivalent will be based on the market exchange
rate for each foreign currency on the latest date for which that rate was
determined on or before the date for determining the holders that may give the
required consent. See "Description of Debt Securities -- Modification and
Waiver" in the accompanying prospectus.
The exchange rate agent will determine the market exchange rate for the
applicable currency as of the day before we accept a purchase order for a note,
and will determine the minimum denomination for that note based on that market
exchange rate.
INDEXED NOTES
We may determine the principal amount of and/or the amount of interest
payable on certain of our indexed notes by reference to currencies, currency
units, commodity prices, financial or non-financial indexes or other factors. We
will indicate in the applicable pricing supplement if we will determine the
amount of principal or interest payable in this manner. If you own indexed
notes, you may receive a principal amount at maturity that is greater than or
less than the face amount of the notes, depending upon the fluctuation of the
relative value, rate or price of the specified index. If applicable, we will
include in the applicable pricing supplement information about how we will
determine the principal amount payable at maturity, the amount of interest
payable, a historical comparison of the relative value, rate or price of the
specified index and the face amount of the indexed note, and certain additional
United States federal income tax considerations. For particular risks relating
to indexed notes, see "Risk Factors -- Risks Relating to Indexed Notes" in this
prospectus supplement.
ADDENDUM AND/OR OTHER/ADDITIONAL PROVISIONS
Any provisions with respect to the notes may be modified and/or
supplemented as specified under "Other/Additional Provisions" on the face of the
note or in an addendum relating to the note, if so specified on the face of the
note. Any addendum or Other/Additional Provisions will be described in the
applicable pricing supplement.
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<PAGE> 18
CERTAIN UNITED STATES FEDERAL INCOME TAX CONSEQUENCES
The following summary describes the principal United States federal income
tax consequences to you of purchasing, owning and disposing of the notes. This
summary supplements the summary under the heading "Certain Federal Income Tax
Considerations" in the prospectus. This summary is based on the Internal Revenue
Code of 1986, as amended, legislative history, administrative pronouncements and
practices of the Internal Revenue Service, judicial decisions and final,
temporary and proposed Treasury Regulations. Future changes, legislation,
Treasury Regulations, administrative interpretations and practices and/or court
decisions may adversely affect, perhaps retroactively, the tax consequences
contained in this discussion. Thus, we can provide no assurance that the tax
considerations contained in this discussion will not be challenged by the
Internal Revenue Service or will be sustained by a court if challenged by the
Internal Revenue Service.
This summary deals only with notes held as "capital assets" -- i.e.,
generally, property held for investment within the meaning of Section 1221 of
the Internal Revenue Code. It does not address all of the tax consequences that
may be relevant to you in light of your particular circumstances or if you are a
holder who receives special treatment under the federal income tax laws, except
to the extent discussed under the heading "Non-United States Holders." Holders
receiving special treatment include, without limitation, pension plans and other
tax-exempt investors, persons who are subject to alternative minimum tax, banks,
thrifts, insurance companies, real estate investment trusts, "S" corporations,
expatriates, foreign corporations or partnerships, persons who are not citizens
or residents of the United States, regulated investment companies, brokers,
dealers or traders in securities or commodities, persons whose functional
currency is other than the United States dollar and persons who hold notes as
part of a straddle, hedging or conversion transaction. This summary also assumes
that a taxpayer obtains any necessary consent of the Internal Revenue Service
before changing a method of accounting. This summary also does not deal with
holders other than original purchasers of notes, except where otherwise
specifically noted.
State, local and foreign income tax laws may differ substantially from the
corresponding federal income tax laws, and this discussion does not purport to
describe any aspect of the tax laws of any state, local or foreign jurisdiction.
BECAUSE THE EXACT PRICING AND OTHER TERMS OF THE NOTES WILL VARY, WE CAN GIVE NO
ASSURANCE THAT THE CONSIDERATIONS DESCRIBED BELOW WILL APPLY TO A PARTICULAR
ISSUANCE OF NOTES. CERTAIN UNITED STATES FEDERAL INCOME TAX CONSEQUENCES
RELATING TO THE OWNERSHIP OF PARTICULAR NOTES, WHERE APPLICABLE, WILL BE
SUMMARIZED IN THE APPLICABLE PRICING SUPPLEMENT FOR SUCH NOTES. BEFORE YOU
PURCHASE ANY NOTES, YOU SHOULD CONSULT YOUR TAX ADVISOR ABOUT HOW THE UNITED
STATES FEDERAL INCOME TAX LAW OR ANY OTHER LAWS, INCLUDING ANY FOREIGN, STATE,
LOCAL OR OTHER TAX LAWS, WILL APPLY TO YOUR PARTICULAR SITUATION.
As used in this section, you are a "United States holder" if you are a
beneficial owner of a note who or which is, for United States federal income tax
purposes, either:
- a citizen or resident of the United States,
- a corporation or partnership created or organized in or under the laws of
the United States or any state or political subdivision thereof,
including the District of Columbia,
- an estate the income of which is subject to United States federal income
taxation regardless of its source, or
- a trust (1) the administration over which a United States court can
exercise primary supervision and (2) all of the substantial decisions of
which one or more United States persons have the authority to control,
and other types of trusts considered United States persons for federal
income tax purposes.
In addition, some trusts in existence on August 20, 1996, and treated as
United States persons prior to such date, that elect to be treated as United
States persons, shall be considered United States holders.
If you hold a note and are not a United States holder, you are a
"non-United States holder."
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UNITED STATES HOLDERS
TAXATION OF INTEREST
The taxation of interest on a note depends on whether it constitutes
"qualified stated interest," as defined below. Interest on a note that
constitutes qualified stated interest can be included in a United States
holder's income as ordinary interest income when actually or constructively
received, if such holder uses the cash method of accounting for United States
federal income tax purposes, or when accrued, if such holder uses an accrual
method of accounting for United States federal income tax purposes. Interest
that does not constitute qualified stated interest is included in a United
States holder's income under the rules described below under "Original Issue
Discount," regardless of such holder's method of accounting. Notwithstanding the
foregoing, interest that is payable on a short-term note is included in a United
States holder's income under the rules described below under "short-term notes."
A short-term note is a note with a maturity of one year or less from its issue
date.
FIXED RATE NOTES
Interest on a fixed rate note will constitute "qualified stated interest"
if the interest is unconditionally payable, or will be constructively received
under Section 451 of the Internal Revenue Code, in cash or in property (other
than debt instruments issued by us) at least annually at a single fixed rate.
FLOATING RATE NOTES
Interest on a floating rate note that is unconditionally payable, or will
be constructively received under Section 451 of the Internal Revenue Code, in
cash or in property (other than debt instruments issued by us) at least annually
will constitute qualified stated interest if the note is a variable rate debt
instrument under the rules described below and the interest is payable at a
single "qualified floating rate" or a single "objective rate," as each term is
defined below. If the note is a variable rate debt instrument but the interest
is payable other than at a single qualified floating rate or at a single
objective rate, special rules apply to determine the portion of such interest
that constitutes qualified stated interest. See "Original Issue
Discount -- Floating Rate notes that are Variable Rate Debt Instruments," below.
DEFINITION OF VARIABLE RATE DEBT INSTRUMENT, QUALIFIED FLOATING RATE
AND OBJECTIVE RATE
A note is a variable rate debt instrument if all of the four following
conditions are met. First, the "issue price," as defined below, of the note must
not exceed the total noncontingent principal payments by more than an amount
equal to the lesser of (i) .015 multiplied by the product of the total
noncontingent principal payments and the number of complete years to maturity
from the issue date (or, in the case of a note that provides for payment of any
amount other than qualified stated interest before maturity, its weighted
average maturity) or (ii) 15% of the total noncontingent principal payments.
Second, the note must provide for stated interest (compounded or paid at
least annually) at (a) one or more qualified floating rates, (b) a single fixed
rate and one or more qualified floating rates, (c) a single objective rate or
(d) a single fixed rate and a single objective rate that is a "qualified inverse
floating rate" (as defined below).
Third, the note must provide that a qualified floating rate or objective
rate in effect at any time during the term of the note is set at the value of
the rate on any day that is no earlier than three months prior to the first day
on which that value is in effect and no later than one year following that first
day.
Fourth, the note may not provide for any principal payments that are
contingent except as provided in the first requirement set forth above.
Subject to certain exceptions, a variable rate of interest on a note is a
"qualified floating rate" if variations in the value of the rate can reasonably
be expected to measure contemporaneous fluctuations in the cost of newly
borrowed funds in United States dollars. A variable rate will be considered a
qualified floating rate if the variable rate equals (i) the product of an
otherwise qualified floating rate and a fixed multiple (i.e., a spread
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multiplier) that is greater than 0.65, but not more than 1.35 or (ii) an
otherwise qualified floating rate (or the product described in clause (i)) plus
or minus a fixed rate (i.e., a spread). If the variable rate equals the product
of an otherwise qualified floating rate and a single spread multiplier greater
than 1.35 or less than or equal to 0.65, however, such rate will generally
constitute an objective rate, described more fully below. A variable rate will
not be considered a qualified floating rate if the variable rate is subject to a
cap, floor, governor (i.e., a restriction on the amount of increase or decrease
in the stated interest rate) or similar restriction that is reasonably expected
as of the issue date to cause the yield on the note to be significantly more or
less than the expected yield determined without the restriction (other than a
cap, floor or governor that is fixed throughout the term of the note).
Subject to certain exceptions, an "objective rate" is a rate (other than a
qualified floating rate) that is determined using a single fixed formula and
that is based on objective financial or economic information that is neither
within our control (or the control of a related party) nor unique to our
circumstances (or the circumstances of a related party). For example, an
objective rate generally includes a rate that is based on one or more qualified
floating rates or on the yield of actively traded personal property (within the
meaning of Section 1092(d)(1) of the Internal Revenue Code). Notwithstanding the
first sentence of this paragraph, a rate on a note is not an objective rate if
it is reasonably expected that the average value of the rate during the first
half of the note's term will be either significantly less than or significantly
greater than the average value of the rate during the final half of the note's
term. An objective rate is a "qualified inverse floating rate" if (a) the rate
is equal to a fixed rate minus a qualified floating rate and (b) the variations
in the rate can reasonably be expected to reflect inversely contemporaneous
variations in the cost of newly borrowed funds (disregarding any caps, floors,
governors or similar restrictions that would not, as described above, cause a
rate to fail to be a qualified floating rate).
If interest on a note is stated at a fixed rate for an initial period of
less than one year, followed by a variable rate that is either a qualified
floating rate or an objective rate for a subsequent period, and the value of the
variable rate on the issue date is intended to approximate the fixed rate, the
fixed rate and the variable rate together constitute a single qualified floating
rate or objective rate.
ORIGINAL ISSUE DISCOUNT
Original Issue Discount with respect to a note is the excess, if any, of
the note's "stated redemption price at maturity" over the note's "issue price."
A note's "stated redemption price at maturity" is the sum of all payments
provided by the note (whether designated as interest or as principal) other than
payments of qualified stated interest. The "issue price" of a note is the first
price at which a substantial amount of the notes in the issuance that includes
the note is sold for money (excluding sales to bond houses, brokers or similar
persons or organizations acting in the capacity of underwriters, placement
agents or wholesalers).
As described more fully below, United States holders of notes with Original
Issue Discount that mature more than one year from their issue date generally
will be required to include such Original Issue Discount in income as it accrues
in accordance with the constant yield method described below, irrespective of
the receipt of the related cash payments. A United States holder's tax basis in
a note is increased by each accrual of Original Issue Discount and decreased by
each payment other than a payment of qualified stated interest.
The amount of Original Issue Discount with respect to a note will be
treated as zero if the Original Issue Discount is less than an amount equal to
.0025 multiplied by the product of the stated redemption price at maturity and
the number of complete years to maturity (or, in the case of a note that
provides for payment of any amount other than qualified stated interest prior to
maturity, the weighted average maturity of the note). If the amount of Original
Issue Discount with respect to a note is less than that amount, the Original
Issue Discount that is not included in payments of stated interest is generally
included in income as capital gain as principal payments are made. The amount of
a principal payment that will be included equals the product of the total amount
of Original Issue Discount and a fraction, the numerator of which is the amount
of such principal payment and the denominator of which is the stated principal
amount of the note.
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FIXED RATE NOTES
With respect to a fixed rate note, the amount of Original Issue Discount
that will be included in a United States holder's income for any taxable year is
determined under the constant yield method, as follows. First, the note's "yield
to maturity" is computed. The yield to maturity is the discount rate that, when
used in computing the present value of all interest and principal payments to be
made under the note (including payments of qualified stated interest), produces
an amount equal to the note's issue price. The yield to maturity is constant
over the term of the note and, when expressed as a percentage, must be
calculated to at least two decimal places.
Second, the term of the note is divided into "accrual periods." Accrual
periods may be of any length and may vary in length over the term of the note,
provided that each accrual period is no longer than one year and that each
scheduled payment of principal or interest occurs either on the final day of an
accrual period or on the first day of an accrual period.
Third, the total amount of Original Issue Discount on the note is allocated
among accrual periods. In general, the Original Issue Discount allocable to an
accrual period equals the product of the "adjusted issue price" of the note at
the beginning of the accrual period and the yield to maturity of the note, less
the amount of any qualified stated interest allocable to the accrual period. The
adjusted issue price of a note at the beginning of the first accrual period is
its issue price. Thereafter, the adjusted issue price of the note is its issue
price, increased by the amount of Original Issue Discount previously includible
in the gross income of any holder and decreased by the amount of any payment
previously made on the note, other than a payment of qualified stated interest.
For purposes of computing the adjusted issue price of a note, the amount of
Original Issue Discount previously includible in the gross income of any holder
is determined without regard to "premium" and "acquisition premium," as those
terms are defined below under the heading "Premium and Acquisition Premium."
Fourth, the "daily portions" of Original Issue Discount are determined by
allocating to each day in an accrual period its ratable portion of the Original
Issue Discount allocable to the accrual period.
A United States holder includes in income in any taxable year the daily
portions of Original Issue Discount for each day during the taxable year that
such holder held notes. In general, under the constant yield method described
above, United States holders will be required to include in income increasingly
greater amounts of Original Issue Discount in successive accrual periods.
FLOATING RATE NOTES THAT ARE VARIABLE RATE DEBT INSTRUMENTS
The taxation of Original Issue Discount (including interest that does not
constitute qualified stated interest) on a floating rate note will depend on
whether the note is a "variable rate debt instrument," as defined above under
the heading "Taxation of Interest -- Definition of Variable Rate Debt
Instrument, Qualified Floating Rate and Objective Rate."
In the case of a variable rate debt instrument that provides for qualified
stated interest, the amount of qualified stated interest and the amount of
Original Issue Discount, if any, that will be included in income during a
taxable year are determined under the rules applicable to fixed rate notes
(described above) by assuming that the variable rate is a fixed rate equal to
(i) in the case of a qualified floating rate or a qualified inverse floating
rate, the value, as of the issue date, of the qualified floating rate or
qualified inverse floating rate, or (ii) in the case of an objective rate (other
than a qualified inverse floating rate), the rate that reflects the yield that
is reasonably expected for the note. Qualified stated interest allocable to an
accrual period is increased (or decreased) if the interest actually paid during
an accrual period exceeds (or is less than) the interest assumed to be paid
during the accrual period.
If a note that is a variable rate debt instrument does not provide for
interest at a single variable rate as described above, the amount of interest
and Original Issue Discount accruals are determined by constructing an
equivalent fixed rate debt instrument, as follows.
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First, in the case of an instrument that provides for interest at one or
more qualified floating rates or at a qualified inverse floating rate and, in
addition, at a fixed rate, replace the fixed rate with a qualified floating rate
(or qualified inverse floating rate) such that the fair market value of the
instrument, so modified, as of the issue date would be approximately the same as
the fair market value of the unmodified instrument.
Second, determine the fixed rate substitute for each variable rate provided
by the note. The fixed rate substitute for each qualified floating rate provided
by the note is the value of that qualified floating rate on the issue date. If
the note provides for two or more qualified floating rates with different
intervals between interest adjustment dates (for example, the 30-day commercial
paper rate and quarterly LIBOR), the fixed rate substitutes are based on
intervals that are equal in length (for example, the 90-day commercial paper
rate and quarterly LIBOR, or the 30-day commercial paper rate and monthly
LIBOR). The fixed rate substitute for an objective rate that is a qualified
inverse floating rate is the value of the qualified inverse floating rate on the
issue date. The fixed rate substitute for an objective rate (other than a
qualified inverse floating rate) is a fixed rate that reflects the yield that is
reasonably expected for the note.
Third, construct an equivalent fixed rate debt instrument that has terms
that are identical to those provided under the note, except that the equivalent
fixed rate debt instrument provides for the fixed rate substitutes determined in
the second step, in lieu of the qualified floating rates or objective rate
provided by the note.
Fourth, determine the amount of qualified stated interest and Original
Issue Discount for the equivalent fixed rate debt instrument under the rules
described above for fixed rate notes. These amounts are taken into account as if
the United States holder held the equivalent fixed rate debt instrument. See
"Taxation of Interest" and "Original Issue Discount -- Fixed Rate Notes," above.
Fifth, make appropriate adjustments for the actual values of the variable
rates. In this step, qualified stated interest or Original Issue Discount
allocable to an accrual period is increased (or decreased) if the interest
actually accrued or paid during the accrual period exceeds (or is less than) the
interest assumed to be accrued or paid during the accrual period under the
equivalent fixed rate debt instrument.
FLOATING RATE NOTES THAT ARE NOT VARIABLE RATE DEBT INSTRUMENTS
Contingent notes are floating rate notes that are not variable rate debt
instruments. They will be taxable under the rules applicable to contingent
payment debt instruments, as follows. First, we are required to determine, as of
the issue date, the comparable yield for the contingent note. The comparable
yield is generally the yield at which we would issue a fixed rate debt
instrument with terms and conditions similar to those of the contingent note
(including the level of subordination, term, timing of payments and general
market conditions, but not taking into consideration the riskiness of the
contingencies or the liquidity of the contingent note), but not less than the
applicable federal rate announced monthly by the Internal Revenue Service. In
certain cases where contingent notes are marketed or sold in substantial part to
tax-exempt investors or other investors for whom the prescribed inclusion of
interest is not expected to have a substantial effect on their U.S. income tax
liability, the comparable yield for the contingent note, without proper evidence
to the contrary, is presumed to be the applicable federal rate.
Second, solely for tax purposes, we construct a projected schedule of
payments for the contingent note. The projected schedule of payments is
determined under the rules applicable to contingent payment debt instruments.
This projected schedule is determined as of the issue date and generally remains
in place throughout the term of the contingent note. If a right to a contingent
payment is based on market information, the amount of the projected payment is
the forward price of the contingent payment. If a contingent payment is not
based on market information, the amount of the projected payment is the expected
value of the contingent payment as of the issue date. The projected schedule
must produce the comparable yield determined as set forth above. Otherwise, the
projected schedule must be adjusted under the rules applicable to contingent
payment debt instruments.
Third, under the usual rules applicable to Original Issue Discount and
based on the Schedule, the interest income on the contingent note for each
accrual period is determined by multiplying the comparable yield of
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the contingent note (adjusted for the length of the accrual period) by the
contingent note's adjusted issue price at the beginning of the accrual period
(determined under the rules applicable to contingent payment debt instruments).
The amount so determined is then allocated on a ratable basis to each day in the
accrual period that the United States holder held the contingent note.
Fourth, appropriate adjustments are made to the interest income determined
under the foregoing rules to account for any differences between the Schedule
and actual contingent payments. Under the rules applicable to contingent payment
debt instruments, differences between the actual amounts of any contingent
payments made in a calendar year and the projected amounts of such payments are
generally aggregated and taken into account, in the case of a positive
difference, as additional interest income, or, in the case of a negative
difference, first as a reduction in interest income for such year and
thereafter, subject to certain limitations, as ordinary loss.
We are required to provide each holder of a contingent note with the
schedule described above. If we do not create such a schedule or the schedule is
unreasonable, a United States holder must set its own projected payment schedule
and explicitly disclose the use of the schedule and the reason therefor. Unless
otherwise prescribed by the Internal Revenue Service, the United States holder
must make such disclosure on a statement attached to the United States holder's
timely filed federal income tax return for the taxable year in which the
contingent note was acquired.
In general, any gain realized by a United States holder on the sale,
exchange or retirement of a contingent note is interest income. In general, any
loss on a contingent note accounted for under the method described above is
ordinary loss to the extent it does not exceed the holder's prior interest
inclusions on the contingent note (net of negative adjustments). Special rules
apply in determining the tax basis of a contingent note and the amount realized
on the retirement of a contingent note.
OTHER RULES
Certain notes having Original Issue Discount may be redeemed prior to
maturity or may be repayable at the option of the holder. These notes may be
subject to rules that differ from the general rules discussed above relating to
the tax treatment of Original Issue Discount. Before you purchase such a note
with a redemption feature you should consult your tax advisor with respect to
this feature since the tax consequences with respect to Original Issue Discount
will depend, in part, on the particular terms and the particular features of the
purchased note.
The Treasury Regulations relating to the tax treatment of Original Issue
Discount contain certain language ("aggregation rules") stating in general that,
with some exceptions, if more than one type of note is issued in connection with
the same transaction or related transactions, the notes may be treated as a
single debt instrument with a single issue price, maturity date, yield to
maturity and stated redemption price at maturity for purposes of calculating and
accruing any Original Issue Discount. Unless otherwise provided in the
applicable prospectus supplement, we do not expect to treat different types of
notes as being subject to the aggregation rules for purposes of computing
Original Issue Discount.
MARKET DISCOUNT
If a United States holder acquires a note having a maturity date of more
than one year from the date of its issuance and has a tax basis in the note that
is, in the case of a note that does not have Original Issue Discount, less than
its stated redemption price at maturity, or, in the case of a note that has
Original Issue Discount, less than its adjusted issue price (as defined above),
the amount of such difference is treated as "market discount" for federal income
tax purposes, unless such difference is less than .0025 multiplied by the stated
redemption price at maturity multiplied by the number of complete years to
maturity (from the date of acquisition).
Under the market discount rules of the Internal Revenue Code, a United
States holder is required to treat any principal payment (or, in the case of a
note that has Original Issue Discount, any payment that does not constitute a
payment of qualified stated interest) on, or any gain on the sale, exchange,
retirement or other
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disposition of, a note as ordinary income to the extent of the accrued market
discount that has not previously been included in income. Thus, partial
principal payments are treated as ordinary income to the extent of accrued
market discount that has not previously been included in income. If such note is
disposed of by the United States holder in certain otherwise nontaxable
transactions, accrued market discount must be included as ordinary income by the
United States holder as if the holder had sold the note at its then fair market
value.
In general, the amount of market discount that has accrued is determined on
a ratable basis. A United States holder may, however, elect to determine the
amount of accrued market discount on a constant yield to maturity basis. This
election is made on a note-by-note basis and is irrevocable.
With respect to notes with market discount, a United States holder may not
be allowed to deduct immediately a portion of the interest expense on any
indebtedness incurred or continued to purchase or to carry the notes. A United
States holder may elect to include market discount in income currently as it
accrues, in which case the interest deferral rule set forth in the preceding
sentence will not apply. This election will apply to all debt instruments
acquired by the United States holder on or after the first day of the first
taxable year to which the election applies and is irrevocable without the
consent of the Internal Revenue Service. A United States holder's tax basis in a
note will be increased by the amount of market discount included in the holder's
income under the election.
In lieu of the foregoing rules, different rules apply in the case of
contingent notes where a holder's tax basis in a contingent note is less than
the contingent note's adjusted issue price (determined under special rules
applicable to contingent payment debt instruments). Accordingly, before you
purchase the contingent notes you should consult with your tax advisor regarding
the application of the rules to the contingent notes.
PREMIUM AND ACQUISITION PREMIUM
If a United States holder purchases a note for an amount in excess of the
sum of all amounts payable on the note after the date of acquisition (other than
payments of qualified stated interest), the holder will be considered to have
purchased the note with "amortizable bond premium" equal in amount to the
excess, and generally will not be required to include any Original Issue
Discount in income. Generally, a United States holder may elect to amortize the
premium as an offset to qualified stated interest income, using a constant yield
method similar to that described above, over the remaining term of the note
(where the note is not redeemable prior to its maturity date). In the case of
notes that may be redeemed prior to maturity, the premium is calculated assuming
that we or the United States holder will exercise or not exercise its redemption
rights in a manner that maximizes the United States holder's yield. A United
States holder who elects to amortize bond premium must reduce the holder's tax
basis in the note by the amount of the premium used to offset qualified stated
interest income as set forth above. An election to amortize bond premium applies
to all taxable debt obligations then owned and thereafter acquired by the holder
and may be revoked only with the consent of the Internal Revenue Service.
If a United States holder purchases a note issued with Original Issue
Discount at an "acquisition premium," the amount of Original Issue Discount that
the United States holder includes in gross income is reduced to reflect the
acquisition premium. A note is purchased at an acquisition premium if its
adjusted basis, immediately after its purchase, is (a) less than or equal to the
sum of all amounts payable on the note after the purchase date other than
payments of qualified stated interest and (b) greater than the note's adjusted
issue price.
If a note is purchased at an acquisition premium, the United States holder
reduces the amount of Original Issue Discount that otherwise would be included
in income during an accrual period by an amount equal to (i) the amount of
Original Issue Discount otherwise includible in income multiplied by (ii) a
fraction, the numerator of which is the excess of the adjusted basis of the note
immediately after its acquisition by the purchaser over the adjusted issue price
of the note and the denominator of which is the excess of the sum of all amounts
payable on the note after the purchase date, other than payments of qualified
stated interest, over the note's adjusted issue price.
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As an alternative to reducing the amount of Original Issue Discount that
otherwise would be included in income by this fraction, the United States holder
may elect to compute Original Issue Discount accruals by treating the purchase
as a purchase at original issuance and applying the constant yield method
described above.
