As filed with the Securities and Exchange Commission on May 11, 1999
Registration Statement No. 333-77371
==============================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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AMENDMENT NO. 1
TO
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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LASALLE HOTEL PROPERTIES
(Exact name of each registrant as specified in its charter)
Maryland 36-4219376
(State or other jurisdiction of (I.R.S. employer identification number)
incorporation or organization)
1401 Eye Street, Suite 900
NW Washington, DC 20005
(202) 222-2600
(Address, including zip code, and telephone number, including area code,
of each registrant's principal executive office)
Jon E. Bortz
President and Chief Executive Officer
LaSalle Hotel Properties
1401 Eye Street, Suite 900
NW Washington, DC 20005
(202) 222-2600
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
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Copy to:
Michael F. Taylor, Esq.
Brown & Wood LLP
One World Trade Center, 58th Floor
New York, N.Y. 10048
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Approximate date of commencement of proposed sale to public: From
time to time after this Registration Statement becomes effective.
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If the only securities being registered on this form are being offered
pursuant to dividend or interest reinvestment plans, please check the
following box.|_|
If any of the securities being registered on this form are to be offered
on a delayed or continuous basis pursuant to Rule 415 under the Securities Act
of 1933, as amended (the "Securities Act"), other than securities offered only
in connection with dividend or interest reinvestment plans, please check the
following box.|X|
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following
box and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering.|_|
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If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering.|_|
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If delivery of the prospectus is expected to be made pursuant to Rule
434, please check the following box.|X|
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<TABLE>
<CAPTION>
CALCULATION OF REGISTRATION FEE
=========================================================================================================
Proposed Maximum
Title of Class of Aggregate Offering Amount of Registration
Securities to be Registered(1) Price (1) Fee(5)(6)
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C>
Common Shares of Beneficial Interest, )
$.01 par value per share(2) .......................}
Common Share Warrants...............................)
Preferred Shares of Beneficial Interest, ) $200,000,000(5) $55,600
$.01 par value per share(3)........................)
Depositary Shares representing )
Preferred Shares (4)...............................)
==========================================================================================================
</TABLE>
(1) Estimated solely for purposes of calculating the registration fee.
(2) Such indeterminate number of common shares of LaSalle Hotel Properties as
may from time to time be issued at indeterminate prices.
(3) Such indeterminate number of preferred shares of LaSalle Hotel Properties
as may from time to time be issued in series at indeterminate prices.
(4) To be represented by depositary receipts of LaSalle Hotel Properties
representing an interest in all or a specified portion of a preferred
share of LaSalle Hotel Properties.
(5) Calculated pursuant to Rule 457(o) under the Securities Act.
(6) Previously paid.
The Registrant hereby amends this registration statement on the date or
dates as may be necessary to delay its effective date until the Registrants
shall file a further amendment which specifically states that this
registration statement shall thereafter become effective with Section 8(a) of
the Securities Act of 1933 or until this registration statement shall become
effective on the date as the Securities and Exchange Commission, acting
pursuant to said Section 8(a), may determine.
SUBJECT TO COMPLETION
PRELIMINARY PROSPECTUS DATED MAY 11, 1999
PROSPECTUS
$200,000,000
LASALLE HOTEL PROPERTIES
Common Shares of Beneficial Interest, Common Share Warrants,
Preferred Shares and Depositary Shares representing Preferred Shares
--------------
We may offer from time to time up to $200,000,000 of our common shares of
beneficial interest, $0.01 par value per share, preferred shares, depositary
shares representing interests in our preferred shares, and warrants to
purchase common shares or preferred shares. Our common shares are listed on
the New York Stock Exchange under the symbol "LHO."
We may offer the securities at prices and on terms to be set forth in one
or more supplements to this prospectus. The securities may be offered
directly, through agents on our behalf or through underwriters or dealers.
The terms of the securities may include limitations on ownership and
restrictions on transfer thereof as may be appropriate to preserve our status
as a real estate investment trust for United States federal income tax
purposes.
See "Risk Factors" beginning on page 2 of this prospectus for a
description of risks that should be considered by purchasers of the
securities.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or determined if
this prospectus is truthful or complete. Any representation to the contrary is
a criminal offense.
The date of this prospectus is , 1999.
<PAGE>
FORWARD-LOOKING STATEMENTS MAY PROVE INACCURATE
This document (and the documents that are incorporated by reference)
contain forward-looking statements that are subject to risks and
uncertainties. You are cautioned not to place undue reliance on such
statements which only speak as of the date hereof. Forward-looking statements
include information concerning possible or assumed future results of our
operations, including any forecasts, projections and plans and objectives for
future operations. You can identify forward looking statements by the use of
forward looking expressions like "may," "will," "should," "expect,"
"anticipate," "estimate," or "continue" or any negative or other variations on
such expressions. Many factors could affect our actual financial results, and
could cause actual results to differ materially from those in the
forward-looking statements.
