<PAGE>
PROSPECTUS SUPPLEMENT
(TO PROSPECTUS DATED MARCH 19, 1997)
[LOGO]
3,750,000 SHARES
Washington Real Estate Investment Trust
COMMON SHARES OF BENEFICIAL INTEREST
-----------
The common shares of beneficial interest (the "Shares") of Washington Real
Estate Investment Trust ("WRIT" or the "Trust") are listed on the American Stock
Exchange under the symbol "WRE." On July 28, 1997, the last reported sale price
of the Shares on the American Stock Exchange was $17 3/16 per Share.
--------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS SUPPLEMENT
OR THE PROSPECTUS TO WHICH IT RELATES. ANY REPRESENTATION TO
THE CONTRARY IS A CRIMINAL OFFENSE.
<TABLE>
<CAPTION>
UNDERWRITING
PRICE TO DISCOUNTS AND PROCEEDS TO
PUBLIC COMMISSIONS(1) TRUST(2)
<S> <C> <C> <C>
Per Share.......................................... $17.1875 $0.90 $16.2875
Total(3)........................................... $64,453,125 $3,375,000 $61,078,125
</TABLE>
(1) The Trust has agreed to indemnify the several Underwriters against certain
liabilities, including liabilities under the Securities Act of 1933. See
"Underwriting."
(2) Before deducting expenses of the offering estimated at $190,000.
(3) The Trust has granted the Underwriters a 30-day option to purchase up to
562,500 additional Shares solely to cover over-allotments, if any. To the
extent that the option is exercised, the Underwriters will offer the
additional Shares at the Price to Public shown above. If the option is
exercised in full, the total Price to Public, Underwriting Discounts and
Commissions and Proceeds to Trust will be $74,121,094, $3,881,250 and
$70,239,844, respectively. See "Underwriting."
--------------
The Shares are offered by the several Underwriters, subject to prior sale,
when, as and if delivered to and accepted by them, and subject to the right of
the Underwriters to reject any order in whole or in part. It is expected that
delivery of the Shares will be made at the offices of Alex. Brown & Sons
Incorporated, Baltimore, Maryland, on or about August 1, 1997.
ALEX. BROWN & SONS
INCORPORATED
A.G. EDWARDS & SONS, INC.
LEGG MASON WOOD WALKER INCORPORATED
MERRILL LYNCH & CO.
FERRIS, BAKER WATTS
INCORPORATED
SCOTT & STRINGFELLOW, INC.
THE DATE OF THIS PROSPECTUS SUPPLEMENT IS JULY 28, 1997.
<PAGE>
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
WRIT
<S> <C> <C>
Growth in
Funds From Operations and
Cash Dividends Paid
Funds From Operations Cash Dividends Paid
1987 $ 12,975,941 $ 12,028,949
1988 14,325,654 13,087,538
1989 17,280,718 15,341,742
1990 19,229,034 17,030,987
1991 21,707,672 19,672,408
1992 23,850,876 22,513,368
1993 26,122,409 25,121,578
1994 27,055,330 25,981,388
1995 31,187,071 29,711,993
1996 35,748,000 32,718,000
</TABLE>
CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE SHARES. SUCH
TRANSACTIONS MAY INCLUDE STABILIZING, THE PURCHASE OF SHARES TO COVER SYNDICATE
SHORT POSITIONS AND THE IMPOSITION OF PENALTY BIDS. FOR A DESCRIPTION OF THESE
ACTIVITIES, SEE "UNDERWRITING."
S-2
<PAGE>
PROSPECTUS SUPPLEMENT SUMMARY
THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE
DETAILED INFORMATION APPEARING ELSEWHERE IN THIS PROSPECTUS SUPPLEMENT AND THE
ACCOMPANYING PROSPECTUS OR INCORPORATED HEREIN AND THEREIN BY REFERENCE. UNLESS
THE CONTEXT INDICATES OTHERWISE, (I) THE TERMS "WRIT" AND "TRUST" AS USED HEREIN
AND IN THE ACCOMPANYING PROSPECTUS INCLUDE THE TRUST AND ITS SUBSIDIARY AND (II)
THE INFORMATION PRESENTED HEREIN ASSUMES THAT THE UNDERWRITERS' OVER-ALLOTMENT
OPTION IS NOT EXERCISED.
THE TRUST
Washington Real Estate Investment Trust ("WRIT" or the "Trust"), founded in
1960, is an equity real estate investment trust investing in income-producing
properties in the greater Washington-Baltimore region. The Trust has a
fundamental strategy of regional focus, diversified property type ownership and
conservative financial management. The Trust owns a diversified portfolio of 49
properties consisting of 16 office buildings, 12 shopping centers, 7 high-rise
apartment buildings and 14 industrial distribution centers. While WRIT has
historically focused most of its investments in the greater Washington-Baltimore
region, in order to maximize acquisition opportunities, WRIT considers
investments from Philadelphia, Pennsylvania on the north to Richmond, Virginia
on the south.
WRIT's principal objective is to increase operating income by investing in
high quality real estate with strong growth potential in prime locations and
aggressively managing these properties with active leasing and capital
improvement programs. Since 1980, WRIT's annual portfolio occupancy level has
not fallen below 91%. The Trust's properties were 95% leased at March 31, 1997,
broken down by property type as follows: 94% for office buildings, 94% for
shopping centers, 97% for apartment buildings and 98% for industrial
distribution centers.
Total debt on July 28, 1997 was $131,000,000, which represented
approximately 19.3% of the total market capitalization of the Trust as of that
date.
WRIT's funds from operations have increased for 33 consecutive years. WRIT
concentrates on increasing its funds from operations to achieve its objective of
paying increasing dividends to its shareholders. Consecutive quarterly dividends
have been paid for 35 years, and the annual dividend paid has increased every
year since 1970, with 34 increases during that period. The most recent dividend
increase was to $.27 per Share payable June 30, 1997 to shareholders of record
on June 16, 1997, representing an indicated current annual rate of $1.08. Since
1980, combined Share splits have totaled 10-for-1.
The principal offices of the Trust are located at 10400 Connecticut Avenue,
Kensington, Maryland 20895, telephone (301) 929-5900/(800) 565-9748.
THE OFFERING
<TABLE>
<S> <C>
Shares Offered............................... 3,750,000
Shares to be Outstanding after the 35,577,844
Offering...................................
Use of Proceeds.............................. To repay certain indebtedness outstanding
under lines of credit and to fund the
acquisition and/or renovation, expansion or
improvement of income-producing properties.
See "Use of Proceeds."
American Stock Exchange Symbol............... WRE
</TABLE>
S-3
<PAGE>
SUMMARY FINANCIAL DATA
(in thousands, except per Share data)
<TABLE>
<CAPTION>
THREE MONTHS
YEAR ENDED DECEMBER 31, ENDED
----------------------------------------------------- MARCH 31,
--------------------
1992 1993 1994 1995 1996 1996 1997
--------- --------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
OPERATING DATA:
Real estate rental revenue................... $ 34,132 $ 39,375 $ 45,511 $ 52,597 $ 65,541 $ 14,681 $ 18,498
Income before gain on sale of real estate.... 20,429 22,506 23,122 26,103 27,964 6,952 7,028
Gain on sale of real estate.................. 0 741 0 0 0 0 0
Net income................................... 20,429 23,247 23,122 26,103 27,964 6,952 7,028
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------------------------------------- MARCH 31,
--------------------
1992 1993 1994 1995 1996 1996 1997
--------- --------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Real estate (at cost)........................ $ 155,765 $ 170,461 $ 206,378 $ 272,597 $ 352,579 $ 284,785 $ 370,260
Total assets................................. 185,673 162,011 178,806 241,784 318,488 251,920 333,523
Mortgages payable............................ 1,115 0 0 7,706 7,590 7,678 7,559
Lines of credit/ Short-term bank loan........ 21,000 0 18,000 28,000 5,000 39,000 22,000
Senior notes................................. 0 0 0 0 100,000 0 100,000
Shareholders' equity......................... 159,027 157,348 154,659 199,735 195,623 198,749 194,748
</TABLE>
<TABLE>
<CAPTION>
THREE MONTHS
YEAR ENDED DECEMBER 31, ENDED
----------------------------------------------------- MARCH 31,
--------------------
1992 1993 1994 1995 1996 1996 1997
--------- --------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
OTHER DATA:
Funds from operations (1).................... $ 23,817 $ 26,122 $ 27,055 $ 31,187 $ 35,748 $ 8,538 $ 9,458
Weighted average number of shares(2)......... 26,910 28,223 28,239 29,787 31,762 31,752 31,822
Dividends paid............................... $ 22,513 $ 24,380 $ 25,981 $ 29,712 $ 32,718 $ 7,938 $ 8,275
Dividends paid per share (2)................. 0.84 0.89 0.92 0.99 1.03 0.25 0.26
</TABLE>
- ------------------------
(1) Funds from Operations ("FFO"), as defined by the National Association of
Real Estate Investment Trusts ("NAREIT"), is net income adjusted for
depreciation and amortization and gains or losses from property sales. FFO
does not represent cash flows from operations as defined by generally
accepted accounting principles, should be considered along with, but not as
an alternative to, net income as an indicator of the Trust's operating
performance and is not indicative of cash available to fund all cash flow
needs. In March 1995, NAREIT issued a clarification of its definition of
FFO. The clarification provides that amortization of deferred financing
costs and depreciation of non-real estate assets are no longer to be added
back to net income in arriving at FFO and that extraordinary, nonrecurring
items should be adjusted out of net income. The amounts reflected in this
Prospectus Supplement and the Prospectus have been adjusted to incorporate
that clarification.
(2) Adjusted to give effect to the 3-for-2 share split in May 1992.
S-4
<PAGE>
THE TRUST
OVERVIEW
WRIT, founded in 1960, is an equity real estate investment trust investing
in income-producing properties in the greater Washington-Baltimore region. The
Trust has a fundamental strategy of regional focus, diversified property type
ownership and conservative financial management. The Trust owns a diversified
portfolio of 49 properties consisting of 16 office buildings, 12 shopping
centers, 7 high-rise apartment buildings and 14 industrial distribution centers.
WRIT's principal objective is to increase operating income by investing in
high quality real estate with strong growth potential in prime locations and
aggressively managing these properties with active leasing and capital
improvement programs. Since 1980, WRIT's annual portfolio occupancy level has
not fallen below 91%. The Trust's properties were 95% leased at March 31, 1997,
broken down by property type as follows: 94% for office buildings, 94% for
shopping centers, 97% for apartment buildings and 98% for industrial
distribution centers.
GENERAL OPERATING PRACTICES
The Trust generally observes the following operating practices:
GEOGRAPHIC FOCUS. WRIT's geographic focus is based on two basic principles:
1. Real estate is a local business and is much more effectively selected
and managed by owners located and expert in the region. All of WRIT's
trustees, officers and employees live and work in the greater
Washington-Baltimore region, and WRIT's officers average over 16
years of experience in this region.
2. Geographic markets deserving of focus must have a strong primary
industry foundation, but be diversified enough to withstand downturns
in that primary industry.
WRIT considers markets to be local if they can be reached within two hours
by car from Washington, D.C. and therefore views its ultimate geographic market
to reach from Philadelphia, Pennsylvania on the north to Richmond, Virginia on
the south. While WRIT has historically focused most of its investments in the
greater Washington-Baltimore region, in order to maximize acquisition
opportunities, WRIT considers investments within the two hour radius described
above.
PROPERTY TYPE DIVERSIFICATION. The Trust generally buys existing
income-producing properties and generally avoids the greater risks of
development except as an adjunct to existing properties. The Trust seeks to
invest in properties with different supply-demand cycles and growth periods,
which helps prevent dependence on any given sector. For the three months ended
March 31, 1997, for example, the Trust's net operating income was generated as
follows according to property type: office buildings 41%, shopping centers 24%,
apartment buildings 21% and industrial distribution centers 14%. As of March 31,
1997, no single property accounted for more than 6% of the Trust's real estate
revenue.
The following tables set forth the percentage of net operating income
(rental revenues less property operating expenses excluding depreciation) and
the percent leased for each of the Trust's property types for the periods shown:
<TABLE>
<CAPTION>
NET OPERATING INCOME
-------------------------------------
1996 1995 1994
----- ----- -----
<S> <C> <C> <C>
Office buildings.................................................................. 41% 38% 39%
Apartment buildings............................................................... 20 19 25
Shopping centers.................................................................. 26 30 26
Industrial distribution centers................................................... 13 13 10
--- --- ---
100% 100% 100%
</TABLE>
S-5
<PAGE>
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
PERCENT LEASED BY PROPERTY TYPE
<S> <C> <C> <C> <C>
Shopping Centers Industrial Distribution Centers Office Buildings Apartment Buildings
1980 98% 100% 99% 93%
1981 99% 98% 97% 97%
1982 98% 100% 92% 94%
1983 98% 100% 97% 95%
1984 96% 98% 94% 96%
1985 99% 97% 90% 95%
1986 94% 96% 83% 95%
1987 95% 96% 87% 94%
1988 94% 96% 94% 95%
1989 97% 99% 92% 95%
1990 98% 98% 86% 94%
1991 95% 98% 87% 94%
1992 97% 93% 89% 94%
1993 97% 89% 95% 95%
1994 97% 94% 93% 97%
1995 95% 97% 90% 96%
1996 91% 98% 91% 96%
</TABLE>
TENANT DIVERSIFICATION. The Trust seeks to maintain a diversified tenant
base in its commercial properties in order to minimize the influence of any one
tenant on the Trust's revenues. As of March 31, 1997, WRIT's commercial tenant
base was diversified among approximately 1,000 tenants, with the average tenant
occupying less than 4,500 square feet and no single lease accounting for more
than 2.2% of the Trust's annual revenues. As of the same date, annual rents
attributable to all Federal Government tenants totaled less than 4% of the
Trust's annual revenues.
WRIT's ten largest commercial tenants in order of annual rental revenues
are: the Federal Government (various agencies), Crestar Bank, OAO Corporation,
District of Columbia Metropolitan Police Department, TRW, Inc., NationsBank, TJ
Maxx, Pepsi Cola, Lockheed Martin Corporation, and CVS Drugstores.
COMMERCIAL LEASING POLICY. WRIT has focused its leasing efforts toward the
private sector smaller space user and toward shorter lease terms. This policy,
consistent with the Trust's local, hands-on strategic approach to real estate,
enables WRIT to use its first-hand knowledge of the greater Washington-Baltimore
region to seek to maximize periodic rental rate increases in its commercial
property portfolio.
CAPITALIZATION AND FINANCE STRATEGY. The Trust currently has unsecured bank
lines of credit and commitments totaling $75,000,000. These commitments permit
the Trust to extend the term of the loans outstanding for up to a period of two
years at the Trust's option. At July 28, 1997, $23,000,000 was outstanding on
these lines at a weighted average interest rate of 6.38%, which the Trust
anticipates repaying with the proceeds of this offering. For the foreseeable
future, the Trust intends to utilize the remaining proceeds of this offering,
together with its credit facilities, to fund acquisitions and major capital
improvements. The Trust intends to repay these debt obligations periodically
from future equity offerings or from the issuance of medium and long term debt.
The Trust's management believes this method of funding for future investment
provides greater flexibility for timing of public equity and debt offerings.
In determining its borrowing policy, the Trust also considers its debt
service coverage ratio (funds from operations plus interest divided by debt
service cost). A ratio of 3:1 is generally considered conservative, and the
Trust intends to maintain its debt service coverage ratio in excess of this. For
the quarter ended March 31, 1997, WRIT's debt service coverage ratio was 5:1.
Capital market conditions may, from time to time, influence management to
reconsider this policy if it deems that a change is in the best interest of the
Trust.
S-6
<PAGE>
RECENT DEVELOPMENTS
PROPERTY ACQUISITIONS. 1996 was the second consecutive year during which
WRIT invested record amounts in real estate. The $70 million invested in 1996
exceeded 1995's record $59 million by nearly 19%. In addition, in February 1997
WRIT acquired Ammendale Technology Park I and II for $13.7 million.
The following table briefly describes WRIT's acquisitions in 1996 and 1997
to date. These acquisitions have produced an average annualized 11.4% return on
investment (net operating income divided by total investment).
<TABLE>
<CAPTION>
NET
SQUARE FEET TOTAL INVESTMENT
PROPERTY DATE ACQUIRED PROPERTY TYPE (# APT. UNITS) AT MARCH 31, 1997
- ------------------------------------------- ---------------- ---------------- -------------- ------------------
<S> <C> <C> <C> <C>
Walker House
Gaithersburg, Maryland..................... Mar. 1996 Apartments 214,000 $ 10,964,505
(196 Units)
Maryland Trade Centers I & II
Greenbelt, Maryland........................ May 1996 Office 350,000 29,204,470
The Ashby at McLean
McLean, Virginia........................... Aug. 1996 Apartments 349,000(1) 21,604,034
(250 Units)
Alban Business Center
Springfield, Virginia...................... Oct. 1996 Industrial 87,000 4,177,328
The Earhart Building
Chantilly, Virginia........................ Dec. 1996 Industrial/Flex 92,000 5,055,325
Ammendale Technology Park I & II
Beltsville, Maryland....................... Feb. 1997 Industrial/Flex 275,000 13,732,401
-------------- ------------------
TOTALS 1,367,000) $ 84,738,063
(446 Units
</TABLE>
- ------------------------
(1) Includes 27,000 square feet of commercial space in addition to 250 units.
The Trust continually evaluates potential acquisition opportunities in both
the greater Washington-Baltimore region and in the Mid-Atlantic region from
Philadelphia, Pennsylvania on the north to Richmond, Virginia on the south.
Accordingly, at any particular time, the Trust is likely to be involved in
negotiations (at various stages) to acquire one or more properties. No assurance
can be given that the Trust will continue to acquire properties at the same rate
or with as high a return on investment as during 1996 and 1997 to date.
EXPANSIONS AND MAJOR RENOVATIONS. WRIT has historically increased the value
of its properties through expansions, renovations and other capital
improvements. Most recently, WRIT completed a 12,000 square foot expansion to
its Chevy Chase Metro Plaza shopping center in 1995 and a 20,000 square foot
expansion to its 7700 Leesburg Pike office building in 1996. The most recent
major renovation completed by WRIT was to its 1901 Pennsylvania Avenue office
building in 1996. The Chevy Chase Metro Plaza and 7700 Leesburg Pike expansions
and the 1901 Pennsylvania Avenue renovation represent a total capital investment
of approximately $6.9 million. Ongoing and planned expansions and major
renovations are as follows:
S-7
<PAGE>
- Wheaton Park Shopping Center -- WRIT commenced construction of a 26,000
square foot addition to the Wheaton Park Shopping Center in the fourth
quarter of 1996. This addition is currently 55% leased and shell
construction was completed in the second quarter of 1997.
- 51 Monroe Street -- At the 51 Monroe Street office building, formerly
known as One Metro Square, WRIT replaced the elevator controls and HVAC
equipment during 1995 and installed an energy management system in 1996.
As a result of these improvements, the comfort and convenience of the
building's tenants has been substantially improved, while WRIT's operating
costs have been significantly reduced. To complement these improvements,
in 1996, WRIT commenced installation of new fire alarm and sprinkler
systems as well as renovations to the main lobby and common hallways.
These improvements are anticipated to be completed in 1997. Occupancy
levels at this property averaged 83% in 1996, but as of March 31, 1997
this property was 93% leased.
- Bradlee Shopping Center -- In late 1996, WRIT commenced planning a major
facade renovation for this shopping center. This renovation coincides with
the termination in the third quarter of 1997 of the 40-year G.C. Murphy
lease on a 26,000 square foot retail space. WRIT estimates current market
rents to be substantially above the rent paid by G.C. Murphy.
Renovations, expansions and tenant improvements, including those listed
above, are currently underway or are anticipated at several of the Trust's
properties, the estimated aggregate cost of which is approximately $14 million
for 1997.
THE GREATER WASHINGTON-BALTIMORE REAL ESTATE MARKET
The Trust has purchased real estate primarily in the greater
Washington-Baltimore region because of management's familiarity with the region,
its expected growth and proven stability. The greater Washington-Baltimore
region is the nation's fourth largest with a population exceeding 6.9 million.
This regional real estate market continues to be one of the strongest in the
country. The region is ranked first in U.S. median household income and
percentage of population with education at the undergraduate and postgraduate
level.
Total non-farm employment in the Washington area has grown 88% from 1.6
million jobs in 1970, to 3.1 million jobs in 1996, while the percentage of
Federal Government employment in the region has decreased from 28.4% to 14.5%.
Since January 1980, seasonally-adjusted unemployment in the Washington area has
averaged 4.1%, with April 1997 unemployment at 3.3%.