In lieu of the foregoing rules, different rules apply in the case of
contingent notes where a holder's tax basis in a contingent note is greater than
the contingent note's adjusted issue price, as determined under the rules
applicable to contingent payment debt instruments. Accordingly, prospective
purchasers of contingent notes should consult with their tax advisors with
respect to the application of the rules to contingent notes.
SHORT-TERM NOTES
In the case of a short-term note, no interest is treated as qualified
stated interest, and therefore all interest is included in Original Issue
Discount. United States holders that report income for federal income tax
purposes on an accrual method and certain other United States holders, including
banks and dealers in securities, are required to include Original Issue Discount
in income on the short-term notes on a straight-line basis, unless an election
is made to accrue the Original Issue Discount according to a constant yield
method based on daily compounding.
Any other United States holder of a short-term note is not required to
accrue Original Issue Discount for federal income tax purposes, unless it elects
to do so, with the consequence that the reporting of such income is deferred
until it is received. In the case of a United States holder that is not
required, and does not elect, to include Original Issue Discount in income
currently, any gain realized on the sale, exchange or retirement of a short-term
note is ordinary income to the extent of the Original Issue Discount accrued on
a straight-line basis (or, if elected, according to a constant yield method
based on daily compounding) through the date of sale, exchange or retirement. In
addition, United States holders that are not required, and do not elect, to
include Original Issue Discount in income currently are required to defer
deductions for any interest paid on indebtedness incurred or continued to
purchase or carry a short-term note in an amount not exceeding the deferred
interest income with respect to the short-term note (which includes both the
accrued Original Issue Discount and accrued interest that are payable but that
have not been included in gross income), until the deferred interest income is
realized. A United States holder of a short-term note may elect to apply the
foregoing rules (except for the rule characterizing gain on sale, exchange or
retirement as ordinary) with respect to "acquisition discount" rather than
Original Issue Discount. Acquisition discount is the excess of the stated
redemption price at maturity of the short-term note over the United States
holder's basis in the short-term note. This election applies to all obligations
acquired by the taxpayer on or after the first day of the first taxable year to
which the election applies, unless revoked with the consent of the Internal
Revenue Service. A United States holder's tax basis in a short-term note is
increased by the amount included in the holder's income on the note.
ELECTION TO TREAT ALL INTEREST AS ORIGINAL ISSUE DISCOUNT
United States holders may elect to include in gross income all interest
that accrues on a note, including any stated interest, acquisition discount,
Original Issue Discount, market discount, de minimis Original Issue Discount, de
minimis market discount and unstated interest (as adjusted by amortizable bond
premium and acquisition premium), by using the constant yield method described
above under the heading "Original Issue Discount." This election for a note with
amortizable bond premium will result in a deemed election to amortize bond
premium for all debt instruments owned and later acquired by the United States
holder with amortizable bond premium and may be revoked only with the permission
of the Internal Revenue Service. Similarly, this election for a note with market
discount will result in a deemed election to accrue market discount in income
currently for the note and for all other debt instruments acquired by the United
States holder with market discount on or after the first day of the taxable year
to which the election first applies, and may be revoked only with the permission
of the Internal Revenue Service. A United States holder's tax basis in a note
will be increased by each accrual of the amounts treated as Original Issue
Discount under the constant yield election described in this paragraph.
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EXTENDIBLE NOTES, RENEWABLE NOTES AND RESET NOTES
If so specified in an applicable prospectus supplement relating to a note,
we or a holder may have the option to extend the maturity of or renew the note.
In addition, we may have the option to reset the interest rate, the spread or
the spread multiplier with respect to a note. The treatment of a United States
holder of notes to which these options apply will depend, in part, on the terms
we establish for the notes pursuant to the exercise of the option by us or a
holder. Upon the exercise of any such option, the United States holder of the
notes may be treated for federal income tax purposes as having exchanged the
notes for new notes with revised terms. If the holder is treated as having
exchanged the notes for new notes, the exchange may be treated as either a
taxable exchange or a tax-free recapitalization.
Final Treasury regulations under Section 1001 of the Internal Revenue Code,
published on June 26, 1996, generally provide that the exercise of an option
provided to an issuer or a holder to change a term of a debt instrument (such as
the maturity or the interest rate) in a manner such as that contemplated for
extendible notes, renewable notes and reset notes will create a deemed exchange
of the old notes for new notes if the exercise modifies the terms to a degree
that is "economically significant." With respect to certain types of debt
instruments, under the Section 1001 regulations a deemed exchange for tax
purposes occurs if the exercise of such an option alters the annual yield of the
debt instrument by more than the greater of (i) 25 basis points or (ii) 5
percent of the annual yield of the debt instrument prior to modification. The
exercise of an option that changes the timing of payments under a debt
instrument creates a deemed exchange under the Section 1001 regulations (whether
or not the annual yield is altered) if there is a "material deferral" of
scheduled payments. In this connection, the Section 1001 regulations generally
provide that a deferral of scheduled payments within a safe-harbor period which
begins on the original due date for the first deferred payment and extends for a
period not longer than the lesser of five years or 50 percent of the original
term of the debt instrument will not be considered to be a material deferral.
If the exercise of the option by us or a holder is not treated as an
exchange of the old notes for new notes, no gain or loss will be recognized by a
United States holder as a result thereof. If the exercise of the option is
treated as a taxable exchange of the old notes for new notes, a United States
holder will recognize gain or loss equal to the difference between the issue
price of the new notes and the holder's tax basis in the old notes. However, if
the exercise of the option is treated as a tax-free recapitalization, no loss
will be recognized by a United States holder as a result thereof and gain, if
any, will be recognized to the extent of the fair market value of the excess, if
any, of the principal amount of securities received over the principal amount of
securities surrendered. In this regard, the meaning of the term "principal
amount" is not clear. The term could be interpreted to mean "issue price" with
respect to securities that are received and "adjusted issue price" with respect
to securities that are surrendered. Legislation to that effect has been
introduced in the past. It is not possible to determine whether the legislation
will be reintroduced or enacted, and, if enacted, whether it would apply to a
recapitalization occurring prior to the date of enactment.
The presence of these options may also affect the calculation of interest
income and Original Issue Discount, among other things. For purposes of
determining the yield and maturity of a note, if we have an unconditional option
or combination of options to require payments to be made on the note under an
alternative payment schedule or schedules (e.g., an option to extend or an
option to redeem the note at a fixed premium), we will be deemed to exercise or
not exercise an option or combination of options in a manner that minimizes the
yield on the note. Conversely, a holder having such option or combination of
such options will be deemed to exercise or not exercise the option or
combination of options in a manner that maximizes the yield on the note. If both
we and the holder have options, the foregoing rules are applied to the options
in the order that they may be exercised. Thus, the deemed exercise of one option
may eliminate other options that are later in time. If the exercise of the
option or options actually occurs or does not occur, contrary to what is deemed
to occur pursuant to the foregoing rules, then, solely for purposes of the
accrual of Original Issue Discount, the yield and maturity of the note are
redetermined by treating the note as reissued on the date of the occurrence or
non-occurrence of the exercise for an amount equal to its adjusted issue price
on that date. As described under the heading "Original Issue
Discount -- Floating Rate Notes that are not Variable Rate Debt Instruments,"
depending on the terms of the options described above, the presence of these
options may instead cause the notes to be taxable as contingent notes.
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THE FOREGOING DISCUSSION OF EXTENDIBLE NOTES, RENEWABLE NOTES AND RESET
NOTES IS PROVIDED FOR GENERAL INFORMATION ONLY, AND IS NOT TAX ADVICE.
ADDITIONAL TAX CONSIDERATIONS MAY ARISE FROM THE OWNERSHIP OF THE NOTES IN LIGHT
OF THE PARTICULAR FEATURES OR COMBINATION OF FEATURES OF THE NOTES AND,
ACCORDINGLY, BEFORE YOU PURCHASE THE NOTES, YOU ARE URGED AND EXPECTED TO
CONSULT WITH YOUR OWN LEGAL AND TAX ADVISORS REGARDING THE TAX CONSEQUENCES OF
THE OWNERSHIP OF THE NOTES.
INTEGRATION OF NOTES WITH OTHER FINANCIAL INSTRUMENTS
Any United States holder of notes that also acquires or has acquired any
financial instrument which, in combination with the notes, would permit the
calculation of a single yield to maturity or could generally constitute a
variable rate debt instrument of an equivalent term, may in certain
circumstances treat the notes and the financial instrument as an integrated debt
instrument for purposes of the Internal Revenue Code, with a single
determination of issue price and the character and timing of income, deductions,
gains and losses. (For purposes of determining Original Issue Discount, none of
the payments under the integrated debt instrument will be treated as qualified
stated interest.) Moreover, under the rules applicable to contingent payment
debt instruments, the Internal Revenue Service may require in certain
circumstances that a United States holder who owns notes integrate the notes
with a financial instrument held or acquired by the holder or a related party.
If you are a United States holder, you should consult your tax advisor as to
such possible integration.
SALE OR EXCHANGE OF NOTES
A United States holder generally will recognize gain or loss upon the sale
or exchange of a note equal to the difference between the amount realized upon
the sale or exchange and the United States holder's adjusted basis in the note.
The adjusted basis in the note generally will equal the cost of the note,
increased by Original Issue Discount, acquisition discount or market discount
previously included in respect thereof, and reduced (but not below zero) by any
payments on the note other than payments of qualified stated interest and by any
premium that the United States holder has taken into account. To the extent
attributable to accrued but unpaid qualified stated interest, the amount
realized by the United States holder will be treated as a payment of interest.
Generally, any gain or loss will be capital gain or loss if the note was held as
a capital asset, except as provided under "-- Market Discount," "-- Short-Term
Notes" and "Original Issue Discount -- Floating Rate Notes that are not Variable
Rate Debt Instruments." Special rules apply in determining the tax basis of a
contingent note and the amount realized on the retirement of a contingent note.
For non-corporate taxpayers, capital gain realized on the disposition of an
asset (including a note) held for more than one year is taxed at a maximum rate
of 20%. Capital gain on the disposition of an asset (including a note) held for
not more than one year is taxed at the rates applicable to ordinary income
(i.e., up to 39.6%). The distinction between capital gain or loss and ordinary
income or loss is relevant for purposes of, among other things, limitations on
the deductibility of capital losses.
NON-UNITED STATES HOLDERS
PAYMENT OF INTEREST
Interest paid by us to a non-United States holder will not be subject to
United States federal income or withholding tax if such interest is not
effectively connected with the conduct of a trade or business within the United
States by such non-United States holder and such non-United States holder:
- does not actually or constructively own 10% of our capital or profits;
- is not a "controlled foreign corporation" (within the meaning of the
Internal Revenue Code), with respect to which we are a "related person"
within the meaning of the Internal Revenue Code; and
- certifies, under penalties of perjury, that it is not a United States
person and provides its name and address in an appropriate form
(currently Internal Revenue Service Form W-8) to us or our paying
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agent (or a security clearing organization, bank or other financial
institution that holds the notes on behalf of such non-United States
holder in the ordinary course of its trade or business certifies on
behalf of the non-United States holder that it has received such
certification from the holder and provides a copy to us or our paying
agent).
If you are not qualified for an exemption under these rules, interest
income (including Original Issue Discount) may be subject to withholding tax at
the rate of 30% (or any lower applicable treaty rate). The payment of interest
effectively connected with your United States trade or business, however, would
not be subject to a 30% withholding tax so long as you provide us or our agent
an adequate certification (currently Internal Revenue Service Form 4224), but
such interest would be subject to United States federal income tax on a net
basis at the rates applicable to United States persons generally (and, if you
are a corporation, may also be subject to a 30% branch profits tax).
The Treasury Department recently promulgated final regulations regarding
the withholding and information reporting rules with respect to non-United
States holders. In general, the final regulations do not significantly alter the
substantive withholding and information reporting requirements but rather unify
current certification procedures and forms and clarify reliance standards. In
addition, the final regulations will replace a number of current tax
certification forms (including Internal Revenue Service Form W-8 and Internal
Revenue Service Form 4224, discussed above) with a single, revised Internal
Revenue Service Form W-8 (which, in certain circumstances, requires information
in addition to that previously required). The final regulations are generally
effective for payments made after December 31, 2000, subject to certain
transition rules.
SALE OR EXCHANGE OF NOTES
If you are a non-United States holder, you will generally not be subject to
United States federal income tax on gain recognized on a sale, redemption or
other disposition of a note unless any of the following is true:
- your investment in the notes is effectively connected with a United
States trade or business that is conducted by you;
- if you are a non-United States holder who is a nonresident alien
individual holding the note as a capital asset, you are present in the
United States for 183 or more days in the taxable year within which such
sale, redemption or other disposition takes place and certain other
requirements are met; or
- you are subject to provisions of United States tax law applicable to
certain United States expatriates.
If you have a United States trade or business and the investment in the
notes is effectively connected with such United States trade or business, the
payment of the sales proceeds with respect to the notes would be subject to
United States federal income tax on a net basis at the rates applicable to
United States persons generally (and, if you are a corporation, you may also be
subject to a 30% branch profits tax).
BACKUP WITHHOLDING AND INFORMATION REPORTING
UNITED STATES HOLDERS
We will, where required, report to the United States holders of notes and
the Internal Revenue Service the amount of any interest paid on the notes in
each calendar year and the amounts of tax withheld, if any, from those payments.
Under section 3406 of the Internal Revenue Code and applicable Treasury
regulations, a United States holder of a note may be subject to backup
withholding at the rate of 31% with respect to payments made on the notes as
well as proceeds from the disposition of the notes unless the holder:
- is a corporation or comes within 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.
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The payor will be required to deduct and withhold the prescribed amounts if:
- the payee fails to furnish a taxpayer identification number to the payor
in the manner required by the Internal Revenue Code and applicable
Treasury regulations,
- the Internal Revenue Service notifies the payor that the taxpayer
identification number furnished by the payee is incorrect,
- there has been a "notified payee underreporting" described in section
3406(c) of the Internal Revenue Code, or
- there has been a failure of the payee to certify under penalty of perjury
that the payee is not subject to withholding under section 3406(a)(1)(C)
of the Internal Revenue Code.
In this event, the payor will be required to withhold an amount equal to 31%
from any interest payment made with respect to the United States holder's notes
and any payment to the United States holder of proceeds of a taxable sale or
exchange of the notes. Amounts paid as backup withholding do not constitute an
additional tax and will be credited against the United States holder's United
States federal income tax liabilities, so long as the required information is
provided to the Internal Revenue Service. A United States holder of the notes
who does not provide the payor with his or her correct taxpayer identification
number may be subject to penalties imposed by the Internal Revenue Service.
NON-UNITED STATES HOLDERS
No backup withholding or information reporting will generally be required
with respect to interest on the notes paid to non-United States holders if the
beneficial owner of the note provides a statement described above in "Non-United
States Holders -- Payment of Interest" or the holder is an exempt recipient and,
in each case, the payor does not have actual knowledge that the beneficial owner
is a United States person.
Information reporting requirements and backup withholding tax will not
apply to any payment of the proceeds of the sale of a note effected outside of
the United States by a foreign office of a "broker" (as defined in applicable
Treasury regulations), unless the broker:
- is a United States person,
- is a foreign person that derives 50% or more of its gross income for
certain periods from the conduct of a trade or business in the United
States, or
- is a controlled foreign corporation for United States federal income tax
purposes.
Payment of the proceeds of any such sale effected outside the United States by a
foreign office of any broker that is described in any of the bullet points
immediately above will not be subject to backup withholding tax but will be
subject to information reporting requirements unless the broker has documentary
evidence in its records that the beneficial owner is a non-United States holder
and certain other conditions are met, or the beneficial owner otherwise
establishes an exemption. Payment of the proceeds of any such sale to or through
the United States office of a broker is subject to information reporting and
backup withholding requirements, unless the beneficial owner of the note
provides the statement described above in "Non-United States Holders -- Payment
of Interest" or otherwise establishes an exemption.
If you are a non-United States holder of the notes, you should consult your
tax advisor regarding the application of information reporting and backup
withholding in your particular situation, the availability of an exemption
therefrom, and the procedure for obtaining the exemption, if available. Any
amounts withheld from payment to you under the backup withholding rules will be
allowed as a refund or a credit against your federal income tax liability,
provided that the required information is furnished to the Internal Revenue
Service.
NEW LEGISLATION
AMB Property Corporation is a real estate investment trust. Recently
legislation was enacted that modifies some of the rules that apply to real
estate investment trusts. Specifically, the legislation includes a
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provision that limits a real estate investment trust's ability to own more than
10% by vote or value of the stock of another corporation. As discussed in the
prospectus under the heading "Certain Federal Income Tax
Considerations -- Taxation of the Company -- Asset Tests," a real estate
investment trust cannot currently own more than 10% of the outstanding voting
securities of any one issuer. The legislation allows a real estate investment
trust to own any percentage of the voting stock and value of a taxable real
estate investment trust subsidiary, provided all of a real estate investment
trust's taxable real estate investment trust subsidiaries do not represent more
than 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 assets or other
qualifying assets. This legislation may require us to restructure our interest
in each of our preferred stock subsidiaries because AMB Property Corporation (by
virtue of its ownership interests in us) is considered to own more than 10% of
the value of each of the preferred stock subsidiaries. See the discussion in the
accompanying prospectus under the heading "Description of Certain Provisions of
the Partnership Agreement of the Operating Partnership -- Purpose, Business and
Management" for a discussion of our preferred stock subsidiaries. Additionally,
the legislation includes a provision that prevents a taxable real estate
investment trust subsidiary from deducting interest on debt funded directly or
indirectly by a real estate investment trust if certain tests regarding the
taxable real estate investment trust subsidiary's debt to equity ratio and
interest expense are satisfied. The legislation also includes a provision that
reduces the real estate investment trust distribution requirement from 95% to
90% of a real estate investment trust's taxable income. See the discussion in
the prospectus under the heading "Certain Federal Income Tax
Considerations -- Taxation of the Company -- Annual Distribution Requirements."
The provisions discussed above are generally effective for taxable years ending
after December 31, 2000. In addition, the legislation includes a provision that
provides transition rules to allow corporations, like the preferred stock
subsidiaries, to convert into "taxable real estate investment trust
subsidiaries" tax-free.
The Treasury Department recently published temporary regulations that
include rules that are similar to the rules set forth in Internal Revenue
Service Notice 88-19. See the discussion in the prospectus under the heading
"Certain Federal Income Tax Considerations -- Taxation of the Company." The
temporary regulations provide that a real estate investment trust must file an
election to be subject to the rules of Section 1374 of the Internal Revenue Code
and regulations thereunder with respect to the net built-in-gain of C
corporation assets that become assets of a real estate investment trust by the
qualification of the C corporation as a real estate investment trust or by the
transfer of the assets of a C corporation to a real estate investment trust in a
transaction in which the assets have a carryover basis in the hands of the real
estate investment trust if the C corporation is to avoid the recognition of any
gain arising from such qualification or transaction.
OTHER TAX CONSEQUENCES
You may be required to pay tax in various state or local jurisdictions,
including those in which you reside. Your state and local tax treatment may not
conform to the federal income tax consequences discussed above. Consequently,
before you purchase any notes, you should consult your tax advisor regarding the
effect of state and local tax laws on an investment in the notes.
THE PREVIOUS DISCUSSION OF CERTAIN UNITED STATES FEDERAL INCOME TAX
CONSEQUENCES IS INCLUDED FOR YOUR GENERAL INFORMATION ONLY, AND IS NOT TAX
ADVICE. ACCORDINGLY, BEFORE YOU PURCHASE ANY NOTES, YOU ARE URGED AND EXPECTED
TO CONSULT WITH YOUR TAX ADVISOR WITH RESPECT TO THE UNITED STATES FEDERAL
INCOME TAX CONSEQUENCES OF THE OWNERSHIP AND DISPOSITION OF THE NOTES, INCLUDING
THE APPLICATION AND EFFECT OF THE LAWS OF ANY STATE, LOCAL, FOREIGN, OR OTHER
JURISDICTION.
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SUPPLEMENTAL PLAN OF DISTRIBUTION
We are offering the medium-term notes on a continuing basis through Morgan
Stanley & Co. Incorporated, Banc of America Securities LLC, Banc One Capital
Markets, Inc., Chase Securities Inc., Merrill Lynch, Pierce, Fenner & Smith
Incorporated, J.P. Morgan Securities Inc. and Salomon Smith Barney Inc., which
we refer to individually as an "agent" and, together, as the "agents," who have
agreed to use their reasonable best efforts to solicit offers to purchase notes.
Each agent may reject, in whole or in part, any offer it solicited to purchase
the notes. Unless otherwise specified in the applicable pricing supplement, we
will pay an agent, in connection with sales of these notes resulting from a
solicitation that agent made or an offer to purchase that agent received, a
commission ranging from .125% to .750% of the initial offering price of the
notes to be sold, depending on the maturity of the notes. We and the agent will
negotiate commissions for notes with a maturity of 30 years or greater at the
time of sale.
We reserve the right to sell the notes directly on our own behalf in
jurisdictions where we and our employees are or may become registered or
qualified to do so or in transactions in which they are exempt from having to
register or qualify. We will not pay commissions on any sales we make directly.
We may sell the notes through one or more additional agents or directly to one
or more underwriters for resale to the public. In addition, we may offer other
debt securities from time to time as described in the accompanying prospectus.
Our sale of other debt securities may reduce the principal amount of the notes
which may be offered by this prospectus supplement and the accompanying
prospectus.
We may also sell the notes to an agent as principal for its own account at
discounts to be agreed upon at the time of sale. That agent may resell the notes
to investors and other purchasers at a fixed offering price or at prevailing
market prices, or prices related thereto at the time of resale or otherwise, as
that agent determines and as we will specify in the applicable pricing
supplement. An agent may offer the notes it has purchased as principal to other
dealers. That agent may sell the notes to any dealer at a discount and, unless
otherwise specified in the applicable pricing supplement, the discount allowed
to any dealer will not be in excess of the discount that agent will receive from
us. After the initial public offering of securities that an agent is to resell
on a fixed public offering price basis, the agent may change the public offering
price, concession and discount.
Each of the agents may be deemed to be an "underwriter" within the meaning
of the Securities Act of 1933. We and the agents have agreed to indemnify each
other against certain liabilities, including liabilities under the Securities
Act or to contribute to payments made in respect of those liabilities. We have
agreed to reimburse the agents for specified expenses.
Unless otherwise provided in the applicable pricing supplement, we do not
intend to apply for the listing of the notes on a national securities exchange,
but have been advised by the agents that they intend to make a market in the
notes, as applicable laws and regulations permit. The agents are not obligated
to do so, however, and the agents may discontinue making a market at any time
without notice. No assurance can be given as to the liquidity of any trading
market for the notes. See "Risk Factors -- Absence of Market for the Notes" in
this prospectus supplement.
In order to facilitate the offering of the notes, the agents may engage in
transactions that stabilize, maintain or otherwise affect the price of the
notes. Specifically, the agents may over-allot in connection with any offering
of the notes, creating a short position in the notes for their own accounts. In
addition, to cover over-allotments or to stabilize the price of the notes, the
agents may bid for, and purchase, the notes in the open market. Finally, in any
offering of the notes through a syndicate of underwriters, the underwriting
syndicate may reclaim selling concessions allowed to an underwriter or a dealer
for distributing the notes in the offering of the syndicate repurchases
previously distributed notes in transactions to cover syndicate short positions,
in stabilization transactions or otherwise. Any of these activities may
stabilize or maintain the market price of the notes above independent market
levels. The agents are not required to engage in these activities, and may end
any of these activities at any time.
In the ordinary course of their respective businesses, certain of the
agents and their affiliates have provided various financial advisory and other
general financing and banking services to us and AMB Property Corporation and
their respective affiliates, for which they have received customary
compensation. The agents
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and their affiliates may continue to provide these or similar services in the
future. Morgan Guaranty Trust Company of New York, an affiliate of J.P. Morgan
Securities Inc., is the administrative agent and a lender under our $500 million
credit facility. J.P. Morgan Securities Inc. and Banc of America Securities LLC
are the joint lead arrangers and joint bookmanagers under the credit facility.
Bank of America, N.A. is the syndication agent and a lender under the credit
facility. The Chase Manhattan Bank is the documentation agent and a lender under
the credit facility and Bank One, NA is the managing agent and a lender under
the credit facility. To the extent the proceeds of an offering of the notes are
used to repay borrowings under our credit facility, one or more of the agents
may receive a portion of those proceeds. It is possible that 10% or more of the
net proceeds of an offering of notes will be applied to the repayment of a loan
or loans made to us by one or more of the agents. Under the Conduct Rules of the
National Association of Securities Dealers, Inc., special considerations apply
to a public offering of securities where more than 10% of the net proceeds will
be paid to a participating underwriter of any of its affiliates. Therefore, any
such offering will be conducted pursuant to Rule 2710(c)(8) of the Conduct Rules
of the National Association of Securities Dealers, Inc. Daniel H. Case III, a
director of AMB Property Corporation, is an employee of Chase Securities, Inc.
LEGAL OPINIONS
Certain legal matters will be passed upon for us, including the validity of
the issuance of the notes, by Latham & Watkins, San Francisco, California and by
Tamra D. Browne, Esq., our General Counsel. Certain legal matters will be passed
upon for the agents by Gibson, Dunn & Crutcher LLP, San Francisco, California.
Certain legal matters relating to Maryland law will be passed upon for AMB
Property Corporation, as our general partner, by Ballard Spahr Andrews &
Ingersoll, LLP, Baltimore, Maryland.
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GLOSSARY
"business day" means any day, other than a Saturday or Sunday:
- that is neither a legal holiday nor a day on which banking institutions
are authorized or required by law or regulation to close (x) in The City
of New York or (y) for notes denominated in a specified currency other
than U.S. dollars, Australian dollars or euro, in the principal financial
center of the country of the specified currency or (z) for notes
denominated in Australian dollars, in Sydney;
and
- for notes denominated in euro, that is also a day on which the
Trans-European Automated Real-time Gross Settlement Express Transfer
System is operating.
"Calculation Date" means, unless we specify otherwise in the applicable
pricing supplement, the earlier of (i) the tenth calendar day after each date on
which a new interest rate is determined, or, if the tenth calendar day is not a
business day, the next succeeding business day, or (ii) the business day
immediately before the applicable interest payment date, maturity date or
redemption date.
"CD rate" means, for any interest rate determination date, the rate on that
date for negotiable certificates of deposit having the index maturity specified
in the applicable pricing supplement as published by the Board of Governors of
the Federal Reserve System in "Statistical Release H.15(519), Selected Interest
Rates," or any successor publication of the Board of Governors of the Federal
Reserve System ("H.15(519)") under the heading "CDs (Secondary Market)."
The following procedures will be followed if the CD rate cannot be
determined as described above:
- If the above rate is not published in H.15(519) by 9:00 a.m., New York
City time, on the calculation date, the CD rate will be the rate on that
interest rate determination date set forth in the daily update of
H.15(519), available through the world wide website of the Board of
Governors of the Federal Reserve System at
http://www.bog.frb.fed.us/releases/h15/update, or any successor site or
publication, which is commonly referred to as the "H.15 Daily Update,"
for the interest rate determination date for certificates of deposit
having the index maturity specified in the applicable pricing supplement,
under the caption "CDs (Secondary Market)."
- If the above rate is not yet published in either H.15(519) or the H.15
Daily Update by 3:00 p.m., New York City time, on the calculation date,
the calculation agent will determine the CD rate to be the arithmetic
mean of the secondary market offered rates as of 10:00 a.m., New York
City time, on that interest rate determination date of three leading
nonbank dealers in negotiable U.S. dollar certificates of deposit in The
City of New York selected by the calculation agent, after consultation
with us, for negotiable certificates of deposit of major United States
money center banks of the highest credit standing in the market for
negotiable certificates of deposit with a remaining maturity closest to
the index maturity specified in the applicable pricing supplement in an
amount that is representative for a single transaction in that market at
that time.
- If the dealers selected by the calculation agent are not quoting as set
forth above, the CD rate will remain the CD rate for the immediately
preceding period between interest rate changes, or, if there was no
period immediately preceding, the rate of interest payable will be the
initial interest rate.
"CMT rate" means, for any interest rate determination date, the rate
displayed on the Designated CMT Telerate Page, as defined below, under the
caption ". . . Treasury Constant Maturities . . . Federal Reserve Board Release
H.15 . . . Mondays Approximately 3:45 p.m.," under the column for the Designated
CMT Maturity Index, as defined below, for:
(1) the rate on that interest rate determination date, if the
Designated CMT Telerate Page is 7051; and
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(2) the week or the month, as applicable, ended immediately preceding
the week in which the related interest rate determination date occurs, if
the Designated CMT Telerate Page is 7052.
The following procedures will be followed if the CMT rate cannot be
determined as described above:
- If that rate is no longer displayed on the relevant page, or if not
displayed by 3:00 p.m., New York City time, on the related calculation
date, then the CMT rate will be the Treasury Constant Maturity rate for
the Designated CMT Maturity Index as published in the relevant H.15(519).
- If the rate described in the immediately preceding sentence is no longer
published, or if not published by 3:00 p.m., New York City time, on the
related calculation date, then the CMT rate will be the Treasury Constant
Maturity rate for the Designated CMT Maturity Index or other United
States Treasury rate for the Designated CMT Maturity Index on the
interest rate determination date as may then be published by either the
Board of Governors of the Federal Reserve System or the United States
Department of the Treasury that the calculation agent determines to be
comparable to the rate formerly displayed on the Designated CMT Telerate
Page and published in the relevant H.15(519).
- If the information described in the immediately preceding sentence is not
provided by 3:00 p.m., New York City time, on the related calculation
date, then the calculation agent will determine the CMT rate to be a
yield to maturity, based on the arithmetic mean of the secondary market
closing offer side prices as of approximately 3:30 p.m., New York City
time, on the interest rate determination date, reported, according to
their written records, by three leading primary United States government
securities dealers, which we refer to as a "reference dealer," in The
City of New York, which may include an agent or other affiliates of ours,
selected by the calculation agent as described in the following sentence.
The calculation agent will select five reference dealers, after
consultation with us, and will eliminate the highest quotation or, in the
event of equality, one of the highest, and the lowest quotation or, in
the event of equality, one of the lowest, for the most recently issued
direct noncallable fixed rate obligations of the United States, which are
commonly referred to as "Treasury notes," with an original maturity of
approximately the Designated CMT Maturity Index and a remaining term to
maturity of not less than that Designated CMT Maturity Index minus one
year. If two Treasury notes with an original maturity as described above
have remaining terms to maturity equally close to the Designated CMT
Maturity Index, the quotes for the Treasury note with the shorter
remaining term to maturity will be used.
- If the calculation agent cannot obtain three Treasury notes quotations as
described in the immediately preceding sentence, the calculation agent
will determine the CMT rate to be a yield to maturity based on the
arithmetic mean of the secondary market offer side prices as of
approximately 3:30 p.m., New York City time, on the interest rate
determination date of three reference dealers in The City of New York,
selected using the same method described in the immediately preceding
sentence, for Treasury notes with an original maturity equal to the
number of years closest to but not less than the Designated CMT Maturity
Index and a remaining term to maturity closest to the Designated CMT
Maturity Index and in an amount of at least $100,000,000.
- If three or four (and not five) of the reference dealers are quoting as
described above, then the CMT rate will be based on the arithmetic mean
of the offer prices obtained and neither the highest nor the lowest of
those quotes will be eliminated.
- If fewer than three reference dealers selected by the calculation agent
are quoting as described above, the CMT rate will be the CMT rate for the
immediately preceding period between interest rate changes, or, if there
was no period immediately preceding, the rate of interest payable will be
the initial interest rate.
"commercial paper rate" means, for any interest rate determination date,
the money market yield, calculated as described below, of the rate on that date
for commercial paper having the index maturity specified in the applicable
pricing supplement, as that rate is published in H.15(519), under the heading
"Commercial Paper -- Nonfinancial."
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The following procedures will be followed if the commercial paper rate
cannot be determined as described above:
- If the above rate is not published by 9:00 a.m., New York City time, on
the calculation date, then the commercial paper rate will be the money
market yield of the rate on that interest rate determination date for
commercial paper of the index maturity specified in the applicable
pricing supplement as published in the H.15 Daily Update under the
heading "Commercial Paper -- Nonfinancial."
- If by 3:00 p.m., New York City time, on that calculation date the rate is
not yet published in either H.15(519) or the H.15 Daily Update, then the
calculation agent will determine the commercial paper rate to be the
money market yield of the arithmetic mean of the offered rates as of
11:00 a.m., New York City time, on that interest rate determination date
of three leading dealers of commercial paper in The City of New York
selected by the calculation agent, after consultation with us, for
commercial paper of the index maturity specified in the applicable
pricing supplement, placed for an industrial issuer whose bond rating is
"AA," or the equivalent, from a nationally recognized statistical rating
agency.
- If the dealers selected by the calculation agent are not quoting as
mentioned above, the commercial paper rate for that interest rate
determination date will remain the commercial paper rate for the
immediately preceding period between interest rate changes, or, if there
was no period immediately preceding, the rate of interest payable will be
the initial interest rate.
The "money market yield" will be a yield (expressed as a percentage)
calculated in accordance with the following formula:
<TABLE>
<S> <C> <C> <C>
D X 360
money market yield = ------------- X 100
360 - (D X M)
</TABLE>
where "D" refers to the applicable per year rate for commercial paper quoted on
a bank discount basis and expressed as a decimal and "M" refers to the actual
number of days in the interest period for which interest is being calculated.
"Designated CMT Maturity Index" means the original period to maturity of
the U.S. Treasury securities (either 1, 2, 3, 5, 7, 10, 20 or 30 years) that we
specify in the applicable pricing supplement with respect to which the CMT rate
will be calculated. If no maturity is specified in the applicable pricing
supplement, the Designated CMT Maturity Index shall be two years.
"Designated CMT Telerate Page" means the display on the Dow Jones Telerate
Service (or a successor service) on the page designated in the applicable
pricing supplement (or any other page as may replace the page on that service)
for the purpose of displaying treasury constant maturities as reported in
H.15(519). If we do not specify the page in the applicable pricing supplement,
the Designated CMT Telerate Page will be page 7052, or its successor, for the
most recent week.
"Designated LIBOR Currency" means the currency specified in the applicable
pricing supplement as to which LIBOR shall be calculated or, if no currency is
specified in the applicable pricing supplement, United States dollars.
"Designated LIBOR Page" means (1) if "LIBOR Reuters" is specified in the
applicable pricing supplement, the display on the Reuter Monitor Money Rates
Service (or any successor service) on the page specified in the pricing
supplement (or any other page as may replace the page on the service) for the
purpose of displaying the London interbank rates of major banks for the
Designated LIBOR Currency, or (2) if "LIBOR Telerate" is specified in the
applicable pricing supplement or neither "LIBOR Reuters" nor "LIBOR Telerate" is
specified in the applicable pricing supplement as the method for calculating
LIBOR, the display on Bridge Telerate, Inc. (or any successor service) on the
page specified in the pricing supplement (or any other page as may replace the
page on the service) for the purpose of displaying the London interbank rates of
major banks for the Designated LIBOR Currency.
S-34
<PAGE> 36
"EURIBOR" means, for any interest rate determination date, the rate for
deposits in euros as sponsored, calculated and published jointly by the European
Banking Federation and ACI -- The Financial Market Association, or any company
established by the joint sponsors for purposes of compiling and publishing those
rates, for the index maturity specified in the applicable pricing supplement as
that rate appears on the display on Bridge Telerate, Inc., or any successor
service, on page 248 or any other page as may replace page 248 on that service,
which is commonly referred to as "Telerate Page 248," as of 11:00 a.m. (Brussels
time).
The following procedures will be followed if the rate cannot be determined
as described above:
- If the above rate does not appear, the calculation agent will request the
principal Euro-zone office of each of four major banks in the Euro-zone
interbank market, as selected by the calculation agent, after
consultation with us, to provide the calculation agent with its offered
rate for deposits in euros, at approximately 11:00 a.m. (Brussels time)
on the interest rate determination date, to prime banks in the Euro-zone
interbank market for the index maturity specified in the applicable
pricing supplement commencing on the applicable interest reset date, and
in a principal amount not less than the equivalent of U.S.$1 million in
euro that is representative of a single transaction in euro, in that
market at that time. If at least two quotations are provided, EURIBOR
will be the arithmetic mean of those quotations.
- If fewer than two quotations are provided, EURIBOR will be the arithmetic
mean of the rates quoted by four major banks in the Euro-zone, as
selected by the calculation agent, after consultation with us, at
approximately 11:00 a.m. (Brussels time), on the applicable interest
reset date for loans in euro to leading European banks for a period of
time equivalent to the index maturity specified in the applicable pricing
supplement commencing on that interest reset date in a principal amount
not less than the equivalent of U.S.$1 million in euro.
- If the banks so selected by the calculation agent are not quoting as
mentioned in the previous bullet point, the EURIBOR rate in effect for
the applicable period will be the same as EURIBOR for the immediately
preceding period between interest rate changes, or, if there was no
period immediately preceding, the rate of interest will be the initial
interest rate.
"Euro-zone" means the region comprised of member states of the European
Union that adopt the single currency in accordance with the treaty establishing
the European Community, as amended by the treaty on European Union.
"federal funds rate" means, for any interest rate determination date, the
rate on that date for federal funds as published in H.15(519) under the heading
"Federal Funds (Effective)" as displayed on Bridge Telerate, Inc., or any
successor service, on page 120 or any other page as may replace the applicable
page on that service, which is commonly referred to as "Telerate Page 120."
The following procedures will be followed if the federal funds rate cannot
be determined as described above:
- If the above rate is not published by 9:00 a.m., New York City time, on
the calculation date, the federal funds rate will be the rate on that
interest rate determination date as published in the H.15 Daily Update
under the heading "Federal Funds/Effective Rate."
- If that rate is not yet published in either H.15(519) or the H.15 Daily
Update by 3:00 p.m., New York City time, on the calculation date, the
calculation agent will determine the federal funds rate to be the
arithmetic mean of the rates for the last transaction in overnight
federal funds by each of three leading brokers of federal funds
transactions in The City of New York selected by the calculation agent,
after consultation with us, prior to 9:00 a.m., New York City time, on
that interest rate determination date.
- If the brokers selected by the calculation agent are not quoting as
mentioned above, the federal funds rate relating to that interest rate
determination date will remain the federal funds rate for the immediately
preceding period between interest rate changes, or, if there was no
period immediately preceding, the rate of interest payable will be the
initial interest rate.
S-35
<PAGE> 37
"H.15(519)" means "Statistical Release H.15(519), Selected Interest Rates"
or any successor publication of the Federal Reserve System.
"H.15 Daily Update" means the daily update of H.15(519), available through
the world-wide-web site of the Board of Governors of the Federal Reserve System
at http://www.bog.frb.fed.us/releases/h15/update, or any successor site or
publication.
"index currency" means the currency specified on the face hereof as the
currency for which LIBOR will be calculated, or, if the euro is substituted for
that currency, the index currency will be the euro. If that currency is not
specified on the face hereof, the index currency will be U.S. dollars.
"index maturity" is defined in "Description of Notes -- Floating Rate
Notes" in this prospectus supplement.
"LIBOR" means, initially or for any date on which the interest rate
changes, the rate determined by the calculation agent as follows:
As of the interest rate determination date, LIBOR will be either:
- if "LIBOR Reuters" is specified on the face hereof, the arithmetic mean
of the offered rates for deposits in the index currency having the Index
Maturity designated on the face hereof, commencing on the second London
banking day immediately following that interest rate determination date,
that appear on the Designated LIBOR Page, as defined below, as of 11:00
a.m., London time, on that interest rate determination date, if at least
two offered rates appear on the Designated LIBOR Page; except that if the
specified Designated LIBOR Page, by its terms provides only for a single
rate, that single rate will be used; or
- if "LIBOR Telerate" is specified on the face hereof, the rate for
deposits in the index currency having the Index Maturity designated on
the face hereof, commencing on the second London banking day immediately
following that interest rate determination date or, if pounds sterling is
the index currency, commencing on that interest rate determination date,
that appears on the Designated LIBOR Page at approximately 11:00 a.m.,
London time, on that interest rate determination date.
- If (1) fewer than two offered rates appear and "LIBOR Reuters" is
specified on the face hereof, or (2) no rate appears and the applicable
pricing supplement specifies either (x) "LIBOR Telerate" or (y) "LIBOR
Reuters" and the Designated LIBOR Page by its terms provides only for a
single rate, then the Calculation Agent will request the principal London
offices of each of four major reference banks in the London interbank
market, as selected by the Calculation Agent after consultation with the
Operating Partnership, to provide the Calculation Agent with its offered
quotation for deposits in the index currency for the period of the Index
Maturity specified on the face hereof commencing on the second London
banking day immediately following the interest rate determination date
or, if pounds sterling is the index currency, commencing on that interest
rate determination date, to prime banks in the London interbank market at
approximately 11:00 a.m., London time, on that interest rate
determination date and in a principal amount that is representative of a
single transaction in that index currency in that market at that time.
- If at least two quotations are provided, LIBOR determined on that
interest rate determination date will be the arithmetic mean of those
quotations. If fewer than two quotations are provided, LIBOR will be
determined for the applicable interest reset date as the arithmetic mean
of the rates quoted at approximately 11:00 a.m., London time, or some
other time specified on the face hereof, in the applicable principal
financial center for the country of the index currency on that interest
reset date, by three major banks in that principal financial center
selected by the Calculation Agent, after consultation with the Operating
Partnership, for loans in the index currency to leading European banks,
having the Index Maturity specified on the face hereof and in a principal
amount that is representative of a single transaction in that index
currency in that market at that time.
- If the banks so selected by the Calculation Agent are not quoting as
mentioned in the previous bullet point, LIBOR in effect for the
applicable period will be the same as LIBOR for the immediately
S-36
<PAGE> 38
preceding period between interest rate changes, or, if there was no
period immediately preceding, the rate of interest payable will be the
initial interest rate.
"Designated LIBOR Page" means either (a) if "LIBOR Reuters" is designated
on the face hereof, the display on the Reuters Monitor Money Rates Service for
the purpose of displaying the London interbank rates of major banks for the
applicable index currency or its designated successor, or (b) if "LIBOR
Telerate" is designated on the face hereof, the display on Bridge Telerate Inc.,
or any successor service, on the page specified on the face hereof, or any other
page as may replace that page on that service, for the purpose of displaying the
London interbank rates of major banks for the applicable index currency.
If neither LIBOR Reuters nor LIBOR Telerate is specified on the face
hereof, LIBOR for the applicable index currency will be determined as if LIBOR
Telerate were specified, and, if the U.S. dollar is the index currency, as if
Page 3750, had been specified.
"London banking day" means any day on which dealings in deposits in the
relevant index currency are transacted in the London interbank market.
"prime rate" means, for any interest rate determination date, the rate on
that date as published in H.15(519) under the heading "Bank Prime Loan."
The following procedures will be followed if the prime rate cannot be
determined as described above:
- If the rate is not published prior to 9:00 a.m., New York City time, on
the calculation date, then the prime rate will be the rate on that
interest rate determination date as published in H.15 Daily Update under
the heading "Bank Prime Loan."
- If the rate is not published prior to 3:00 p.m., New York City time, on
the calculation date in either H.15(519) or the H.15 Daily Update, then
the calculation agent will determine the prime rate to be the arithmetic
mean of the rates of interest publicly announced by each bank that
appears on the Reuters Screen USPRIME 1 Page, as defined below, as that
bank's prime rate or base lending rate as in effect for that interest
rate determination date.
- If fewer than four rates appear on the Reuters Screen USPRIME 1 Page for
that interest rate determination date, the calculation agent will
determine the prime rate to be the arithmetic mean of the prime rates
quoted on the basis of the actual number of days in the year divided by
360 as of the close of business on that interest rate determination date
by at least three major banks in The City of New York selected by the
calculation agent, after consultation with us.
- If the banks selected are not quoting as mentioned above, the prime rate
will remain the prime rate for the immediately preceding period between
the interest rate changes, or, if there was no period immediately
preceding, the rate of interest payable will be the initial interest
rate.
"Reuters Screen USPRIME 1 Page" means the display designated as page
"USPRIME 1" on the Reuters Monitor Money Rates Service, or any successor
service, or any other page as may replace the USPRIME 1 Page on that service for
the purpose of displaying prime rates or base lending rates of major United
States banks.
"Treasury rate" means:
- the rate from the auction held on the applicable interest rate
determination date, which we refer to as the "auction," of direct
obligations of the United States, which are commonly referred to as
"Treasury Bills," having the index maturity specified in the applicable
pricing supplement as that rate appears under the caption "INVESTMENT
RATE" on the display on Bridge Telerate, Inc., or any successor service,
on page 56 or any other page as may replace page 56 on that service,
which we refer to as "Telerate Page 56," or page 57 or any other page as
may replace page 57 on that service, which we refer to as "Telerate Page
57," or
S-37
<PAGE> 39
- if the rate described in the first bullet point is not published by 3:00
p.m., New York City time, on the calculation date, the bond equivalent
yield of the rate for the applicable Treasury Bills as published in the
H.15 Daily Update, or other recognized electronic source used for the
purpose of displaying the applicable rate, under the caption "U.S.
Government Securities/Treasury Bills/Auction High," or
- if the rate described in the second bullet point is not published by 3:00
p.m., New York City time, on the related calculation date, the bond
equivalent yield of the auction rate of the applicable Treasury Bills,
announced by the United States Department of the Treasury, or
- in the event that the rate referred to in the third bullet point is not
announced by the United States Department of the Treasury, or if the
auction is not held, the bond equivalent yield of the rate on the
applicable interest rate determination date of Treasury Bills having the
index maturity specified in the applicable pricing supplement published
in H.15(519) under the caption "U.S. Government Securities/Treasury
Bills/Secondary Market," or
- if the rate referred to in the fourth bullet point is not so published by
3:00 p.m., New York City time, on the related calculation date, the rate
on the applicable interest rate determination date of the applicable
Treasury Bills as published in H.15 Daily Update, or other recognized
electronic source used for the purpose of displaying the applicable rate,
under the caption "U.S. Government Securities/ Treasury Bills/Secondary
Market," or
- if the rate referred to in the fifth bullet point is not so published by
3:00 p.m., New York City time, on the related calculation date, the rate
on the applicable interest rate determination date calculated by the
calculation agent as the bond equivalent yield of the arithmetic mean of
the secondary market bid rates, as of approximately 3:30 p.m., New York
City time, on the applicable interest rate determination date, of three
primary United States government securities dealers, which may include
the agent or its affiliates, selected by the calculation agent, for the
issue of Treasury Bills with a remaining maturity closest to the index
maturity specified in the applicable pricing supplement, or
- if the dealers selected by the calculation agent are not quoting as
mentioned in the sixth bullet point, the Treasury rate for the
immediately preceding period between interest rate changes, or, if there
was no period immediately preceding, the rate of interest payable will be
the initial interest rate.
The "bond equivalent yield" means a yield (expressed as a percentage)
calculated in accordance with the following formula:
<TABLE>
<S> <C> <C> <C>
D X N
bond equivalent yield = ------------- X 100
360 - (D X M)
</TABLE>
where "D" refers to the applicable per annum rate for Treasury Bills quoted on a
bank discount basis, "N" refers to 365 or 366, as the case may be, and "M"
refers to the actual number of days in the interest period for which interest is
being calculated.
S-38
<PAGE> 40
PROSPECTUS
$600,000,000
AMB PROPERTY CORPORATION
Common Stock, Preferred Stock,
Depositary Shares and Warrants
$400,000,000
Guarantees
AMB PROPERTY, L.P.
Debt Securities
------------------------
AMB Property Corporation may offer, from time to time, in one or more
series or classes and in amounts, at prices and on terms that it will determine
at the time of offering, with an aggregate public offering price of up to
$600,000,000 (or its equivalent in another currency based on the exchange rate
at the time of sale):
- shares of common stock, $.01 par value per share;
- shares of preferred stock, $.01 par value per share;
- shares of preferred stock represented by depositary shares; and
- warrants to purchase common stock or preferred stock.
AMB Property, L.P. may offer, from time to time, its debt securities in one
or more series, which may be either senior or subordinated, at prices and on
terms that it will determine at the time of offering, with an aggregate public
offering price of up to $400,000,000 (or its equivalent in another currency
based on the exchange rate at the time of sale). AMB Property Corporation may
unconditionally guarantee the payment obligations on the debt securities on the
terms described in this prospectus and in the applicable supplement to this
prospectus.
We will provide the specific terms of these securities in supplements to
this prospectus. You should read this prospectus and the applicable supplement
carefully before you invest.
Our common stock is listed on the New York Stock Exchange under the symbol
"AMB." On December 16, 1998, the last reported sales price of our common stock
on the New York Stock Exchange was $21 5/8 per share.
------------------------
To facilitate maintenance of our qualification as a Real Estate Investment
Trust (a "REIT") for federal income tax purposes, subject to certain exceptions,
we prohibit the ownership, actually or constructively, by any single person of
more than 9.8% (by value or number of shares, whichever is more restrictive) of
the issued and outstanding shares of our common stock and more than 9.8% (by
value or number of shares, whichever is more restrictive) of the issued and
outstanding shares of our Series A Preferred Stock. We will also prohibit,
subject to certain exceptions, the ownership, actually or constructively, of any
shares of our Series B Preferred Stock and any shares of our Series C 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% of our issued and
outstanding capital stock.
------------------------
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED 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 December 17, 1998
<PAGE> 41
WE HAVE NOT AUTHORIZED ANY DEALER, SALESMAN OR OTHER PERSON TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATION OTHER THAN THOSE CONTAINED OR
INCORPORATED BY REFERENCE IN THIS PROSPECTUS AND THE ACCOMPANYING SUPPLEMENT TO
THIS PROSPECTUS. YOU MUST NOT RELY UPON ANY INFORMATION OR REPRESENTATION NOT
CONTAINED OR INCORPORATED BY REFERENCE IN THIS PROSPECTUS OR THE ACCOMPANYING
PROSPECTUS SUPPLEMENT AS IF WE HAD AUTHORIZED IT. THIS PROSPECTUS AND THE
ACCOMPANYING SUPPLEMENT TO THIS PROSPECTUS DO NOT CONSTITUTE AN OFFER TO SELL OR
THE SOLICITATION OF AN OFFER TO BUY ANY SECURITIES OTHER THAN THE REGISTERED
SECURITIES TO WHICH THEY RELATE, NOR DO THIS PROSPECTUS AND THE ACCOMPANYING
SUPPLEMENT TO THIS PROSPECTUS CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF
AN OFFER TO BUY SECURITIES IN ANY JURISDICTION TO ANY PERSON TO WHOM IT IS
UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION IN SUCH JURISDICTION. YOU SHOULD NOT
ASSUME THAT THE INFORMATION CONTAINED IN THIS PROSPECTUS AND THE SUPPLEMENT TO
THIS PROSPECTUS IS CORRECT ON ANY DATE AFTER THEIR RESPECTIVE DATES, EVEN THOUGH
THIS PROSPECTUS OR A SUPPLEMENT IS DELIVERED OR SECURITIES ARE SOLD ON A LATER
DATE.