The Washington-Baltimore region is a leader in the rapidly growing
technology/infocom and biotech/health care industries. The region has the
nation's second highest concentration of technology companies and the third
highest concentration of biotech companies. It is also the center of the U.S.
space commerce/satellite industry with Comsat, GTE Spacenet, Intelsat and NASA
located there.
This region is also the headquarters for several of the largest U.S. and
international financial institutions including the World Bank, International
Monetary Fund, Inter-American Development Bank, Export-Import Bank, Federal
National Mortgage Association (FNMA), Federal Home Loan Mortgage Corp. (Freddie
Mac) and the Student Loan Marketing Association (Sallie Mae).
Other major public companies headquartered in the Washington-Baltimore
region, to name a few, include Mobil Oil, MCI, USAirways, Host Marriott and
Marriott International, Lockheed Martin and Gannett Co. The region is also the
second most popular tourist destination in the world. Most importantly, the
region is known as a job center with solid educational opportunities and easy
access to leisure time activities.
The greater Washington-Baltimore regional economy is principally service
industry oriented and, particularly in the case of the greater Washington area,
is driven by the presence of the Federal Government. There has been, and
management expects there will continue to be, a shrinking in the size of the
Federal Government as evidenced by, among other things, a decrease in direct
Federal Government
S-8
<PAGE>
employment. However, management believes Federal spending cuts nationally have
caused Federal contractors to move closer to their Federal clients in order to
retain business. As a result, while Federal spending decreased nationally, it
has become more concentrated and increased in the Washington area. Total Federal
procurement (outsourcing) decreased 3.5% nationally from 1991 to 1996, but
increased in the Washington area by over 45% during this same period. While the
Federal Government workforce reductions to date have not resulted in any major
negative impact on the business of the Trust, no assurance can be given as to
the effect on the Trust of further cutbacks in Federal spending or employment.
USE OF PROCEEDS
The net proceeds to be received by the Trust from the issuance and sale of
the Shares offered hereby are estimated at $60,888,125 ($70,049,844 if the
Underwriters' over-allotment option is exercised in full). Approximately
$23,000,000 of the net proceeds are anticipated to be used to repay certain
borrowings outstanding under the Trust's lines of credit. These borrowings
currently bear interest at a weighted average rate of 6.38% with $19,000,000 due
on July 25, 1998 and $4,000,000 due on September 26, 1997. The balance of the
net proceeds may be used to acquire and/or renovate, expand or improve income-
producing properties or to repay other indebtedness drawn under the lines of
credit. It is expected that properties purchased in the future will be of the
same general character as those presently held by the Trust.
Pending the uses described above, the net proceeds may be invested in
certificates of deposit, highly rated commercial paper, other similar
interest-bearing government or rated corporate securities or money market funds
investing in such securities.
CAPITALIZATION
The following table sets forth the capitalization of the Trust as of March
31, 1997, and as adjusted to give effect to an increase of approximately
$1,000,000 in amounts outstanding under the lines of credit since March 31,
1997, the issuance and sale of the Shares offered hereby and the anticipated use
of approximately $23,000,000 of the net proceeds to repay indebtedness
outstanding under the lines of credit.
<TABLE>
<CAPTION>
MARCH 31, 1997
-------------------------
<S> <C> <C>
ACTUAL AS ADJUSTED
----------- ------------
<CAPTION>
(IN THOUSANDS)
<S> <C> <C>
Lines of credit........................................................................ $ 22,000 $ 0
Mortgages payable...................................................................... 7,559 7,559
Senior notes........................................................................... 100,000 100,000
----------- ------------
Total debt........................................................................... $ 129,559 $ 107,559
----------- ------------
----------- ------------
Shareholders' equity:
Shares of beneficial interest; $.01 par value; 100,000,000 shares authorized,
31,827,844 issued and outstanding, and 35,577,844, as adjusted....................... $ 318 $ 356
Additional paid-in capital........................................................... 194,430 255,281
----------- ------------
Total shareholders' equity......................................................... 194,748 255,637
----------- ------------
Total capitalization............................................................. $ 324,307 $ 363,196
----------- ------------
----------- ------------
</TABLE>
S-9
<PAGE>
[LOGO]
On Page S-10 of the Prospectus Supplement there appears a map of the greater
Washington, D.C. metropolitan area indicating the location of the Trust's 49
properties and indicating whether each property is a shopping center, an office
building, industrial distribution center or an apartment building. There is also
a list of properties conforming to the list appearing on the following pages of
the Prospectus Supplement.
S-10
<PAGE>
INVESTMENTS OF THE TRUST
The following table describes the Trust's real estate investment portfolio.
All information is as of March 31, 1997. Net square footage does not include
garage or surface parking. The percent leased is the percentage of net potential
rental revenue, including signed leases for space not yet occupied by the
tenants.
<TABLE>
<CAPTION>
CAPITAL
IMPROVEMENTS
YEAR NET SQUARE PERCENT ACQUISITION SINCE TOTAL
REAL ESTATE INVESTMENTS ACQUIRED FEET LEASED COST ACQUISITION INVESTMENT
- -------------------------------------- ----------- ----------- ----------- -------------- -------------- --------------
<S> <C> <C> <C> <C> <C> <C>
OFFICE BUILDINGS
1901 Pennsylvania Ave................. 1977 97,000 92% $ 4,373,000 $ 5,509,736 $ 9,882,736
WRIT Building......................... 1979 65,000 94 1,913,000 3,131,786 5,044,786
51 Monroe Street...................... 1979 210,000 93 11,709,000 6,435,324 18,144,324
444 N. Frederick Ave.................. 1989 66,000 90 4,631,000 1,496,718 6,127,718
7700 Leesburg Pike.................... 1990 145,000 81 7,669,000 4,733,921 12,402,921
Arlington Financial Center............ 1992 51,000 100 6,293,000 203,271 6,496,271
515 King Street....................... 1992 78,000 95 8,033,000 738,301 8,771,301
Lexington Building.................... 1993 47,000 96 2,443,000 432,352 2,875,352
Saratoga Building..................... 1993 59,000 100 3,018,000 668,184 3,686,184
Brandywine Center..................... 1993 35,000 100 1,453,000 254,115 1,707,115
Tycon Plaza II........................ 1994 131,000 98 10,505,000 1,126,547 11,631,547
Tycon Plaza III....................... 1994 152,000 89 11,049,000 784,571 11,833,571
6110 Executive Blvd................... 1995 199,000 93 16,516,000 1,315,264 17,831,264
1220 19th Street...................... 1995 104,000 100 19,168,000 118,501 19,286,501
Maryland Trade Center I............... 1996 191,000 100 16,077,000 512,915 16,589,915
Maryland Trade Center II.............. 1996 159,000 99 12,313,000 301,555 12,614,555
----------- --- -------------- -------------- --------------
Sub-Total......................... 1,789,000 94% $ 137,163,000 $ 27,763,061 $ 164,926,061
----------- --- -------------- -------------- --------------
----------- --- -------------- -------------- --------------
SHOPPING CENTERS
Takoma Park........................... 1963 59,000 100% $ 1,500,000 $ 1,000 $ 1,501,000
Prince William Plaza.................. 1968 55,000 100 991,000 976,318 1,967,318
Westminster........................... 1972 165,000 95 2,442,000 1,778,912 4,220,912
Dover Mart............................ 1973 44,000 71 708,000 726,000 1,434,000
Concord Centre........................ 1973 76,000 85 1,263,000 2,670,836 3,933,836
Clairmont............................. 1976 40,000 82 1,047,000 672,000 1,719,000
Wheaton Park.......................... 1977 47,000 100 1,480,000 2,172,252 3,652,252
Bradlee............................... 1984 168,000 96 9,580,000 3,554,427 13,134,427
Chevy Chase Metro Plaza............... 1985 51,000 98 5,853,000 2,953,072 8,806,072
Montgomery Village.................... 1992 196,000 82 20,729,000 667,197 21,396,197
The Shoppes of Foxchase............... 1994 128,000 98 8,818,000 964,835 9,782,835
Frederick County Square............... 1995 233,000 100 13,391,000 717,678 14,108,678
----------- --- -------------- -------------- --------------
Sub-Total......................... 1,262,000 94% $ 67,802,000 $ 17,854,527 $ 85,656,527
----------- --- -------------- -------------- --------------
----------- --- -------------- -------------- --------------
APARTMENT BUILDINGS/UNITS
3801 Connecticut Ave./307 units....... 1963 242,000 98% $ 3,098,000 $ 3,981,324 $ 7,079,324
Roosevelt Towers/191.................. 1965 229,000 96 2,332,000 1,718,073 4,050,073
Park Adams/200........................ 1969 210,000 100 1,941,000 2,992,705 4,933,705
Country Club Towers/227............... 1969 276,000 92 2,860,000 2,405,882 5,265,882
Munson Hill Towers/279 (1)............ 1970 340,000 93 3,337,000 3,873,148 7,210,148
The Ashby at McLean/250............... 1996 349,000 93 21,481,000 123,034 21,604,034
Walker House Apartments/196........... 1996 214,000 98 10,797,000 167,505 10,964,505
----------- --- -------------- -------------- --------------
Sub-Total 1,650 units............. 1,860,000 97% $ 45,846,000 $ 15,261,671 $ 61,107,671
----------- --- -------------- -------------- --------------
----------- --- -------------- -------------- --------------
</TABLE>
S-11
<PAGE>
<TABLE>
<CAPTION>
CAPITAL
IMPROVEMENTS
YEAR NET SQUARE PERCENT ACQUISITION SINCE TOTAL
REAL ESTATE INVESTMENTS ACQUIRED FEET LEASED COST ACQUISITION INVESTMENT
- -------------------------------------- ----------- ----------- ----------- -------------- -------------- --------------
<S> <C> <C> <C> <C> <C> <C>
INDUSTRIAL DISTRIBUTION CENTERS
Shirley I-395......................... 1961 113,000 100% $ 1,917,000 $ 1,101,000 $ 3,018,000
Dept. of Commerce..................... 1971 105,000 100 1,356,000 1,336,117 2,692,117
V Street.............................. 1973 31,000 100 443,000 162,000 605,000
Capitol Freeway....................... 1974 145,000 100 1,505,000 2,627,490 4,132,490
Fullerton............................. 1985 103,000 91 4,267,000 823,257 5,090,257
Ravensworth Center.................... 1986 29,000 67 1,451,000 395,675 1,846,675
Pepsi Cola............................ 1987 69,000 100 2,552,000 1,560,000 4,112,000
Charleston............................ 1993 85,000 95 4,136,000 131,973 4,267,973
Tech 100.............................. 1995 167,000 100 6,830,000 145,594 6,975,594
Crossroads Distribution Center........ 1995 85,000 100 2,839,000 24,000 2,863,000
The Alban Business Center............. 1996 87,000 88 4,176,000 1,328 4,177,328
The Earhart Building.................. 1996 92,000 100 5,044,000 11,325 5,055,325
Ammendale Technology Park I........... 1997 167,000 100 7,847,000 0 7,847,000
Ammendale Technology Park II.......... 1997 108,000 96 5,886,000 0 5,886,000
----------- --- -------------- -------------- --------------
Sub-Total......................... 1,386,000 98% $ 50,249,000 $ 8,319,759 $ 58,568,759
----------- --- -------------- -------------- --------------
----------- --- -------------- -------------- --------------
TOTAL (1,650 units)........... 6,297,000 95% $ 301,060,000 $ 69,199,018 $ 370,259,018
----------- --- -------------- -------------- --------------
----------- --- -------------- -------------- --------------
</TABLE>
- ------------------------
(1) The site of Munson Hill Towers apartments is rented under a ground lease
requiring annual payments of $22,590 until the expiration of the lease in
February 2060.
S-12
<PAGE>
DESCRIPTION OF REAL ESTATE INVESTMENTS
The Trust's portfolio of 49 properties consists of 16 office buildings
containing approximately 1,789,000 square feet, 12 shopping centers containing
approximately 1,262,000 square feet, 7 high-rise apartment buildings with a
total of 1,650 units, and 14 industrial distribution centers containing
approximately 1,386,000 square feet. In the opinion of management, the Trust's
properties are adequately protected by "all risk" insurance coverage, have been
well maintained and are in good condition.
The following are descriptions of WRIT's most significant properties in each
property group, in terms of total investment.
OFFICE BUILDINGS
MARYLAND TRADE CENTER (MTC) I AND II
7500 AND 7474 GREENWAY CENTER DRIVE
GREENBELT, MARYLAND
In May 1996, the Trust purchased these two adjacent office buildings for
approximately $28 million. Strategically located at the intersection of the
Capital Beltway (I-495) and the Baltimore-Washington Parkway, these buildings
were approximately 99% leased as of March 31, 1997. MTC-I has 16 stories,
contains 191,000 rentable square feet and can accommodate 759 surface-parked
cars. MTC-II has 12 stories, contains 159,000 rentable square feet and has 493
surface parking spaces. Over the past year, extensive improvements totaling over
$800,000 have been made to these properties as anticipated by WRIT at
acquisition.
TYCON PLAZA II AND III
8245 AND 8229 BOONE BOULEVARD
TYSONS CORNER, VIRGINIA
In June 1994, the Trust purchased these two adjacent eight-story office
buildings containing a total of 283,000 rentable square feet plus surface
parking for 895 cars for approximately $22 million. At the time of purchase, the
properties were 74% leased and as of March 31, 1997, they were 94% leased. Over
the past three years, extensive improvements anticipated at acquisition,
totaling approximately $1.9 million, have been made in order to reposition these
properties in their market.
1220 19TH STREET, NW
WASHINGTON, DC
Purchased in November 1995 for approximately $19 million, this eight-story
office building contains 104,000 rentable square feet and has 74 parking spaces
located in three basement levels. The building is located in Washington's
central business district and was 100% leased as of March 31, 1997. The property
was in very good physical condition upon acquisition and, as a result, has
required no significant capital improvements to date.
51 MONROE STREET
ROCKVILLE, MARYLAND
Purchased in 1979, 51 Monroe Street is a 22-story office building containing
210,000 rentable square feet of office and retail space, and was 93% leased as
of March 31, 1997. The property includes a garage structure with 360 parking
spaces. The property is connected by elevated pedestrian bridges to the
Montgomery County Office Building--Courthouse Complex and to a Washington Metro
subway station. Portions of the roof are leased for communications antennae,
creating additional current annual income of over $425,000, as of the date
hereof.
S-13
<PAGE>
6110 EXECUTIVE BOULEVARD
ROCKVILLE, MARYLAND
In January 1995, the Trust purchased this 10-story office building
containing 199,000 rentable square feet for approximately $16.5 million. This
property includes a detached three-story parking deck and surface parking for
565 cars. As of March 31, 1997, the property was 93% leased.
7700 LEESBURG PIKE
FALLS CHURCH, VIRGINIA
In October 1990, WRIT purchased 7700 Leesburg Pike, a circular four-story
office building and parking deck with an interior office tower and park-like
atrium. It is located just inside the Capital Beltway (I-495) and competes in
the Tysons Corner office market. The building won an American Institute of
Architecture award and is set in a wooded campus environment on seven acres of
land. Until recently, the property contained approximately 125,000 rentable
square feet; however, WRIT just completed construction of a 20,000 square foot
office space expansion located atop the parking structure. The total complex was
81% leased as of March 31, 1997.
1901 PENNSYLVANIA AVENUE, NW
WASHINGTON, DC
1901 Pennsylvania Avenue is an 11-story office building containing 97,000
rentable square feet located three blocks west of the White House and two blocks
from a Washington Metro subway station. Two years ago, three large tenants
vacated, leaving the building 51% occupied. WRIT took this opportunity to
perform extensive renovations to the 35-year-old building interiors and elevator
and mechanical systems which, when combined with a focused marketing campaign,
resulted in a turn around of this property. As of March 31, 1997, the property
was 92% leased.
SHOPPING CENTERS
MONTGOMERY VILLAGE CENTER
MONTGOMERY VILLAGE AVENUE
GAITHERSBURG, MARYLAND
In December 1992, the Trust purchased Montgomery Village Center, a Giant
Food supermarket anchored shopping center containing 169,000 square feet of
retail space, 27,000 square feet of townhouse-type office space and surface
parking for 791 cars. As of March 31, 1997, this center was 82% leased and is
the focus of a major releasing and repositioning effort to fill two large blocks
of space vacated due to tenant bankruptcies. This property is located in the
Montgomery Village Planned Unit Development ("PUD"), and its value is enhanced
by the controlled nature of the zoning restrictions in the PUD with its existing
restrictions on commercial growth and lack of available building sites.
FREDERICK COUNTY SQUARE SHOPPING CENTER
1003 WEST PATRICK STREET
FREDERICK, MARYLAND
Purchased in August 1995 for approximately $13 million, this center contains
233,000 rentable square feet and was 100% leased as of March 31, 1997. Located
in Frederick's most central and dominant retail shopping area, known as the
"Golden Mile", this center has greatly benefitted from a rebounding real estate
market. Shortly after acquisition, two tenants vacated their spaces due to
bankruptcy, and WRIT successfully released both spaces (to Trak Auto and Red
River Barbecue) at rents that are more than 50% higher than those paid by the
prior tenants.
S-14
<PAGE>
BRADLEE SHOPPING CENTER
3600 KING STREET
ALEXANDRIA, VIRGINIA
Bradlee Shopping Center, purchased in 1984, is a neighborhood shopping
center containing 168,000 rentable square feet anchored by a Giant Food
supermarket and a Rite-Aid drugstore. As of March 31, 1997, the center was 96%
leased. In late 1996, WRIT commenced planning a major facade renovation for this
shopping center. This renovation coincides with the termination in the third
quarter of 1997 of the 40-year G.C. Murphy lease on a 26,000 square foot retail
space. WRIT estimates current market rents to be substantially above the rent
paid by G.C. Murphy.
THE SHOPPES OF FOXCHASE
4600 DUKE STREET
ALEXANDRIA, VIRGINIA
In 1994, the Trust purchased The Shoppes of Foxchase, containing 128,000
rentable square feet and surface parking for 583 cars for approximately $9
million. The center is anchored by a Rite-Aid drugstore and a Magruder's
supermarket and was 98% leased as of March 31, 1997. The timing of various lease
expirations will afford the Trust opportunities to enhance the property's gross
revenues over the near term.
CHEVY CHASE METRO PLAZA
5252 WISCONSIN AVENUE, NW
WASHINGTON, DC
Purchased in 1985, the Trust repositioned this property in 1994/95 by adding
a 12,000 square foot floor to a space that previously had very high ceilings to
accommodate a former movie theater tenant. The property now contains 51,000
square feet of retail space and was 98% leased as of March 31, 1997 to such
national chains as TJ Maxx and TGI Fridays, among others. Structured parking for
133 cars is provided in the attached three-story garage. The property is located
in the Chevy Chase area of the District of Columbia, adjacent to a Washington
Metro subway station and is surrounded by upscale retail development and densely
populated residential neighborhoods.
APARTMENT BUILDINGS
THE ASHBY AT MCLEAN
1350 BEVERLY ROAD
MCLEAN, VIRGINIA
The Ashby was purchased by the Trust in August 1996 for approximately $21.5
million. This 12-story complex contains 250 apartment units, 27,000 square feet
of space for office and/or retail users, 241 surface parking spaces and 108
basement level spaces. Located three miles east of Tysons Corner and eight miles
west of downtown Washington, DC, the property is easily accessible from both the
Capital Beltway (I-495) and the Dulles Toll Road. Amenities include a swimming
pool and fitness center, and as of March 31, 1997, the property was 93% leased.
WALKER HOUSE
18700 WALKER'S CHOICE ROAD
GAITHERSBURG, MARYLAND
The Trust purchased Walker House in March 1996 for approximately $10.8
million. Walker House has eight stories containing 196 residential units and can
accommodate 288 surface parked cars. The
S-15
<PAGE>
property is within the planned community of Montgomery Village, which offers
residents many recreational parks and playgrounds and is also within 1/2 mile of
a regional shopping mall and other significant retail and commercial
development. As of March 31, 1997, Walker House was 98% leased.
MUNSON HILL TOWERS
6129 LEESBURG PIKE
FALLS CHURCH, VIRGINIA
Munson Hill Towers is an architectural award-winning, 12-story apartment
building that contains 279 apartments and is located approximately eight miles
from downtown Washington, DC. The 12 1/2-acre property upon which the building
is situated includes a swimming pool, tennis court and other recreational
facilities. In addition, there are 450 surface parking spaces. This property was
93% leased as of March 31, 1997.