------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
About This Prospectus....................................... 1
Where You Can Find More Information......................... 1
Incorporation Of Certain Documents By Reference............. 2
Forward Looking Statements.................................. 3
The Company................................................. 4
Use Of Proceeds............................................. 4
Ratios Of Earnings to Fixed Charges And Preferred Dividends
and Distributions......................................... 4
Description Of Debt Securities.............................. 5
Description Of Common Stock................................. 20
Description Of Preferred Stock.............................. 21
Description Of Depositary Shares............................ 34
Description Of Warrants..................................... 37
Restrictions On Ownership And Transfer Of Capital Stock..... 38
Certain Provisions Of Maryland Law And Of Our Charter And
Bylaws.................................................... 40
Description Of Certain Provisions Of The Partnership
Agreement Of The Operating Partnership.................... 43
Certain Federal Income Tax Considerations................... 54
Plan of Distribution........................................ 64
Legal Matters............................................... 65
Experts..................................................... 65
</TABLE>
i
<PAGE> 42
ABOUT THIS PROSPECTUS
This prospectus is part of a registration statement that we filed with the
Securities and Exchange Commission using a "shelf" registration process. Under
this shelf process, we may sell any combination of the common stock, preferred
stock, depositary shares and warrants described in this prospectus in one or
more offerings up to a total dollar amount of $600,000,000 and the Operating
Partnership may sell the debt securities described in this prospectus in one or
more offerings up to a total dollar amount of $400,000,000. This prospectus
provides you with a general description of the securities we may offer. Each
time we sell securities, we will provide a prospectus supplement that will
contain specific information about the terms of that offering. The prospectus
supplement may also add, update or change information contained in this
prospectus. You should read both this prospectus and the applicable prospectus
supplement together with additional information described under the heading
"Where You Can Find More Information."
Unless otherwise indicated or unless the context requires otherwise, all
references in this prospectus to "we," "us," "our" or the "Company" mean AMB
Property Corporation and its subsidiaries, including AMB Property, L.P. (which
we refer to as the "Operating Partnership") and its subsidiaries and, with
respect to the period prior to the Company's initial public offering, the
Company's predecessor, AMB Institutional Realty Advisors, Inc., and certain real
estate investment funds, trusts, corporations and partnerships that prior to the
Company's initial public offering owned properties that they contributed to the
Operating Partnership. In some instances, in order to avoid confusion between
AMB Property Corporation and the Operating Partnership, we refer to AMB Property
Corporation alone as the "Company." When we refer to our "Charter" we mean the
Company's Articles of Incorporation, as supplemented by the Articles
Supplementary establishing the terms of our 8 1/2% Series A Cumulative
Redeemable Preferred Stock (the "Series A Preferred Stock"), the Articles
Supplementary establishing the terms of our 8 5/8% Series B Cumulative
Redeemable Preferred Stock (the "Series B Preferred Stock") and the Articles
Supplementary establishing the terms of our 8.75% Series C Cumulative Redeemable
Preferred Stock (the "Series C Preferred Stock"). When we refer to "Units" we
mean the Operating Partnership's common units and preferred units, including the
8 1/2% Series A Cumulative Redeemable Preferred Units (the "Series A Preferred
Units"), the 8 5/8% Series B Cumulative Redeemable Preferred Units (the "Series
B Preferred Units") and any 8 3/4% Series C Cumulative Redeemable Preferred
Units (the "Series C Preferred Units"), and other partnership interests of the
Operating Partnership of different classes and series with rights, preferences
and privileges that the Company may determine in its capacity as general partner
of the Operating Partnership.
WHERE YOU CAN FIND MORE INFORMATION
The Company and the Operating Partnership file annual, quarterly and
special reports, proxy statements and other information with the Securities and
Exchange Commission (the "SEC"). 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, as amended
(the "Securities Act"). The registration statement contains additional
information about us and the securities. 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.
1
<PAGE> 43
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 of the Company on Form 10-K for the year ended December 31,
1997;
- Quarterly Reports of the Company on Form 10-Q for the quarters ended
March 31, 1998, June 30, 1998 and September 30, 1998;
- Quarterly Reports of the Operating Partnership on Form 10-Q for the
quarters ended June 30, 1998 and September 30, 1998;
- Current Report of the Company on Form 8-K filed on January 13, 1998;
- Current Report of the Company on Form 8-K filed on July 9, 1998;
- Current Report of the Company on Form 8-K filed on December 2, 1998;
- Current Report of the Operating Partnership on Form 8-K filed on December
2, 1998;
- the description of the Company's common stock contained in the Company's
Registration Statement on Form 8-A filed with the SEC on October 28,
1997;
- the description of the Company's Series A Preferred Stock contained in
the Company's Registration Statement on Form 8-A filed with the SEC on
July 14, 1998;
- the report, financial statements and financial statement schedule for the
Operating Partnership from our Registration Statement on Form S-11 (No.
333-49163);
- the report, financial statements and financial statement schedule for the
AMB Contributed Properties from our Registration Statement on Form S-11
(No. 333-49163);
- the reports and financial statements for 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);
and
- all documents filed by either the Company or the Operating Partnership
with the SEC pursuant to Sections 13(a), 13(c), 14 or 15(d) of the
Securities Exchange Act of 1934, as amended (the "Exchange Act") 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).
You should rely only on the information incorporated by reference or set
forth in this prospectus or the applicable prospectus supplement. We have not
authorized anyone else to provide you with different information. We may only
use this prospectus to sell securities if it is accompanied by a prospectus
supplement. We are only offering these securities in states where the offer is
permitted. You should not assume that the information in this prospectus or the
applicable prospectus supplement is accurate as of any date other than the dates
on the front of these documents.
2
<PAGE> 44
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 contained or 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 identify forward-looking statements by discussions of strategy, plans or
intentions. 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, risks and uncertainties affecting property
development and construction (including construction delays, cost overruns, our
inability to obtain necessary permits and public opposition to such activities),
our failure to qualify and maintain our status as a REIT under the Internal
Revenue Code of 1986, as amended (the "Code"), environmental uncertainties,
risks related to natural disasters, financial market fluctuations, changes in
real estate and zoning laws and increases in real property tax rates. Our
success also depends upon economic trends generally, including interest rates,
income tax laws, governmental regulations, legislation, population changes and
certain other matters discussed in this prospectus and the applicable prospectus
supplement, including under the heading "Risk Factors" in the prospectus
supplement. We caution you not to place undue reliance on forward-looking
statements, which reflect our analysis only.
3
<PAGE> 45
THE COMPANY
We are one of the largest publicly-traded real estate companies in the
United States. As of November 30, 1998, we owned 587 industrial buildings
located in 26 markets throughout the United States, including 40 industrial
buildings acquired since September 30, 1998, and 38 retail centers located in 16
markets throughout the United States, including one center acquired since
September 30, 1998. As of September 30, 1998, our industrial buildings,
principally warehouse distribution properties, encompassed approximately 53.1
million rentable square feet and, as of the same date, were 95.9% leased to over
1,500 tenants. As of September 30, 1998, our retail centers, principally
grocer-anchored community shopping centers, encompassed approximately 6.9
million rentable square feet and, as of the same date, were 94.8% leased to over
900 tenants. We own substantially all of our assets, and conduct substantially
all of our business, through the Operating Partnership and its subsidiaries.
We are engaged in the business of acquiring and operating industrial
buildings and community shopping centers in target markets nationwide. We are
led by Hamid R. Moghadam, our Chief Executive Officer and one of our three
founders. Douglas D. Abbey and T. Robert Burke, our other two founders, also
play active roles in our operations as the Chairman of our Investment Committee
and the Chairman of our Board of Directors, respectively. Our 10 executive
officers have an average of 23 years of experience in the real estate industry
and have worked together for an average of nine years building the AMB real
estate business.
The Company was organized in November 1997 and commenced operations upon
the completion of the initial public offering on November 26, 1997. We operate
as a self-administered and self-managed real estate company and believe that we
have qualified and that we will continue to qualify as a REIT for federal income
tax purposes beginning with the year ended December 31, 1997.
USE OF PROCEEDS
Unless we indicate otherwise in the applicable prospectus supplement, the
Operating Partnership intends to use the net proceeds from the sale of debt
securities for general purposes, which may include the acquisition or
development of additional properties and the repayment of indebtedness. Unless
we indicate otherwise in the applicable prospectus supplement, the Company will
invest any proceeds from the sale of common stock, preferred stock, depositary
shares or warrants in the Operating Partnership, which will use the proceeds as
described above unless we indicate otherwise in the applicable prospectus
supplement. Initially, we may temporarily invest net proceeds from the sale of
the securities in short-term securities.
RATIOS OF EARNINGS TO FIXED CHARGES AND
PREFERRED DIVIDENDS AND DISTRIBUTIONS
The ratio of earnings to fixed charges and preferred dividends for the
Company for the nine month period ended September 30, 1998 was 2.6x. Prior to
1998, the Company did not have any outstanding preference securities. The ratio
of earnings to fixed charges for the Company for the nine month period ended
September 30, 1998 was 2.7x and for the fiscal year ended December 31, 1997 was
5.6x. The Company's fiscal year ended December 31, 1997 includes the historical
results of AMB Institutional Realty Advisors, Inc., the Company's predecessor,
for the period from January 1, 1997 through November 25, 1997 and the Company's
historical results for the period from November 26, 1997 to December 31, 1997.
The ratio of earnings to fixed charges for AMB Institutional Realty Advisors,
Inc. for the fiscal years ended December 31, 1993, 1994, 1995 and 1996 are not
applicable because AMB Institutional Realty Advisors, Inc. had no or immaterial
fixed charges.
The ratio of earnings to fixed charges and preferred distributions for the
Operating Partnership for the nine month period ended September 30, 1998 was
2.6x. Prior to 1998, the Operating Partnership did not have any outstanding
preference securities. The ratios of earnings to fixed charges for the Operating
Partnership for the nine month period ended September 30, 1998 was 2.7x and for
the period from inception (November 26, 1997) to December 31, 1997 was 3.1x.
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We have computed the ratios of earnings to fixed charges by dividing fixed
charges, excluding capitalized interest, plus income from continuing operations
including income from minority interests which have fixed charges and including
distributed operating income from unconsolidated joint ventures instead of
income from unconsolidated joint ventures, by fixed charges. Fixed charges
consist of interest costs, whether expensed or capitalized, the interest
component of rental expense and amortization of debt issuance costs.
We have computed the ratios of earnings to fixed charges and preferred
dividends/distributions by dividing fixed charges, excluding capitalized
interest, plus income from continuing operations including income from minority
interests which have fixed charges and including distributed operating income
from unconsolidated joint ventures instead of income from unconsolidated joint
ventures, by fixed charges plus preferred dividends/distributions. Fixed charges
consist of interest costs, whether expensed or capitalized, the interest
component of rental expense and amortization of debt issuance costs.
DESCRIPTION OF DEBT SECURITIES
GENERAL
The debt securities will be direct, non-convertible, obligations of the
Operating Partnership, which may be secured or unsecured, and which may be
senior or subordinated indebtedness of the Operating Partnership. The Operating
Partnership will issue the debt securities under an Indenture dated as of June
30, 1998, as supplemented by the First Supplemental Indenture dated as of June
30, 1998, the Second Supplemental Indenture dated as of June 30, 1998 and the
Third Supplemental Indenture dated as of June 30, 1998, and as further amended
or supplemented from time to time, among the Operating Partnership, the Company
and State Street Bank and Trust Company of California, N.A., as Trustee
(together with any other trustee(s) appointed in a supplemental indenture with
respect to a particular series of debt securities, the "trustee"). The indenture
is subject to, and governed by, the Trust Indenture Act of 1939, as amended. The
statements made in this section relating to the indenture and the debt
securities are summaries of certain provisions of the debt securities and the
indenture. These summaries are not complete. For more detail you should refer to
the indenture, which we have filed as an exhibit to the registration statement
of which this prospectus is a part.
TERM
We will describe the particular terms of the debt securities offered by a
prospectus supplement in the applicable prospectus supplement, along with any
applicable modifications of or additions to the general terms of the debt
securities as described in this prospectus. Accordingly, for a description of
the terms of any series of debt securities, you must refer to both the
prospectus supplement relating to that series and the description of the debt
securities set forth in this prospectus. A prospectus supplement may change any
of the terms of the debt securities described in this prospectus.
The Operating Partnership may offer under this prospectus up to
$400,000,000 (or its equivalent in another currency based on the exchange rate
at the time of sale) aggregate principal amount of debt securities or if debt
securities are issued at a discount, such principal amount as may be sold for an
initial public offering price of up to $400,000,000. Unless we state otherwise
in any prospectus supplement, the Operating Partnership may issue the debt
securities in one or more series, as established from time to time by the
Operating Partnership. The Operating Partnership need not issue all debt
securities of one series at the same time and, unless otherwise provided, a
series may be reopened, without the consent of the holders of the debt
securities of that series, for issuances of additional debt securities of that
series.
The Operating Partnership may, but need not, designate more than one
trustee under the indenture, each with respect to one or more series of debt
securities. Any trustee may resign or be removed with respect to one or more
series of debt securities, and a successor trustee may be appointed to act with
respect to the series. If two or more persons are acting as trustee with respect
to different series of debt securities, each such trustee will be a trustee of a
trust under the indenture separate and apart from the trust administered by any
other trustee and, except as we state otherwise in this prospectus, any action
to be taken by a trustee may be taken
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by each trustee with respect to, and only with respect to, the one or more
series of debt securities for which it is trustee.
The following summaries set forth certain general terms and provisions of
the indenture and the debt securities. The prospectus supplement relating to the
series of debt securities being offered will contain further terms of the debt
securities, including the following specific terms:
- the title of the debt securities;
- the limit on the aggregate principal amount of the debt securities of the
series that may be authenticated and delivered under the indenture;
- the date or dates, or the method for determining the date or dates, on
which the Operating Partnership will pay the principal of the debt
securities;
- the rate or rates (which may be fixed or variable), or the method by
which such rate or rates will be determined, at which the debt securities
will bear interest, if any;
- the date or dates (or the method for determining the date or dates) from
which any interest will accrue, the dates upon which any interest will be
payable and the record dates for payment of interest (or the method by
which the record dates will be determined);
- the place or places, if any, other than or in addition to the Borough of
Manhattan, The City of New York, where the principal of (and premium, if
any) and interest, if any, on the debt securities will be payable, where
the debt securities may be surrendered for conversion or registration of
transfer or exchange and where notices or demands to or upon the
Operating Partnership in respect of the debt securities and the indenture
may be served;
- any obligation the Operating Partnership has to redeem, repay or
repurchase the debt securities, in whole or in part, at the option of a
holder of the debt securities, and the period or periods within which,
the date or dates on which the price or prices at which and the terms and
conditions upon which the Operating Partnership will redeem, repay or
repurchase the debt securities;
- if other than the trustee, the identity of each security registrar and/or
paying agent;
- any provisions granting special rights to holders of the debt securities;
- any deletions from, modifications of, or additions to the events of
default or covenants of the Operating Partnership with respect to the
debt securities, whether or not such events of default or covenants are
consistent with the events of default or covenants with the indenture;
- the person to whom any interest will be payable, if other than the person
in whose name the debt security is registered; and
- any other terms of the debt securities and any deletions from or
modifications or additions to the indenture in respect of the debt
securities (whether or not consistent with the other provisions of the
indenture).
The Operating Partnership may issue debt securities at a discount below
their principal amount and provide for less than the entire principal amount of
the debt securities to be payable upon declaration of acceleration of maturity.
In such cases, we will describe any material U.S. federal income tax, accounting
and other considerations in the applicable prospectus supplement.
DENOMINATIONS AND INTEREST
Unless we specify otherwise in the applicable prospectus supplement, the
debt securities of any series will be issuable in denominations of $1,000 and
integral multiples thereof. Unless we specify otherwise in the applicable
prospectus supplement, interest on any series of debt securities will be payable
to the person in whose name the security is registered at the close of business
on the record date for such interest at the office of the Operating Partnership
maintained for such purpose within the City and State of New York. However,
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unless we provide otherwise in the applicable prospectus supplement, the
Operating Partnership may make interest payments by check mailed to the address
of the person entitled to the interest as it appears in the applicable register
for debt securities or by wire transfer of funds to such person at an account
maintained within the United States.
GLOBAL NOTES
Unless we specify otherwise in the applicable prospectus supplement, the
debt securities of each series will be issued in the form of one or more fully
registered book-entry debt securities of such series (each, a "Global Note")
that will be deposited with, or on behalf of The Depository Trust Company, New
York, New York ("DTC"). Global Notes will be issued in fully registered form.
The Operating Partnership anticipates that the Global Notes will be
deposited with, or on behalf of DTC, and that such Global Note will be
registered in the name of Cede & Co., DTC's nominee. Unless we specify otherwise
in the applicable prospectus supplement, the Operating Partnership further
anticipates that the following provisions will apply to the depository
arrangements with respect to the Global Notes.
So long as DTC or its nominee is the registered owner of the Global Notes,
DTC or its nominee, as the case may be, will be considered the sole holder of
the debt securities represented by the Global Note for all purposes under the
indenture. Except as described below, owners of beneficial interests in the
Global Notes will not be entitled to have debt securities represented by such
Global Note registered in their names, will not receive or be entitled to
receive physical delivery of debt securities in certificated form and will not
be considered the owners or holders of the debt securities under the indenture.
The laws of some states require that certain purchasers of securities take
physical delivery of such securities in certificated form; accordingly, such
laws may limit the transferability of beneficial interests in the Global Notes.
The Global Notes will be exchangeable for certificated debt securities only
if:
- DTC notifies the Operating Partnership that it is unwilling or unable to
continue as depository or DTC ceases to be a clearing agency registered
under the Exchange Act (if so required by applicable law or regulation)
and, in either case, a successor depository is not appointed by the
Operating Partnership within 90 days after the Operating Partnership
receives such notice or becomes aware of such ineligibility;
- the Operating Partnership in its sole discretion determines that the
Global Notes shall be exchangeable for certificated debt securities; or
- there shall have occurred and be continuing an event of default with
respect to debt securities of any series under the indenture and
beneficial owners representing a majority in aggregate principal amount
of the debt securities of such series represented by a Global Note advise
DTC to cease acting as depository. Upon any such exchange, owners of a
beneficial interest in such Global Note will be entitled to physical
delivery of individual debt securities of such series in certificated
form of like tenor, terms and rank, equal in principal amount to such
beneficial interest, and to have such debt securities in certificated
form registered in the names of the beneficial owners, which names are
expected to be provided by DTC's relevant Participants (as identified by
DTC) to the trustee.
Debt securities so issued in certificated form will be issued in denominations
of $1,000 or any integral multiple thereof, and will be issued in registered
form only, without coupons.
The following is based on information furnished to us by DTC:
DTC will act as securities depository for the debt securities. The debt
securities will be issued as fully registered securities registered in the name
of Cede & Co. (DTC's partnership nominee). One fully registered certificate will
be issued with respect to each $200 million (or such other amount as shall be
permitted by DTC from time to time) of principal amount of the debt securities,
and an additional certificate will be issued with respect to any remaining
principal amount.
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DTC is a limited purpose trust company organized under the New York Banking
Law, a "banking organization" within the meaning of the New York Banking Law, a
member of the Federal Reserve System, a clearing corporation" within the meaning
of the New York Uniform Commercial Code, and a "clearing agency" registered
pursuant to the provisions of Section 17A of the Exchange Act. DTC holds
securities that its participants ("participants") deposit with DTC. DTC also
facilitates the settlement among participants of securities transactions, such
as transfers and pledges, in deposited securities through electronic
computerized book-entry changes in participants' accounts, thereby eliminating
the need for physical movement of securities certificates. Direct participants
include securities brokers and dealers, banks, trust companies, clearing
corporations and certain other organizations ("direct participants"). DTC is
owned by a number of its direct participants and by the New York Stock Exchange,
Inc., the American Stock Exchange, Inc. and the National Association of
Securities Dealers, Inc. Access to the DTC system is also available to others,
such as securities brokers and dealers, and banks and trust companies that clear
through or maintain a custodial relationship with a direct participant, either
directly or indirectly ("indirect participants"). The rules applicable to DTC
and its Participants are on file with the SEC.
Purchases of debt securities under the DTC system must be made by or
through direct participants, which will receive a credit for the debt securities
on DTC's records. The ownership interest of each actual purchaser of each debt
security ("beneficial owner") is in turn recorded on the Direct and Indirect
participants' records. A beneficial owner does not receive written confirmation
from DTC of its purchase, but is expected to receive a written confirmation
providing details of the transaction, as well as periodic statements of its
holdings, from the direct or indirect participant through which such beneficial
owner entered into the transaction. Transfers of ownership interests in debt
securities are accomplished by entries made on the books of direct and indirect
participants acting on behalf of beneficial owners. Beneficial owners do not
receive certificates representing their ownership interests in debt securities,
except under the circumstances described above.
To facilitate subsequent transfers, the debt securities are registered in
the name of DTC's nominee, Cede & Co. The deposit of the debt securities with
DTC and their registration in the name of Cede & Co. will effect no change in
beneficial ownership. DTC has no knowledge of the actual beneficial owners of
the debt securities; DTC records reflect only the identity of the direct
participants to whose accounts debt securities are credited, which may or may
not be the beneficial owners. The participants remain responsible for keeping
account of their holdings on behalf of their customers.
Delivery of notices and other communications by DTC to direct participants,
by direct participants to indirect participants, and by direct participants and
indirect participants to beneficial owners are governed by arrangements among
them, subject to any statutory or regulatory requirements as may be in effect
from time to time.
Neither DTC nor Cede & Co. consents or votes with respect to the debt
securities. Under its usual procedures, DTC mails a proxy (an "omnibus proxy")
to the issuer as soon as possible after the record date. The omnibus proxy
assigns Cede & Co.'s consenting or voting rights to those direct participants to
whose accounts the debt securities are credited on the record date (identified
on a list attached to the omnibus proxy).
Principal payments, premium payments, if any, and interest payments, if
any, on the debt securities will be made to DTC. DTC's practice is to credit
direct participants' accounts on the payment date in accordance with their
respective holdings as shown on DTC's records unless DTC has reason to believe
that it will not receive payment on the payment date. Payments by direct and
indirect participants to beneficial owners are governed by standing instructions
and customary practices, as is the case with securities held for the accounts of
customers in bearer form or registered in "street name" and are the
responsibility of such direct and indirect participants and not of DTC, the
Trustee or the Operating Partnership, subject to any statutory or regulatory
requirements as may be in effect from time to time. Payment of principal (and
premium, if any) and interest, if any, to DTC is the responsibility of the
Operating Partnership or the trustee, disbursement of such payments to direct
participants is the responsibility of DTC, and disbursement of such payments to
the beneficial owners is the responsibility of direct and indirect participants.
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If applicable, redemption notices shall be sent to Cede & Co. If less than
all of the debt securities of any series represented by the Global Notes are
being redeemed, DTC's practice is to determine by lot the amount of the interest
of each direct participant in such issue to be redeemed.
DTC may discontinue providing its services as securities depository with
respect to the debt securities of any series at any time by giving reasonable
notice to the Operating Partnership or the trustee. Under such circumstances, in
the event that a successor securities depository is not appointed, certificates
are required to be printed and delivered as described above.
The Operating Partnership may decide to discontinue use of the system of
book-entry transfers through DTC (or a successor securities depository). In that
event, certificates will be printed and delivered as described above.
Neither the Operating Partnership, the underwriters, the trustee, or any
applicable paying agent will have any responsibility or liability for any aspect
of the records relating to or payments made on account of beneficial interests
in the debt securities, or for maintaining, supervising or reviewing any records
relating to such beneficial interest.
Notices or demands to or upon the Operating Partnership in respect of the
debt securities and the indenture may be served and, in the event that debt
securities are issued in definitive certificated form, debt securities may be
surrendered for payment, registration of transfer or exchange, at the office or
agency of the Operating Partnership maintained for such purpose in the Borough
of Manhattan, The City of New York, which shall initially be the office of State
Street Bank and Trust Company, an affiliate of the Trustee, which on the date of
this Prospectus is located at 61 Broadway, 15th Floor, New York, New York.
GUARANTEES
Unless we specify otherwise in the applicable prospectus supplement, the
indenture provides that the Operating Partnership's obligations under the debt
securities will be guaranteed by the Company. The obligations of the Company
under any guarantee will be limited to the maximum amount permitted under
applicable federal or state law. A supplemental indenture establishing the terms
of a particular series of debt securities may provide that such series will not
be guaranteed by the Company.
MERGER, CONSOLIDATION OR SALE OF ASSETS
Unless we specify otherwise in the applicable prospectus supplement, the
indenture provides that the Operating Partnership will not, in any transaction
or series of transactions, consolidate with, or sell, lease, assign, transfer or
otherwise convey all or substantially all of its assets to, or merge with or
into any other person unless:
- either the Operating Partnership is the continuing person or the
successor person (if other than the Operating Partnership) is a
corporation, partnership, limited liability company or other entity
organized and existing under the laws of the United States of America or
a State of the United States of America or the District of Columbia and
expressly assumes the Operating Partnership's obligations on the debt
securities and under the indenture;
- immediately after giving effect to the transaction and treating any Debt
(including Acquired Debt) which becomes an obligation of the Operating
Partnership or any of its affiliates as a result of such transaction as
having been incurred by the Operating Partnership or such affiliate at
the time of such transaction, no event of default under the indenture,
and no event which, after notice or lapse of time, or both, would become
an event of default, shall have occurred and be continuing; and
- the Operating Partnership delivers to the trustee an officers'
certificate and legal opinion covering these conditions.
In the event that the Operating Partnership is not the continuing person, then,
for purposes of the second bullet point above, the successor person will be
deemed to be the Operating Partnership.
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Upon any such merger, consolidation, sale, assignment, transfer, lease or
conveyance in which the Operating Partnership is not the continuing legal
entity, the successor entity formed by the consolidation or into which the
Operating Partnership is merged or to which the sale, assignment, transfer,
lease or other conveyance is made shall succeed to, and be substituted for, and
may exercise every right and power of, the Operating Partnership under the
indenture with the same effect as if the successor entity has been named as the
Operating Partnership in the indenture and the Operating Partnership will be
released (except in the case of a lease) from its obligations under the
indenture and the debt securities.
The indenture provides that neither the Company, as guarantor of a series
of debt securities, nor any other guarantor, will in any transaction or series
of transactions, consolidate with, or sell, lease, assign, transfer or otherwise
convey all or substantially all of its assets to, or merge with or into any
other person unless:
- either such guarantor is the continuing person or the successor person
(if other than such guarantor) is a corporation, partnership, limited
liability company or other entity organized and existing under the laws
of the United States of America or a State of the United States of
America or the District of Columbia and expressly assumes such
guarantor's obligations on the debt securities and under the indenture;
- immediately after giving effect to the transaction, no event of default,
and no event which, after notice or lapse of time, or both, would become
an event of default, shall have occurred and be continuing; and
- such guarantor delivers to the trustee an officers' certificate and legal
opinion covering these conditions.
In the event that such guarantor is not the continuing corporation, then, for
purposes of the second bullet point above, the successor corporation will be
deemed to be such guarantor.
Any consolidation, merger, sale, lease, assignment, transfer or conveyance
permitted above is also subject to the condition precedent that the trustee
receive an officers' certificate and legal opinion to the effect that any such
consolidation, merger, sale, lease, assignment, transfer or conveyance, and the
assumption by any successor corporation, complies with the provisions of the
indenture and that all conditions precedent provided for in the indenture
relating to such transaction have been complied with.
A supplemental indenture establishing the terms of a particular series of
debt securities may provide that such series will not be guaranteed by the
Company.
CERTAIN COVENANTS
Unless we specify otherwise in the applicable prospectus supplement, the
indenture contains the following covenants:
Aggregate Debt Test. The Operating Partnership will not, and will not
permit any of its subsidiaries to, incur any Debt (including Acquired Debt) if,
immediately after giving effect to the incurrence of such Debt and the
application of the proceeds from such Debt on a pro forma basis, the aggregate
principal amount of all outstanding Debt of the Operating Partnership and its
subsidiaries (determined on a consolidated basis in accordance with generally
accepted accounting principles) is greater than 60% of the sum of the following
(without duplication):
- the Total Assets of the Operating Partnership and its subsidiaries as of
the last day of the then most recently ended fiscal quarter; and
- the aggregate purchase price of any real estate assets or mortgages
receivable acquired, and the aggregate amount of any securities offering
proceeds received (to the extent such proceeds were not used to acquire
real estate assets or mortgages receivable or used to reduce Debt) by the
Operating Partnership or any of its subsidiaries since the end of such
fiscal quarter, including the proceeds obtained from the incurrence of
such additional Debt, determined on a consolidated basis in accordance
with generally accepted accounting principles.
Debt Service Test. The Operating Partnership will not, and will not permit
any of its subsidiaries to, incur any Debt (including Acquired Debt) if the
ratio of Consolidated Income Available for Debt Service to
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Annual Debt Service Charge for the period consisting of the four consecutive
fiscal quarters most recently ended prior to the date on which such additional
Debt is to be incurred shall have been less than 1.5:1 on a pro forma basis
after giving effect to the incurrence of such Debt and the application of the
proceeds from such Debt, and calculated on the following assumptions:
- such Debt and any other Debt (including Acquired Debt) incurred by the
Operating Partnership or any of its subsidiaries since the first day of
such four-quarter period had been incurred, and the application of the
proceeds from such Debt (including to repay or retire other Debt) had
occurred, on the first day of such period;
- the repayment or retirement of any other Debt of the Operating
Partnership or any of its subsidiaries since the first day of such
four-quarter period had occurred on the first day of such period (except
that, in making this computation, the amount of Debt under any revolving
credit facility, line of credit or similar facility will be computed
based upon the average daily balance of such Debt during such period);
and
- in the case of any acquisition or disposition by the Operating
Partnership or any of its subsidiaries of any asset or group of assets
with a fair market value in excess of $1 million, since the first day of
such four-quarter period, whether by merger, stock purchase or sale or
asset purchase or sale or otherwise, such acquisition or disposition had
occurred as of the first day of such period with the appropriate
adjustments with respect to such acquisition or disposition being
included in such pro forma calculation.
If the Debt giving rise to the need to make the calculation described above
or any other Debt incurred after the first day of the relevant four-quarter
period bears interest at a floating rate, then, for purposes of calculating the
Annual Debt Service Charge, the interest rate on such Debt will be computed on a
pro forma basis by applying the average daily rate which would have been in
effect during the entire four-quarter period to the greater of the amount of
such Debt outstanding at the end of such period or the average amount of Debt
outstanding during such period.
Secured Debt Test. The Operating Partnership will not, and will not permit
any of its subsidiaries to, incur any Debt (including Acquired Debt) secured by
any Lien on any property or assets of the Operating Partnership or any of its
subsidiaries, whether owned on the date of this indenture or subsequently
acquired, if, immediately after giving effect to the incurrence of such Debt and
the application of the proceeds from such debt on a pro forma basis, the
aggregate principal amount (determined on a consolidated basis in accordance
with generally accepted accounting principles) of all outstanding Debt of the
Operating Partnership and its subsidiaries which is secured by a Lien on any
property or assets of the Operating Partnership or any of its subsidiaries is
greater than 40% of the sum of (without duplication) the following:
- the Total Assets of the Operating Partnership and its subsidiaries as of
the last day of the then most recently ended fiscal quarter; and
- the aggregate purchase price of any real estate assets or mortgages
receivable acquired, and the aggregate amount of any securities offering
proceeds received (to the extent such proceeds were not used to acquire
real estate assets or mortgages receivable or used to reduce Debt) by the
Operating Partnership or any of its subsidiaries since the end of such
fiscal quarter, including the proceeds obtained from the incurrence of
such additional debt, determined on a consolidated basis in accordance
with generally accepted accounting principles.
Maintenance of Total Unencumbered Assets. The Operating Partnership will
not have at any time Total Unencumbered Assets of less than 150% of the
aggregate principal amount of all outstanding Unsecured Debt of the Operating
Partnership and its subsidiaries determined on a consolidated basis in
accordance with generally accepted accounting principles.
Existence. Except as permitted under "-- Merger, Consolidation or Sale of
Assets," the Operating Partnership will do or cause to be done all things
necessary to preserve and keep in full force and effect its existence, rights
(charter and statutory) and franchises. However, the Operating Partnership will
not be
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required to preserve any right or franchise if the Board of Directors of the
Company determines that the preservation of the right or franchise is no longer
desirable in the conduct of its business and that the loss of the right or
franchise is not disadvantageous in any material respect to the holders of the
debt securities.
Maintenance of Properties. The Operating Partnership will cause all of its
properties used or useful in the conduct of its business or the business of any
subsidiary to be maintained and kept in good condition, repair and working order
and supplied with all necessary equipment and cause all necessary repairs to be
made, all as in the judgment of the Operating Partnership and the Company may be
necessary in order for the Operating Partnership to all times properly and
advantageously conduct its business in connection with the properties.
Insurance. The Operating Partnership will, and will cause each of its
subsidiaries to, keep in force upon all of its properties and operations
insurance policies carried with responsible companies in customary amounts and
covering customary risks in accordance with prevailing market conditions and
availability.
Payment of Taxes and Other Claims. The Operating Partnership will pay or
discharge or cause to be paid or discharged before it becomes delinquent:
- all taxes, assessments and governmental charges levied or imposed on it
or any subsidiary or on its or any subsidiary's income, profits or
property; and
- all lawful claims for labor, materials and supplies that, if unpaid,
might by law become a lien upon its or any subsidiary's property.
However, the Operating Partnership will not be required to pay or
discharge or cause to be paid or discharged any tax, assessment, charge
or claim the amount, applicability or validity of which it is contesting
in good faith by appropriate proceedings.
Provision of Financial Information. The Operating Partnership will:
- file with the trustee, within 15 days after the Operating Partnership or
the Company is required to file them with the SEC, copies of the annual
reports and information, documents and other reports which the Operating
Partnership or the Company may be required to file with the SEC pursuant
to Section 13 or Section 15(d) of the Exchange Act; or, if the Operating
Partnership or the Company is not required to file information, documents
or reports pursuant to those Sections, then the Operating Partnership
will file with the trustee and the SEC, in accordance with rules and
regulations prescribed by the SEC, such of the supplementary and periodic
information, documents and reports which Section 13 of the Exchange Act
may require with respect to a security listed and registered on a
national securities exchange;
- file with the trustee and the SEC, in accordance with the rules and
regulations prescribed from time to time by the SEC, any additional
information, documents and reports with respect to compliance by the
Operating Partnership and the Company with the conditions and covenants
of the indenture as such rules and regulations may require; and
- transmit to the holders of the debt securities, within 30 days after
filing with the trustee, in the manner and to the extent provided in the
Trust Indenture Act of 1939, as amended, such summaries of any
information, documents and reports required to be filed by the Operating
Partnership and the Company pursuant to the bullet points above as the
Commission's rules and regulations may require.
Subsidiary Guarantees. The Operating Partnership will not permit any of its
subsidiaries to guarantee or secure through the granting of liens, the payment
of any Debt of the Operating Partnership or any guarantor. The indenture also
provides that the Operating Partnership will not and will not permit any of its
subsidiaries to pledge any intercompany notes representing obligations of any of
its subsidiaries, to secure the payment of any debt of the Operating Partnership
or any guarantor unless such subsidiary (a "Subsidiary Guarantor"), the
Operating Partnership and the trustee execute and deliver a supplemental
indenture evidencing such subsidiary's guarantee providing for the unconditional
guarantee by the subsidiary, on a senior basis, of the debt securities. If any
Subsidiary Guarantor is released from all of its obligations described above, it
will also be released from its unconditional guarantee.
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Deletions, Modifications or Additions. We will specify in the applicable
prospectus supplement any deletions of, modifications of, or additions to the
covenants described above with respect to any series of debt securities.
DEFINITIONS
As used in this prospectus,
"Acquired Debt" means Debt of a person:
- existing at the time such person is merged or consolidated with or into,
or becomes a subsidiary of, the Operating Partnership; or
- assumed by the Operating Partnership or any of its subsidiaries in
connection with the acquisition of assets from such person.
"Annual Debt Service Charge" means, for any period, the interest expense of
the Operating Partnership and its subsidiaries for such period, determined on a
consolidated basis in accordance with generally accepted accounting principles,
including, without duplication:
- all amortization of debt discount and premiums;
- all accrued interest;
- all capitalized interest; and
- the interest component of capitalized lease obligations.
"Consolidated Income Available for Debt Service" for any period means
Consolidated Net Income of the Operating Partnership and its subsidiaries for
such period, plus amounts which have been deducted and minus amounts which have
been added for, without duplication:
- interest expense on Debt;
- provision for taxes based on income;
- amortization of debt discount, premium and deferred financing costs;
- provisions for gains and losses on sales or other dispositions of
properties and other investments;
- property depreciation and amortization;
- the effect of any non-cash items; and
- amortization of deferred charges, all determined on a consolidated basis
in accordance with generally accepted accounting principles.
"Consolidated Net Income" for any period means the amount of net income (or
loss) of the Operating Partnership and its subsidiaries for such period,
excluding, without duplication:
- extraordinary items; and
- the portion of net income (but not losses) of the Operating Partnership
and its subsidiaries allocable to minority interests in unconsolidated
persons to the extent that cash dividends or distributions have not
actually been received by the Operating Partnership or one of
subsidiaries, all determined on a consolidated basis in accordance with
generally accepted accounting principles.
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"Debt" means, with respect to any person, any indebtedness of such person,
whether or not contingent, in respect of:
- borrowed money or evidenced by bonds, notes, debentures or similar
instruments;
- indebtedness secured by any Lien on any property or asset owned by such
person, but only to the extent of the lesser of:
- the amount of indebtedness so secured; and
- the fair market value (determined in good faith by the board of
directors of such person or, in the case of the Operating Partnership or
a subsidiary, by the Company's Board of Directors) of the property
subject to such Lien;
- reimbursement obligations, contingent or otherwise, in connection with
any letters of credit actually issued or amounts representing the balance
deferred and unpaid of the purchase price of any property except any such
balance that constitutes an accrued expense or trade payable; or
- any lease of property by such person as lessee which is required to be
reflected on such person's balance sheet as a capitalized lease in
accordance with generally accepted accounting principles, and also
includes, to the extent not otherwise included, any obligation of such
person to be liable for, or to pay, as obligor, guarantor or otherwise
(other than for purposes of collection in the ordinary course of
business), Debt of the types referred to above of another person (it
being understood that Debt shall be deemed to be incurred by such person
whenever such person shall create, assume, guarantee or otherwise become
liable in respect thereof).
"Lien" means any mortgage, deed of trust, lien, charge, pledge, security
interest, security agreement, or other encumbrance of any kind.
"Total Assets" means the sum of, without duplication:
- Undepreciated Real Estate Assets; and
- all other assets (excluding accounts receivable and intangibles) of the
Operating Partnership and its subsidiaries, all determined on a
consolidated basis in accordance with generally accepted accounting
principles.
"Total Unencumbered Assets" means the sum of, without duplication:
- those Undepreciated Real Estate Assets which are not subject to a Lien
securing Debt; and
- all other assets (excluding accounts receivable and intangibles) of the
Operating Partnership and its subsidiaries not subject to a Lien securing
Debt, all determined on a consolidated basis in accordance with generally
accepted accounting principles.
"Undepreciated Real Estate Assets" means, as of any date, the cost
(original cost plus capital improvements) of real estate assets of the Operating
Partnership and its subsidiaries on such date, before depreciation and
amortization, all determined on a consolidated basis in accordance with
generally accepted accounting principles.
"Unsecured Debt" means Debt of the Operating Partnership or any of its
subsidiaries which is not secured by a Lien on any property or assets of the
Operating Partnership or any of its subsidiaries.
EVENTS OF DEFAULT, NOTICE AND WAIVER
Unless we specify otherwise in the applicable prospectus supplement, the
indenture provides that the following events are "events of default" with
respect to any series of debt securities issued under the indenture:
- default in the payment of any interest upon any debt security of that
series when it becomes due and payable, and continuance of that default
for a period of 30 days;
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- default in the payment of principal of or premium, if any, on any debt
security of that series when due and payable;
- default in the performance or breach of any covenant or warranty of the
Operating Partnership in the indenture with respect to any debt security
of that series (other than a covenant or warranty the default or breach
of which is specifically dealt with in the indenture or that has been
included in the indenture solely for the benefit of a series of debt
securities other than that series), which default continues uncured for a
period of 60 days after receipt of written notice as provided in the
indenture;
- the following:
- default by the Operating Partnership or any subsidiary of the Operating
Partnership in the payment, beyond any grace period, of any principal of
or interest on any bond, note, debenture or other evidence of
indebtedness; or
- the occurrence of any other breach or default (or other event or
condition) under any agreement, indenture or instrument relating to any
such bond, note, debenture or other evidence of indebtedness beyond any
cure period,
- if as a result, the holder or holders of any such instrument has the
immediate right to cause any such instrument to become or be declared due
and payable, or required to be prepaid, redeemed, purchased or defeased
(or an offer of prepayment, redemption, purchase or defeasance be made),
prior to its stated maturity (other than by a scheduled mandatory
prepayment), which in the aggregate under the bullet points above have a
principal amount equal to or greater than $20,000,000 without such
instrument having been discharged, or such breach or default having been
cured, within a period of 10 days after the notice specified in the
indenture has been provided;
- certain events of bankruptcy, insolvency or reorganization with respect
to the Operating Partnership, the Company or any significant subsidiary
of the Operating Partnership (as defined in Regulation S-X under the
Securities Act); and
- any other event of default provided with respect to debt securities of
that series that is described in the applicable prospectus supplement.
A supplemental indenture establishing the terms of a particular series of
debt securities may delete, modify or add to the events of default described
above.
No event of default with respect to a particular series of debt securities
necessarily constitutes an event of default with respect to any other series of
debt securities. The occurrence of an event of default may constitute an event
of default under our bank credit agreements in existence from time to time. In
addition, the occurrence of certain events of default or an acceleration under
the indenture may constitute an event of default under certain of our other
indebtedness outstanding from time to time.
If an event of default with respect to debt securities of any series at the
time outstanding occurs and is continuing, then the trustee or the holders of
25% in principal amount of the outstanding debt securities of that series may,
by a notice in writing to us (and to the trustee if given by the holders),
declare all debt securities of that series to be due and payable immediately.
At any time after a declaration of acceleration with respect to debt
securities of any series has been made, but before a judgment or decree for
payment of the money due has been obtained by the trustee, the holders of a
majority in principal amount of the outstanding debt securities of that series
may rescind and annul the acceleration if:
- the Operating Partnership has paid or deposited with the trustee a sum
sufficient to pay:
- all overdue installments of interest on all outstanding debt securities
of that series;
- the principal of (and premium, if any, on) any outstanding debt
securities of that series which have become due otherwise than by such
declaration of acceleration, and interest thereon at the rates provided
for in such debt securities; and
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- to the extent lawful, interest upon overdue installments of interest at
the rate or rates provided in such debt securities; and
- all events of default with respect to debt securities of that series,
other than the nonpayment of the principal of (or premium, if any) or
interest on debt securities of that series which have become due solely
by such declaration of acceleration, have been cured or waived.
The indenture also provides that the holders of a majority in principal
amount of the outstanding debt securities of any series may on behalf of the
holders of all debt securities of such series waive any past default under the
indenture with respect to such debt securities and its consequences, except a
default:
- in the payment of the principal of (or premium, if any) or interest on or
payable in respect of any debt security of such series; or
- in respect of a covenant or provision of the indenture which cannot be
modified or amended without the consent of the holder of each outstanding
debt security of such series affected.
If the trustee knows of a default with respect to the debt securities of
any series, the indenture requires the trustee, within 90 days after the
default, to give notice to the holders of such debt securities, unless such
default shall have been cured or waived. However the trustee may withhold notice
to the holders of any debt securities of such series of any default (except a
default in the payment of the principal of (or premium, if any) or interest, if
any, on any debt security of such series) if the trustee determines such
withholding is in the interest of such holders.
The indenture provides that the trustee will be under no obligation to
exercise any of its rights or powers under the indenture at the request of any
holders of outstanding debt securities, unless the holders offer the trustee
security or indemnity reasonably satisfactory to it against the costs, expenses
and liabilities which might be incurred by it in compliance with such request.
Subject to certain rights of the trustee, the holders of a majority in principal
amount of the outstanding debt securities of any series will have the right to
direct the time, method and place of conducting any proceeding for any remedy
available to the trustee or exercising any trust or power conferred on the
trustee with respect to the debt securities of that series.
No holder of any debt security of any series will have any right to
institute any proceeding, judicial or otherwise, with respect to the indenture
or for the appointment of a receiver or trustee, or for any remedy under the
indenture, unless:
- that holder has previously given to the trustee written notice of a
continuing event of default with respect to debt securities of that
series; and
- the holders of 25% in principal amount of the outstanding debt securities
of that series have made written request, and offered reasonable
indemnity, to the trustee to institute the proceeding as trustee, and the
trustee has not received from the holders of a majority in principal
amount of the outstanding debt securities of that series a direction
inconsistent with that request and has failed to institute the proceeding
within 60 days.
Notwithstanding the foregoing, the holder of any debt security will have an
absolute and unconditional right to receive payment of the principal of, premium
and any interest on that debt security on or after the due dates expressed in
that debt security and to institute suit for the enforcement of payment.
The indenture requires the Operating Partnership, within 120 days after the
end of each fiscal year, to furnish to the trustee a statement as to compliance
with the indenture. Further, upon any request by the Operating Partnership to
take any action under the indenture, the Operating Partnership will furnish to
the trustee:
- an officers' certificate stating that all conditions precedent, if any,
provided for in the indenture relating to the proposed action have been
complied with; and
- an opinion of counsel stating that in the opinion of such counsel all
such conditions precedent, if any, have been complied with.
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MODIFICATION AND WAIVER
We may modify and amend the indenture with the consent of the holders of a
majority in principal amount of the outstanding debt securities of each series
affected by the modifications or amendments except that we may not make any
modification or amendment without the consent of the holders of each affected
debt security then outstanding if that amendment will:
- change the stated maturity of the principal of (or premium, if any, on)
or any installment of principal of, or premium, if any, or the interest
payment date with respect to such debt security;
- reduce the principal amount of debt securities or the rate or amount of
interest on such debt securities, or any premium payable on such debt
security;
- adversely affect the right of any holder of debt securities to repayment
of such debt security at the holder's option;
- change the place, or the currency, for payment of principal of (or
premium, if any) such debt security;
- impair the right to institute suit for enforcement of any payment on or
with respect to such debt security;
- impair the right to institute suit for the enforcement of any payment on
or with respect to such debt security;
- reduce the amount of debt securities whose holders must consent to an
amendment or waiver or reduce the quorum or voting requirements set forth
in the indenture; or
- modify any of the foregoing provisions or any of the provisions relating
to the waiver of certain past defaults or certain covenants, except to
increase the required percentage to effect such action or to provide that
certain other provisions may not be modified or waived without the
consent of the holder of such debt security.
The holders of a majority in principal amount of the outstanding debt
securities of any series may on behalf of the holders of all debt securities of
that series waive the Operating Partnership's compliance with certain covenants
of the indenture.
Modifications and amendments of the indenture may be made by the Operating
Partnership and the trustee without the consent of any holder of debt securities
issued thereunder for any of the following purposes:
- to evidence the succession of another person to the Operating Partnership
or any guarantor under the indenture;
- to add to the covenants of the Operating Partnership or any guarantor for
the benefit of the holders of the debt securities or to surrender any
right or power conferred upon the Operating Partnership or any guarantor
in the indenture;
- to add events of default for the benefit of the holders of all or any
series of debt securities;
- to add or change any provisions of the indenture to facilitate the
issuance of the debt securities in certificated form, provided that such
action shall not adversely affect the interests of the holders of any
debt securities in any material respect;
- to secure the debt securities or guarantees;
- to provide for the acceptance of appointment by a successor trustee or to
facilitate the administration of the trusts under the indenture by more
than one trustee;
- to cure any ambiguity, defect or inconsistency in the indenture or to add
or change any other provisions with respect to matters or questions
arising under the indenture, provided that such action shall not
adversely affect the interests of holders of debt securities of any
series or any related guarantees in any material respect; or
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- to supplement any of the provisions of the indenture to the extent
necessary to permit or facilitate discharge, legal defeasance, or
covenant defeasance of any series of debt securities, provided that such
action shall not adversely affect the interests of the holders of the
debt securities in any material respect.
The indenture provides that in determining whether the holders of the
requisite principal amount of outstanding debt securities of a series have given
any request, demand, authorization, direction, notice, consent or waiver under
the indenture or whether a quorum is present at a meeting of holders of the debt
securities of a series, debt securities of each series owned by the Operating
Partnership or any other obligor upon such debt securities or any affiliate of
the Operating Partnership or of such other obligor will be disregarded.
The indenture contains provisions for convening meetings of the holders of
debt securities of a series. A meeting may be called at any time by the trustee
and also, upon request, by the Operating Partnership or the Holders of 25% in
principal amount of the outstanding debt securities of such series, in any such
case upon notice given as provided in the indenture. Except for any consent that
must be given by the holder of each debt security affected by certain
modifications and amendments of the indenture, any resolution presented at a
meeting or adjourned meeting duly reconvened at which a quorum is present may be
adopted by the affirmative vote of the holders of a majority in principal amount
of the outstanding debt securities of such series. However, except as referred
to above, any resolution with respect to any request, demand, authorization,
direction, notice, consent, waiver or other action that may be made, given or
taken by the holders of a specified percentage, which is less or more than a
majority, in principal amount of the outstanding debt securities of such series
may be adopted at a meeting or adjourned meeting duly reconvened at which a
quorum is present by the affirmative vote of the holders of such specified
percentage in principal amount of the outstanding debt securities of such
series. Any resolution passed or decision taken at any meeting of holders of
debt securities of any series duly held in accordance with the indenture will be
binding on all holders of debt securities of such series. The quorum at any
meeting called to adopt a resolution, and at any reconvened meeting, will be
persons holding or representing a majority in principal amount of the
outstanding debt securities of any series; provided, however, that if any action
is to be taken at such meeting with respect to a consent or waiver which may be
given by the holders of not less than a specified percentage, which is less or
more than a majority, in principal amount of the outstanding debt securities of
such series, the persons holding or representing such specified percentage in
principal amount of the outstanding debt securities of such series will
constitute a quorum.
Notwithstanding the provisions described above, the indenture provides that
if any action is to be taken at a meeting of holders of debt securities of any
series with respect to any request, demand, authorization, direction, notice,
consent, waiver or other action that the indenture expressly provides may be
made, given or taken by the holders of a specified percentage in principal
amount of all outstanding debt securities of such series affected thereby:
- there shall be no minimum quorum requirement for such meeting; and
- the principal amount of the outstanding debt securities of such series
that are entitled to vote in favor of such request, demand,
authorization, direction, notice, consent, waiver or other action shall
be taken into account in determining whether such request, demand,
authorization, direction, notice, consent, waiver or other action has
been made, given or taken under the indenture.
DEFEASANCE OF DEBT SECURITIES AND CERTAIN COVENANTS IN CERTAIN CIRCUMSTANCES
Legal Defeasance and Covenant Defeasance. Unless we specify otherwise in
the applicable prospectus supplement, the indenture provides that the Operating
Partnership may elect:
- to be discharged from any and all obligations in respect of the debt
securities of any series (except for certain obligations to register the
transfer or exchange of debt securities of such series, to replace
stolen, lost or mutilated debt securities of such series, and to maintain
paying agencies and certain provisions relating to the treatment of funds
held by paying agents) ("legal deafeasance"); or
- to be released from compliance with the covenants in the indenture
("covenant defeasance").
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The Operating Partnership will be so discharged upon the deposit with the
trustee, in trust, of money and/or Government Obligations that, through the
payment of interest and principal in accordance with their terms, will provide
money in an amount sufficient to pay and discharge each installment of principal
(and premium, if any) and interest on the debt securities of that series on the
scheduled due dates or the applicable redemption date in accordance with the
terms of the indenture and those debt securities.