3801 CONNECTICUT AVENUE, NW
WASHINGTON, DC
3801 Connecticut Avenue is a nine-story apartment building containing 307
apartment units and 3,150 square feet of office space. The building has 92
indoor parking spaces. The apartments are subject to District of Columbia rent
control laws, which allow landlords to make rent increases tied to the rate of
inflation (subject to an annual maximum of 10%) and also allow additional rent
increases as units are re-rented to new tenants. This property was 98% leased as
of March 31, 1997.
INDUSTRIAL DISTRIBUTION CENTERS
AMMENDALE TECHNOLOGY PARK (ATP) I & II
11800--11900 BALTIMORE AVENUE AND
12104--12240 INDIAN CREEK COURT
BELTSVILLE, MARYLAND
In March 1997, the Trust purchased this industrial/flex complex for
approximately $13.7 million. These two non-contiguous properties, each
containing three buildings, are configured in a campus style setting. The
buildings contain approximately 275,000 rentable square feet and can accommodate
957 surface parked cars. Ammendale Technology Park is located on US Route 1 and
is situated two miles east of I-95 and three miles north of the Capital Beltway.
ATP-I was 100% leased, and ATP-II was 96% leased as of March 31, 1997.
TECH 100 INDUSTRIAL PARK
6671 SANTA BARBARA ROAD
ELKRIDGE, MARYLAND
Tech 100 is a three-building industrial distribution complex containing
167,000 rentable square feet and surface parking for 331 cars. Purchased in May
1995 for approximately $6.8 million, Tech 100 is located 25 miles northeast of
Washington, DC and seven miles southwest of Baltimore, Maryland. It is within
the Route 100 Industrial Park, which has an industrial space inventory of 2.5
million square feet, and is highly accessible via Route 100, a major arterial
road connecting I- 95 with I-97 and Route 301. As of March 31, 1997, Tech 100
was 100% leased.
S-16
<PAGE>
FULLERTON BUSINESS CENTER
7401 FULLERTON ROAD
SPRINGFIELD, VIRGINIA
Fullerton Business Center is located in the 2 million square foot Fullerton
Industrial Park. This multi-tenanted property contains 103,000 rentable square
feet, plus surface parking for 247 cars. The property was 91% leased as of March
31, 1997.
DIVIDENDS
Consecutive quarterly dividends have been paid for 35 years, and the annual
dividend paid has increased every year since 1970, with 34 increases during that
period. The most recent dividend increase was to $.27 per Share payable June 30,
1997 to shareholders of record on June 16, 1997, representing an indicated
current annual rate of $1.08. The Trust complies with the current distribution
provisions of federal income tax laws applicable to real estate investment
trusts and, assuming compliance with other requirements, income so distributed
is not taxable to the Trust under such laws. The declaration of dividends is
discretionary with the Trustees and depends upon the Trust's distributable
funds, financial requirements, tax considerations and other factors. Decisions
by the Trustees as to distributions of capital gains are made on a case by case
basis. It is the present intention of the Trustees to consider the payment of
cash dividends each quarter, but no assurance can be given that past dividend
practices will be followed in the future.
The tax status of 1996 dividends were reported as:
<TABLE>
<CAPTION>
ORDINARY CAPITAL RETURN OF
INCOME GAINS CAPITAL TOTAL
- ----------- ------------- ------------- -----
<S> <C> <C> <C>
91.0% -- 9.0% 100%
</TABLE>
DIVIDEND REINVESTMENT PLAN
The Trust has a Dividend Reinvestment Plan (the "Plan") which allows
shareholders to acquire additional Shares by automatically reinvesting all or
part of their cash dividends. Shares are acquired in the open market pursuant to
the Plan at the prevailing market price of such Shares, without payment of any
brokerage commission or service charge by the participant. The Plan also allows
participating shareholders to purchase Shares pursuant to the same terms and in
the same manner as cash dividends are invested in amounts of not less than $100
nor more than $25,000 per calendar quarter, without payment of any brokerage
commission or service charge by the participant. Shareholders who do not
participate in the Plan continue to receive cash dividends as declared.
S-17
<PAGE>
SELECTED FINANCIAL DATA
The following table sets forth selected financial data for the Trust and
should be read in conjunction with "Management's Discussion and Analysis of
Financial Condition and Results of Operations" and the consolidated financial
statements of the Trust and related notes thereto incorporated herein by
reference. The operating data for the three months ended March 31, 1996 and 1997
has been derived from the unaudited consolidated financial statements of the
Trust. In the opinion of management, the operating data for the three months
ended March 31, 1996 and 1997 includes all adjustments (consisting only of
normal recurring adjustments) necessary to present fairly the information set
forth therein.
<TABLE>
<CAPTION>
THREE MONTHS
ENDED
YEAR ENDED DECEMBER 31, MARCH 31,
----------------------------------------------------- --------------------
1992 1993 1994 1995 1996 1996 1997
--------- --------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
(IN THOUSANDS, EXCEPT PER SHARE DATA)
OPERATING DATA:
Real estate rental revenue...................... $ 34,132 $ 39,375 $ 45,511 $ 52,597 $ 65,541 $ 14,681 $ 18,498
Real estate expenses(1)......................... (10,330) (11,830) (14,412) (17,038) (21,932) (4,913) (6,081)
--------- --------- --------- --------- --------- --------- ---------
23,802 27,545 31,099 35,559 43,609 9,768 12,417
Depreciation.................................... (3,388) (3,616) (3,933) (5,084) (7,784) (1,528) (2,295)
--------- --------- --------- --------- --------- --------- ---------
Income from real estate......................... 20,414 23,929 27,166 30,475 35,825 8,240 10,122
Other income (expense).......................... 3,311 1,496 (550) 715 708 121 70
Interest expense................................ (454) (61) (614) (2,170) (5,474) (654) (2,207)
General and administrative(1)................... (2,842) (2,858) (2,880) (2,917) (3,095) (755) (957)
--------- --------- --------- --------- --------- --------- ---------
Income before gain on sale of real estate....... 20,429 22,506 23,122 26,103 27,964 6,952 7,028
Gain on sale of real estate..................... 0 741 0 0 0 0 0
--------- --------- --------- --------- --------- --------- ---------
Net income...................................... $ 20,429 $ 23,247 $ 23,122 $ 26,103 $ 27,964 $ 6,952 $ 7,028
--------- --------- --------- --------- --------- --------- ---------
--------- --------- --------- --------- --------- --------- ---------
Income before gain on sale of real estate per
share(2)...................................... $ 0.76 $ 0.80 $ 0.82 $ 0.88 $ 0.88 $ 0.22 $ 0.22
--------- --------- --------- --------- --------- --------- ---------
--------- --------- --------- --------- --------- --------- ---------
Net income per share(2)......................... $ 0.76 $ 0.82 $ 0.82 $ 0.88 $ 0.88 $ 0.22 $ 0.22
--------- --------- --------- --------- --------- --------- ---------
--------- --------- --------- --------- --------- --------- ---------
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31, MARCH 31,
----------------------------------------------------- --------------------
1992 1993 1994 1995 1996 1996 1997
--------- --------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
(IN THOUSANDS)
BALANCE SHEET DATA:
Real estate (at cost)........................... $ 155,765 $ 170,461 $ 206,378 $ 272,597 $ 352,579 $ 284,785 $ 370,260
Total assets.................................... 185,673 162,011 178,806 241,784 318,488 251,920 333,523
Mortgages payable............................... 1,115 0 0 7,706 7,590 7,678 7,559
Lines of credit/Short-term bank loan............ 21,000 0 18,000 28,000 5,000 39,000 22,000
Senior notes.................................... 0 0 0 0 100,000 0 100,000
Shareholders' equity............................ 159,027 157,348 154,659 199,735 195,623 198,749 194,748
</TABLE>
<TABLE>
<CAPTION>
THREE MONTHS
ENDED
YEAR ENDED DECEMBER 31, MARCH 31,
----------------------------------------------------- --------------------
1992 1993 1994 1995 1996 1996 1997
--------- --------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
(IN THOUSANDS, EXCEPT PER SHARE DATA)
OTHER DATA:
Funds from operations(3)........................ $ 23,817 $ 26,122 $ 27,055 $ 31,187 $ 35,748 $ 8,538 $ 9,458
Weighted average number of shares(2)............ 26,910 28,223 28,239 29,787 31,762 31,752 31,822
Dividends paid.................................. $ 22,513 $ 24,380 $ 25,981 $ 29,712 $ 32,718 $ 7,938 $ 8,275
Dividends paid per share(2)..................... 0.84 0.89 0.92 0.99 1.03 0.25 0.26
</TABLE>
- --------------
(1) Certain general and administrative expenses for 1994 and 1995 have been
reclassified as real estate expenses to conform to the current period
presentation.
(2) Adjusted to give effect to the 3-for-2 share split in May 1992.
(3) Funds from Operations ("FFO"), as defined by the National Association of
Real Estate Investment Trusts ("NAREIT"), is net income adjusted for
depreciation and amortization and gains or losses from property sales. FFO
does not represent cash flows from operations as defined by generally
accepted accounting principles, should be considered along with, but not as
an alternative to, net income as an indicator of the Trust's operating
performance and is not indicative of cash available to fund all cash flow
needs. In March 1995, NAREIT issued a clarification of its definition of
FFO. The clarification provides that amortization of deferred financing
costs and depreciation of non-real estate assets are no longer to be added
back to net income in arriving at FFO and that extraordinary, nonrecurring
items should be adjusted out of net income. The amounts reflected in this
Prospectus Supplement and the Prospectus have been adjusted to incorporate
that clarification.
S-18
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS--THREE MONTHS ENDED MARCH 31, 1997 COMPARED TO THE THREE
MONTHS ENDED MARCH 31, 1996
REAL ESTATE RENTAL REVENUE
Total revenues for the three months ended March 31, 1997 increased 26% ($3.8
million) to $18.5 million from $14.7 million for the first three months of 1996.
For the first three months of 1997, WRIT's office buildings had increases of
33.6% in revenues and operating income over the first three months of 1996.
These increases were due primarily to the acquisitions of the Maryland Trade
Center I and II office buildings in May 1996, the expansion of 7700 Leesburg
Pike in December 1996 and increases in occupancy at the 1901 Pennsylvania Avenue
and 1220 19th Street office buildings. Comparing those office buildings owned by
WRIT for the entire first three months of 1996 to their results in the first
three months of 1997, revenues and operating income increased 6.5% and 4.8%
respectively, over the first three months of 1996. These increases were due
primarily to the expansion of 7700 Leesburg Pike in December 1996 and increases
in occupancy at the 1901 Pennsylvania Avenue and 1220 19th Street office
buildings.
For the first three months of 1997, WRIT's shopping center revenues remained
unchanged and operating income increased 6.7% over the first three months of
1996. Revenues remained unchanged due to rate and occupancy gains for the group
offset by reduced common area maintenance recoveries for the group which
resulted from decreased utility and snow removal expenses. Operating income
increased due to decreased utility and snow removal expenses which were higher
in the first quarter of 1996 due to the unusually severe weather. There were no
property additions in WRIT's shopping center portfolio in the first three months
of 1997 compared to the first three months of 1996.
For the first three months of 1997, WRIT's apartment building revenues and
operating income increased 46% and 47.6%, respectively, over the first three
months of 1996. These increases were due primarily to the acquisition of Walker
House Apartments in March 1996 and The Ashby in August of 1996. Comparing those
apartment buildings owned by WRIT for the entire first three months of 1996 to
their results in the first three months of 1997, revenue and operating income
increased 2.9% and 7.2%, respectively, over the first three months of 1996. The
increases in revenues and operating income were due primarily to increased
rental rates for the group and decreased utility and snow removal expenses,
offset partially by increased vacancy at Country Club Towers.
For the first three months of 1997, WRIT's industrial distribution center
revenues and operating income increased 25.5% and 24.9%, respectively, over the
first three months of 1996. This was due primarily to the acquisition in October
1996 of the Alban Business Center and the acquisition in December 1996 of the
Earhart Building, partially offset by increased bad debt and leasing
commissions. Comparing those industrial distribution centers owned by WRIT for
the entire first three months of 1996 to their same results in the first three
months of 1997, revenue decreased 5.8% primarily due to increased bad debt
expense, and operating income decreased 6.3% primarily due to decreased revenue
and increased leasing commissions.
OPERATING EXPENSES AND OTHER RESULTS OF OPERATIONS
Depreciation expense increased $767,000 to $2.3 million as compared to $1.5
million for the first three months of 1996. This was primarily due to 1996
acquisitions of $69.9 million and 1996 capital and tenant improvement
expenditures which totaled $12.0 million.
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<PAGE>
Other income decreased as compared to the first three months of 1996 due to
decreased investment earnings. This decrease resulted from a lower average
balance of cash and temporary investments in the first quarter of 1997 as
compared to the first quarter of 1996.
Total interest expense was $2.2 million for the first three months of 1997
as compared to $654,000 for the first three months of 1996. This increase is
primarily attributed to the issuance of $100 million of senior notes in August
1996. For the first three months of 1997, senior notes payable interest expense
was $1.8 million, lines of credit interest expense was $167,000 attributable to
advances for 1996 and 1997 acquisitions and mortgage interest expense was
$171,000. For the first three months of 1996, lines of credit interest expense
was $481,000 attributable to advances for 1995 and 1996 acquisitions and
mortgage interest expense was $173,000.
General and administrative expenses increased $202,000 to $957,000 as
compared to $755,000 for the first three months of 1996. The increase for the
first three months of 1997 as compared to the first three months of 1996 is
primarily attributable to personnel additions in 1996 and incentive compensation
charged to operations in the first quarter of 1997 but not incurred in the first
quarter of 1996. General and administrative expenses as a percentage of revenue
decreased to 4.75% in the first three months of 1997 from 5.14% in the first
three months of 1996.
RESULTS OF OPERATIONS--YEAR ENDED DECEMBER 31, 1996 COMPARED TO THE YEAR ENDED
DECEMBER 31, 1995
REAL ESTATE RENTAL REVENUE
Total revenues for 1996 increased $12.9 million to $65.5 million from $52.6
million in 1995. The percentage increase in real estate rental revenue from 1995
to 1996 by property type was as follows:
<TABLE>
<CAPTION>
1995/1996
---------------
<S> <C>
Office buildings.................................................................. 33%
Shopping centers.................................................................. 10%
Apartment buildings............................................................... 28%
Industrial distribution centers................................................... 21%
</TABLE>
During 1996, WRIT's office building revenues and operating income increased
by 33% and 34%, respectively, over 1995. These increases were primarily due to
1995 acquisitions (6110 Executive Boulevard and 1220 19th Street) and 1996
acquisitions (Maryland Trade Centers I & II) combining with increased rental
rates overall for the group.
During 1996, WRIT's shopping center revenues and operating income increased
by 10% and 6%, respectively, over 1995. These increases were primarily due to
the 1995 acquisition of Frederick County Square combining with increased rental
rates overall for the group. These increases were partially offset by decreased
occupancy levels in Concord and Montgomery Village.
WRIT's apartment building revenues and operating income increased by 28% and
25%, respectively, in 1996 over 1995. These increases were primarily due to
increased rental rates throughout the group combining with the 1996 acquisitions
of Walker House Apartments and The Ashby at McLean.
WRIT's industrial distribution center revenues and operating income
increased by 21% and 19%, respectively, over 1995. These increases were
primarily due to increased rental rates and occupancy levels overall for the
group combining with the 1995 acquisitions (Tech 100 Industrial Park and
Crossroads Distribution Center) and the 1996 acquisition of the Alban Business
Center. In December of 1996, WRIT also acquired The Earhart Building, a 92,300
square foot flex property which is 100% leased.
S-20
<PAGE>
OPERATING EXPENSES AND OTHER RESULTS OF OPERATIONS
Real estate operating expenses as a percentage of revenue was 33% for 1996
as compared to 32% for 1995. This increase was attributable to an increase in
occupancy levels and rental rates in 1996 offset by an increase in the office
building segment of WRIT's portfolio. Operating expenses as a percentage of
revenues are higher for office building properties than the other property types
within the WRIT portfolio. WRIT's percentage of revenue from office buildings
within its entire real estate portfolio increased from 41% as of December 31,
1995 to 44% as of December 31, 1996.
Other income (expense) remained relatively constant between 1996 and 1995.
Interest expense increased $3.3 million in 1996 from 1995. This increase was
primarily attributed to the issuance of $100 million in debt securities in
August 1996. An additional increase was due to advances on lines of credit being
outstanding for longer periods in 1996 than in 1995. This increase in
outstanding advances was due to an increase in acquisitions in 1996.
General and administrative expenses were $3.1 million for 1996 as compared
to $2.9 million for 1995.
CAPITAL RESOURCES AND LIQUIDITY
WRIT has utilized the proceeds of Share offerings, medium and long-term
fixed interest rate debt, bank lines of credit and cash flow from operations for
its capital needs. External sources of capital will continue to be available to
WRIT from its existing unsecured credit commitments, and management believes
that additional sources of capital are available from selling additional Shares
and/or the sale of medium or long-term notes. The funds raised would be used to
pay off any outstanding advances on the lines of credit and for new acquisitions
and capital improvements.
In August 1996, WRIT sold $50 million of 7.125% 7-year unsecured notes due
August 13, 2003, and $50 million of 7.25% unsecured 10-year notes due August 13,
2006. The 7-year notes were sold at 99.107% of par and the 10-year notes were
sold at 98.166% of par. WRIT received net proceeds of $97.6 million from the
sale of the senior unsecured notes. Approximately $67 million of the net
proceeds was used to repay all borrowings outstanding under WRIT's lines of
credit. Those borrowings were used for various 1995 and 1996 property
acquisitions. An additional $20.7 million was used to fund a portion of the
aggregate purchase price of The Ashby at McLean and The Alban Business Center,
subsequent to August 13, 1996. The balance of the net proceeds was used to
renovate, expand or improve income producing properties.
WRIT has line of credit commitments in place from commercial banks for up to
$75.0 million which bear interest at an adjustable spread over LIBOR based on
the Trust's interest coverage ratio and public debt rating. Currently, WRIT has
outstanding under its lines of credit approximately $23 million in advances with
an average interest rate of 6.38%, and $52 million available for future
advances. These advances were used for the acquisition of the Ammendale
Technology Park I and II and capital improvements and major renovations to
WRIT's various properties. The $23 million in advances have maturities of July
25, 1998 and September 26, 1997.
Cash flow from operating activities totaled $8.0 million for the first three
months of 1997, as a result of net income of $7.0 million, depreciation of $2.3
million, decreases in other assets of $284,000 and decreases in liabilities
(other than mortgage note, senior notes and lines of credit payable) of $1.1
million. The majority of the decrease in cash flow from operating activities was
due to the decrease in accounts payable resulting from the semi-annual interest
payment on the senior notes, offset partially by increased depreciation
resulting from a larger portfolio.
Net cash used in investing activities for the first three months of 1997 was
$17.6 million including property acquisitions of $13.7 million and capital
improvements to real estate of $3.9 million.
S-21
<PAGE>
Net cash provided by financing activities for the first three months of 1997
was $9.1 million, including line of credit borrowings of $17.0 million and
proceeds from share options exercised of $372,000, offset by principal
repayments of $31,000 on the mortgage note payable and $8.3 million in dividends
paid. Rental revenue has been the principal source of funds to pay WRIT's
operating expenses, interest expense and dividends to shareholders.
Management believes that it has the liquidity and the capital resources
necessary to meet all of its known obligations and to make additional property
acquisitions and capital improvements when appropriate to enhance long-term
growth.
In 1995 WRIT formed a subsidiary partnership, WRIT Limited Partnership, in
which WRIT currently owns 99.9% of the partnership interest. As of July 28,
1997, WRIT Limited Partnership had acquired 10 properties for cash contributed
or loaned to the partnership by WRIT. WRIT intends to use WRIT Limited
Partnership to offer property owners an opportunity to contribute properties in
exchange for WRIT Limited Partnership units. Such a transaction will enable
property owners to diversify their holdings and to obtain a tax deferred
contribution for WRIT Limited Partnership units rather than make a taxable cash
sale. To date, no such exchange transactions have occurred. WRIT believes that
WRIT Limited Partnership will provide WRIT an opportunity to acquire real estate
assets which might not otherwise have been offered to it.
DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS
This Prospectus Supplement and certain documents incorporated herein by
reference include statements that may be deemed to be "forward-looking
statements" within the meaning of Section 27A of the Securities Act of 1933, as
amended, and Section 21E of the Securities Exchange Act of 1934, as amended. All
statements, other than statements of historical facts, included in this
Prospectus Supplement and such incorporated documents that address activities,
events or developments that the Trust expects, believes or anticipates will or
may occur in the future, including such matters as business strategies,
acquisitions, return on investment, capital expenditures, economic and other
trends in the greater Washington-Baltimore region, the use of the proceeds of
this offering, dividends, external sources of capital and other matters, are
forward-looking statements. These statements are based upon certain assumptions
and analyses made by the Trust's management in light of their experience and
their perception of historical trends, current conditions, expected future
developments and other factors they believe are relevant. Such statements are
subject to a number of risks and uncertainties discussed in this Prospectus
Supplement, the Prospectus and the documents incorporated herein and therein by
reference, including general economic conditions, local business conditions, the
performance of the Trust's current properties and properties it acquires in the
future, acquisition opportunities that may be presented to and pursued by the
Trust, changes in laws and other regulations and other factors, many of which
are beyond the Trust's control. Prospective investors are cautioned that actual
results or developments may differ materially from those anticipated in the
forward-looking statements.
S-22
<PAGE>
MANAGEMENT
The Trustees and executive officers of the Trust are:
<TABLE>
<CAPTION>
NAME AGE POSITION
- ------------------------------ --- ---------------------------------------------------------------------------
<S> <C> <C>
Arthur A. Birney.............. 69 Trustee and Chairman of the Board
William N. Cafritz............ 71 Trustee (President, William Cafritz Development Corp., a real estate
development company)
Edmund B. Cronin, Jr. ........ 60 Trustee, President and Chief Executive Officer
John M. Derrick, Jr. ......... 57 Trustee (President/COO, Potomac Electric Power Company)
Benjamin H. Dorsey............ 73 Trustee, Secretary and Retired General Counsel
David M. Osnos................ 65 Trustee (Senior Partner, Arent Fox Kintner Plotkin & Kahn (legal counsel to
the Trust); Director, VSE Corporation, an engineering company; Director
EastGroup Properties, a real estate company)
Stanley P. Snyder............. 62 Trustee (Chairman, Snyder-Cohn-Collyer-Hamilton & Associates, P.C.
(formerly Snyder, Kamerow & Associates, P.C.), Certified Public
Accountants)
Larry E. Finger............... 44 Senior Vice President--Chief Financial Officer
Mary Beth Avedesian........... 38 Vice President--Investments
Brian J. Fitzgerald........... 35 Vice President--Leasing
Laura M. Franklin............. 36 Vice President--Chief Accounting Officer, Assistant Secretary
George F. McKenzie............ 41 Vice President--Asset Management
Kenneth C. Reed............... 44 Vice President--Property Management
Thomas L. Regnell............. 40 Vice President--Acquisitions
</TABLE>
Mr. Arthur A. Birney, a founding Trustee, is Managing Partner and Chief
Executive Officer of Washington Brick & Terra Cotta Company, a real estate
investment and holding company founded in 1892, and President of Port Annapolis
Marina, Inc.
Mr. Edmund B. Cronin, Jr. has 36 years of real estate investment, operations
and finance experience in the Washington-Baltimore metropolitan market. From
1977 to 1993, he served as Chairman and Chief Executive Officer of Smithy
Braedon, a full service commercial real estate firm providing leasing, sales,
asset management, finance, consulting, investment advisory and development
services. From 1993 until joining WRIT in June 1994, Mr. Cronin was Chief
Executive Officer of H.G. Smithy Company, a real estate management and
investment advisory service company.
Mr. Larry E. Finger, an attorney and CPA, joined the Trust as Vice President
and Chief Financial Officer in December 1993 and was promoted to Senior Vice
President--Chief Financial Officer in June 1995. Mr. Finger previously served as
Chief Operating Officer of Savage/Fogarty Companies, Inc., a real estate
investment, management and development company based in Alexandria, Virginia.
Mr. Finger was employed by Savage/Fogarty for 13 years, from 1978 to 1991.
During 1992 and until he joined the Trust, Mr. Finger created and operated a
multi-restaurant delivery business.
Ms. Mary Beth Avedesian joined the Trust as Vice President--Investments in
March 1995. Ms. Avedesian was an Assistant Vice President for Towle Financial
Services from 1993 to 1995, where she was responsible for acquisition due
diligence and asset management. From 1991 to 1993, Ms. Avedesian was a Marketing
Manager for AMRESCO, a subsidiary of NationsBank formed to dispose of bank-owned
property; and from 1987 to 1991 Ms. Avedesian was a Financial Analyst and
Development Coordinator with Himmel and Company on the $350 million Reston Town
Center.
Mr. Brian J. Fitzgerald joined the Trust in January of 1996 as Vice
President--Leasing. From 1984 to 1993, Mr. Fitzgerald served as a commercial
leasing broker with Smithy Braedon Company in Northern Virginia. In 1993, he
became a Vice President of H. G. Smithy Company, responsible for managing all
agency leasing activities. From the date of the merger of H. G. Smithy
Commercial Management Group
S-23
<PAGE>
with Cushman & Wakefield of Washington, D.C., Inc. in June 1994, until joining
the Trust, Mr. Fitzgerald managed institutional agency leasing activities at
Cushman & Wakefield, Inc. of Washington, D.C.
Ms. Laura M. Franklin, a CPA, joined the Trust as Assistant Vice
President--Finance in August 1993 and was promoted to Vice President--Chief
Accounting Officer in June 1995. From 1985 to 1993, Ms. Franklin was an
associate with Reznick, Fedder and Silverman, P.C., a regional public accounting
firm known nationally to the real estate industry. While at Reznick, Ms.
Franklin provided audit and tax services to clients.
Mr. George F. McKenzie joined the Trust in September of 1996 as Vice
President--Asset Management. From 1985 to 1996, Mr. McKenzie served with the
Prudential Realty Group, most recently as Vice President, Investment & Sales,
responsible for property dispositions throughout the East Coast. Prior
assignments included mortgage originations and asset management in the
Mid-Atlantic region.
Mr. Kenneth C. Reed, Vice President--Property Management, is President of
CSN Management, Inc., which manages the Trust's properties. Mr. Reed has been
with CSN Management since 1983 and has held the position of President since
1991.
Mr. Thomas L. Regnell joined the Trust as Vice President--Acquisitions in
January 1995. Mr. Regnell previously served as an Investment Officer with
Federal Realty Investment Trust in Bethesda, Maryland. Mr. Regnell was employed
by Federal Realty from 1992 to 1995, and was responsible for Federal Realty's
real estate acquisitions in the Midwest and Southeast United States. Prior to
joining Federal Realty, Mr. Regnell was a Vice President with Spaulding & Slye
Company, a real estate development, brokerage and management company in
Bethesda, Maryland.
SHARES
The Trust is authorized to issue 100,000,000 Shares with a par value of $.01
per Share. Under Maryland law and the Trust's Declaration of Trust, the Trust
may increase the aggregate number of authorized Shares without shareholder
approval. Holders of Shares are entitled to one vote per Share, to participate
pro rata in distributions as may be declared by the Trustees and, upon
liquidation of the Trust, to receive their pro rata share of the assets after
payment of liabilities and expenses of the Trust. The Shares do not have
preference, conversion, exchange, preemptive, cumulative voting or redemption
rights. All of the Trust's outstanding Shares are, and the Shares offered hereby
will be, when issued against full payment of the agreed purchase price, validly
issued, fully paid and non-assessable.
For the Trust to qualify as a real estate investment trust under the
Internal Revenue Code, in any taxable year, not more than 50% in value of its
outstanding Shares may be owned, directly or indirectly, by five or fewer
individuals during the last six months of such year, and the Shares must be
owned by 100 or more persons during at least 335 days of a taxable year or a
proportionate part of a taxable year less than 12 months. In order to meet these
and other requirements, the Trustees have the power to redeem or prohibit the
transfer of a sufficient number of Shares to maintain or bring the ownership of
the Shares into conformity with such requirements. In connection with the
foregoing, if the Trustees shall, at any time and in good faith, be of the
opinion that direct or indirect ownership of Shares representing more than 10%
in value of the total Shares outstanding (the "Excess Shares") has or may become
concentrated in the hands of one beneficial owner, the Trustees shall have the
power (i) to repurchase from any shareholder of the Trust such Excess Shares and
(ii) to refuse to sell, transfer or deliver Shares to any person whose
acquisition of such Shares would, in the opinion of the Trustees, result in the
direct or indirect beneficial ownership by any person of Shares representing
more than 10% in value of the outstanding Shares. The purchase price for any
Shares so repurchased shall be at cost or at the last sale price of the Shares
as of the date immediately preceding the day on which the demand for repurchase
is mailed, whichever price is higher. From and after the date fixed for
repurchase by the Trustees, and so long as payment of the purchase price for the
Shares to be so repurchased shall have been made or duly provided for, the
holder of any Excess Shares so called for repurchase shall cease to be entitled
to
S-24
<PAGE>
distributions, voting rights and other benefits with respect to such Shares,
except the right to payment of the purchase price for the Shares.
Outstanding Shares are listed on the American Stock Exchange and application
has been made to list the additional Shares that are being offered hereby by the
Trust. American Stock Transfer & Trust Company, New York, New York is the
transfer agent for the Shares.
TAXATION
The Trust has elected to be taxed as a real estate investment trust under
the Internal Revenue Code. Real estate investment trusts which meet certain
qualifications are relieved of federal income taxes on ordinary income and
capital gains distributed to shareholders. In the opinion of Arent Fox Kintner
Plotkin & Kahn, legal counsel for WRIT, the Trust has qualified as a real estate
investment trust for the years 1992-1996 and its present and contemplated method
of operation will put it in a position to continue to so qualify. David M.
Osnos, a Trustee, is a partner of such firm.
UNDERWRITING
Subject to the terms and conditions of the Terms Agreement and the related
Underwriting Agreement, Alex. Brown & Sons Incorporated, A.G. Edwards & Sons,
Inc., Legg Mason Wood Walker, Incorporated, Merrill Lynch, Pierce, Fenner &
Smith Incorporated, Ferris, Baker Watts, Incorporated and Scott & Stringfellow,
Inc., have severally agreed to purchase from the Trust the following respective
numbers of Shares at the public offering price less the underwriting discounts
and commissions set forth on the cover page of this Prospectus Supplement:
<TABLE>
<CAPTION>
NUMBER
UNDERWRITER OF SHARES
- ----------------------------------------------------------------------------------------------------- -----------
<S> <C>
Alex. Brown & Sons Incorporated...................................................................... 625,000
A.G. Edwards & Sons, Inc............................................................................. 625,000
Legg Mason Wood Walker, Incorporated................................................................. 625,000
Merrill Lynch, Pierce, Fenner & Smith Incorporated................................................... 625,000
Ferris, Baker Watts, Incorporated.................................................................... 625,000
Scott & Stringfellow, Inc............................................................................ 625,000
-----------
Total.......................................................................................... 3,750,000
-----------
-----------
</TABLE>
The Underwriting Agreement provides that the obligations of the Underwriters
are subject to certain conditions precedent and that the Underwriters will
purchase all of the Shares offered hereby if any of such Shares are purchased.
The Trust has been advised that the Underwriters propose to offer the Shares
to the public at the public offering price set forth on the cover page of this
Prospectus Supplement and to certain dealers at such price less a concession not
in excess of $0.52 per Share. The Underwriters may allow, and such dealers may
reallow, a concession not in excess of $0.10 per Share to certain other dealers.
After the public offering, the public offering price and other selling terms may
be changed by the Underwriters.
The Trust has granted to the Underwriters an option, exercisable not later
than 30 days after the date of this Prospectus Supplement, to purchase up to
562,500 additional Shares at the public offering price less the underwriting
discounts and commissions set forth on the cover page of this Prospectus
Supplement. To the extent that the Underwriters exercise such option, each of
the Underwriters will have a firm commitment to purchase approximately the same
percentage thereof that the number of Shares to be purchased by it shown in the
above table bears to 3,750,000, and the Trust will be obligated, pursuant to the
option, to sell such Shares to the Underwriters. The Underwriters may exercise
such option only to cover over-allotments made in connection with the sale of
Shares offered hereby. If purchased, the
S-25
<PAGE>
Underwriters will offer such additional Shares on the same terms as those on
which the 3,750,000 Shares are being offered.
The Trust has agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act of 1933, as amended.
The Trust and its officers and Trustees have agreed that for a period of 90
days from the date of this Prospectus Supplement they will not, without the
prior written consent of the Underwriters, offer, sell, grant any option for the
sale of or otherwise dispose of any Shares, except pursuant to the Trust's
Dividend Reinvestment Plan and except for grants of options or the issuance of
Shares upon exercise of options pursuant to the Trust's Incentive Share Option
Plan.
In August 1996, Alex. Brown & Sons Incorporated and Merrill Lynch, Pierce,
Fenner & Smith Incorporated acted as the underwriters for the Trust's offering
of Senior Notes.
Until the distribution of the Shares is completed, rules of the Securities
and Exchange Commission may limit the ability of the Underwriters and certain
selling group members to bid for and purchase Shares. As an exception to these
rules, the Underwriters are permitted to engage in certain transactions that
stabilize the price of the Shares. Such transactions may consist of bids or
purchases for the purpose of pegging, fixing or maintaining the price of the
Shares.
If the Underwriters create a short position in the Shares in connection with
the offering (I.E., if they sell more Shares than are set forth on the cover
page of this Prospectus Supplement), the Underwriters may reduce that short
position by purchasing Shares in the open market. The Underwriters also may
elect to reduce any short position by exercising all or part of the
over-allotment option described herein.
The Underwriters also may impose a penalty bid on certain selling group
members. This means that if the Underwriters purchase Shares in the open market
to reduce the Underwriters' short position or to stabilize the price of the
Shares, they may reclaim the amount of the selling concession from the selling
group members who sold those Shares as part of the offering.
Neither the Trust nor any of the Underwriters makes any representation or
prediction as to the direction or magnitude of any effect that the transactions
described above may have on the price of the Shares. In addition, neither the
Trust nor any of the Underwriters makes any representation that the Underwriters
will engage in such transactions or that such transactions, once commenced, will
not be discontinued without notice.
LEGAL OPINIONS
The legality of the Shares has been passed upon for the Trust by Arent Fox
Kintner Plotkin & Kahn, Washington, D.C. Arent Fox Kintner Plotkin & Kahn has
also passed on certain tax matters relating to the qualification of the Trust as
a real estate investment trust. David M. Osnos, a Trustee of the Trust, is a
partner of Arent Fox Kintner Plotkin & Kahn. Certain legal matters with respect
to the Shares offered hereby will be passed upon for the Underwriters by Andrews
& Kurth L.L.P., Washington, D.C.
EXPERTS
The financial statements for the year ended December 31, 1996 incorporated
herein by reference to the Trust's Annual Report on Form 10-K for the year ended
December 31, 1996 have been so incorporated in reliance on the report of Arthur
Andersen LLP, independent public accountants, and the financial statements for
the years ended December 31, 1995 and 1994 incorporated herein by reference to
the Trust's Annual Report on Form 10-K for the year ended December 31, 1996 have
been so incorporated in reliance on the report of Price Waterhouse LLP,
independent accountants, given on the authority of said firms as experts in
auditing and accounting.
S-26
<PAGE>
The historical summary of gross income and direct operating expenses for the
year ended December 31, 1995 of Maryland Trade Center I and II included in the
Trust's Current Report on Form 8-K dated May 31, 1996, as amended by Amendment
No. 1 dated July 25, 1996, incorporated herein by reference, has been so
incorporated in reliance on the report dated June 18, 1996 of Stoy, Malone &
Company, P.C., also incorporated by reference herein, and on the authority of
said firm as experts in auditing and accounting.
AVAILABLE INFORMATION
In addition to the documents incorporated by reference pursuant to the
accompanying Prospectus dated March 19, 1997, there is incorporated by reference
herein the Trust's Quarterly Report on Form 10-Q for the quarter ended March 31,
1997.
S-27
<PAGE>
PROSPECTUS
[LOGO]
$200,000,000
WASHINGTON REAL ESTATE INVESTMENT TRUST
DEBT SECURITIES
PREFERRED SHARES
COMMON SHARES
COMMON SHARE WARRANTS
---------------------
Washington Real Estate Investment Trust ("WRIT" or the "Trust") intends to
issue from time to time its (i) unsecured senior or subordinated debt securities
(the "Debt Securities"), (ii) preferred shares of beneficial interest, $.01 par
value per share ("Preferred Shares"), (iii) common shares of beneficial
interest, $.01 par value per share ("Common Shares"), and/or (iv) warrants to
purchase Common Shares ("Common Share Warrants"), having an aggregate initial
public offering price not to exceed $200,000,000 or the equivalent thereof in
one or more foreign currencies or composite currencies, including European
Currency Units, on terms to be determined at the time of sale. The Debt
Securities, the Preferred Shares, the Common Shares and the Common Share
Warrants offered hereby (collectively, the "Offered Securities") may be offered,
separately or as units with other Offered Securities, in separate series or
amounts, at prices and on terms to be determined at the time of sale and to be
set forth in a supplement to this Prospectus (a "Prospectus Supplement.")
The Debt Securities will be direct unsecured obligations of the Trust and
may be either senior Debt Securities ("Senior Securities") or subordinated Debt
Securities ("Subordinated Securities"). The Senior Securities will rank equally
with all other unsecured and unsubordinated indebtedness of the Trust. The
Subordinated Securities will be subordinated to all existing and future Senior
Debt of the Trust, as defined. See "Description of Debt Securities."
The specific terms of the Offered Securities in respect of which this
Prospectus is being delivered will be set forth in the applicable Prospectus
Supplement and will include, where applicable, (i) in the case of Debt
Securities, the specific title, aggregate principal amount, currency,
denominations, maturity, priority, interest rate, time of payment of interest,
terms of redemption at the option of the Trust or repayment at the option of the
holder or for sinking fund payments, terms for conversion into or exchange for
other Offered Securities and the initial public offering price; (ii) in the case
of Preferred Shares, the series designation and the number of shares and the
dividend, liquidation, redemption, conversion, voting and other rights and the
initial public offering price; (iii) in the case of Common Shares, the initial
public offering price; (iv) in the case of Common Share Warrants, the duration,
offering price, exercise price and detachability; and (v) in the case of all
Offered Securities, whether such Offered Securities will be offered separately
or as a unit with other Offered Securities. In addition, such specific terms may
include limitations on direct or beneficial ownership and restrictions on
transfer of the Offered Securities, in each case as may be appropriate to
preserve the status of the Trust as a qualified real estate investment trust
("REIT") under the Internal Revenue Code of 1986, as amended (the "Code").
The applicable Prospectus Supplement will also contain information, where
applicable, about certain United States federal income tax considerations
relating to, and any listing on a securities exchange of, the Offered Securities
covered by such Prospectus Supplement.
The Offered Securities may be offered directly, through agents designated
from time to time by the Trust or to or through underwriters or dealers. If any
agents or underwriters are involved in the sale of any of the Offered
Securities, their names, and any applicable purchase price, fee, commission or
discount arrangement between or among them, will be set forth, or will be
calculable from the information set forth, in an accompanying Prospectus
Supplement. See "Plan of Distribution." No Offered Securities may be sold
without delivery of a Prospectus Supplement describing the method and terms of
the offering of such series of Offered Securities.
------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
------------------------
THE ATTORNEY GENERAL OF THE STATE OF NEW YORK HAS NOT PASSED ON OR ENDORSED THE
MERITS OF THIS OFFERING. ANY REPRESENTATION TO THE CONTRARY IS UNLAWFUL.
------------------------
The date of this Prospectus is March 19, 1997.
<PAGE>
AVAILABLE INFORMATION
The Trust is subject to the information requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith files reports and other information with the Securities and Exchange
Commission (the "Commission"). Reports, proxy statements and other information
filed by the Trust can be inspected and copied at the public reference
facilities maintained by the Commission at 450 Fifth Street, N.W., Washington,
D.C. 20549 and at the Commission's Regional Offices at 7 World Trade Center,
Suite 1300, New York, New York 10048 and 500 West Madison Street, Suite 1400,
Chicago, Illinois 60661. Copies of such materials can be obtained at prescribed
rates from the Public Reference Section of the Commission at 450 Fifth Street,
N.W., Washington, D.C. 20549. Such filings are also available from commercial
document retrieval services and from the Commission's site on the World Wide Web
located at www.sec.gov. The Common Shares are listed on the American Stock
Exchange, 86 Trinity Place, New York, New York 10005 and reports, proxy
statements and other information filed by the Trust can be inspected at such
Exchange.
The Trust has filed a registration statement on Form S-3 (together with all
amendments and exhibits thereto, the "Registration Statement") under the
Securities Act of 1933, as amended (the "Securities Act"), with respect to the
Offered Securities. This Prospectus does not contain all the information set
forth in the Registration Statement, certain parts of which are omitted in
accordance with the rules and regulations of the Commission. For further
information, reference is made to the Registration Statement.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The Trust hereby incorporates by reference the following documents filed
with the Commission pursuant to the Exchange Act:
1. The Trust's Annual Report on Form 10-K for the year ended December
31, 1996.