This trust may only be established if, among other things:
- the Operating Partnership has delivered to the trustee a legal opinion to
the effect that the holders of the debt securities will not recognize
income, gain or loss for United States federal income tax purposes as a
result of such legal defeasance or covenant defeasance and will be
subject to United States federal income tax on the same amounts, in the
same manner and at the same times as would have been the case if such
legal defeasance or covenant defeasance had not occurred, and such legal
opinion, in the case of legal defeasance, must refer to and be based upon
a ruling of the Internal Revenue Service or a change in applicable United
States federal, income tax law occurring after the date of the indenture;
- if the cash and Government Obligations deposited are sufficient to pay
the outstanding debt securities of such series, provided such debt
securities are redeemed on a particular redemption date, the Operating
Partnership shall have given the trustee irrevocable instructions to
redeem the debt securities of such series on such date;
- such legal defeasance or covenant defeasance will not result in a breach
or violation of, or constitute a default under, the indenture or any
other material agreement or instrument to which the Operating Partnership
is a party or by which it is bound; and
- no event of default or event which with notice or lapse of time or both
would become an event of default with respect to the debt securities
shall have occurred and shall be continuing on the date of, or, solely in
the case of events of default due to certain events of bankruptcy,
insolvency, or reorganization, during the period ending on the 91st day
after the date of, such deposit into trust.
"Government Obligations" means securities which are:
- direct obligations of the United States of America, for the payment of
which obligations its full faith and credit is pledged; or
- obligations of a person controlled or supervised by and acting as an
agency or instrumentality of the United States of America, the payment of
which is unconditionally guaranteed as a full faith and credit obligation
by the United States of America
and which, in either of the above cases, are not callable or redeemable at the
option of the issuer thereof and also includes a depository receipt issued by a
bank or trust company as custodian with respect to any such Government
Obligation held by such custodian for the account of the holder of a depository
receipt, provided that (except as provided by law) such custodian is not
authorized to make any amount received by the custodian.
Covenant Defeasance and Events of Default. In the event the Operating
Partnership exercises its option to effect covenant defeasance with respect to
any series of debt securities and the debt securities of that series are
declared due and payable because of the occurrence of any event of default, the
amount of money and/or Government Obligations on deposit with the trustee will
be sufficient to pay amounts due on the debt securities of that series at the
time of their stated maturity but may not be sufficient to pay amounts due on
the debt securities of that series at the time of the acceleration resulting
from the event of default. However, the Operating Partnership will remain liable
for those payments.
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DESCRIPTION OF COMMON STOCK
Our Charter provides that we are authorized to issue 500,000,000 shares of
common stock, $.01 par value per share. As of November 30, 1998, we had
85,874,513 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 the Charter regarding the ownership of shares of common stock in
excess of the ownership limit or any other limit specified in the Charter 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 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 and the Series C Preferred Stock (see "-- Preferred Stock"), and
to the provisions of the Charter regarding ownership of shares of common stock
in excess of the ownership limit, or such other limit specified in the Charter
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 (the "MGCL"), 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 and the Series C 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.
Subject to the provisions of our Charter regarding the ownership of shares
of common stock in excess of the ownership limit, or such other limit specified
in the Charter, 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 MGCL, a Maryland corporation generally cannot dissolve, amend its
charter, merge, sell all or substantially all of its assets, engage in a share
exchange or engage in similar transactions outside the ordinary course of
business unless approved by the affirmative vote of 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 MGCL, the term "substantially all
of the Company's assets" is not defined and is, therefore, subject to Maryland
common law and to judicial interpretation and review in the context of the
unique facts and circumstances of any particular transaction. Our Charter does
not provide for a lesser percentage in any of the above situations.
Our Charter authorizes 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. The transfer agent and registrar for our common stock is
BankBoston, N.A., an affiliate of First National Bank of Boston.
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DESCRIPTION OF PREFERRED STOCK
Our Charter provides 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 and 2,200,000 shares are
of a separate class designated as Series C Preferred Stock. The Series B
Preferred Stock is issuable in exchange, on a one for one basis, subject to
adjustment, for the Series B Preferred Units. The Series C Preferred Stock is
issuable in exchange, on a one for one basis, subject to adjustment, for 8 3/4%
Series C Cumulative Redeemable Preferred Units (the "AMB Property II Series C
Preferred Units") of AMB Property II, L.P. ("AMB Property II") that AMB Property
II issued to an institutional investor on November 24, 1998. The Company owns
100% of the common stock of AMB Property Holding Corporation, which has an
approximate 1% general partnership interest in AMB Property II. The Operating
Partnership has an approximate 99% limited partnership interest in AMB Property
II. As of November 30, 1998, we had 4,000,000 shares of Series A Preferred Stock
issued and outstanding. As of the same date, we had 1,300,000 shares of Series B
Preferred Stock and 2,200,000 shares of Series C Preferred Stock reserved for
issuance but not issued or outstanding.
The following description summarizes certain general terms and provisions
of the preferred stock to which any prospectus supplement may relate. This
summary and the summary included in the relevant prospectus supplement are not
complete. For more detail you should refer to the applicable provisions of our
Charter (including the applicable Articles Supplementary) and Bylaws. Our
Charter and Bylaws have been filed as exhibits to the registration statement of
which this prospectus is a part and the applicable Articles Supplementary will
be filed as an exhibit to this registration statement or incorporated by
reference in this registration statement by a Form 8-K.
GENERAL
We may issue 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, subject to the provisions of our Charter regarding the
restrictions on transfer of stock, the Board of Directors is required by the
MGCL and our Charter 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 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 of the Company that might involve a premium price for holders
of shares of common stock or otherwise be in their best interest.
Preferred stock, upon issuance against full payment of the purchase price
therefor, will be fully paid and nonassessable. The specific terms of a
particular class of preferred stock will be described in the prospectus
supplement relating to that class, including a prospectus supplement providing
that preferred stock may be issuable upon the exercise of warrants. The
description of preferred stock set forth below and the description of the terms
of a particular class of preferred stock set forth in a prospectus supplement do
not purport to be complete and are qualified in their entirety by reference to
the Articles Supplementary relating to that class.
The preferences and other terms of the preferred stock of each class will
be fixed by the Articles Supplementary relating to the class. A prospectus
supplement relating to each class of preferred stock will specify the following
terms:
- The title and stated value of the preferred stock;
- The number of shares of the preferred stock offered, the liquidation
preference per share and the offering price of the preferred stock;
- The dividend rate(s), period(s), and/or payment date(s) or method(s) of
calculation thereof applicable to the preferred stock;
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- Whether the preferred stock is cumulative or not and, if cumulative, the
date from which dividends on the preferred stock will accumulate;
- The provision for a sinking fund, if any, for the preferred stock;
- The provision for redemption, if applicable, of the preferred stock;
- Any listing of the preferred stock on any securities exchange;
- The terms and conditions, if applicable, upon which the preferred stock
will be converted into common stock, including the conversion price (or
manner of calculation thereof);
- A discussion of any material federal income tax considerations applicable
to the preferred stock;
- Any limitations on actual and constructive ownership and restrictions on
transfer, in each case as may be appropriate to preserve our status as a
REIT;
- The relative ranking and preferences of the preferred stock as to
dividend rights and rights upon liquidation, dissolution or winding up of
our affairs;
- Any limitations on issuance of any class of preferred stock ranking
senior to or on a parity with such class or series of preferred stock as
to dividend rights and rights upon liquidation, dissolution or winding up
of our affairs;
- Any other specific terms, preferences, rights, limitations or
restrictions of the preferred stock; and
- Any voting rights of the preferred stock.
RANK
Unless otherwise specified in the applicable prospectus supplement, the
preferred stock will be, with respect to dividends and upon our voluntary or
involuntary liquidation, dissolution or winding up:
- senior to all classes or series of common stock and to all of our equity
securities the terms of which provide that the equity securities shall
rank junior to the preferred stock;
- junior to all equity securities that we issue which rank senior to the
preferred stock; and
- on a parity with all equity securities that we issued other than those
that are referred to in the bullet points above.
The term "equity securities" does not include convertible debt securities.
DIVIDENDS
Holders of shares of the preferred stock of each class will be entitled to
receive, when, as and if authorized and declared by our Board of Directors, out
of our assets legally available for payment, cash dividends at the rates and on
the dates as we will set forth in the applicable prospectus supplement.
Dividends will be payable to holders of record as they appear on our stock
transfer books on the record dates that the Board of Directors will fix.
Dividends on any class of preferred stock may be cumulative or
noncumulative, as provided in the applicable prospectus supplement. Dividends,
if cumulative, will be cumulative from and after the date set forth in the
applicable prospectus supplement. If our Board of Directors fails to authorize a
dividend payable on a dividend payment date on any class of preferred stock for
which dividends are noncumulative, then the holders of the class of preferred
stock will have no right to receive a dividend in respect of the dividend period
ending on the dividend payment date, and we will have no obligation to pay the
dividend accrued for the period, whether or not dividends on the class are
declared or paid for any future period.
Unless full cumulative dividends on the class of preferred stock have been
or contemporaneously are declared and paid or declared and a sum sufficient for
the payment thereof set apart for payment for all past dividend periods and the
then current dividend period, no dividends (other than in common stock or any of
our
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other equity securities ranking junior to the series or class of preferred stock
as to dividends and upon our voluntary or involuntary liquidation, dissolution
and winding up) shall be declared or paid or set aside for payment or other
dividend be declared or made upon the common stock or any of our other equity
securities ranking as to distributions or upon our voluntary or involuntary
liquidation, dissolution or winding up junior to or on a parity with the series
or class of preferred stock, nor will any common stock or any of our other
equity securities ranking junior to or on a parity with the class of preferred
stock as to dividends or upon our voluntary or involuntary liquidation,
dissolution or winding up 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 our other equity securities ranking junior to the class of
preferred stock as to dividends and upon voluntary or involuntary liquidation,
dissolution and winding up and pursuant to the provisions of our Charter
providing for limitations on ownership and transfer in order to ensure that we
remain qualified as a REIT). When dividends are not paid in full (or a sum
sufficient for full payment is not so set apart) upon the class of preferred
stock and any other equity securities ranking as to dividends on a parity with
the class of preferred stock, all dividends declared upon the series or class of
preferred stock and any of our other equity securities ranking on a parity with
the class of preferred stock as to dividends and upon voluntary or involuntary
liquidation, dissolution or winding up will be declared pro rata so that the
amount of dividends declared per share of the series or class of preferred stock
and each other equity securities will in all cases bear to each other the same
ratio that accumulated dividends per share of the series or class of preferred
stock and the other equity securities (which will not include any accumulation
in respect of unpaid dividends for prior dividend periods if the other equity
securities do not have a cumulative dividend) bear to each other. No interest,
or sum of money in lieu of interest, will be payable in respect of any dividend
payment or payments on any series or class of preferred stock which may be in
arrears.
Any dividend payment that we make on shares of a class of preferred stock
will first be credited against the earliest accrued but unpaid dividend due with
respect to shares of such series or class that remains payable.
REDEMPTION
If we so provide in the applicable prospectus supplement, the shares of
preferred stock will be subject to mandatory redemption or redemption at our
option, as a whole or in part, in each case on the terms, at the times and at
the redemption prices set forth in the prospectus supplement.
The prospectus supplement relating to a series or class of preferred stock
that is subject to mandatory redemption will specify the number of shares of
preferred stock that we will redeem in each year commencing after a date to be
specified, at a redemption price per share to be specified, together with an
amount equal to all accumulated and unpaid dividends thereon (which will not, if
the preferred stock does not have a cumulative dividend, include any
accumulation in respect of unpaid dividends for prior dividend periods) to the
date of redemption. We may pay the redemption price in cash or other property,
as specified in the applicable prospectus supplement. If the redemption price
for preferred stock of any class is payable only from the net proceeds of the
issuance of our stock, the terms of the preferred stock may provide that, if no
such preferred stock shall have been issued or to the extent the net proceeds
from any issuance are insufficient to pay in full the aggregate redemption price
then due, the preferred stock will automatically and mandatorily be converted
into shares of the applicable stock pursuant to conversion provisions specified
in the applicable prospectus supplement.
Notwithstanding the foregoing, if the class of preferred stock has a
cumulative dividend, unless full cumulative dividends on all outstanding shares
of the class of preferred stock have been or contemporaneously are declared and
paid or declared and a sum sufficient for the payment thereof set apart for
payment for all past dividend periods and the then current dividend period, we
may not redeem any shares of the class of preferred stock unless we
simultaneously redeem all outstanding shares of the class of preferred stock;
provided, however, that the foregoing will not prevent the purchase or
acquisition of shares of the series or class of preferred stock pursuant to a
purchase or exchange offer made on the same terms to holders of all outstanding
shares of the class of preferred stock. In addition, unless full cumulative
dividends on all outstanding shares of the class of preferred stock have been or
contemporaneously are declared and paid or declared and a sum sufficient for the
payment thereof set apart for payment for all past dividend periods and
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the then current dividend period, we may not purchase or otherwise acquire
directly or indirectly any shares of such class of preferred stock or any of our
equity securities ranking junior to or on a parity with such class of preferred
stock as to dividends or upon voluntary or involuntary liquidation, dissolution
or winding up (except by conversion into or exchange for our equity securities
ranking junior to such class of preferred stock as to dividends and upon
voluntary or involuntary liquidation, dissolution or winding up).
The foregoing provisions will not prevent us from acquiring shares of
preferred stock pursuant to the provisions of the applicable Articles
Supplementary providing for limitations on ownership and transfer in order to
ensure that we remain qualified as a REIT for federal income tax purposes. See
"Restrictions on Ownership and Transfer of Capital Stock."
If we redeem fewer than all of the outstanding shares of a class of
preferred stock, we will select the shares that we will redeem pro rata (as
nearly as may be practicable without creating fractional shares), by lot or by
any other equitable method that we determine. If this redemption is to be by lot
and, as a result of the redemption, any holder of shares of the class of
preferred stock would become a holder of a number of shares of the class of
preferred stock in excess of the ownership limit because we did not redeem the
holder's shares of the class of preferred stock, or we only redeemed those
shares in part, then, except as otherwise provided in our Charter, we will
redeem the requisite number of shares of the series or class of preferred stock
of the holder such that no holder will hold in excess of the ownership limit
subsequent to the redemption. See "Restrictions on Ownership and Transfer of
Capital Stock."
We will give notice of redemption by publication in a newspaper of general
circulation in The City of New York. This publication will be made once a week
for two successive weeks commencing not less than 30 nor more than 60 days'
prior to the redemption date. We will mail a similar notice, postage prepaid,
not less than 30 nor more than 60 days' prior to the redemption date, addressed
to the respective holders of record of the preferred stock to be redeemed at
their respective addresses as they appear on our share transfer records. No
failure to give notice or any defect in notice or in the mailing thereof will
affect the validity of the proceedings for the redemption of any shares of the
series or class of preferred stock except as to the holder to whom notice was
defective or not given. Each notice will state the following:
- the redemption date;
- the redemption price;
- the number of shares of the class of preferred stock to be redeemed;
- the place or places where the certificates evidencing shares of the
series or class of preferred stock are to be surrendered for payment of
the redemption price; and
- that dividends on the class of preferred stock to be redeemed will cease
to accumulate on the redemption date. If we will redeem fewer than all
the shares of the class of preferred stock held by any holder, the notice
that we mail to the holder will also specify the number of shares of the
class of preferred stock that we will redeem from the holder.
The holders of shares of a class of preferred stock at the close of
business on a dividend record date will be entitled to receive the dividend
payable with respect to the shares of the class of preferred stock held on the
corresponding dividend payment date notwithstanding the redemption of the shares
between the dividend record date and the corresponding dividend payment date or
our default in the payment of the dividend due. Except as provided above, we
will make no payment or allowance for unpaid dividends, whether or not in
arrears, on shares of any class of preferred stock to be redeemed.
Subject to applicable law and the limitation on purchases when dividends on
a class of preferred stock are in arrears, we may, at any time and from time to
time, purchase any shares of the class of preferred stock in the open market, by
tender or by private agreement.
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LIQUIDATION PREFERENCE
In the event that we voluntarily or involuntarily liquidate, dissolve or
wind up, the holders of 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, liquidating
distributions in the amount of the liquidation preference per share set forth in
the applicable prospectus supplement, plus an amount equal to any accumulated
and unpaid dividends to the date of payment, before any distribution of assets
is made to holders of common stock or any other equity securities that rank
junior to the class of preferred stock as to voluntary or involuntary
liquidation. After payment of the full amount of the liquidating distributions
to which they are entitled, the holders of the class of 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 by us or the sale, lease, transfer or conveyance
of all or substantially all of our property or business will not be considered a
liquidation, dissolution or winding up.
If, upon any voluntary or involuntary liquidation, dissolution or winding
up, our assets are insufficient to make full payment to holders of such class of
preferred stock and the corresponding amounts payable on all shares of other
classes of our equity securities ranking on a parity with the class of preferred
stock as to liquidation rights, then the holders of the class of preferred stock
and all other such classes of equity securities will share ratably in any
distribution of assets in proportion to the full liquidating distributions to
which they would otherwise be respectively entitled. In determining whether a
distribution (other than upon voluntary or involuntary liquidation, dissolution
or winding up) by dividend, redemption or other acquisition of shares of stock
or otherwise is permitted under the MGCL, no effect will be given to amounts
that would be needed, if we were to be dissolved at the time of the
distribution, to satisfy the preferential rights upon dissolution of holders of
shares of the class of preferred stock, whose preferential rights upon
dissolution are superior to those receiving the distribution.
VOTING RIGHTS
Holders of the preferred stock will not have any voting rights, except as
set forth below or as otherwise from time to time required by law or as we
indicate in the applicable prospectus supplement.
Unless provided for otherwise by any class of preferred stock, so long as
any shares of preferred stock of a class remain outstanding, we will not,
without the affirmative vote or consent of at least two-thirds of the votes
entitled to be cast by the holders of such outstanding shares, given in person
or by proxy, either in writing or at a meeting (the class voting separately as a
class) do any of the following:
- authorize or create, or increase the authorized or issued amount of, any
class or series of stock ranking senior to such series or class of
preferred stock with respect to payment of dividends or the distribution
of assets upon voluntary or involuntary liquidation, dissolution or
winding up, or reclassify any of our authorized stock into shares, or
create, authorize or issue any obligation or security convertible into,
exchangeable or exercisable for, or evidencing the right to purchase, any
stock; or
- amend, alter or repeal the provisions of our Charter, whether by merger
or consolidation or otherwise, so as to materially and adversely affect
any right, preference, privilege or voting power of the class of
preferred stock or the holders of such class.
So long as shares of the class of preferred stock (or shares issued by a
surviving entity in substitution for the class of preferred stock) remain
outstanding with their terms materially unchanged, taking into account that upon
the occurrence of such an event, we may not be the surviving entity, the
occurrence of an event set forth in the second bullet point above will not be
considered to materially and adversely affect the rights, preferences,
privileges or voting powers of holders of such class of preferred stock.
Additionally, any increase in the amount of the authorized preferred stock or
the creation or issuance of any other class or series of preferred stock, or any
increase in the amount of authorized series or class of preferred stock or any
other class or series of preferred stock, in each case ranking on a parity with
or junior to such series or class of preferred stock with respect to payment of
dividends and the distribution of assets upon voluntary or involuntary
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liquidation, dissolution or winding up, will not be considered to materially and
adversely affect such rights, preferences, privileges or voting powers.
The foregoing voting provisions will not apply if, at or prior to the act
with respect to which such vote would otherwise be required, we have redeemed or
called for redemption upon proper notice and deposited sufficient funds in
trust.
CONVERSION RIGHTS
We will specify in the applicable prospectus supplement the terms and
conditions upon which any shares of any class or series of preferred stock are
convertible into common stock. The terms will include:
- the number of shares of common stock into which the shares of preferred
stock are convertible;
- the conversion price (or method for calculating the conversion price);
- the conversion period;
- provisions regarding whether conversion will be at the option of the
holders of the class of preferred stock or the Operating Partnership;
- the events requiring an adjustment of the conversion price; and
- provisions affecting conversion in the event of the redemption of the
class of preferred stock.
RESTRICTIONS ON OWNERSHIP AND TRANSFER OF CAPITAL STOCK
In order for the Company to qualify as a REIT under the Code, the Company's
capital stock is subject to certain restrictions on ownership and transfer. See
"Restrictions on Ownership and Transfer of Capital Stock."
TRANSFER AGENT AND REGISTRAR
The transfer agent, registrar and dividend disbursing agent for our Series
A Preferred Stock, Series B Preferred Stock and Series C Preferred Stock is
BankBoston, N.A. We will specify in the applicable prospectus supplement the
transfer agent, registrar and dividend disbursing agent for any other class of
preferred stock.
DESCRIPTION OF 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 the Series
B Preferred Stock and the Series C 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) may be declared or paid or set
aside for payment or other dividend be declared
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or made upon the common stock or any other equity securities ranking junior to
or on a parity with the Series A Preferred Stock (including the Series B
Preferred Stock and 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 A
Preferred Stock (including the Series B Preferred Stock and 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 A Preferred
Stock and pursuant to the provisions of our Charter providing for limitations on
ownership and transfer in order to ensure that we remain qualified as a REIT).
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 (including the
Series B Preferred Stock and the Series C 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 (including the Series B
Preferred Stock and the Series C 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 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 REIT 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),
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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 Charter, 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.
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 Third Amended and Restated Agreement of
Limited Partnership of the Operating Partnership (the "Partnership Agreement"),
we contributed the net proceeds of the sale of the Series A Preferred Stock 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.
DESCRIPTION OF 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
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
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- on a parity with all equity securities issued by us (including the Series
A Preferred Stock and the Series C 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 or on a parity
with the Series B Preferred Stock (including the Series A Preferred Stock and
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 B Preferred Stock
(including the Series A Preferred Stock and 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 B Preferred Stock and pursuant to the
provisions of our Charter providing for limitations on ownership and transfer in
order to ensure that we remain qualified as a REIT). 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 (including the Series A Preferred Stock and
the Series C 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 (including the Series A Preferred Stock and the Series
C 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 the Series B Preferred Stock and our assets are insufficient to
make full payment to 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 (including the Series A Preferred Stock and
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the Series C Preferred Stock) 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 REIT 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 Charter, 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."
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DESCRIPTION OF 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 the AMB
Property II Series C Preferred Units. The AMB Property II 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 AMB Property II Series C
Preferred Units, on a one for one basis, subject to adjustment, for shares of
our Series C Preferred Stock. In addition, the AMB Property II Series C
Preferred Units are exchangeable in whole at any time at the option of 51% of
the holders of all outstanding AMB Property II Series C Preferred Units if:
- any AMB Property II 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,
or one of its subsidiaries takes the position, and a holder or holders of
AMB Property II Series C
- Preferred Units receive an opinion of independent counsel that AMB
Property II is, or upon the happening of a certain event likely will be,
a "publicly traded partnership" within the meaning of the Code.
The AMB Property II Series C Preferred Units are exchangeable in whole for
shares of 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 AMB
Property II Series C 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 AMB Property II Series C Preferred Units
at that time would not cause the AMB Property II Series C Preferred Units to be
considered "stock and securities" within the meaning of the Code for purposes of
determining whether the holder of AMB Property II Series C Preferred Units is an
"investment company" under the Code.
The AMB Property II Series C Preferred Units are also exchangeable in whole
at any time for shares of Series C Preferred Stock, if initial purchasers of the
AMB Property II Series C Preferred Units holding 51% of all outstanding AMB
Property II Series C Preferred Units determine, (regardless of whether held by
the initial purchasers) if:
- AMB Property II reasonably determines that the assets and income of AMB
Property II for a taxable year after 1998 would not satisfy the income
and assets tests of the Code for such taxable year if AMB Property II
were a REIT; or
- any holder of AMB Property II Series C Preferred Units delivers to AMB
Property II and AMB Property Holding Corporation an opinion of
independent counsel to the effect that (based on the assets and income of
AMB Property II for a taxable year after 1998) AMB Property II would not
satisfy the income and assets tests of the Code for such taxable year if
AMB Property II were a REIT and that such failure would create a
meaningful risk that a holder of AMB Property II Series C Preferred Units
would fail to maintain qualification as a REIT.
In lieu of an exchange for Series C Preferred Stock, AMB Property II may
redeem AMB Property II Series C Preferred Units for cash in an amount equal to
the original capital account balance of the holder of AMB Property II Series C
Preferred Units. A holder of AMB Property II Series C Preferred Units 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
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- on a parity with all equity securities issued by us (including the Series
A Preferred Stock and the Series B 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 (including the Series A Preferred Stock and
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 C Preferred Stock
(including the Series A Preferred Stock and 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 C Preferred Stock and pursuant to the
provisions of our Charter providing for limitations on ownership and transfer in
order to ensure that we remain qualified as a REIT). 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 (including the Series A Preferred Stock and
the Series B 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 (including the Series A Preferred Stock and the Series
B 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 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
(including the Series A Preferred Stock and
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the Series B Preferred Stock) 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 REIT for federal income tax purposes, we may redeem shares of Series C
Preferred Stock. See "-- 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 Charter, 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 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 Series C Preferred Units as soon as practicable but not later than 60 days
after the date the AMB Property II 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.
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DESCRIPTION OF DEPOSITARY SHARES
GENERAL
We may issue depositary shares, each of which will represent a fractional
interest of a share of a particular class of preferred stock, as specified in
the applicable prospectus supplement. We will deposit with a depositary (the
"preferred stock depositary") shares of a class of preferred stock represented
by depositary shares pursuant to a separate deposit agreement among the Company,
the preferred stock depositary and the holders from time to time of the
depositary receipts issued by the preferred stock depositary which will evidence
the depositary shares ("depositary receipts"). Subject to the terms of the
deposit agreement, each owner of a depositary receipt will be entitled, in
proportion to the fractional interest of a share of a particular class of
preferred stock represented by the depositary shares evidenced by the depositary
receipt, to all the rights and preferences of the class of the preferred stock
represented by the depositary shares (including dividend, voting, conversion,
redemption and liquidation rights).
The depositary shares will be evidenced by depositary receipts issued
pursuant to the applicable deposit agreement. Immediately after we issue and
deliver the preferred stock to a preferred stock depositary, we will cause the
preferred stock depositary to issue the depositary receipts on our behalf. You
may obtain copies of the applicable form of deposit agreement and depositary
receipt from us upon request. The statements made in this section relating to
the deposit agreement and the depositary receipt are summaries of certain
anticipated provisions. These summaries are not complete and may be modified by
the applicable prospectus supplement. For more detail you should refer to the
deposit agreement itself, which will be filed as an exhibit to the registration
statement of which this prospectus is a part or incorporated by reference in
this registration statement by a Form 8-K.
DIVIDENDS AND OTHER DISTRIBUTIONS
The preferred stock depositary will distribute all cash dividends or other
cash distributions received in respect of a class or series of preferred stock
to the record holders of depositary receipts evidencing the related depositary
shares in proportion to the number of depositary receipts owned by such holders,
subject to certain obligations of holders to file proofs, certificates and other
information and to pay certain charges and expenses to the preferred stock
depositary.
In the event of a distribution other than in cash, the preferred stock
depositary will distribute property that it receives to the record holders of
depositary receipts entitled to the property, subject to certain obligations of
holders to file proofs, certificates and other information and to pay certain
charges and expenses to the preferred stock depositary, unless the preferred
stock depositary determines that it is not feasible to make the distribution, in
which case the preferred stock depositary may, with our approval, sell the
property and distribute the net proceeds from the sale to the holders.
No distribution will be made in respect of any depositary share to the
extent that it represents any preferred stock converted into shares in excess of
the ownership limit or otherwise converted or exchanged.
WITHDRAWAL OF STOCK
Upon surrender of the depositary receipts at the corporate trust office of
the preferred stock depositary (unless the related depositary shares have
previously been called for redemption or converted, or converted into Excess
Shares (defined under "Restrictions on Ownership and Transfer of Capital Stock")
or otherwise), the holders will be entitled to delivery at the corporate trust
office, or upon each such holder's order, of the number of whole or fractional
shares of the class or series of preferred stock and any money or other property
represented by the depositary shares evidenced by such depositary receipts.
Holders of depositary receipts will be entitled to receive whole or fractional
shares of the related class or series of preferred stock on the basis of the
proportion of preferred stock represented by each depositary share as specified
in the applicable prospectus supplement, but holders of such shares of preferred
stock will not thereafter be entitled to receive depositary shares therefor. If
the depositary receipts delivered by the holder evidence a number of depositary
shares in excess of the number of depositary shares representing the number of
shares of preferred stock to be
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withdrawn, the preferred stock depositary will deliver to such holder at the
same time a new depositary receipt evidencing the excess number of depositary
shares.
REDEMPTION OF DEPOSITARY SHARES
Whenever we redeem shares of preferred stock held by the preferred stock
depositary, the preferred stock depositary will redeem as of the same redemption
date the number of the depositary shares representing shares of such class or
series of preferred stock so redeemed, provided we shall have paid in full to
the preferred stock depositary the redemption price of the preferred stock to be
redeemed plus an amount equal to any accrued and unpaid dividends on the
preferred stock to the date fixed for redemption. The redemption price per
depositary share will be equal to the corresponding portion of the redemption
price and any other amounts per share payable with respect to such class or
series of preferred stock. If we redeem fewer than all the depositary shares,
the depositary shares we will select the depositary shares that we will redeem
pro rata (as nearly as may be practicable without creating fractional depositary
shares), by lot or by any other equitable method that we determine that will not
result in the issuance of any Excess Shares.
From and after the date fixed for redemption, all dividends in respect of
the shares of a class or series of preferred stock so called for redemption will
cease to accrue, the depositary shares called for redemption will no longer be
deemed to be outstanding and all rights of the holders of the depositary
receipts evidencing the depositary shares so called for redemption will cease,
except the right to receive any moneys payable upon redemption and any money or
other property to which the holders of the depositary receipts were entitled
upon redemption upon surrender of the depositary receipts to the preferred stock
depositary.
VOTING OF THE PREFERRED STOCK
Upon receipt of notice of any meeting at which the holders of a class of
preferred stock deposited with the preferred stock depositary are entitled to
vote, the preferred stock depositary will mail the information contained in the
notice of meeting to the record holders of the depositary receipts evidencing
the depositary shares which represent such class of preferred stock. Each record
holder of depositary receipts evidencing depositary shares on the record date
(which will be the same date as the record date for such class of preferred
stock) will be entitled to instruct the preferred stock depositary as to the
exercise of the voting rights pertaining to the amount of preferred stock
represented by the holder's depositary shares. The preferred stock depositary
will vote the amount of such class or series of preferred stock represented by
the depositary shares in accordance with such instructions, and we will agree to
take all reasonable action which the preferred stock depositary may deem
necessary in order to enable the preferred stock depositary to do so. The
preferred stock depositary will abstain from voting the amount of preferred
stock represented by the depositary shares to the extent it does not receive
specific instructions from the holders of depositary receipts evidencing the
depositary shares. The preferred stock depositary will not be responsible for
any failure to carry out any instruction to vote, or for the manner or effect of
any such vote made, as long as any such action or non-action is in good faith
and does not result from the preferred stock depositary's negligence or willful
misconduct.
LIQUIDATION PREFERENCE
In the event that we voluntarily or involuntarily liquidate, dissolve or
wind up, the holders of each depositary receipt will be entitled to the fraction
of the liquidation preference accorded each share of preferred stock represented
by the depositary share evidenced by the depositary receipt as set forth in the
applicable prospectus supplement.
CONVERSION OF PREFERRED STOCK
The depositary shares, as such, will not be convertible into common stock
or any other securities or property, except in connection with certain exchanges
in connection with the preservation of our status as a REIT. See "Restrictions
on Ownership and Transfer of Capital Stock." Nevertheless, if stated in the
applicable prospectus supplement relating to an offering of depositary shares,
holders may surrender depositary receipts to the applicable preferred stock
depositary with written instructions to the preferred stock depositary
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to instruct us to cause conversion of a class or series of preferred stock
represented by the depositary shares evidenced by the depositary receipts into
whole shares of common stock, other shares of a class or series of preferred
stock (including Excess Shares) or other shares of stock, and we have agreed
that upon receipt of these instructions and any amounts payable, we will cause
the conversion of the shares of preferred stock utilizing the same procedures as
those provided for delivery of preferred stock to effect the conversion. If we
convert only a portion of depositary shares evidenced by a depositary receipt,
we will issue a depositary receipt or receipts for any depositary shares that we
do not covert. We will not issue fractional shares of common stock upon
conversion, and if conversion will result in a fractional share, we will pay an
amount in cash by equal to the value of the fractional interest based upon the
closing price of our common stock on the last business day prior to the
conversion.
AMENDMENT AND TERMINATION OF A DEPOSIT AGREEMENT
The form of depositary receipt evidencing depositary shares which represent
the preferred stock and any provision of the deposit agreement may at any time
be amended by agreement between us and the preferred stock depositary. However,
any amendment that materially and adversely alters the rights of the holders of
depositary receipts or that would be materially or adversely inconsistent with
the rights granted to the holders of the related preferred stock will not be
effective unless such amendment has been approved by the existing holders of at
least two-thirds of the applicable depositary shares evidenced by the applicable
depositary receipts then outstanding. No amendment will impair the right,
subject to certain anticipated exceptions in the deposit agreements, of any
holder of depositary receipts to surrender any depositary receipt with
instructions to deliver to the holder the related class of preferred stock and
all money and other property, if any, represented by the depositary receipt,
except in order to comply with law. Every holder of an outstanding depositary
receipt at the time any such amendment becomes effective will be deemed, by
continuing to hold such depositary receipt, to consent and agree to such
amendment and to be bound by the applicable deposit agreement as amended.
We may terminate the deposit agreement upon not less than 30 days prior
written notice to the preferred stock depositary if such termination is
necessary to preserve our status as a REIT or a majority of each class or series
of preferred stock subject to the deposit agreement consents to termination, at
which time the preferred stock depositary will deliver or make available to each
holder of depositary receipts, upon surrender of the depositary receipts held by
the holder, the number of whole or fractional shares of preferred stock as are
represented by the depositary shares evidenced by the depositary receipts
together with any other property held by the preferred stock depositary with
respect to the depositary receipts. We will agree that if the deposit agreement
is terminated to preserve our status as a REIT, then we will use our best
efforts to list each class or series of preferred stock issued upon surrender of
the related depositary shares. In addition, the deposit agreement will
automatically terminate if:
- we have redeemed all outstanding depositary shares;
- there shall have been a final distribution in respect of each class or
series of preferred stock in connection with our liquidation, dissolution
or winding up and such distribution shall have been distributed to the
holders of the depositary receipts evidencing the depositary shares
representing such class or series of preferred stock; or
- each share of the related preferred stock shall have been converted into
our stock which is not represented by depositary shares.
CHARGES OF A PREFERRED STOCK DEPOSITARY
We will pay all transfer and other taxes and governmental charges arising
solely from the existence of the deposit agreement. In addition, we will pay the
fees and expenses of the preferred stock depositary in connection with the
performance of our duties under the deposit agreement. However, holders of
depositary receipts will pay the fees and expenses of the preferred stock
depositary for any duties requested by the holders to be performed which are
outside of those expressly provided for in the deposit agreement.
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RESIGNATION AND REMOVAL OF DEPOSITARY
The preferred stock depositary may resign at any time by delivering to us
notice of its election to do so, and we may at any time remove the preferred
stock depositary, any such resignation or removal to take effect upon the
appointment of a successor preferred stock depositary. A successor preferred
stock depositary must be appointed within 60 days after delivery of the notice
of resignation or removal and must be a bank or trust company with its principal
office in the United States and a combined capital and surplus of at least
$50,000,000.
MISCELLANEOUS
The preferred stock depositary will forward to holders of depositary
receipts any reports and communications from us which are received by the
preferred stock depositary with respect to the related preferred stock.
We will not be liable, and the preferred stock depositary will not be
liable, if we are prevented or it is prevented from or delayed in, by law or any
circumstances beyond its or our control, performing the obligations under the
deposit agreement. Our obligations and the obligations of the preferred stock
depositary under the deposit agreement will be limited to performing our duties
in good faith and without negligence (in the case of any action or inaction in
the voting of a class or series of preferred stock represented by the depositary
shares), gross negligence or willful misconduct. We will not be obligated, and
the preferred stock depositary will not be obligated, to prosecute or defend any
legal proceeding in respect of any depositary receipts, depositary shares or
shares of a class or series of preferred stock represented thereby unless
satisfactory indemnity is furnished. We may rely on, and the preferred stock
depositary may rely on, written advice of counsel or accountants, or information
provided by persons presenting shares of preferred stock represented thereby for
deposit, holders of depositary receipts or other persons that we believe in good
faith to be competent to give such information, and on documents that we believe
in good faith to be genuine and signed by a proper party.
If a preferred stock depositary receives conflicting claims, requests or
instructions from any holders of depositary receipts, on the one hand, and from
us, on the other hand, the preferred stock depositary will be entitled to act on
such claims, requests or instructions received by us.
DESCRIPTION OF WARRANTS
We currently have no warrants outstanding (other than options issued under
our Stock Option and Incentive Plan). We may issue warrants for the purchase of
common stock or preferred stock. We may issue warrants independently or together
with any other securities offered pursuant to any prospectus supplement and
warrants may be attached to or separate from such securities. We will issue each
series of warrants under a separate warrant agreement that we will enter into
with a warrant agent specified in the applicable prospectus supplement. The
warrant agent will act solely as our agent in connection with the warrants of
such series and will not assume any obligation or relationship of agency or
trust for or with any provisions of the warrants. We will set forth additional
terms of the warrants and the applicable warrant agreements in the applicable
prospectus supplement.
The applicable prospectus supplement will describe the terms of the
warrants in respect of which we are delivering this prospectus, including, where
applicable, the following:
- the title of the warrants;
- the aggregate number of the warrants;
- the price or prices at which the warrants will be issued;
- the designation, terms and number of shares of preferred stock or common
stock purchasable upon exercise of the warrants;
- the designation and terms of any securities with which the warrants are
issued and the number of any warrants issued with each such security;
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- the date, if any, on and after which the warrants and the related
preferred stock or common stock will be separately transferable,
including any limitations on ownership and transfer of the warrants as
may be appropriate to preserve our status as a REIT;
- the price at which each share of preferred stock or common stock
purchasable upon exercise of the warrants may be purchased;
- the date on which the right to exercise the warrants will commence and
the date on which the right will expire;
- the minimum or maximum amount of the warrants which may be exercised at
any one time;
- information with respect to book-entry procedures, if any;
- a discussion of certain federal income tax considerations; and
- any other terms of the warrants, including terms, procedures and
limitations relating to the exchange and exercise of the warrants.
RESTRICTIONS ON OWNERSHIP AND TRANSFER OF CAPITAL STOCK
In order for us to qualify as a REIT under the 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 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 REIT). 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 REITs contained in the Code. A REIT'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 REIT
has been made).
Because our Board of Directors believes it is desirable for us to qualify
as a REIT, our Charter, 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 Code, more than 9.8% (by value or number of
shares, whichever is more restrictive) of either our issued and outstanding
common stock or our issued and outstanding Series A Preferred Stock. We will
also prohibit the ownership, actually or constructively, of any shares of our
Series B Preferred Stock and any shares of our Series C 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% of our issued and outstanding
capital stock. The constructive ownership rules under the 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 or Series C
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 REIT 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 REIT 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
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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 REIT.
Our Charter also provides that:
- no person may actually or constructively own common stock, Series A
Preferred Stock, Series B Preferred Stock or Series C Preferred Stock
that would result in us being "closely held" under Section 856(h) of the
Code or otherwise cause us to fail to qualify as a REIT;
- no person may transfer common stock, Series A Preferred Stock, Series B
Preferred Stock or Series C 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 or Series C 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 REIT. The foregoing restrictions on
transferability and ownership will not apply if our Board of Directors
determines that it is no longer in our best interest to attempt to
qualify, or to continue to qualify, as a REIT. Except as otherwise
described above, any change in the applicable ownership limit would
require an amendment to our Charter, 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.
Under our Charter, 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 Charter, then any such attempted transfer will be void and of no force or
effect with respect to the purported transferee (the "Prohibited Transferee") as
to that number of shares 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 (the "Prohibited
Owner") 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 (the "Beneficiary"). 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 Purported Transferee or Prohibited Owner will be
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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 Charter or imposed by the Board of Directors, then our Charter provides
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 Charter provides that the transfer will be null
and void in its entirety and the intended transferee will acquire no rights to
the stock.
All certificates representing shares 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 Charter, 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 and/or Series C Preferred
Stock on our status as a REIT and to ensure compliance with each ownership
limit, or any other limit specified in the Charter or required by the Board of
Directors.
CERTAIN PROVISIONS OF MARYLAND LAW AND
OF OUR CHARTER AND BYLAWS
We have summarized certain terms and provisions of the MGCL and our Charter
and Bylaws. This summary is not complete and is qualified by the provisions of
our Charter and Bylaws, and the MGCL. For more detail, you should refer to our
Charter and Bylaws, which we have filed as exhibits to the registration
statement of which this prospectus is a part. See "Where You Can Find More
Information."
BOARD OF DIRECTORS
The Charter provides that the number of our directors shall be established
by the Bylaws, but cannot be less than the minimum number required by the MGCL,
which in the case of the Company is three. Our Bylaws currently provide that the
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 our 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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REMOVAL OF DIRECTORS
While our Charter and the MGCL empower our stockholders to fill vacancies
in the Board of Directors that are caused by the removal of a director, our
Charter precludes stockholders from removing incumbent directors except upon a
substantial affirmative vote. Specifically, our Charter provides 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 Series A Preferred
Stock and any holders of shares of our preferred stock to elect and remove
directors elected by such holders under certain circumstances. The MGCL 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 MGCL (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 MGCL (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 CHARTER AND BYLAWS
Our Charter may not be amended without the affirmative vote of at least
two-thirds of the shares of capital stock outstanding and entitled to vote on
the amendment, voting together as a single class. Our Bylaws may be amended by
the vote of a majority of the Board of Directors or by a 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 requires 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;
- the requirement in our Bylaws that our independent directors approve
transactions involving our executive officers or directors or any limited
partners of the Operating Partnership and their affiliates; and
- provisions governing amendment of our Bylaws.
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 MGCL 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.
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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 the 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 Charter regarding amendments to the Charter 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 MGCL, we may be dissolved by the affirmative vote of a majority
of the entire Board of Directors declaring dissolution to be advisable and
directing that the proposed dissolution be submitted for consideration at any
annual or special meeting of stockholders. We may also be dissolved, upon proper
notice, by the affirmative vote of the holders of two-thirds of the total number
of shares of capital stock outstanding and entitled to vote on the dissolution,
voting as a single class.
LIMITATION OF DIRECTORS' AND OFFICERS' LIABILITY
Our officers and directors are indemnified under the MGCL, our Charter and
the Partnership Agreement against certain liabilities. Our Charter and Bylaws
require us to indemnify our directors and officers to the fullest extent
permitted from time to time by the MGCL.
The MGCL permits a corporation to indemnify its directors and officers and
certain other parties against judgments, penalties, fines, settlements and
reasonable expenses actually incurred by them in connection with any proceeding
to which they may be made a party by reason of their service in those or other
capacities unless:
- 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;
- 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 MGCL 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
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restrictions. Our Charter contains this provision. The MGCL does not, however,
permit the liability of directors and officers to the corporation or its
stockholders to be limited to the extent that:
- 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 our stockholders to obtain
other relief, such as an injunction or rescission. The 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 Charter, 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 Charter. 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.
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 November 30, 1998, an
approximate 95.1% 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 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 we have filed 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 (the "GP 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 and any
Series C 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 and any Series C 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 and Series C Preferred Stock that we may issue upon exchange of
the common Units, Series B Preferred Units and AMB Property II Series C
Preferred Units may be sold in registered transactions or transactions exempt
from registration under
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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 Act"). The
Partnership Agreement imposes certain restrictions on the transfer of Units, as
described below.
PURPOSE, BUSINESS AND MANAGEMENT
The Operating Partnership is organized as a Delaware limited partnership
pursuant to the terms of the Partnership Agreement. 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. ("AMB
Investment Management")) and certain other activities that we conduct through
Headlands Realty Corporation. The Operating Partnership owns 100% of the
non-voting preferred stock of AMB Investment Management and Headlands Realty
Corporation (representing approximately 95% of the economic interest in each
entity). Certain of our executive officers and an officer of AMB Investment
Management own all of the outstanding voting common stock of AMB Investment
Management (representing approximately 5% of the economic interest in AMB
Investment Management). Certain of our executive officers and a director of
Headlands Realty Corporation own all of the outstanding voting common stock of
Headlands Realty Corporation (representing approximately 5% of the economic
interest in Headlands Realty Corporation). We refer to AMB Investment Management
and Headlands Realty Corporation as the "Preferred Stock Subsidiaries."
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 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 the Company to be
classified as a REIT under Section 856 of the Code, unless the Company ceases to
qualify as a REIT for reasons other than the conduct of the business of the
Operating Partnership. Subject to the foregoing limitation, the Operating
Partnership may enter into partnerships, joint ventures or similar arrangements
and may own interests directly or indirectly in any other entity.
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. The Company
and the Operating Partnership have no liability to a limited partner as a result
of any liabilities or damages incurred or suffered by, or benefits not derived
by, a limited partner as a result of an action or inaction of the Company as
general partner of the Operating Partnership as long as the Company acted in
good faith. Limited partners have no right or authority to act for or to bind
the Operating Partnership.
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.
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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, as amended, its operation as a
REIT and activities that are incidental to these activities (including ownership
of any interest in AMB Property Holding Corporation, AMB Property Holding II
Corporation, the Preferred Stock Subsidiaries 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 Partnership Agreement does not prevent another person
or entity that acquires control of the Company in the future from conducting
other businesses or owning other assets, even if it would be in the best
interests of the limited partners for the Operating 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, whether direct or indirect.
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, our continued
existence and qualification as a REIT 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.
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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;
- 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 Units (with an estimated aggregate value
of approximately $253.7 million), 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
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 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
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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 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 the Company 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 Shares, 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 that the Operating Partnership may issue to us (see "-- Series C
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 to
us, we will receive preferred distributions of cash and preferred allocations of
income on the Series B Preferred Units or Series C Preferred Units in an amount
equal to the dividends payable by us on the Series B Preferred Stock or Series C
Preferred Stock. See "-- Series C 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 and Series C Preferred Stock before any other partner
in the Operating Partnership (other than holders of parity preferred units,
including the Series B 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 and Series C 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."
SERIES B PREFERRED UNITS
General. The Series B 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 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 and 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 and any Series C 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
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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 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 Code for
purposes of determining whether the holder of Series B Preferred Units is an
"investment company" under the 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 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."
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.
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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 us 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.
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 such 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
and any Series C 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 our 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 AMB Property II Series C
Preferred Units 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 AMB Property II Series C Preferred Units 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 AMB Property II Series C Preferred Units to AMB
Property Holding Corporation.
Any Series C Preferred Units 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 Series C Preferred Stock and the Series A Preferred Stock before any
other partner in the Operating Partnership (other than holders of parity
preferred units, including the Series B Preferred Units).
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COMMON LIMITED PARTNERSHIP UNITS
Redemption/Exchange Rights
Holders of common Units 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 Charter) 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). See
"Redemption/Exchange of Common Units for Common Stock." We presently anticipate
that we will elect to issue shares of common stock in exchange for common Units
in connection with each redemption request, rather than having the Operating
Partnership pay cash. 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 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 Units 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 Units a registration statement covering the issuance of shares of
common stock upon exchange of the Units and the resale of the shares. In
addition, we have agreed to file a registration statement covering shares of
common stock issuable upon exchange of Performance Units. We may also agree to
provide registration rights to any other person who may become an owner of
Units, provided the person provides us with satisfactory undertakings. See "Risk
Factors -- Ownership of Common Stock -- The Large Number of Shares Available for
Future Sale Could Adversely Affect the Market Price of Our Common Stock." We
will bear expenses incident to our registration obligations upon exercise of
registration rights, including the payment of federal securities law 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, depending on the trading price
of our common stock after November 26, 1998 (the first anniversary of our
initial public offering), certain of our officers, in their capacity as limited
partners of the Operating Partnership, may receive performance units
("Performance Units") as of each of February 26, May 26, August 26 and November
26, 1999. The Performance Units are similar to common 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 Units, and certain redemption and exchange rights, including limited
rights to cause the Operating Partnership to redeem the Performance Units for
cash or, at the Company's 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.
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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." If officers receive
Performance Units, an equal number of GP Units allocable to the Company and
Units allocable to Performance Investors who are limited partners in the
Operating Partnership will be transferred to the Operating Partnership. If any
of our GP 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 Company stockholder or limited partner in the
Operating Partnership (other than Performance Investors, to the extent of their
obligations to transfer Performance Shares to the Company or the Operating
Partnership, as applicable) will be diluted as a result of the issuance of
Performance Units.
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, 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 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 the Company nor the Operating Partnership may engage in any merger,
consolidation or other combination with or into another person, or effect any
reclassification, recapitalization or change of its outstanding equity
interests, and the Company may not sell all or substantially all of its assets
(each a "Termination Transaction") unless in connection with the Termination
Transaction all holders of 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. Any Performance Units issued will also have
the benefit of these provisions, irrespective of the capital account then
applicable to the Performance Units.
A Termination Transaction may also occur 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 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
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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.
Our Board of Directors will reasonably determine fair market values and
rights, preferences and privileges of the common limited partners 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 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 defined 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 described under "Risk Factors -- Conflicts of Interest -- Some of Our
Executive Officers are Involved in Other Real Estate Activities and
Investments," 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 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 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 Partnership Agreement may be proposed by the Company or
by limited partners owning at least 25% of the then outstanding 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 the 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
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limited partners) holding a majority of the percentage interests of the limited
partners other than preferred limited 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 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 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.
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.
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CERTAIN FEDERAL INCOME TAX CONSIDERATIONS
The following summary of certain federal income tax considerations
regarding the Company 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. The tax treatment of a holder of any of the
securities will vary depending upon the terms of the specific securities
acquired by such holder, as well as his or her particular situation, and this
discussion does not attempt to address any aspects of federal income taxation
relating to holders of securities. We will provide certain federal income tax
considerations relevant to holders of the securities in the prospectus
supplement relating to those securities.
The information in this section is based on the Code, current, temporary
and proposed Treasury Regulations promulgated under the Code, the legislative
history of the Code, current administrative interpretations and practices of the
Internal Revenue Service (the "IRS") (including its practices and policies as
expressed in certain private letter rulings which are not binding on the IRS
except with respect to the particular taxpayers who requested and received such
rulings), and court decisions, all as of the date of this prospectus. Future
legislation, Treasury Regulations, administrative interpretations and practices
and/or court decisions may adversely affect, perhaps retroactively, the tax
considerations described herein. We have not requested, and do not plan to
request, any rulings from the IRS concerning our tax treatment and the
statements in this prospectus are not binding on the IRS or a court. Thus, we
can provide no assurance that these statements will not be challenged by the IRS
or sustained by a court if challenged by the IRS.
YOU ARE ADVISED TO CONSULT THE APPLICABLE PROSPECTUS SUPPLEMENT, AS WELL AS
YOUR TAX ADVISOR, REGARDING THE SPECIFIC TAX CONSEQUENCES TO YOU OF THE
ACQUISITION, OWNERSHIP AND SALE OF OUR SECURITIES, INCLUDING THE FEDERAL, STATE,
LOCAL, FOREIGN AND OTHER TAX CONSEQUENCES OF SUCH ACQUISITION, OWNERSHIP AND
SALE AND OF POTENTIAL CHANGES IN APPLICABLE TAX LAWS.