2. The Trust's Proxy Statement dated April 22, 1996
3. The Trust's Current Report on Form 8-K dated May 31, 1996, as amended
by Amendment No. 1 dated July 25, 1996.
4. The Trust's Form 8-B dated July 10, 1996.
Each document filed subsequent to the date of this Prospectus pursuant to
Section 13(a), 13(c), 14 or 15(d) of the Exchange Act and prior to termination
of the offering of all Offered Securities to which this Prospectus relates shall
be deemed to be incorporated by reference in this Prospectus and shall be a part
hereof from the date of filing of such document. Any statement contained herein
or in a document incorporated or deemed to be incorporated by reference herein
shall be deemed to be modified or superseded for purposes of this Prospectus to
the extent that a statement contained in this Prospectus (in the case of a
statement in a previously-filed document incorporated or deemed to be
incorporated by reference herein), in any accompanying Prospectus Supplement
relating to a specific offering of Offered Securities or in any other
subsequently filed document that is also incorporated or deemed to be
incorporated by reference herein, modifies or supersedes such statement. Any
such statement so modified or superseded shall not be deemed, except as so
modified or superseded, to constitute a part of this Prospectus or any
accompanying Prospectus Supplement. Subject to the foregoing, all information
appearing in this Prospectus and each accompanying Prospectus Supplement is
qualified in its entirety by the information appearing in the documents
incorporated by reference.
The Trust will provide without charge to each person to whom a copy of this
Prospectus is delivered, upon their written or oral request, a copy of any or
all of the documents incorporated herein by reference (other than exhibits to
such documents). Written requests for such copies should be addressed to Larry
E. Finger, Washington Real Estate Investment Trust, 10400 Connecticut Avenue,
Kensington, Maryland 20895, telephone (301) 929-5900 or (800) 565-9748.
2
<PAGE>
THE TRUST
The Trust is an equity real estate investment trust investing in income
producing properties in the Mid-Atlantic area with a principal focus in the
greater Washington-Baltimore region. The Trust owns a diversified portfolio of
49 properties consisting of 16 office buildings, 12 shopping centers, 7
high-rise apartment buildings and 14 industrial distribution properties.
WRIT's principal objective is to increase operating income by investing in
high quality real estate with strong growth potential in prime locations and
aggressively managing these properties with active leasing and capital
improvement programs. The percentage leased at December 31, 1996 for the Trust's
properties was 94% for office buildings, 91% for shopping centers, 98% for
apartment buildings and 97% for industrial distribution properties.
Total debt (all medium term) on December 31, 1996 was $113,000,000, which
represented approximately 17% of the market capitalization of the Trust.
In 1995, the Trust organized WRIT Limited Partnership (the "Partnership") to
assist the Trust in competing for acquisition of properties that meet the
Trust's objectives from sellers who may wish to defer taxation of gain realized
on sale through an exchange of partnership interests.
WRIT's income from operations per share has increased for 31 consecutive
years. WRIT concentrates on increasing its income from operations and funds from
operations to achieve its objective of paying increasing dividends to its
shareholders. Consecutive quarterly dividends have been paid for 35 years, and
the annual dividend paid has increased every year for the last 26 years.
The Trust is a Maryland real estate investment trust, successor to a trust
founded in 1960. The principal offices of the Trust are located at 10400
Connecticut Avenue, Kensington, Maryland 20895, telephone (301) 929-5900 or
(800) 565-9748.
USE OF PROCEEDS
Unless otherwise specified in the applicable Prospectus Supplement, the
Trust intends to use the net proceeds from the sale of Offered Securities for
general business purposes, including the acquisition and/ or renovation,
expansion or improvement of income-producing properties or the repayment of
indebtedness. It is expected that properties purchased in the future will be of
the same general character as those presently held by the Trust. Pending such
uses, the net proceeds may be invested in short- term income producing
investments such as commercial paper, government securities or money market
funds that invest in government securities.
RATIOS OF EARNINGS TO FIXED CHARGES
The following table sets forth the Trust's ratios of earnings to fixed
charges for the periods shown:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
- -----------------------------------------------------
<S> <C> <C> <C> <C>
1996 1995 1994 1993 1992
- --------- --------- --------- --------- ---------
6.11x 12.95x 38.65x 366.95x 45.13x
</TABLE>
The ratios of earnings to fixed charges were computed by dividing earnings
by fixed charges. For this purpose, earnings consist of income from continuing
operations plus fixed charges. Fixed charges consist of interest expense
(including interest costs capitalized) and the amortization of debt issuance
costs.
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DESCRIPTION OF DEBT SECURITIES
GENERAL
The Senior Securities will be issued under an indenture dated as of August
1, 1996, as supplemented from time to time (the "Senior Indenture") between the
Trust and The First National Bank of Chicago, as trustee (the "Senior Indenture
Trustee"), and the Subordinated Securities will be issued under an indenture
(the "Subordinated Indenture"), between the Trust and a commercial bank to be
selected (the "Subordinated Indenture Trustee"). The term "Indenture Trustee,"
as used herein, shall refer to the Senior Indenture Trustee or the Subordinated
Indenture Trustee, as appropriate. The Senior Indenture and the form of the
Subordinated Indenture (being sometimes referred to herein collectively as the
"Indentures" and individually as an "Indenture") are filed as exhibits to the
Registration Statement to which this Prospectus is a part and will be available
for inspection at the corporate trust offices of the Senior Indenture Trustee
and the Subordinated Indenture Trustee, or as described under "Available
Information." The Indentures are subject to and governed by the Trust Indenture
Act of 1939, as amended (the "TIA"). The statements made under this heading
relating to the Debt Securities and the Indentures are summaries of the
provisions thereof and do not purport to be complete and are qualified in their
entirety by reference to the Indentures and the Debt Securities. All Section
references herein are to sections of the Indentures, and capitalized terms used
but not defined herein shall have the respective meanings set forth in the
Indentures and the Debt Securities.
TERMS
The Debt Securities will be direct, unsecured obligations of the Trust. The
indebtedness represented by the Senior Securities will rank equally with all
other unsecured and unsubordinated indebtedness of the Trust. The indebtedness
represented by the Subordinated Securities will be subordinated in right of
payment to the prior payment in full of the Senior Debt of the Trust, as
described under "Subordination." Each Indenture provides that the Debt
Securities may be issued without limit as to aggregate principal amount, in one
or more series, in each case as established from time to time in or pursuant to
authority granted by a resolution of the Board of Trustees of the Trust or as
established in one or more indentures supplemental to such Indenture. Debt
Securities may be issued with terms different from those of Debt Securities
previously issued. All Debt Securities of one series need not be issued at the
same time and, unless otherwise provided, a series may be reopened, without the
consent of the holders of the Debt Securities of such series, for issuances of
additional Debt Securities of such series (Section 301 of each Indenture).
Each Indenture provides that there may be more than one Indenture Trustee
thereunder, each with respect to one or more series of Debt Securities. Any
Indenture Trustee under either Indenture may resign or be removed with respect
to one or more series of Debt Securities, and a successor Indenture Trustee may
be appointed to act with respect to such series (Section 608 of each Indenture).
In the event that two or more persons are acting as Indenture Trustee with
respect to different series of Debt Securities, each such Indenture Trustee
shall be an Indenture Trustee of a trust under the applicable Indenture separate
and apart from the trust administered by any other Indenture Trustee (Section
609 of each Indenture), and, except as otherwise indicated herein, any action
described herein to be taken by an Indenture Trustee may be taken by each such
Indenture Trustee with respect to, and only with respect to, the one or more
series of Debt Securities for which it is Indenture Trustee under the applicable
Indenture.
The Prospectus Supplement relating to the series of Debt Securities being
offered will contain the specific terms thereof, including:
(1) The title of such Debt Securities and whether such Debt Securities
are Senior Securities or Subordinated Securities;
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(2) The aggregate principal amount of such Debt Securities and any limit
on such principal amount;
(3) The percentage of the principal amount at which such Debt Securities
will be issued and, if other than the principal amount thereof, the
portion of the principal amount thereof payable upon declaration of
acceleration of the maturity thereof, or (if applicable) the portion
of the principal amount of such Debt Securities that is convertible
into Common Shares or Preferred Shares, or the method by which any
such portion shall be determined;
(4) If convertible, in connection with the preservation of the Trust's
status as a REIT, any applicable limitations on the ownership or
transferability of the Common Shares or Preferred Shares into which
such Debt Securities are convertible:
(5) The date or dates, or the method for determining such date or dates,
on which the principal of such Debt Securities will be payable and
the amount of principal payable thereon;
(6) The rate or rates (which may be fixed or variable) at which such Debt
Securities will bear interest, if any, or the method by which such
rate or rates shall be determined, the date or dates, or the method
for determining such date or dates, from which any such interest will
accrue, the dates on which any such interest will be payable, the
record dates for such interest payment dates, or the method by which
such dates shall be determined, the persons to whom such interest
shall be payable, and the basis upon which interest shall be
calculated if other than that of a 360-day year of twelve 30-day
months;
(7) The place or places where the principal of (and premium, if any) and
interest, if any, on such Debt Securities will be payable, where such
Debt Securities may be surrendered for registration of transfer or
exchange and where notices or demands to or upon the Trust in respect
of such Debt Securities and the applicable Indenture may be served;
(8) The period or periods within which, the price or prices at which, the
currency or currencies, currency units or units or composite currency
or currencies in which, and other terms and conditions upon which
such Debt Securities may be redeemed, as a whole or in part, at the
option of the Trust, if the Trust is to have such an option;
(9) The obligation, if any, of the Trust to redeem, repay or purchase
such Debt Securities pursuant to any sinking fund or analogous
provision or at the option of a holder thereof, and the period or
periods within which or the date or dates on which, the price or
prices at which, the currency or currencies, currency unit or units
or composite currency or currencies in which, and other terms and
conditions upon which such Debt Securities will be redeemed, repaid
or purchased, as a whole or in part, pursuant to such obligation;
(10) If other than U.S. dollars, the currency or currencies in which such
Debt Securities will be denominated and payable, which may be a
foreign currency or units of two or more foreign currencies or a
composite currency or currencies, and the terms and conditions
relating thereto;
(11) Whether the amount of payments of principal of (and premium, if any)
or interest, if any, on such Debt Securities may be determined with
reference to an index, formula or other method (which index, formula
or method may, but need not be, based on a currency, currencies,
currency unit or units or composite currency or currencies) and the
manner in which such amounts shall be determined;
(12) Whether the principal of (and premium, if any) or interest on such
Debt Securities are to be payable, at the election of the Trust or a
holder thereof, in a currency, or currencies, currency unit or units
or composite currency or currencies other than that in which such
Debt Securities are denominated or stated to be payable, the period
or periods within which, and
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the terms and conditions upon which, such election may be made, and
the time and manner of, and identity of the exchange rate agent with
responsibility for, determining the exchange rate between the
currency or currencies, currency unit or units or composite currency
or currencies in which such Debt Securities are denominated or stated
to be payable and the currency or currencies, currency unit or units
or composite currency or currencies in which such Debt Securities are
to be payable;
(13) Provisions, if any, granting special rights to the holders of such
Debt Securities upon the occurrence of such events as may be
specified;
(14) Any deletions from, modifications of or additions to the Events of
Default or covenants of the Trust with respect to such Debt
Securities, whether or not such Events of Default or covenants are
consistent with the Events of Default or covenants set forth in the
applicable Indenture.
(15) Whether such Debt Securities will be issued in certificated or
book-entry form;
(16) Whether such Debt Securities will be in registered or bearer form
and, if in registered form, the denominations thereof if other than
$1,000 and any integral multiple thereof and, if in bearer form, the
denominations thereof and terms and conditions relating thereto;
(17) The applicability, if any, of the defeasance and covenant defeasance
provisions described herein, or any modification thereof;
(18) Whether and under what circumstances the Trust will pay any
Additional Amounts as contemplated in the applicable Indenture on
such Debt Securities in respect of any tax, assessment or
governmental charge and, if so, whether the Trust will have the
option to redeem such Debt Securities in lieu of making such payment;
and
(19) Any other terms of such Debt Securities not inconsistent with the
provisions of the applicable Indenture (Section 301 of each
Indenture).
The Debt Securities may provide for less than the entire principal amount
thereof to be payable upon declaration of acceleration of the maturity thereof
("Original Issue Discount Securities"). Special U.S. federal income tax,
accounting and other considerations applicable to Original Issue Discount
Securities will be described in the applicable Prospectus Supplement.
Except as set forth below under "--Certain Covenants" and as may be set
forth in any Prospectus Supplement, the Indentures will not contain any
provisions that would limit the ability of the Trust to incur indebtedness or
that would afford holders of Debt Securities protection in the event of a highly
leveraged or similar transaction involving the Trust or in the event of a change
of control. Reference is made to the applicable Prospectus Supplement for
information with respect to any deletions from, modifications of, or additions
to the events of default or covenants of the Trust that are described below,
including any addition of a covenant or other provision providing event risk or
similar protection.
DENOMINATIONS, INTEREST, REGISTRATION AND TRANSFER
Unless otherwise described in the applicable Prospectus Supplement, the Debt
Securities of any series issued in registered form will be issuable in
denominations of $1,000 and integral multiples thereof. Unless otherwise
specified in the applicable Prospectus Supplement, the Debt Securities of any
series issued in bearer form will be issuable in denominations of $5,000.
(Section 302 of each Indenture).
Unless otherwise specified in the applicable Prospectus Supplement, the
principal of (and premium, if any) and interest on any series of Senior
Securities will be payable at the corporate trust office of the Senior Indenture
Trustee, which initially shall be c/o First Chicago Trust Company of New York,
14 Wall Street, Eighth Floor, New York, New York 10005 and the principal of (and
premium, if any) and interest
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on any series of Subordinated Securities will be payable at the corporate trust
office of the Subordinated Indenture Trustee; provided that, at the option of
the Trust, payment of interest on any series of Debt Securities may be made by
check mailed to the address of the Person entitled thereto as it appears in the
applicable register for such Debt Securities or by wire transfer of funds to
such person at an account maintained within the United States (Sections 301, 307
and 1002 of each Indenture).
Any interest not punctually paid or duly provided for on any interest
payment date with respect to a Debt Security ("Defaulted Interest") will
forthwith cease to be payable to the holder on the applicable Regular Record
Date and may either be paid to the Person in whose name such Security is
registered at the close of business on a special record date (the "Special
Record Date") for the payment of such Defaulted Interest to be fixed by the
Indenture Trustee, notice whereof shall be given to the holder of such Debt
Security not less than 10 days prior to such Special Record Date, or may be paid
at any time in any other lawful manner, all as more completely described in the
applicable Indenture (Section 307 of each Indenture).
Subject to certain limitations imposed upon Debt Securities issued in
book-entry form, the Debt Securities of any series will be exchangeable for
other Debt Securities of the same series and of a like aggregate principal
amount and tenor of different authorized denominations upon surrender of such
Debt Securities at the corporate trust office of the applicable Indenture
Trustee referred to above. In addition, subject to certain limitations imposed
upon Debt Securities issued in book-entry form, the Debt Securities of any
series may be surrendered for conversion, registration of transfer or exchange
thereof at the corporate trust office of the applicable Indenture Trustee. Every
Debt Security surrendered for conversion, registration of transfer or exchange
must be duly endorsed or accompanied by a written instrument of transfer. No
service charge will be made for any registration of transfer or exchange of any
Debt Securities, but the Trust may require payment of a sum sufficient to cover
any tax or other governmental charge payable in connection therewith (Section
305 of each Indenture). If the applicable Prospectus Supplement refers to any
transfer agent (in addition to the applicable Indenture Trustee) initially
designated by the Trust with respect to any series of Debt Securities, the Trust
may at any time rescind the designation of any such transfer agent or approve a
change in the location through which any such transfer agent acts, except that
the Trust will be required to maintain a transfer agent in each place of payment
for such series. The Trust may at any time designate additional transfer agents
with respect to any series of Debt Securities (Section 1002 of each Indenture).
Neither the Trust nor either Indenture Trustee shall be required to (i)
issue, register the transfer of or exchange Debt Securities of any series during
a period beginning at the opening of business 15 days before any selection of
Debt Securities of that series to be redeemed and ending at the close of
business on the day of mailing of the relevant notice of redemption; (ii)
register the transfer of or exchange any Debt Security, or portion thereof,
called for redemption, except the unredeemed portion of any Debt Security being
redeemed in part; or (iii) issue, register the transfer of or exchange any Debt
Security that has been surrendered for repayment at the option of the holder,
except the portion, if any, of such Debt Security not to be so repaid (Section
305 of each Indenture).
MERGER, CONSOLIDATION OR SALE
The Trust will be permitted to consolidate with, or sell, lease or convey
all or substantially all of its assets to, or merge with or into, any other
entity provided that (a) either the Trust shall be the continuing entity, or the
successor entity (if other than the Trust) formed by or resulting from any such
consolidation or merger or which shall have received the transfer of such assets
shall expressly assume payment of the principal of (and premium, if any) and
interest on all of the Debt Securities and the due and punctual performance and
observance of all of the covenants and conditions contained in each Indenture;
(b) immediately after giving effect to such transaction and treating any
indebtedness that becomes an obligation of the Trust or any Subsidiary as a
result thereof as having been incurred by the Trust or such Subsidiary at the
time of such transaction, no Event of Default under an Indenture, and no event
which,
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after notice or the lapse of time, or both, would become such an Event of
Default, shall have occurred and be continuing; and (c) an officer's certificate
and legal opinion covering such conditions shall be delivered to the Indenture
Trustee (Sections 801 and 803 of each Indenture).
CERTAIN COVENANTS
SENIOR INDENTURE LIMITATIONS ON INCURRENCE OF DEBT. The Senior Indenture
provides that the Trust will not, and will not permit any Subsidiary to, incur
any Debt (as defined below) if, immediately after giving effect to the
incurrence of such Debt and the application of the proceeds thereof, the
aggregate principal amount of all outstanding Debt of the Trust and its
Subsidiaries on a consolidated basis determined in accordance with generally
accepted accounting principles is greater than 60% of the sum of (without
duplication) (i) the Trust's Total Assets as of the end of the calendar quarter
covered in the Trust's Annual Report on Form 10-K or Quarterly Report on Form
10-Q, as the case may be, most recently filed with the Commission (or, if such
filing is not permitted under the Exchange Act, with the Indenture Trustee)
prior to the incurrence of such additional Debt and (ii) any increase in the
Trust's Total Assets since the end of such quarter including, without
limitation, any increase in Total Assets resulting from the incurrence of such
additional Debt (such increase together with the Trust's Total Assets being
referred to as "Adjusted Total Assets") (Section 1011 of the Senior Indenture).
In addition to the foregoing limitation on the incurrence of Debt, the
Senior Indenture provides that the Trust will not, and will not permit any
Subsidiary to, incur any Debt secured by any mortgage, lien, charge, pledge,
encumbrance or security interest of any kind upon any of the property of the
Trust or any Subsidiary ("Secured Debt"), whether owned at the date of the
Senior Indenture or thereafter acquired, if, immediately after giving effect to
the incurrence of such additional Secured Debt and the application of the
proceeds thereof, the aggregate principal amount of all outstanding Secured Debt
of the Trust and its Subsidiaries on a consolidated basis is greater than 40% of
the Trust's Adjusted Total Assets (Section 1011 of the Senior Indenture).
In addition to the foregoing limitations on the incurrence of Debt, the
Senior Indenture provides that the Trust will not, and will not permit any
Subsidiary to, incur any Debt if the ratio of Consolidated Income Available for
Debt Service (as defined below) to the Annual Service Charge (as defined below)
for 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 to
1.0, on a pro forma basis after giving effect thereto and to the application of
the proceeds therefrom, and calculated on the assumption that (i) such Debt and
any other Debt incurred by the Trust and its Subsidiaries since the first day of
such four-quarter period and the application of the proceeds therefrom,
including to refinance other Debt, had occurred at the beginning of such period;
(ii) the repayment or retirement of any other Debt by the Trust and its
Subsidiaries since the first day of such four-quarter period had been incurred,
repaid or retired at the beginning of such period (except that, in making such
computation, the amount of Debt under any revolving credit facility shall be
computed based upon the average daily balance of such Debt during such period);
(iii) in the case of Acquired Debt (as defined below) or Debt incurred in
connection with any acquisition since the first day of such four-quarter period,
the related acquisition had occurred as of the first day of such period with the
appropriate adjustments with respect to such acquisition being included in such
pro forma calculation; and (iv) in the case of any acquisition or disposition by
the Trust or its Subsidiaries of any asset or group of assets since the first
day of such four-quarter period, whether by merger, stock purchase or sale, or
asset purchase or sale, such acquisition or disposition or any related repayment
of Debt 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 (Section 1011 of the Senior Indenture).