TAXATION OF THE COMPANY
General. We elected to be taxed as a REIT under Sections 856 through 860 of
the 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 REIT under the Code commencing with our taxable year ended
December 31, 1997. We intend to continue to operate in this manner. However, our
qualification and taxation as a REIT 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
Code. Accordingly, there is no assurance that we have operated or will continue
to operate in a manner so as to qualify or remain qualified as a REIT. See
"-- Failure to Qualify."
The sections of the Code that relate to the qualification and operation as
a REIT are highly technical and complex. The following sets forth the material
aspects of the sections of the Code that govern the federal income tax treatment
of a REIT and its stockholders. This summary is qualified in its entirety by the
applicable Code provisions, relevant rules and regulations promulgated under the
Code, and administrative and judicial interpretations of the Code, and these
rules and these regulations. Latham & Watkins has acted as tax counsel to the
Company in connection with the IPO, subsequent offerings of Common Stock, and
the Company's election to be taxed as a REIT.
Unless we specify otherwise in the applicable prospectus supplement, as a
condition to the closing of each offering of equity securities by the Company,
our tax counsel will render an opinion to the underwriters of the offering to
the effect that, commencing with our taxable year ended December 31, 1997, we
have been organized and operated in conformity with the requirements for
qualification as a REIT, and our proposed method of operation will enable us to
continue to meet the requirements for qualification and taxation as a REIT under
the Code. It must be emphasized that each such opinion will be based on various
factual assumptions relating to our organization and operation, including
matters relating to the Operating Partnership and the Preferred Stock
Subsidiaries, and will be conditioned upon certain representations to be made by
us as
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to factual matters. Our tax counsel has no obligation to update any such opinion
subsequent to its date. In addition, such opinions will be based upon our
factual representations as set forth in this prospectus and any applicable
prospectus supplement or supplements, and assume that the actions described in
this prospectus and any such supplement or supplements will be completed by us
in a timely fashion. Moreover, such qualification and taxation as a REIT depends
upon the 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 Code and discussed below, the
results of which have not been and will not be reviewed by our tax counsel.
Accordingly, we cannot assure you that the actual results of our operation
during any particular taxable year will satisfy such requirements. See
"-- Failure to Qualify." Further, the anticipated income tax treatment described
in the prospectus or in any prospectus supplement or supplements may be changed,
perhaps retroactively, by legislation, administrative or judicial action at any
time.
If we qualify for taxation as a REIT, we generally will not be subject to
federal corporate income taxes on our net income that is currently distributed
to our stockholders. This treatment substantially eliminates the "double
taxation" (once at the corporate level when earned and once again at the
stockholder level when distributed) that generally results from investment in a
corporation. However, the Company will be subject to federal income tax as
follows:
First, we will be taxed at regular corporate rates on any undistributed
REIT taxable income, including undistributed net capital gains.
Second, we may be subject to the "alternative minimum tax" on our items of
tax preference under certain circumstances.
Third, if we have (a) net income from the sale or other disposition of
"foreclosure property" (defined generally as property we acquired through
foreclosure or after a default on a loan secured by the property or a lease of
the property) which is held primarily for sale to customers in the ordinary
course of business or (b) other nonqualifying income from foreclosure property,
we will be subject to tax at the highest corporate rate on this income.
Fourth, we will be subject to a 100% tax on any net income from prohibited
transactions (which are, in general, certain sales or other dispositions of
property held primarily for sale to customers in the ordinary course of business
other than foreclosure property).
Fifth, we will be subject to a 100% tax on an amount equal to (a) the gross
income attributable to the greater of the amount by which we fail the 75% or 95%
gross income test multiplied by (b) a fraction intended to reflect our
profitability, if we fail to satisfy the 75% gross income test or the 95% gross
income test (as discussed below), but have maintained our qualification as a
REIT because we satisfied certain other requirements.
Sixth, we would be subject to 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 (i) 85% of our REIT ordinary
income for the year, (ii) 95% of our REIT capital gain net income for the year,
and (iii) any undistributed taxable income from prior periods.
Seventh, if we acquire any asset (a "Built-In Gain Asset") from a
corporation which is or has been a C corporation (i.e., generally a corporation
subject to full corporate-level tax) in a transaction in which the basis of the
Built-In Gain 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 (the "Recognition
Period") beginning on the date on which we acquired the asset, then we will be
subject to tax at the highest regular corporate tax rate on this gain to the
extent of the Built-In Gain (i.e., the excess of (a) the fair market value of
the asset over (b) our adjusted basis in the asset, in each case determined as
of the beginning of the Recognition Period). The results described in this
paragraph with respect to the recognition of Built-In Gain assume that we will
make an election pursuant to IRS Notice 88-19.
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Requirements for Qualification as a REIT. The Code defines a REIT 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 859 of the Code;
(4) that is not a financial institution or an insurance company within the
meaning of certain provisions of the 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 Code to include certain entities) during the last half of each
taxable year; and
(7) that meets certain other tests, described below, regarding the nature
of its income and assets and the amount of its distributions.
The 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 REIT. For purposes of condition (6), pension funds and certain other
tax-exempt entities are treated as individuals, subject to a "look-through"
exception with respect to pension funds.
We believe that we have satisfied each of the above conditions. In
addition, our charter provides for restrictions regarding ownership and transfer
of shares. These restrictions are intended to assist us in continuing to satisfy
the share ownership requirements described in (5) and (6) above. These ownership
and transfer restrictions are described in "Description of Capital
Stock -- Restrictions on Ownership and Transfer 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, our status as a REIT 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 "-- Failure to
Qualify."
In addition, a corporation may not elect to become a REIT unless its
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 the Company 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 such
election had not been revoked or otherwise terminated (except as provided
below). In order to allow us to become a REIT, AMB Institutional Realty
Advisors, Inc. revoked its S election shortly before its merger into the
Company. 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 qualify as a REIT 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 certain representations made by AMB
Institutional Realty Advisors, Inc. as to factual matters and upon the opinion
of counsel for certain shareholders of AMB Institutional Realty Advisors, Inc.,
with respect to matters relating to the tax status of such shareholders.
Ownership of Interests in Partnerships and Qualified REIT Subsidiaries. In
the case of a REIT which is a partner in a partnership, IRS regulations provide
that the REIT will be deemed to own its proportionate share of the assets of the
partnership. Also, the REIT will be deemed to be entitled to the income of the
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partnership attributable to its proportionate share. The character of the assets
and gross income of the partnership retains the same character in the hands of
the REIT for purposes of Section 856 of the Code, including satisfying the gross
income tests and the asset tests. Thus, our proportionate share of the assets
and items of income of the Operating Partnership (including the Operating
Partnership's share of these items for any partnership in which it owns an
interest) are treated as our assets and items of income for purposes of applying
the requirements described in this prospectus (including the income and asset
tests described below). 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 consistent
with the requirements for qualification as a REIT. However, we are a limited
partner or non-managing member in certain of our joint ventures. If a joint
venture takes or expects to take actions which could jeopardize our status as a
REIT or subject us to 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 REIT income or asset test, and that we
would not become aware of such action in a time 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 REIT. The Company
owns 100% of the stock of two subsidiaries that are qualified REIT subsidiaries
(each, a "QRS") and may acquire stock of one or more new subsidiaries. A
corporation will qualify as a QRS if 100% of its stock is held by the Company. A
QRS will not be treated as a separate corporation, and all assets, liabilities
and items of income, deduction and credit of a QRS will be treated as assets,
liabilities and such items (as the case may be) of the Company for all purposes
of the Code, including the REIT qualification tests. For this reason, references
under "Certain Federal Income Tax Considerations" to our income and assets shall
include the income and assets of any QRS. A QRS will not be subject to federal
income tax, and our ownership of the voting stock of a QRS 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 REIT. 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,
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). 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" in satisfying
the gross income requirements for a REIT described above only if the following
conditions are met:
- the amount of rent must not be based 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 "rents from real property" solely by
reason of being based on a fixed percentage or percentages of receipts or
sales;
- the Code provides that rents received from a tenant will not qualify as
"rents from real property" in satisfying the gross income tests if the
REIT, or an actual or constructive owner of 10% or more of the REIT,
actually or constructively owns 10% or more of the interests in such
tenant (a "Related Party Tenant");
- if rent attributable to personal property, leased in connection with a
lease of real property, is greater than 15% of the total rent received
under the lease, then the portion of rent attributable to personal
property will not qualify as "rents from real property"; and
- for rents received to qualify as "rents from real property," the REIT
generally must not operate or manage the property or furnish or render
services to the tenants of the property (subject to a 1% de
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minimis exception), other than through an independent contractor from
whom the REIT derives no revenue. The REIT 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 property.
We do not and will not, and as general partner of the Operating
Partnership, will not permit the Operating Partnership to:
- charge rent for any property that is based in whole or in part on the
income or profits of any person (except by reason of being based on a
percentage of receipts or sales, as described above);
- rent any property to a Related Party Tenant;
- derive rental income attributable to personal property (other than
personal property leased in connection with the lease of real property,
the amount of which is less than 15% of the total rent received under the
lease); or
- perform services considered to be rendered to the occupant of the
property, other than through an independent contractor from whom we
derive no revenue.
NOTWITHSTANDING THE FOREGOING, WE MAY HAVE TAKEN AND MAY CONTINUE TO TAKE
CERTAIN OF THE ACTIONS SET FORTH ABOVE TO THE EXTENT THESE ACTIONS WILL NOT,
BASED ON THE ADVICE OF OUR TAX COUNSEL, JEOPARDIZE OUR STATUS AS A REIT.
AMB Investment Management is the sole general partner of, and conducts its
operations through, AMB Investment Management Limited Partnership (the
"Investment Management Partnership.") The Investment Management 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
REIT gross income tests. Such fees and other income do not accrue to us, but we
derive our allocable share of dividend income from the Preferred Stock
Subsidiaries through our interest in the Operating Partnership. Such dividend
income qualifies under the 95%, but not the 75%, REIT gross income test. The
Operating Partnership may provide certain management or administrative services
to the Investment Management 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% REIT
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 the Investment Management Partnership, Headlands Realty
Corporation and the Operating Partnership. We will monitor the amount of the
dividend income from the Preferred Stock Subsidiaries 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 REIT income tests.
However, there can be no assurance that such actions will in all cases prevent
us from violating a REIT 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 REIT for the year if we are
entitled to relief under certain provisions of the Code. Generally, we may avail
ourselves of the relief provisions if:
- our failure to meet these tests was due to reasonable cause and not due
to willful neglect;
- we attach a schedule of the sources of our income to our federal income
tax return; and
- any incorrect information on the schedule was not due to fraud with
intent to evade tax.
IT IS NOT POSSIBLE, HOWEVER, TO STATE WHETHER IN ALL CIRCUMSTANCES WE WOULD
BE ENTITLED TO THE BENEFIT OF THESE RELIEF PROVISIONS. FOR EXAMPLE, IF WE FAIL
TO SATISFY THE GROSS INCOME TESTS BECAUSE NONQUALIFYING INCOME THAT WE
INTENTIONALLY INCUR EXCEEDS THE LIMITS ON NONQUALIFYING INCOME, THE IRS COULD
CONCLUDE THAT OUR FAILURE TO SATISFY THE TESTS WAS NOT DUE
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TO REASONABLE CAUSE. IF THESE RELIEF PROVISIONS DO NOT APPLY TO A PARTICULAR SET
OF CIRCUMSTANCES, WE WILL NOT QUALIFY AS A REIT. AS DISCUSSED ABOVE IN
"-- TAXATION OF THE COMPANY -- GENERAL," EVEN IF THESE RELIEF PROVISIONS APPLY,
AND WE RETAIN OUR STATUS AS A REIT, A TAX WOULD BE IMPOSED WITH RESPECT TO OUR
EXCESS NET INCOME. WE MAY NOT ALWAYS BE ABLE TO MAINTAIN COMPLIANCE WITH THE
GROSS INCOME TESTS FOR REIT QUALIFICATION DESPITE OUR PERIODIC MONITORING OF OUR
INCOME.
Prohibited Transaction Income. 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) will be treated as income from a
prohibited transaction that is subject to a 100% penalty tax. This prohibited
transaction income may also adversely affect our ability to satisfy the income
tests for qualification as a REIT. 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 IRS may contend
that that one or more of these sales is subject to the 100% penalty tax.
Asset Tests. At the close of each quarter of our taxable year, we also must
satisfy three tests relating to the nature and diversification of our assets.
First, at least 75% of the value of our total assets must be represented by real
estate assets, cash, cash items and government securities. For purposes of this
test, real estate assets include stock or debt instruments that are purchased
with the proceeds of a stock offering or a long-term (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
each of the Preferred Stock Subsidiaries, and by virtue of its ownership of
interests in the Operating Partnership, the Company is considered to own its pro
rata share of such stock. See "Structure of the Company." The stock of each of
the Preferred Stock Subsidiaries held by us is not a qualifying real estate
asset. The Operating Partnership does not and will not own any of the voting
securities of either of the Preferred Stock Subsidiaries, and therefore we will
not be considered to own more than 10% of the voting securities of either of the
Preferred Stock Subsidiaries. In addition, we believe that the value of our pro
rata share of the securities of each of the Preferred Stock Subsidiaries 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. There can be no
assurance that the IRS will not contend that the value of the securities of one
or both of the Preferred Stock Subsidiaries held by us exceeds the 5% value
limitation. The 5% value test must be satisfied not only on the date that we
(directly or through the Operating Partnership) acquire securities in the
applicable Preferred Stock Subsidiary, but also each time we increase our
ownership of securities of such Preferred Stock Subsidiary, including as a
result of increasing our interest in the Operating Partnership. For example, our
indirect ownership of securities of each Preferred Stock Subsidiary 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, there can be no assurance 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 the Preferred Stock Subsidiaries.
After initially meeting the asset tests at the close of any quarter, we
will not lose our status as a REIT 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
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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 REIT.
Annual Distribution Requirements. To maintain our qualification as a REIT,
we are required to distribute dividends (other than capital gain dividends) to
our stockholders in an amount at least equal to the sum of 95% of our "REIT
taxable income" (computed without regard to the dividends paid deduction and our
net capital gain) and 95% of our net income (after tax), if any, from
foreclosure property, minus the excess of the sum of certain items of noncash
income (i.e., 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) over 5% of "REIT taxable income" as described above.
These distributions must be paid 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 below, these distributions
are taxable to our stockholders (other than tax-exempt entities, as discussed
below) in the year in which paid. This is so even though these distributions
relate to the prior year for purposes of our 95% distribution requirement. The
amount distributed must not be preferential -- e.g., 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 "REIT taxable income," as adjusted, we will be subject to tax
thereon at regular ordinary and capital gain corporate tax rates. We believe we
have made and intend to continue to make timely distributions sufficient to
satisfy these annual distribution requirements. 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 REIT taxable income will be less than our cash flow due
to the allowance of depreciation and other non-cash charges in computing REIT
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,
in order to meet the distribution requirements, 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.
Under certain circumstances, we may be able to rectify a failure to meet
the distribution requirement for a year by paying "deficiency dividends" to
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 taken for deficiency
dividends.
Furthermore, we would be subject to a 4% excise tax on the excess of the
required distribution over the amounts actually distributed if we should 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 REIT ordinary income for such year, 95% of our REIT capital gain
income for the year and any undistributed taxable income from prior periods. Any
REIT 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
REIT, we cannot have at the end of any taxable year any undistributed "earnings
and profits" that are attributable to a "C corporation" taxable year (i.e., a
year in which a corporation is neither a REIT nor an S corporation). In
connection with our
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formation transactions, we succeeded to various tax attributes of AMB
Institutional Realty Advisors, Inc., AMB Current Income Fund, Inc. ("CIF") and
AMB Value Added Fund, Inc. ("VAF") (if the mergers of CIF and VAF into AMB
Institutional Realty Advisors, Inc. (the "Private REIT Mergers") were treated as
tax-free reorganizations under the Code), including any undistributed C
corporation earnings and profits of such corporations. If AMB Institutional
Realty Advisors, Inc. qualified as an S corporation for each year in which its
activities would have created earnings and profits, and each of CIF and VAF
qualified as a REIT during its existence and its merger into us was treated as a
tax-free reorganization under the Code, then those corporations would not have
any undistributed C corporation earnings and profits. If, however, either CIF or
VAF failed to qualify as a REIT 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 its first taxable year, would prevent
us from qualifying as a REIT.
We believe that each of CIF and VAF qualified as a REIT throughout the
duration of its existence and that, in any event, neither CIF nor VAF had any
undistributed C corporation earnings and profits at the time of the applicable
Private REIT Merger. We believe that AMB Institutional Realty Advisors, Inc.
qualified as an S corporation since its 1989 taxable year and that its
activities prior to such year did not create any earnings and profits. In
addition, in connection with our initial public offering, counsel to CIF and VAF
rendered opinions with respect to the qualification of those corporations as
REITs for federal income tax purposes, and Latham & Watkins rendered an opinion
with respect to AMB Institutional Realty Advisors, Inc.'s status as an S
corporation for federal income tax purposes. Those opinions were based on
certain representations and assumptions. However, the IRS may contend otherwise
on a subsequent audit of AMB Institutional Realty Advisors, Inc., CIF or VAF.
FAILURE TO QUALIFY
If we fail to qualify for taxation as a REIT in any taxable year, and the
relief provisions do not apply, we will be subject to 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
will not be deductible by us and we will not be required to distribute any
amounts to our stockholders. As a result, our failure to qualify as a REIT would
reduce the cash available for distribution by us to our stockholders. In
addition, if we fail to qualify as a REIT, 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 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 REIT 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 will be 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 subject to federal income
tax. Rather, partners are allocated their proportionate shares of the items of
income, gain, loss, deduction and credit of a partnership, and are potentially
subject to tax thereon, without regard to whether the partners receive a
distribution from the partnership. We will include in our income our
proportionate share of the foregoing partnership items for purposes of the
various REIT income tests and in the computation of our REIT taxable income.
Moreover, for purposes of the REIT asset tests, we will include our
proportionate share of assets held by the Operating Partnership and joint
ventures. See "-- Taxation of the Company."
Entity Classification. Our interests in the Operating Partnership and the
joint ventures involve special tax considerations, including the possibility of
a challenge by the IRS of the status of the Operating Partnership or a
partnership 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 therefore be subject to an entity-level tax on its income. In such a
situation, the
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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 the Company -- Asset Tests" and "-- Income Tests"). This, in turn, would
prevent us from qualifying as a REIT. 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 classified
as a corporation and which has at least two members (an "Eligible Entity") may
elect to be taxed 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, and, as a result, we believe such
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 the Company with respect to its Series A Preferred
Units and to the holders of Series B Preferred Units. In addition, to the extent
the Company issues Series C Preferred Stock in exchange for AMB Property II
Series C Preferred Units, the Operating Partnership will issue Series C
Preferred Units to the Company, and the Partnership Agreement will be amended to
provide for similar preferred distributions of cash and preferred allocations of
income to the Company with respect to its Series C Preferred Units. As a
consequence, the Company will receive distributions from the Operating
Partnership and attributable to its other assets that we would use to pay
dividends on shares of Series A Preferred Stock and any shares of Series B
Preferred Stock or Series C Preferred Stock issued by the Company before any
other partner in the Operating Partnership (other than a holder of Series B
Preferred Units, if such units are not then held by the Company) receives a
distribution. In addition, if necessary, income will be specially allocated to
the Company, and losses will be allocated to the other partners of the Operating
Partnership, in amounts necessary to ensure that the balance in the capital
account of the Company will at all times be equal to or in excess of the amount
payable by the Company on the Series A Preferred Stock and any Series B
Preferred Stock or Series C Preferred Stock then issued by the Company upon
liquidation or redemption. As long as the Company does not hold the Series B
Preferred Units, similar preferred distributions and allocations will be made
for the benefit of the holders of such 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 the Company's 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 the Company and unitholders which were Performance Investors. Certain limited
partners 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, such limited partners 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 the
Company.
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 Code and the Treasury Regulations
promulgated under this section of the Code.
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Tax Allocations with Respect to the Properties. Under Section 704(c) of the
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 of contributed property at the time of
contribution and the adjusted tax basis of the property at the time of
contribution (a "Book-Tax Difference"). 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 Code.
In general, the partners of the Operating Partnership (including the
Company) 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
such 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 the Company 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 the Company or other partners
as a result of such sale. Such an allocation might cause the Company or other
partners to recognize taxable income in excess of cash proceeds, which might
adversely affect the Company's ability to comply with the REIT distribution
requirements. See "-- Taxation of the Company -- Requirements for Qualification"
and "-- Annual Distribution Requirements."
Treasury Regulations issued under Section 704(c) of the 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 Code will not apply.
OTHER TAX CONSEQUENCES
We may be subject to state or local taxation in various state or local
jurisdictions, including those in which we transact business. Our state and
local tax treatment may not conform to the federal income tax consequences
discussed above.
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PLAN OF DISTRIBUTION
We may sell securities offered pursuant to any applicable prospectus
supplement directly to one or more purchasers or though agents or underwriters.
We may sell securities offered pursuant to any applicable prospectus supplement
in at-the-market equity offerings or on a negotiated or competitive bid basis
through underwriters or dealers or directly to other purchasers or through
agents. Such underwriters or agents may include Morgan Stanley & Co.
Incorporated. We will name any underwriter or agent involved in the offer and
sale of the securities in the applicable prospectus supplement. The amount of
voting stock registered pursuant to this prospectus that we may sell in
at-the-market equity offerings will not exceed an aggregate offering price of
$203,645,123, which represents 10% of the aggregate market value of the
Company's outstanding voting stock held by non-affiliates of the Company
calculated as of October 14, 1998.
We may distribute the securities from time to time in one or more
transactions:
- at a fixed price or prices, which may be changed;
- at market prices prevailing at the time of sale;
- at prices related to prevailing market prices; or
- at negotiated prices.
In connection with the sale of the securities, underwriters may be deemed
to have received compensation from us in the form of underwriting discounts or
commissions and may also receive commissions from purchasers of securities for
whom they may act as agent. Underwriters may sell the securities to or through
dealers, and dealers may receive compensation in the form of discounts,
concessions or commissions from the underwriters and/or commissions from the
purchasers for whom they may act as agent.
We will describe in the applicable prospectus supplement any underwriting
compensation we pay to underwriters or agents in connection with the offering of
the securities, and any discounts, concessions or commissions allowed by
underwriters to participating dealers. Dealers and agents participating in the
distribution of the securities may be deemed to be underwriters, and any
discounts and commissions received by them and any profit realized by them on
resale of the securities may be deemed to be underwriting discounts and
commissions. We may enter into agreements to indemnify underwriters, dealers and
agents against certain civil liabilities, including liabilities under the
Securities Act, and to reimburse these persons for certain expenses. We will
describe any indemnification agreements in the applicable prospectus supplement.
Unless we specify otherwise in the related prospectus supplement, each
series of securities offered will be a new issue with no established trading
market, other than the common stock which is listed on the New York Stock
Exchange. Any shares of common stock sold pursuant to a prospectus supplement
may be listed on the exchange, subject to official notice of issuance. We may
elect to list any series of preferred stock and any series of debt securities,
depository shares or warrants on any exchange, but we are not obligated to do
so. It is possible that one or more underwriters may make a market in a series
of offered securities, but will not be obligated to do so and may discontinue
any market making at any time without notice. Therefore, no assurance can be
given as to the liquidity of the trading market for the securities.
If indicated in the applicable prospectus supplement, we may authorize
dealers acting as our agents to solicit offers by certain institutions to
purchase the securities from us at the public offering price set forth in the
prospectus supplement pursuant to delayed delivery contracts providing for
payment and delivery on the date or dates stated in the prospectus supplement.
We may make delayed delivery with various institutions, including commercial and
savings banks, insurance companies, pension funds, investment companies and
educational and charitable institutions. Delayed delivery contracts will not be
subject to any conditions except:
- the purchase by an institution of the securities covered by its delayed
delivery contracts shall not at the time of delivery be prohibited under
the laws of any jurisdiction in the United States to which the
institution is subject; and
- if the securities are sold to underwriters, we shall have sold to the
underwriters the total principal amount of the offered securities less
the principal amount covered by the delayed delivery contracts.
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To facilitate the offering of the securities, certain persons participating
in the offering may engage in transactions that stabilize, maintain, or
otherwise affect the price of the securities. This may include over-allotments
or short sales of the securities, which involves the sale by persons
participating in the offering of more securities than we sold to them. In these
circumstances, these persons would cover the over-allotments or short positions
by making purchases in the open market or by exercising their over-allotment
option. In addition, these persons may stabilize or maintain the price of the
debt securities by bidding for or purchasing debt securities in the open market
or by imposing penalty bids, whereby selling concessions allowed to dealers
participating in the offering may be reclaimed if securities sold by them are
repurchased in connection with stabilization transactions. The effect of these
transactions may be to stabilize or maintain the market price of the securities
at a level above that which might otherwise prevail in the open market. These
transactions may be discontinued at any time.
Certain of the underwriters and their affiliates may be customers of,
engage in transactions with and perform services for, us in the ordinary course
of business.
LEGAL MATTERS
The validity of the debt securities, depositary shares and warrants will be
passed upon for us by Latham & Watkins, San Francisco, and the validity of the
common stock and preferred stock will be passed upon for us by Ballard Spahr
Andrews & Ingersoll, LLP, Baltimore, Maryland.
In addition, the description of federal income tax consequences contained
in this prospectus under the heading "Certain Federal Income Tax Considerations"
is based upon the opinion of Latham & Watkins. Latham & Watkins will rely upon
the opinion of Ballard Spahr Andrews & Ingersoll, LLP, as to certain matters of
Maryland law.
EXPERTS
The audited financial statements and schedules incorporated by reference in
this prospectus and elsewhere in the registration statement to the extent and
for the periods indicated in their reports have been audited by Arthur Andersen
LLP, independent public accountants, and are included herein in reliance upon
the authority of said firm as experts in accounting and auditing in giving said
reports.
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