For purposes of the foregoing provisions regarding the limitation on the
incurrence of Debt, Debt shall be deemed to be "incurred" by the Trust or a
Subsidiary whenever the Trust or such Subsidiary shall create, assume, guarantee
or otherwise become liable in respect thereof.
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MAINTENANCE OF TOTAL UNENCUMBERED ASSETS. The Senior Indenture also
provides that the Trust is required to maintain Total Unencumbered Assets (as
defined below) of not less than 150% of the aggregate outstanding principal
amount of the Unsecured Debt (as defined below) of the Trust (Section 1012 of
the Senior Indenture).
As used herein:
"ACQUIRED DEBT" means Debt of a Person (i) existing at the time such Person
becomes a Subsidiary or (ii) assumed in connection with the acquisition of
assets from such Person, in each case, other than Debt incurred in connection
with, or in contemplation of, such Person becoming a Subsidiary or such
acquisition. Acquired Debt shall be deemed to be incurred on the date of the
related acquisition of assets from any Person or the date the acquired Person
becomes a Subsidiary.
"ANNUAL SERVICE CHARGE" as of any date means the maximum amount which is
payable in any period for interest on, and original issue discount of, Debt of
the Trust and its Subsidiaries.
"CAPITAL STOCK" means, with respect to any Person, any capital stock
(including preferred stock), shares, interests, participations or other
ownership interests (however designated) of such Person and any rights (other
than debt securities convertible into or exchangeable for corporate stock),
warrants or options to purchase any thereof.
"CONSOLIDATED INCOME AVAILABLE FOR DEBT SERVICE" for any period means
Consolidated Net Income (as defined below) of the Trust and its Subsidiaries (i)
plus amounts which have been deducted for (a) interest on Debt of the Trust and
its Subsidiaries, (b) provision for taxes of the Trust and its Subsidiaries
based on income, (c) amortization of debt discount, (d) depreciation and
amortization, (e) the effect of any noncash charge resulting from a change in
accounting principles in determining Consolidated Net Income for such period,
(f) amortization of deferred charges and (g) provision for or realized losses on
properties and (ii) less amounts which have been included for gains on
disposition of properties.
"CONSOLIDATED NET INCOME" for any period means the amount of consolidated
net income (or loss) of the Trust and its Subsidiaries for such period
determined on a consolidated basis in accordance with generally accepted
accounting principles.
"DEBT" of the Trust or any Subsidiary means any indebtedness of the Trust or
any Subsidiary, whether or not contingent, in respect of (i) borrowed money
evidenced by bonds, notes, debentures or similar instruments, (ii) indebtedness
secured by any mortgage, pledge, lien, charge, encumbrance or any security
interest existing on property owned by the Trust or any Subsidiary, (iii) the
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 all conditional sale
obligations or obligations under any title retention agreement, (iv) the
principal amount of all obligations of the Trust or any Subsidiary with respect
to redemption, repayment or other repurchase of any Disqualified Stock, or (v)
any lease of property by the Trust or any Subsidiary as lessee which is
reflected in the Trust's consolidated balance sheet as a capitalized lease in
accordance with generally accepted accounting principles to the extent, in the
case of items of indebtedness under (i) through (iii) above, that any such items
(other than letters of credit) would appear as a liability on the Trust's
consolidated balance sheet in accordance with generally accepted accounting
principles, and also includes, to the extent not otherwise included, any
obligation by the Trust or any Subsidiary to be liable for, or to pay, as
obligor, guarantor or otherwise (other than for purposes of collection in the
ordinary course of business), indebtedness of another person (other than the
Trust or any Subsidiary).
"DISQUALIFIED STOCK" means, with respect to any Person, any Capital Stock of
such Person which by the terms of such Capital Stock (or by the terms of any
security into which it is convertible or for which it is exchangeable or
exercisable), upon the happening of any event or otherwise (i) matures or is
mandatorily redeemable, pursuant to a sinking fund obligation or otherwise, (ii)
is convertible into or exchangeable or
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exercisable for Debt or Disqualified Stock or (iii) is redeemable at the option
of the holder thereof, in whole or in part, in each case on or prior to the
Stated Maturity of the series of Debt Securities.
"ENCUMBRANCE" means any mortgage, security interest, pledge, hypothecation,
assignment, deposit arrangement, encumbrance, lien (statutory or other) or
preference, priority or other security agreement, except: (i) liens for taxes
(a) which are not yet delinquent, (b) which are not in an aggregate amount, as
to the Trust and all Subsidiaries, of greater than 10% of Total Assets or (c)
which are being contested in good faith by all appropriate proceedings, provided
that adequate reserves with respect thereto are maintained on the books of the
Trust or its Subsidiaries, as the case may be, in conformity with GAAP; (ii)
carrier's, warehousemen's, mechanic's, materialmen's, repairmen's or other like
liens (a) which are not in an aggregate amount, as to the Trust and all
Subsidiaries, of greater than 10% of Total Assets, (b) which do not remain
unsatisfied or undischarged for a period of more than 90 days or (c) which are
being contested in good faith by all appropriate proceedings; (iii) pledges or
deposits in connection with workers compensation, unemployment insurance and
other social security legislation and deposits securing liability to insurance
carriers under insurance or self-insurance arrangements; (iv) deposits to secure
the performance of bids, trade contracts (other than for borrowed money),
leases, statutory obligations, surety and appeal bonds, performance bonds and
other obligations of a like nature incurred in the ordinary course of business;
and (v) easements, rights of way, restrictions, development orders, plats and
other similar encumbrances.
"SUBSIDIARY" means a corporation, partnership or limited liability company,
a majority of the outstanding voting stock, partnership interests or membership
interests, as the case may be, of which is owned or controlled, directly or
indirectly, by the Trust or by one or more other Subsidiaries of the Trust. For
the purposes of this definition, "voting stock" means stock having voting power
for the election of directors, or trustees, as the case may be, whether at all
times or only so long as no senior class of stock has such voting power by
reason of any contingency.
"TOTAL ASSETS" as of any date means the sum of (i) the Undepreciated Real
Estate Assets and (ii) all other assets of the Trust and its Subsidiaries
determined in accordance with generally accepted accounting principles (but
excluding accounts receivable and intangibles).
"TOTAL UNENCUMBERED ASSETS" means the sum of (i) those Undepreciated Real
Estate Assets not subject to an Encumbrance and (ii) all other assets of the
Trust and its Subsidiaries not subject to an Encumbrance determined in
accordance with generally accepted accounting principles (but excluding accounts
receivable and intangibles).
"UNDEPRECIATED REAL ESTATE ASSETS" as of any date means the cost (original
cost plus capital improvements) of real estate assets of the Trust and its
Subsidiaries on such date, before depreciation and amortization, determined on a
consolidated basis in accordance with generally accepted accounting principles.
"UNSECURED DEBT" means Debt of the Trust or any Subsidiary which is not
secured by any mortgage, lien, charge, pledge or security interest of any kind
upon any of the properties owned by the Trust or any of its Subsidiaries.
EXISTENCE. Except as permitted under "--Merger, Consolidation or Sale," the
Trust will be required to do or cause to be done all things necessary to
preserve and keep in full force and effect its existence, rights and franchises;
provided, however, that the Trust shall not be required to preserve any right or
franchise if it determines that the preservation thereof is no longer desirable
in the conduct of its business (Section 1004 of each Indenture).
MAINTENANCE OF PROPERTIES. The Trust will be required to cause all of its
material properties used or useful in the conduct of its business or the
business of any Subsidiary to be maintained and kept in good condition, repair
and working order and supplied with all necessary equipment and will cause to be
made all necessary repairs, renewals, replacements, betterments and improvements
thereof, all as in the judgment of the Trust may be necessary so that the
business carried on in connection therewith may be properly and advantageously
conducted at all times (Section 1005 of each Indenture).
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INSURANCE. The Trust will be required to, and will be required to cause
each of its Subsidiaries to, keep all of its insurable properties insured
against loss or damage at least equal to their then full insurable value with
insurers of recognized responsibility and, if described in the applicable
Prospectus Supplement, having a specified rating from a recognized insurance
rating service (Section 1006 of each Indenture).
PAYMENT OF TAXES AND OTHER CLAIMS. The Trust will be required to pay or
discharge or cause to be paid or discharged, before the same shall become
delinquent, (i) all taxes, assessments and governmental charges levied or
imposed upon it or any Subsidiary or upon the income, profits or property of the
Trust or any Subsidiary, and (ii) all lawful claims for labor, materials and
supplies, which, if unpaid, might by law become a material lien upon the
property of the Trust or any Subsidiary; PROVIDED, HOWEVER, that the Trust shall
not be required to pay or discharge or cause to be paid or discharged any such
tax, assessment, charge or claim whose amount, applicability or validity is
being contested in good faith (Section 1007 of each Indenture).
PROVISION OF FINANCIAL INFORMATION. Whether or not the Trust is subject to
Section 13 or 15(d) of the Exchange Act, the Trust will be required, within 15
days of each of the respective dates by which the Trust would have been required
to file annual reports, quarterly reports and other documents with the
Commission if the Trust were so subject, to (i) transmit by mail to all holders
of Debt Securities, as their names and addresses appear in the applicable
register for such Debt Securities, without cost to such holders, copies of the
annual reports, quarterly reports and other documents that the Trust would have
been required to file with the Commission pursuant to Section 13 or 15(d) of the
Exchange Act if the Trust were subject to such sections, (ii) file with the
applicable Indenture Trustee copies of the annual reports, quarterly reports and
other documents that the Trust would have been required to file with the
Commission pursuant to Section 13 or 15(d) of the Exchange Act if the Trust were
subject to such Sections, and (iii) promptly upon written request and payment of
the reasonable cost of duplication and delivery, supply copies of such documents
to any prospective holder (Section 1008 of each Indenture).
ADDITIONAL COVENANTS. Any additional covenants of the Trust with respect to
any series of Debt Securities will be set forth in the Prospectus Supplement
relating thereto.
EVENTS OF DEFAULT, NOTICE AND WAIVER
Each Indenture provides that the following events are "Events of Default"
with respect to any series of Debt Securities issued thereunder: (a) default for
30 days in the payment of any installment of interest or Additional Amounts
payable on any Debt Security of such series; (b) default in the payment of
principal of (or premium, if any, on) any Debt Security of such series at its
maturity; (c) default in making any sinking fund payment as required for any
Debt Security of such series; (d) default in the performance or breach of any
other covenant or warranty of the Trust contained in the Indenture (other than a
covenant added to the Indenture solely for the benefit of a series of Debt
Securities issued thereunder other than such series), continued for 60 days
after written notice as provided in the Indenture; (e) a default under any bond,
debenture, note or other evidence of indebtedness for money borrowed by the
Trust (including obligations under leases required to be capitalized on the
balance sheet of the lessee under generally accepted accounting principles but
not including any indebtedness or obligations for which recourse is limited to
property purchased) in an aggregate principal amount in excess of $5,000,000 or
under any mortgage, indenture or instrument under which there may be issued or
by which there may be secured or evidenced any indebtedness for money borrowed
by the Trust (including such leases, but not including such indebtedness or
obligations for which recourse is limited to property purchased) in an aggregate
principal amount in excess of $5,000,000, whether such indebtedness now exists
or shall hereafter be created which default shall have resulted in such
indebtedness becoming or being declared due and payable prior to the date on
which it would otherwise have become due and payable or such obligations being
accelerated, without such acceleration having been rescinded or annulled; (f)
certain events of bankruptcy, insolvency or reorganization, or court appointment
of a receiver, liquidator or trustee of the Trust or any Significant
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Subsidiary of the Trust; and (g) any other event of default provided with
respect to a particular series of Debt Securities (Section 501 of each
Indenture). The term "Significant Subsidiary" means each significant subsidiary
(as defined in Regulation S-X promulgated under the Securities Act) of the
Trust.
If an Event of Default under either Indenture with respect to Debt
Securities of any series at the time outstanding occurs and is continuing, then
in every such case the Indenture Trustee or the holders of not less than 25% in
principal amount of the outstanding Securities of that series will have the
right to declare the principal amount (or, if the Debt Securities of that series
are Original Issue Discount Securities or Indexed Securities, such portion of
the principal amount as may be specified in the terms thereof) of, and premium,
if any, on all of the Debt Securities of that series to be due and payable
immediately by written notice thereof to the Trust (and to the Indenture Trustee
if given by the holders). However, at any time after such a declaration of
acceleration with respect to Debt Securities of such series (or of all Debt
Securities then outstanding under the applicable Indenture, as the case may be)
has been made, but before a judgment or decree for payment of the money due has
been obtained by the Indenture Trustee, the holders of not less than a majority
in principal amount of outstanding Debt Securities of such series (or of all
Debt Securities then outstanding under the applicable Indenture, as the case may
be) may rescind and annul such declaration and its consequences if (a) the Trust
shall have deposited with the applicable Indenture Trustee all required payments
of the principal of (and premium, if any) and interest, and any Additional
Amounts, on the Debt Securities of such series (or of all Debt Securities then
outstanding under the applicable Indenture, as the case may be), plus certain
fees, expenses, disbursements and advances of such Indenture Trustee and (b) all
Events of Default, other than the non-payment of accelerated principal (or
specified portion thereof and the premium, if any) or interest, with respect to
Debt Securities of such series (or of all Debt Securities then outstanding under
the applicable Indenture, as the case may be) have been cured or waived as
provided in the applicable Indenture (Section 502 of each Indenture). Each
Indenture also provides that the holders of not less than a majority in
principal amount of the outstanding Debt Securities of any series (or of all
Debt Securities then outstanding under the applicable Indenture, as the case may
be) may waive any past default with respect to such series and its consequences,
except a default (x) in the payment of the principal of (or premium, if any) or
interest or Additional Amounts payable on any Debt Security of such series or
(y) in respect of a covenant or provision contained in the applicable Indenture
that cannot be modified or amended without the consent of the holder of each
outstanding Debt Security affected thereby (Section 513 of each Indenture).
Each Indenture Trustee will be required to give notice to the holders of
Debt Securities within 90 days of a default under the applicable Indenture
unless such default shall have been cured or waived; PROVIDED, HOWEVER, that
such Indenture Trustee may withhold notice to the holders of any series of Debt
Securities of any default with respect to such series (except a default in the
payment of the principal of (or premium, if any) or interest or Additional
Amounts payable on any Debt Security of such series or in the payment of any
sinking fund installment in respect of any Security of such series) if specified
responsible officers of such Indenture Trustee consider such withholding to be
in the interest of such holders (Section 601 of each Indenture).
Each Indenture provides that no holders of Debt Securities of any series may
institute any proceedings, judicial or otherwise, with respect to such Indenture
or for any remedy thereunder, except in the cases of failure of the Indenture
Trustee, for 60 days, to act after it has received a written request to
institute proceedings in respect of an event of default from the holders of not
less than 25% in principal amount of the outstanding Debt Securities of such
series, as well as an offer of indemnity reasonably satisfactory to it (Section
507 of each Indenture). This provision will not prevent, however, any holder of
Debt Securities from instituting suit for the enforcement of payment of the
principal of (and premium, if any), interest on and Additional Amounts payable
with respect to, such Debt Securities at the respective due dates thereof.
Subject to provisions in each Indenture relating to its duties in case of
default, each Indenture Trustee will not be under any obligation to exercise any
of its rights or powers under the applicable Indenture at the request or
direction of any holders of any series of Debt Securities then outstanding under
such
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Indenture, unless such holders shall have offered to the Indenture Trustee
thereunder reasonable security or indemnity (Section 602 of each Indenture). The
holders of not less than a majority in principal amount of the outstanding Debt
Securities of any series (or of all Debt Securities then outstanding under the
applicable Indenture, as the case may be) shall have the right to direct the
time, method and place of conducting any proceeding for any remedy available to
the Indenture Trustee, or of exercising any trust or power conferred upon such
Indenture Trustee. However, an Indenture Trustee may refuse to follow any
direction which is in conflict with any law or the Indenture, which may involve
the Indenture Trustee in personal liability or which may be unduly prejudicial
to the holders of Debt Securities of such series not joining therein (Section
512 of each Indenture).
Within 120 days after the close of each fiscal year, the Trust will be
required to deliver to each Indenture Trustee a certificate, signed by one of
several specified officers of the Trust, stating whether or not such officer has
knowledge of any default under the applicable Indenture and, if so, specifying
each such default and the nature and status thereof (Section 1009 of each
Indenture).
MODIFICATION OF THE INDENTURES
Modifications and amendments of either Indenture will be permitted to be
made only with the consent of the holders of not less than a majority in
principal amount of all outstanding Debt Securities issued under each Indenture
which are affected by such modification or amendment; PROVIDED, HOWEVER, that no
such modification or amendment may, without the consent of the holder of each
such Debt Security affected thereby, (a) change the stated maturity of the
principal of (or premium, if any) , or any installment of principal of or
interest payable on, any such Debt Security; (b) reduce the principal amount of,
or the rate or amount of interest on, or any premium payable on redemption of,
or Additional Amounts payable with respect to, any such Debt Security, or reduce
the amount of principal of an Original Issue Discount Security that would be due
and payable upon declaration of acceleration of the maturity thereof or would be
provable in bankruptcy, or adversely affect any right of repayment of the holder
of any such Debt Security; (c) change the place of payment, or the coin or
currency, for payment of principal of (and premium, if any), or interest on, or
any Additional Amounts payable with respect to, any such Debt Security; (d)
impair the right to institute suit for the enforcement of any payment on or with
respect to any such Debt Security; (e) reduce the above-stated percentage of
outstanding Debt Securities of any series necessary to modify or amend the
applicable Indenture, to waive compliance with certain provisions thereof or
certain defaults and consequences thereunder or to reduce the quorum or voting
requirements set forth in the Indenture; or (f) 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
(Section 902 of each Indenture).
The holders of not less than a majority in principal amount of outstanding
Debt Securities issued under either Indenture will have the right to waive
compliance by the Trust with certain covenants in such Indenture (Section 1013
of each Indenture).
Modifications and amendments of each Indenture will be permitted to be made
by the Trust and the applicable Indenture Trustee thereunder without the consent
of any holder of Debt Securities for any of the following purposes: (i) to
evidence the succession of another person to the Trust as obligor under the
applicable Indenture; (ii) to add to the covenants of the Trust for the benefit
of the holders of all or any series of Debt Securities or to surrender any right
or power conferred upon the Trust in the applicable Indenture; (iii) to add
events of default for the benefit of the holders of all or any series of Debt
Securities; (iv) to add or change any provisions of the applicable Indenture to
facilitate the issuance of, or to liberalize certain terms of, Debt Securities
in bearer form, or to permit or facilitate the issuance of Debt Securities in
uncertificated form, PROVIDED that such action shall not adversely affect the
interests of the holders of the Debt Securities of any series in any material
aspect; (v) to change or eliminate any provisions of the applicable Indenture,
PROVIDED that any such change or elimination shall become effective only when
there
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are no Debt Securities outstanding of any series created prior thereto which are
entitled to the benefit of such provision; (vi) to secure the Debt Securities;
(vii) to establish the form or terms of Debt Securities of any series; (viii) to
provide for the acceptance of appointment by a successor Indenture Trustee or
facilitate the administration of the trusts under the applicable Indenture by
more than one Indenture Trustee; (ix) to cure any ambiguity, defect or
inconsistency in the applicable Indenture, PROVIDED that such action shall not
adversely affect the interests of holders of Debt Securities of any series
issued under such Indenture in any material respect; or (x) to supplement any of
the provisions of such Indenture to the extent necessary to permit or facilitate
defeasance and discharge of any series of such Debt Securities, PROVIDED that
such action shall not adversely affect the interests of the holders of the Debt
Securities of any series in any material respect (Section 901 of each
Indenture).
Each 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
thereunder or whether a quorum is present at a meeting of holders of Debt
Securities, (i) the principal amount of an Original Issue Discount Security that
shall be deemed to be outstanding shall be the amount of the principal thereof
that would be due and payable as of the date of such determination upon
declaration of acceleration of the maturity thereof, (ii) the principal amount
of any Debt Security denominated in a foreign currency that shall be deemed
outstanding shall be the U.S. dollar equivalent, determined on the issue date
for such Debt Security, of the principal amount (or, in the case of Original
Issue Discount Security, the U.S. dollar equivalent on the issue date of such
Debt Security of the amount determined as provided in (i) above), (iii) the
principal amount of an Indexed Security that shall be deemed outstanding shall
be the principal face amount of such Indexed Security at original issuance,
unless otherwise provided with respect to such indexed security pursuant to
Section 301 of the Indenture, and (iv) Debt Securities owned by the Trust or any
other obligor upon the Debt Securities or any affiliate of the Trust or of such
other obligor shall be disregarded (Section 101 of each Indenture).
Each Indenture contains provisions for convening meetings of the holders of
Debt Securities of a series (Section 1501 of each Indenture). A meeting will be
permitted to be called at any time by the applicable Indenture Trustee, and
also, upon request, by the Trust or the holders of at least 10% in principal
amount of the outstanding Debt Securities of such series, in any such case upon
notice given as provided in the applicable Indenture (Section 1502 of each
Indenture). Except for any consent that must be given by the holder of each Debt
Security affected by certain modifications and amendments of the applicable
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 that series; PROVIDED, HOWEVER, that, except as referred to above,
any resolution with respect to any request, demand, authorization, direction,
notice, consent, waiver or other action that may be made, given or taken by the
holders of a specified percentage, which is less than a majority, in principal
amount of the outstanding Debt Securities of a series may be adopted at a
meeting or adjourned 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 that
series. Any resolution passed or decision taken at any meeting of holders of
Debt Securities of any series duly held in accordance with the applicable
Indenture will be binding on all holders of Debt Securities of that 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 a 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 in principal
amount of the outstanding Debt Securities of a series, the persons holding or
representing such specified percentage in principal amount of the outstanding
Debt Securities of such series will constitute a quorum (Section 1504 of each
Indenture).
Notwithstanding the foregoing provisions, each 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,
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direction, notice, consent, waiver and 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 affected thereby, or of the
holders of such series and one or more additional series: (i) there shall be no
minimum quorum requirement for such meeting, and (ii) the principal amount of
the outstanding Debt Securities of such series that 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 (Section 1504 of each Indenture).
SUBORDINATION
Upon any distribution to creditors of the Trust in a liquidation,
dissolution or reorganization, the payment of the principal of and interest on
the Subordinated Securities will be subordinated to the extent provided in the
Subordinated Indenture in right of payment to the prior payment in full of all
Senior Debt (Sections 1601 and 1602 of the Subordinated Indenture), but the
obligation of the Trust to make payment of the principal and interest on the
Subordinated Securities will not otherwise be affected (Section 1608 of the
Subordinated Indenture). No payment of principal or interest may be made on the
Subordinated Securities at any time if a default on Senior Debt exists that
permits the holders of such Senior Debt to accelerate its maturity and the
default is the subject of judicial proceedings or the Trust receives notice of
the default (Section 1603 of the Subordinated Indenture). After all Senior Debt
is paid in full and until the Subordinated Securities are paid in full, holders
will be subrogated to the rights of holders of Senior Debt to the extent that
distributions otherwise payable to holders have been applied to the payment of
Senior Debt (Section 1607 of the Subordinated Indenture). By reason of such
subordination, in the event of a distribution of assets upon insolvency, certain
general creditors of the Trust may recover more, ratably, than holders of the
Subordinated Securities.
Senior Debt is defined in the Subordinated Indenture as the principal of and
interest on, or substantially similar payments to be made by the Trust in
respect of, the following, whether outstanding at the date of execution of the
Subordinated Indenture or thereafter incurred, created or assumed: (a)
indebtedness of the Trust for money borrowed or represented by purchase-money
obligations, (b) indebtedness of the Trust evidenced by notes, debentures, or
bonds, or other securities issued under the provisions of an indenture, fiscal
agency agreement or other instrument, (c) obligations of the Trust as lessee
under leases of property either made as part of any sale and leaseback
transaction to which the Trust is a party or otherwise, (d) indebtedness of
partnerships and joint ventures that is included in the consolidated financial
statements of the Trust, (e) indebtedness, obligations and liabilities of others
in respect of which the Trust is liable contingently or otherwise to pay or
advance money or property or as guarantor, endorser or otherwise or which the
Trust has agreed to purchase or otherwise acquire and (f) any binding commitment
of the Trust to fund any real estate investment or to fund any investment in any
entity making such real estate investment, in each case other than (1) any such
indebtedness, obligation or liability referred to in clauses (a) through (f)
above as to which, in the instrument creating or evidencing the same pursuant to
which the same is outstanding, it is provided that such indebtedness, obligation
or liability is not superior in right of payment to the Subordinated Securities
or ranks pari passu with the Subordinated Securities, (2) any such indebtedness,
obligation or liability which is subordinated to indebtedness of the Trust, to
substantially the same extent as or to a greater extent than the Subordinated
Securities are subordinated and (3) the Subordinated Securities (Section 101 of
the Subordinated Indenture). At December 31, 1996, Senior Debt aggregated
approximately $113 million. There are no restrictions in the Subordinated
Indenture upon the creation of additional Senior Debt. However, the Senior
Indenture contains limitations on incurrence of indebtedness by the Trust.
"See--Certain Covenants--Senior Indenture Limitations on Incurrence of Debt."
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DISCHARGE, DEFEASANCE AND COVENANT DEFEASANCE
Under each Indenture, the Trust may discharge certain obligations to holders
of any series of Debt Securities issued thereunder that have not already been
delivered to the applicable Indenture Trustee for cancellation and that either
have become due and payable or will become due and payable within one year (or
scheduled for redemption within one year) by irrevocably depositing with the
applicable Indenture Trustee, in trust, funds in such currency or currencies,
currency unit or units or composite currency or currency in which such Debt
Securities are payable in an amount sufficient to pay the entire indebtedness on
such Debt Securities in respect of principal (and premium, if any) and interest
and any Additional Amounts payable to the date of such deposit (if such Debt
Securities have become due and payable) or to the stated maturity or redemption
date, as the case may be (Section 401 of each Indenture).
Each Indenture provides that, if the provisions of Article Fourteen thereof
are made applicable to the Debt Securities of or within any series pursuant to
Section 301 of such Indenture, the Trust may elect either (a) to defease and be
discharged from any and all obligations with respect to such Debt Securities
(except for the obligation to pay Additional Amounts, if any, upon the
occurrence of certain events of tax, assessment or governmental charge with
respect to payments on such Debt Securities and the obligations to register the
transfer or exchange of such Debt Securities, to replace temporary or mutilated,
destroyed, lost or stolen Debt Securities, to maintain an office or agency in
respect of such Debt Securities and to hold moneys for payment in trust)
("defeasance") (Section 1402 of each Indenture) or (b) to be released from its
obligations with respect to such Debt Securities under Sections 1004 to 1008,
inclusive, and Sections 1011 and 1012 under such Indenture (being the
restrictions described under "--Certain Covenants") or, if provided pursuant to
such Indenture, its obligations with respect to any other covenant, and any
omission to comply with such obligations shall not constitute an event of
default with respect to such Debt Securities ("covenant defeasance") (Section
1403 of each Indenture), in either case upon the irrevocable deposit by the
Trust with the applicable Indenture Trustee, in trust, of an amount, in such
currency or currencies, currency unit or units or composite currency or
currencies in which such Debt Securities are payable at stated maturity, or
Government Obligations (as defined below), or both, applicable to such Debt
Securities which through the scheduled payment of principal and interest in
accordance with their terms will provide money in an amount sufficient to pay
the principal of (and premium, if any) and interest on such Debt Securities, and
any mandatory sinking fund or analogous payments thereon, on the scheduled due
dates therefor (Section 1404 of each Indenture).
Such a trust will only be permitted to be established if, among other
things, the Trust has delivered to the applicable Indenture Trustee an opinion
of counsel (as specified in each Indenture) to the effect that the holders of
such Debt Securities will not recognize income, gain or loss for U.S. federal
income tax purposes as a result of such defeasance or covenant defeasance and
will be subject to U.S. federal income tax on the same amounts, in the same
manner and at the same times as would have been the case if such defeasance or
covenant defeasance had not occurred, and such opinion of counsel, in the case
of defeasance, will be required to 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 such Indenture (Section 1404 of each
Indenture).
"Government Obligations" means securities which are (i) direct obligations
of the United States of America or the government which issued the foreign
currency in which the Debt Securities of a particular series are payable for the
payment of which its full faith and credit is pledged or (ii) obligations of a
person controlled or supervised by and acting as an agency or instrumentality of
the United States of America or the government which issued the foreign currency
in which the Debt Securities of a particular series are payable, the payment of
which is unconditionally guaranteed as a full faith and credit obligation by the
United States of America or such other government, which, in either case, are
not callable or redeemable at the option of the issuer thereof, and shall also
include a depository receipt issued by a bank or trust company as custodian with
respect to any such Government Obligation or a specific payment of interest on
or principal of any such Government Obligation held by such custodian for the
account of the holder of a
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depository receipt, PROVIDED that (except as required by law) such custodian is
not authorized to make any deduction from the amount payable to the holder of
such depository receipt from any amount receiving by the custodian in respect of
the Government Obligation or the specific payment of interest on or principal of
the Government Obligation evidenced by such depository receipt (Section 101 of
each Indenture).
Unless otherwise provided in the applicable Prospectus Supplement, if after
the Trust has deposited funds and/or Government Obligations to effect defeasance
or covenant defeasance with respect to Debt Securities of any series, (a) the
holder of a Debt Security of such series is entitled to, and does, elect
pursuant to Section 301 of either Indenture or the terms of such Debt Security
to receive payment in a currency, currency unit or composite currency other than
that in which such deposit has been made in respect of such Debt Security, or
(b) a Conversion Event (as defined below) occurs in respect of the currency,
currency unit or composite currency in which such deposit has been made, the
indebtedness represented by such Debt Security shall be deemed to have been, and
will be, fully discharged and satisfied through the payment of the principal of
(and premium, if any) and interest on such Debt Security as they become due out
of the proceeds yielded by converting the amount so deposited in respect of such
Security into the currency, currency unit or composite currency in which such
Debt Security becomes payable as a result of such election or such cessation of
usage based on the applicable market exchange rate (Section 1405 of each
Indenture). "Conversion Event" means the cessation of use of (i) a currency,
currency unit or composite currency both by the government of the country which
issued such currency and for the settlement of transactions by a central bank or
other public institutions of or within the international banking community, (ii)
the ECU both within the European Monetary System and for the settlement of
transactions by public institutions of or within the European Communities or
(iii) any currency unit or composite currency other than the ECU for the
purposes for which it was established. Unless otherwise provided in the
applicable Prospectus Supplement, all payments of principal of (and premium, if
any) and interest on any Debt Security that is payable in a foreign currency
that ceases to be used by its government of issuance shall be in U.S. dollars
(Section 101 of each Indenture).
In the event the Trust effects covenant defeasance with respect to any Debt
Securities and such Debt Securities are declared due and payable because of the
occurrence of any Event of Default other than the Event of Default described in
clause (d) under "Events of Default, Notice and Waiver" with respect to Sections
1004 to 1008, inclusive, and Sections 1011 and 1012 of either Indenture (which
sections would no longer be applicable to such Debt Securities) or described in
clause (g) under "Events of Default, Notice and Waiver" with respect to any
other covenant as to which there has been covenant defeasance, the amount in
such currency, currency unit or composite currency in which such Debt Securities
are payable, and Government Obligations on deposit with the applicable Indenture
Trustee, will be sufficient to pay amounts due on such Debt Securities at the
time of their stated maturity but may not be sufficient to pay amounts due on
such Debt Securities at the time of the acceleration resulting from such Event
of Default. However, the Trust would remain liable to make payment of such
amounts due at the time of acceleration.
The applicable Prospectus Supplement may further describe the provisions, if
any, permitting such defeasance or covenant defeasance, including any
modifications to the provisions described above, with respect to the Debt
Securities of or within a particular series.
CONVERSION RIGHTS
The terms and conditions, if any, upon which the Debt Securities are
convertible into Common Shares or Preferred Shares will be set forth in the
applicable Prospectus Supplement relating thereto. Such terms will include
whether such Debt Securities are convertible into Common Shares or Preferred
Shares, the conversion price (or manner of calculation thereof), the conversion
period, provisions as to whether conversion will be at the option of the holders
or the Trust, the events requiring an adjustment of the conversion price and
provisions affecting conversion in the event of the redemption of such Debt
Securities.
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GLOBAL SECURITIES
The Debt Securities of a series may be issued in whole or in part in the
form of one or more global securities (the "Global Securities") that will be
deposited with, or on behalf of, a depositary identified in the applicable
Prospectus Supplement relating to such series. Global Securities may be issued
in either registered or bearer form and in either temporary or permanent form.
The specific terms of the depositary arrangement with respect to a series of
Debt Securities will be described in the applicable Prospectus Supplement
relating to such series.
DESCRIPTION OF SHARES
GENERAL
The Trust is authorized to issue 100,000,000 Common Shares with a par value
of $.01 per share. Under Maryland law and the Trust's Declaration of Trust (the
"Declaration of Trust"), the Trust may increase the aggregate number of
authorized Common Shares without shareholder approval. As of March 7, 1997,
31,827,844 Common Shares were outstanding.
The Trust's Board of Trustees has proposed to amend the Declaration of Trust
to authorize the Trust to issue Preferred Shares, $.01 par value per share (the
"Preferred Amendment"). The adoption of the Preferred Amendment requires the
approval of the Board of Trustees and of the holders of a majority of the
Trust's outstanding Common Shares of the form of an amendment to the Declaration
of Trust authorizing the Preferred Shares. No Preferred Shares may be issued
prior to the adoption of the Preferred Amendment.
The following statements with respect to the Common Shares and Preferred
Shares (being sometimes referred to herein collectively as the "Shares") are
subject to the detailed provisions of the Declaration of Trust, the Trust's
bylaws and the proposed Preferred Amendment. These statements do not purport to
be complete or to give full effect to the terms of the provisions of the
statutory or common law and are subject to, and are qualified in their entirety
by reference to, the terms of the Declaration of Trust, the Trust's bylaws and
the proposed Preferred Amendment.
COMMON SHARES
Holders of Common Shares are entitled to receive dividends and distributions
when and as declared by the Board of Trustees after payment of, or provision
for, any cumulated dividends and distributions on and any required redemptions
of Preferred Shares then outstanding. Holders of Common Shares have one vote per
share and non-cumulative voting rights. The Declaration of Trust establishes the
number of Trustees at not less than three nor more than seven and divides the
Trustees into three classes to be elected on a staggered basis. Upon liquidation
of the Trust, holders of Common Shares would receive their PRO RATA share of the
distributable assets of the Trust remaining after the satisfaction of prior
preferential rights of Preferred Shares and the satisfaction of all debts and
liabilities of the Trust. Holders of Common Shares do not have any preference,
conversion, exchange, preemptive or redemption rights.
Outstanding Common Shares are listed on the American Stock Exchange.
American Stock Transfer & Trust Company, New York, New York is the transfer
agent for the Common Shares.
PREFERRED SHARES
The following description of the terms of the Preferred Shares sets forth
certain general terms and provisions of the Preferred Shares to which a
Prospectus Supplement may relate. Specific terms of any series of Preferred
Shares offered by a Prospectus Supplement will be described in that Prospectus
Supplement. The description set forth below is subject to and qualified in its
entirety by reference to the Articles of Amendment to the Declaration of Trust
fixing the preferences, limitations and relative rights of a particular series
of Preferred Shares.
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GENERAL. Upon the adoption of the Preferred Amendment, the Board of
Trustees would be authorized, without further shareholder action, to provide for
issuance of Preferred Shares, in one or more series, with such voting powers and
with such designations, preferences and relative, participating, optional or
other special rights, and qualifications, limitations or restrictions, as the
Board of Trustees shall approve.
The Preferred Shares will have the dividend, liquidation, redemption,
conversion and voting rights set forth below unless otherwise provided in the
Prospectus Supplement relating to a particular series of Preferred Shares.
Reference is made to the Prospectus Supplement relating to the particular series
of Preferred Shares offered thereby for specific terms, including: (i) the title
and liquidation preference per share of such Preferred Shares and the number of
shares offered; (ii) the price at which such series will be issued; (iii) the
dividend rate (or method of calculation), the dates on which dividends shall be
payable and the dates from which dividends shall commence to accumulate; (iv)
any redemption or sinking fund provisions of such series; (v) any conversion
provisions of such series; and (vi) any additional dividend, liquidation,
redemption, sinking fund and other rights, preferences, privileges, limitations
and restrictions of such series.
The Preferred Shares will, when issued, be fully paid and nonassessable.
Unless otherwise specified in the Prospectus Supplement relating to a particular
series of Preferred Shares, each series will rank on a parity as to dividends
and distributions in the event of a liquidation with each other series of
Preferred Shares and, in all cases, will be senior to the Common Shares.
DIVIDEND RIGHTS. Holders of Preferred Shares of each series will be
entitled to receive, when, as and if declared by the Board of Trustees, out of
assets of the Trust legally available therefor, cash dividends at such rates and
on such dates as are set forth in the Prospectus Supplement relating to such
series of Preferred Shares. Such rate may be fixed or variable or both and may
be cumulative, noncumulative or partially cumulative.
If the applicable Prospectus Supplement so provides, as long as any
Preferred Shares are outstanding, no dividends will be declared or paid or any
distributions be made on the Common Shares, other than a dividend payable in
Common Shares, unless the accrued dividends on each series of Preferred Shares
have been fully paid or declared and set apart for payment and the Trust shall
have set apart all amounts, if any, required to be set apart for all sinking
funds, if any, for each series of Preferred Shares.
If the applicable Prospectus Supplement so provides, when dividends are not
paid in full upon any series of Preferred Shares and any other series of
Preferred Shares ranking on a parity as to dividends with such series of
Preferred Shares, all dividends declared upon such series of Preferred Shares
and any other series of Preferred Shares ranking on a parity as to dividends
will be declared PRO RATA so that the amount of dividends declared per share on
such series of Preferred Shares and such other series will in all cases bear to
each other the same ratio that accrued dividends per share on such series of
Preferred Shares and such other series bear to each other.
Each series of Preferred Shares will be entitled to dividends as described
in the Prospectus Supplement relating to such series, which may be based upon
one or more methods of determination. Different series of Preferred Shares may
be entitled to dividends at different dividend rates or based upon different
methods of determination. Except as provided in the applicable Prospectus
Supplement, no series of Preferred Shares will be entitled to participate in the
earnings or assets of the Trust.
RIGHTS UPON LIQUIDATION. In the event of any voluntary or involuntary
liquidation, dissolution or winding up of the Trust, the holders of each series
of Preferred Shares will be entitled to receive out of the assets of the Trust
available for distribution to shareholders the amount stated or determined on
the basis set forth in the Prospectus Supplement relating to such series, which
may include accrued dividends, if such liquidation, dissolution or winding up is
involuntary, or may equal the current redemption price per share (otherwise than
for the sinking fund, if any, provided for such series) provided for such series
set forth in such Prospectus Supplement, if such liquidation, dissolution or
winding up is voluntary, and on such
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preferential basis as is set forth in such Prospectus Supplement. If, upon any
voluntary or involuntary liquidation, dissolution or winding up of the Trust,
the amounts payable with respect to Preferred Shares of any series and any other
shares of stock of the Trust ranking as to any such distribution on a parity
with such series of Preferred Shares are not paid in full, the holders of
Preferred Shares of such series and of such other shares will share ratably in
any such distribution of assets of the Trust in proportion to the full
respective preferential amounts to which they are entitled or on such other
basis as is set forth in the applicable Prospectus Supplement. The rights, if
any, of the holders of any series of Preferred Shares to participate in the
assets of the Trust remaining after the holders of other series of Preferred
Shares have been paid their respective liquidation preferences upon any
liquidation dissolution or winding up of the Trust will be described in the
Prospectus Supplement relating to such series.
REDEMPTION. A series of Preferred Shares may be redeemable, in whole or in
part, at the option of the Trust, and may be subject to mandatory redemption
pursuant to a sinking fund, in each case upon terms, at the times, at the
redemption prices and for the types of consideration set forth in the Prospectus
Supplement relating to such series. The Prospectus Supplement relating to a
series of Preferred Shares which is subject to mandatory redemption shall
specify the number of shares of such series that shall be redeemed by the Trust
in each year commencing after a date to be specified, together with an amount
equal to any accrued and unpaid dividends thereon to the date of redemption.
If, after giving notice or redemption to the holders of a series of
Preferred Shares, the Trust deposits with a designated bank funds sufficient to
redeem such Preferred Shares, then from and after such deposit, all shares
called for redemption will no longer be outstanding for any purpose, other than
the right to receive the redemption price and the right to convert such shares
into other classes of capital stock of the Trust. The redemption price will be
stated in the Prospectus Supplement relating to a particular series of Preferred
Shares.
Except as indicated in the applicable Prospectus Supplement, the Preferred
Shares will not be subject to any mandatory redemption at the option of the
holder.
SINKING FUND. The Prospectus Supplement for any series of Preferred Shares
will state the terms, if any, of a sinking fund for the purchase or redemption
of that series.
CONVERSION RIGHTS. The Prospectus Supplement for any series of Preferred
Shares will state the terms, if any, on which shares of that series are
convertible into Common Shares or another series of Preferred Shares. The
Preferred Shares will have no preemptive rights.
VOTING RIGHTS. Except as indicated in the Prospectus Supplement relating to
a particular series of Preferred Shares, or except as expressly required by
Maryland law, a holder of Preferred Shares will not be entitled to vote. Except
as indicated in the Prospectus Supplement relating to a particular series of
Preferred Shares, in the event the Trust issues full shares of any series of
Preferred Shares, each such share will be entitled to one vote on matters on
which holders of such series of Preferred Shares are entitled to vote.
Under Maryland law, the affirmative vote of the holders of a majority of the
outstanding shares of all series of Preferred Shares, voting as a separate
voting group, will be required for (i) the authorization of any class of shares
ranking prior to or on parity with Preferred Shares or the increase in the
authorized number of any such shares, (ii) any increase in the authorized number
of Preferred Shares and (iii) certain amendments to the Declaration of Trust
that may be adverse to the rights of Preferred Shares outstanding.
TRANSFER AGENT AND REGISTRAR. The transfer agent, registrar and dividend
disbursement agent for a series of Preferred Shares will be selected by the
Trust and be described in the applicable Prospectus Supplement. The registrar
for Preferred Shares will send notices to shareholders of any meetings at which
holders of Preferred Shares have the right to vote on any matter.
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BUSINESS COMBINATION PROVISIONS
The Declaration of Trust provides that any merger, consolidation or
liquidation of the Trust, or any sale of all or substantially all of its assets,
must be approved by a majority of the Trustees, and that if any such transaction
is with, into or to a Related Shareholder (defined as a person or entity
beneficially owning, directly or indirectly, 5% or more of the outstanding
Shares), the transaction must be approved by a majority of the Trustees not
appointed or nominated by or acting on behalf of the Related Shareholder or an
affiliate or associate of the Related Shareholder.
The Trust, as permitted by Maryland Law, has expressly elected to be
governed by the special voting requirement of the Maryland Corporations and
Associates Article (the "Special Voting Article"). The Special Voting Article
establishes special requirements with respect to "business combinations" between
an "interested stockholder" and a Maryland corporation unless exemptions are
applicable. Among other things, the Special Voting Article prohibits, for a
period of five years, a merger and other specific or similar transactions
between a Maryland corporation and an interested stockholder and requires a
super majority vote for such transactions after the end of such five-year
period. (For the purposes of the Special Voting Article and the Control Share
Article (described below), a "Maryland corporation" includes a Maryland real
estate investment trust. They are referred to collectively in this section as a
"Maryland company.")
"Interested stockholders" are all persons owning beneficially, directly or
indirectly, more than 10% of the outstanding voting stock of a Maryland company.
"Business combinations" include any merger or similar transaction subject to a
statutory vote and additional transactions involving transfers of assets or
securities in specified amounts to interested stockholders or their affiliates.
Unless an exemption is available, transactions of these types may not be
consummated between a Maryland company and an interested stockholder and,
thereafter, may not be consummated unless recommended by the board of the
Maryland company and approved by the affirmative vote of at least 80% of the
votes entitled to be cast by all holders of outstanding shares of voting stock
and 66 2/3% of the votes entitled to be cast by all holders of outstanding
shares of voting stock other than the interested stockholder unless, among other
things, the company's stockholders receive a minimum price (as defined in the
Special Voting Article) for their shares and the consideration is received in
cash or in the same form as previously paid by the interested stockholder for
its shares.
A business combination with an interested stockholder which is approved by
the board of a Maryland company at any time before an interested stockholder
first becomes an interested stockholder is not subject to the special voting
requirements or fair price provisions of the Special Voting Article. An
amendment to a Maryland company's charter electing not to be subject to the
foregoing requirements must be approved by the affirmative vote of at least 80%
of the votes entitled to be cast by all holders of outstanding shares of voting
stock and 66 2/3% of the votes entitled to be cast by holders of outstanding
shares of voting stock who are not interested stockholders. Any such amendment
is not effective until eighteen months after the vote of stockholders and does
not apply to any business combination of a company with a stockholder who was an
interested stockholder on the date of the stockholder vote.
The Trust, as permitted by Maryland law, has also expressly elected to be
governed by the control share provisions of the Maryland Corporations and
Associates Article (the "Control Share Article"). Under the Control Share
Article, "control shares" of a Maryland company acquired in a "control share
acquisition" have no voting rights except to the extent approved a vote of
two-thirds of the votes entitled to be cast on the matter, excluding shares of
stock owned by the acquirer or by officers or directors who are employees of the
company. "Control shares" are voting shares of stock which, if aggregated with
all other shares of stock previously acquired by such a person, would entitle
the acquirer to exercise voting power in electing directors within one of the
following ranges of voting power: (i) 20% or more but less than 33 1/3%, or
33 1/3% or more but less than a majority, or (iii) a majority of all voting
power. Control shares do not include shares the acquiring person is then
entitled to vote as a result of having previously obtained
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shareholder approval. A "control share acquisition" means, subject to certain
exceptions, the acquisition of, ownership of, or the power to direct the
exercise of voting power with respect to, control shares.
A person who has made or proposes to make a control share acquisition upon
satisfaction of certain conditions (including an undertaking to pay expenses)
may compel the board of directors to call a special meeting of shareholders to
be held within 50 days of demand to consider the voting rights of the shares. If
no request for a meeting is made, the Maryland company may itself present the
question at any shareholders' meeting.
If voting rights are not approved at the meeting or if the acquiring person
does not deliver an acquiring person statement as permitted by the statute,
then, subject to certain conditions and limitations, the Maryland company may
redeem any or all of the control shares (except those for which voting rights
have previously been approved) for fair value, without regard to voting rights.
Fair value shall be determined as of the date of the meeting of the shareholders
at which the voting rights of the control shares are considered but not
approved. If no such meeting is held, fair value shall be determined as of the
date of the last acquisition of control shares by the acquiring person. If
voting rights for control shares are approved at a shareholders' meeting and the
acquirer becomes entitled to a majority of the shares entitled to vote, all
other shareholders may exercise appraisal rights. The fair value of the shares
as determined for purposes of such appraisal rights may not be less than the
highest price per share paid in the control share acquisition, and certain
limitations and restrictions otherwise applicable to the exercise of dissenters'
rights do not apply in the context of a control share acquisition.
The Control Share Article does not apply to shares acquired in a merger,
consolidation or share exchange if the Maryland company is a party to the
transaction, to acquisitions approved or exempted by the charter or bylaws of
the Maryland company or to shares acquired before November 4, 1988 or pursuant
to a contract entered into before November 4, 1988.
The foregoing provisions may have the effect of discouraging unilateral
tender offers or other takeover proposals which certain shareholders might deem
in their interests or pursuant to which they might receive a substantial premium
for their Shares. The Control Share Article in particular has the effect of
making a unilateral tender offer or other takeover of the Trust more difficult.
The provisions could also have the effect of insulating current management
against the possibility of removal and could, by possibly reducing temporary
fluctuations in market price caused by accumulations of Shares, deprive
shareholders of opportunities to sell at a temporarily higher market price.
EXCESS SHARE PROVISIONS
For the Trust to qualify as a REIT under the Code, in any taxable year, not
more than 50% in value of its outstanding Shares may be owned, directly or
indirectly, by five or fewer individuals during the last six months of such
year, and the Shares must be owned by 100 or more persons during at least 335
days of a taxable year or a proportionate part of a taxable year less than 12
months. In order to meet these and other requirements, the Trustees have the
power to redeem or prohibit the transfer of a sufficient number of Shares to
maintain or bring the ownership of the Shares into conformity with such
requirements. In connection with the foregoing, if the Trustees shall, at any
time and in good faith, be of the opinion that direct or indirect ownership of
Shares representing more than 10% in value of the total Shares outstanding (the
"Excess Shares") has or may become concentrated in the hands of one beneficial
owner, the Trustees shall have the power (i) to repurchase from any shareholder
of the Trust such Excess Shares and (ii) to refuse to sell, transfer or deliver
Shares to any person whose acquisition of such Shares would, in the opinion of
the Trustees, result in the direct or indirect beneficial ownership by any
person of Shares representing more than 10% in value of the outstanding Shares.
The purchase price for any Shares so repurchased shall be at cost or at the last
sale price of the Share as of the date immediately preceding the day on which
the demand for repurchase is mailed, whichever price is higher. From and after
the date fixed for repurchase by the Trustees, and so long as payment of the
purchase price for the Shares to be so
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repurchased shall have been made or duly provided for, the holder of any Excess
Shares so called for repurchase shall cease to be entitled to distributions,
voting rights and other benefits with respect to such Shares, except the right
to payment of the purchase price for the Shares.
The Declaration of Trust includes an excess share provision to ensure that
any rent paid to the trust by a "sister corporation" not become disqualified as
rent from real property by virtue of Section 856(d)(2)(B) of the Code. Under
these provisions, the Trustees have the power (i) by lot or other means deemed
equitable to call for purchase from any shareholder such numbers of Shares as
shall be sufficient in the opinion of the Trustees to maintain or bring the
direct or indirect ownership of Shares in conformity with the requirements of
Section 856(d)(2)(B), and (ii) to refuse to register the transfer of Shares to
any person whose ownership would jeopardize the Trust's compliance with Section
856(d)(2)(B). For purposes of this provision, the term "sister corporation"
means a corporation the shares of which are owned by exactly or substantially
the same persons and in exactly or substantially the same numbers as are the
Shares. This provision shall apply even if a "sister corporation" does not exist
(i) at the time the Trustees determine that the ownership of Shares has or may
become so concentrated, or (ii) at the time the Trustees call Shares for
purchase or refuse to register the transfer of Shares. The purchase price for
the Shares purchased pursuant thereto shall be equal to the fair market value of
such Shares as reflected in the closing price for such Shares on the principal
stock exchange on which such Shares are listed or, if such Shares are not
listed, then the last bid for the Shares, as of the close of business on the
date fixed by the Trustees for such purchase or, if no such quotation is
available, as shall be determined in good faith by the Trustees. From and after
the date fixed for purchase by the Trustees, the holder of any Shares so called
for purchase shall cease to be entitled to dividends, voting rights and other
benefits with respect to such Shares, except the right to payment of the
purchase price fixed as aforesaid.
In order to further assure that ownership of the Shares does not become so
concentrated, the Declaration of Trust provides that if any transfer of Shares
would prevent amounts received by the Trust from a "sister corporation," if one
existed, from qualifying as "rents from real property" as defined in Section
856(d) of the Code, by virtue of the application of Section 856(d)(2)(B) of the
Code, the transfer shall be void AB INITIO and the intended transferee of such
Shares shall be deemed never to have had an interest therein. If this provision
is deemed void or invalid by virtue of any legal decision, statute, rule or
regulation, then the transferee of such Shares is deemed to have acted as an
agent on behalf of the Trust. Furthermore, the Declaration of Trust provides
that shareholders shall upon demand disclose to the Trustees in writing such
information with respect to their direct and indirect ownership of the Shares as
the Trustees deem necessary to determine whether the Trust satisfies the
provisions of Sections 856(a)(5) and (6) and Section 856(d) of the Code or the
regulations thereunder, as the same shall from time to time be amended, or to
comply with the requirements of any other taxing authority.
Similarly to the business combination provisions, the excess share
provisions may deter or render more difficult attempts by third parties to
obtain control of the Trust if such attempts are not supported by the Board of
Trustees.
TAXATION
The Trust has elected to be taxed as a REIT under the Code. A REIT which
meets certain qualifications is relieved of federal income taxes on ordinary
income and capital gains distributed to shareholders. In the opinion of Arent
Fox Kintner Plotkin & Kahn, legal counsel for WRIT, the Trust has qualified as a
real estate investment trust for the years 1992--1996 and its present and
contemplated method of operation will put it in a position to continue to so
qualify. David M. Osnos, a trustee, is a partner of such firm.
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DESCRIPTION OF COMMON SHARE WARRANTS
The Trust may issue Common Share Warrants for the purchase of Common Shares.
Common Share Warrants may be issued independently or together with any other
Offered Securities offered by any Prospectus Supplement and may be attached to
or separate from such Offered Securities. Each series of Common Share Warrants
will be issued under a separate warrant agreement (each, a "Warrant Agreement")
to be entered into between the Trust and a warrant agent specified in the
applicable Prospectus Supplement (the "Warrant Agent"). The Warrant Agent will
act solely as an agent of the Trust in connection with the Common Share Warrants
of such series and will not assume any obligation or relationship of agency or
trust for or with any holders or beneficial owners of Common Share Warrants.
The applicable Prospectus Supplement will describe the terms of the Common
Share Warrants in respect of which this Prospectus is being delivered,
including, where applicable, the following: (i) the title of such Common Share
Warrants; (ii) the aggregate number of such Common Share Warrants; (iii) the
price or prices at which such Common Share Warrants will be issued; (iv) the
designation, number and terms of the Common Shares purchasable upon exercise of
such Common Share Warrants; (v) the designation and terms of the other Offered
Securities with which such Common Share Warrants are issued and the number of
such Common Share Warrants issued with each such Offered Security; (vi) the
date, if any, on and after which such Common Share Warrants and the related
Common Shares will be separately transferable; (vii) the price at which each
Common Share purchasable upon exercise of such Common Share Warrants may be
purchased; (viii) the date on which the right to exercise such Common Share
Warrants shall commence and the date on which such right shall expire; (ix) the
minimum and maximum amount of such Common Share Warrants which may be exercised
at any one time; (x) information with respect to book-entry procedures, if any;
(xi) a discussion of certain federal income tax considerations; and (xii) any
other material terms of such Common Share Warrants, including terms, procedures
and limitations relating to the exchange and exercise of such Common Share
Warrants.
PLAN OF DISTRIBUTION
The Trust may sell the Offered Securities to one or more underwriters for
public offering and sale by them or may sell the Offered Securities to investors
directly or through agents. Any such underwriter or agent involved in the offer
and sale of the Offered Securities will be named in the applicable Prospectus
Supplement.
Underwriters may offer and sell the Offered Securities at a fixed price or
prices, which may be changed, at prices related to the prevailing market prices
at the time of sale or at negotiated prices. The Trust also may, from time to
time, authorize underwriters acting as the Trust's agents to offer and sell the
Offered Securities upon the terms and conditions as are set forth in the
applicable Prospectus Supplement. In connection with the sale of Offered
Securities, underwriters may be deemed to have received compensation from the
Trust in the form of underwriting discounts or commissions and may also receive
commissions from purchasers of Offered Securities for whom they may act as
agent. Underwriters may sell Offered Securities to or through dealers, and such
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.
Any underwriting compensation paid by the Trust to underwriters or agents in
connection with the offering of Offered Securities, and any discounts,
concessions or commissions allowed by underwriters to participating dealers,
will be set forth in the applicable Prospectus Supplement. Underwriters, dealers
and agents participating in the distribution of the Offered Securities may be
deemed to be underwriters, and any discounts and commission received by them and
any profit realized by them on resale of the Offered Securities may be deemed to
be underwriting discounts and commissions, under the Securities Act.
Underwriters, dealers and agents may be entitled, under agreements entered into
with the Trust, to
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indemnification against the contribution toward certain civil liabilities,
including liabilities under the Securities Act.
If so indicated in the applicable Prospectus Supplement, the Trust will
authorize dealers acting as the Trust's agents to solicit offers by certain
institutions to purchase Offered Securities from the Trust at the public
offering price set forth in such Prospectus Supplement pursuant to delayed
delivery contracts ("Contracts") providing for payment and delivery on the date
or dates stated in such Prospectus Supplement. Each Contract will be for an
amount not less than, and the aggregate principal amount of Offered Securities
sold pursuant to Contracts shall be not less nor more than, the respective
amounts stated in the applicable Prospectus Supplement. Institutions with whom
Contracts, when authorized, may be made include commercial and savings banks,
insurance companies, pension funds, investment companies, educational and
charitable institutions and other institutions but will in all cases be subject
to the approval of the Trust. Contracts will not be subject to any conditions
except (i) the purchase by an institution of the Offered Securities covered by
its Contracts shall not at the time of delivery be prohibited under the laws of
any jurisdiction in the United States to which such institution is subject, and
(ii) if the Offered Securities are being sold to underwriters, the Trust shall
have sold to such underwriters the total principal amount of the Offered
Securities less the principal amount thereof covered by Contracts.
Certain of the underwriters and their affiliates may engage in transactions
with and perform services for the Trust and its subsidiaries in the ordinary
course of business.
LEGAL OPINIONS
The legality of the Offered Securities is being passed upon for the Trust by
Arent Fox Kintner Plotkin & Kahn, Washington, D.C. David M. Osnos, a trustee of
the Trust, is a partner of Arent Fox Kintner Plotkin & Kahn. Andrews & Kurth
L.L.P., Washington, D.C., will act as counsel to any underwriters, dealers or
agents.
EXPERTS
The financial statements for the year ended December 31, 1996 incorporated
in this Prospectus by reference to the Trust's Annual Report on Form 10-K for
the year ended December 31, 1996 have been so incorporated in reliance on the
report of Arthur Andersen LLP, independent public accountants, and the financial
statements for the years ended December 31, 1995 and 1994 incorporated in this
Prospectus by reference to the Trust's Annual Report on Form 10-K for the year
ended December 31, 1996 have been so incorporated in reliance on the report of
Price Waterhouse LLP, independent accountants, given on the authority of said
firms as experts in auditing and accounting.
The historical summary of gross income and direct operating expenses for the
year ended December 31, 1995 of Maryland Trade Center I and II included in the
Trust's Current Report on Form 8-K dated May 31, 1996, as amended by Amendment
No. 1 dated July 25, 1996, incorporated by reference herein, has been so
incorporated in reliance on the report dated June 18, 1996 of Stoy, Malone &
Company, P.C., also incorporated by reference herein, and on the authority of
said firm as experts in auditing and accounting.
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NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED OR INCORPORATED BY REFERENCE IN THIS
PROSPECTUS SUPPLEMENT AND THE PROSPECTUS IN CONNECTION WITH THE OFFER MADE BY
THIS PROSPECTUS SUPPLEMENT AND THE PROSPECTUS AND, IF GIVEN OR MADE, SUCH
INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED
BY THE TRUST OR THE UNDERWRITERS. THIS PROSPECTUS SUPPLEMENT AND THE PROSPECTUS
DO NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF ANY OFFER TO BUY ANY OF
THE SECURITIES OFFERED HEREBY TO ANY PERSON OR BY ANYONE IN ANY JURISDICTION IN
WHICH IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION. NEITHER THE DELIVERY OF
THIS PROSPECTUS SUPPLEMENT AND THE PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL,
UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THE INFORMATION CONTAINED
HEREIN IS CORRECT AS OF ANY DATE SUBSEQUENT TO THE DATE HEREOF.
--------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
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<S> <C>
PROSPECTUS SUPPLEMENT
Prospectus Supplement Summary................... S-3
The Trust....................................... S-5
Use of Proceeds................................. S-9
Capitalization.................................. S-9
Investments of the Trust........................ S-11
Description of Real Estate Investments.......... S-13
Dividends....................................... S-17
Dividend Reinvestment Plan...................... S-17
Selected Financial Data......................... S-18
Management's Discussion and Analysis of
Financial Condition and Results of
Operations.................................... S-19
Management...................................... S-23
Shares.......................................... S-24
Underwriting.................................... S-25
Legal Opinions.................................. S-26
Experts......................................... S-26
Available Information........................... S-27
PROSPECTUS
Available Information........................... 2
Incorporation of Certain Documents By
Reference..................................... 2
The Trust....................................... 3
Use of Proceeds................................. 3
Ratios of Earnings to Fixed Charges............. 3
Description of Debt Securities.................. 4
Description of Shares........................... 18
Description of Common Share Warrants............ 24
Plan of Distribution............................ 24
Legal Opinions.................................. 25
Experts......................................... 25
</TABLE>
3,750,000 SHARES
[LOGO]
Washington
Real Estate
Investment Trust
COMMON SHARES OF
BENEFICIAL INTEREST
--------------------------
PROSPECTUS SUPPLEMENT
--------------------------
ALEX. BROWN & SONS
INCORPORATED
A.G. EDWARDS & SONS, INC.
LEGG MASON WOOD WALKER
INCORPORATED
MERRILL LYNCH & CO.
FERRIS, BAKER WATTS
INCORPORATED
SCOTT & STRINGFELLOW, INC.
July 28, 1997
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