We undertake no obligation to publicly update or revise any
forward-looking statements, whether as a result of new information, future
events or otherwise. In light of these risks and uncertainties, the
forward-looking events and circumstances discussed in this prospectus might
not occur.
LASALLE HOTEL PROPERTIES
We were organized on January 15, 1998 and commenced operations upon the
completion of our initial public offering on April 29, 1998. We are a real
estate investment trust ("REIT") that buys, owns and leases upscale and luxury
full service hotels located in convention, resort and major urban business
markets. We were formed to own hotels and to continue and expand the hotel
investment activities of Jones Lang LaSalle Incorporated ("Jones Lang
LaSalle") and its predecessors. We have no employees and our investment
advisor, LaSalle Hotel Advisors, Inc. (the "Advisor"), a wholly owned
subsidiary of Jones Lang LaSalle, conducts our day to day operations.
As of March 31, 1999, we owned interests in 12 hotels with an aggregate
of 4,110 guest rooms located in nine states. Our hotels target both business
and leisure travelers, including groups and those attending meetings and
conventions, who prefer a full range of high quality facilities, services and
amenities. All of our hotels are managed by independent hotel operators. Our
hotels include two LeMeridiens(R), three Marriotts(R), two Radissons(R), two
Holiday Inns(R), one Hyatt(R) and two independent hotels.
Our primary objectives are to:
o maximize current returns to shareholders through increases in distributable
cash flow; and
o to increase long-term total returns to shareholders through appreciation
in the value of our common shares.
To achieve these objectives, we seek to:
o invest in or acquire additional hotels on favorable terms; and
o enhance the return from, and the value of, our hotels and any additional
hotels that we may acquire or develop.
We will seek to achieve revenue growth principally through:
o acquisitions of full service hotels located in convention, resort and
major urban business markets in the United States and abroad, especially
upscale and luxury full service hotels in markets and where the Advisor
perceives strong demand growth or significant barriers to entry;
o renovations and/or expansions at certain of our hotels; and
o selective development of hotels, particularly upscale and luxury full
service hotels in high demand markets where development economics are
favorable.
We focus on hotels located in convention, resort and major urban business
markets. Within these markets we primarily focus on upscale and luxury full
service hotels. Full service hotels generally provide a significant array of
guest services and offer a full range of meeting and conference facilities and
banquet space. Facilities also typically include restaurants and lounge areas,
gift shops and recreational facilities, including swimming pools. As a result,
full service hotels often generate significant revenue from sources other than
guest room revenue.
We own all our assets and conduct substantially all our business through
LaSalle Hotel Operating Partnership, L.P., a Delaware limited partnership (the
"Operating Partnership"). We are the general partner of the Operating
Partnership and as of March 31, 1999, we owned 82.7% of the outstanding units
in the Operating Partnership.
To enable us to satisfy certain requirements for qualifications as a
REIT, neither we nor the Operating Partnership can operate any of the hotels
in which we invest. Accordingly, four of our hotels are leased to LaSalle
Hotel Lessee, Inc. We own a 9% interest in LaSalle Hotel Lessee, Inc., and
together with Jones Lang LaSalle and LPI Charities, a charitable corporation
organized under the laws of the state of Illinois, we make all material
decisions concerning LaSalle Hotel Lessee, Inc.'s business affairs and
operations. Our remaining eight hotels are leased to unaffiliated lessees
(affiliates of whom also operate these hotels).
All of our hotels are leased under participating leases which provide for
rent equal to the greater of a base rent or participating rent, which is based
on fixed percentages of gross hotel revenues. These leases are designed to
allow us to achieve substantial participation in revenue growth at our hotels.
We intend to operate as a REIT as defined in the Internal Revenue Code of
1986, as amended (the "Code").
Our executive offices are located at 1401 Eye Street, NW, Suite 900
,Washington, DC 20005 and our telephone number at that location is (202)
222-2600.
RISK FACTORS
An investment in the securities offered by this prospectus and related
prospectus supplement involves various risks.
o Our Ability to Make Distributions on Our Common Shares Depends Upon the
Ability of the Lessees to Make Rent Payments Under Our Leases
Dependence Upon Lessees. Our income is dependent upon rental payments
from the lessees of our hotels which in turn depends upon the ability of the
lessees to generate sufficient revenues from our hotels in excess of operating
expenses. Any failure or delay by the lessees in making rent payments would
adversely affect our ability to make distributions to our shareholders. Such
failure or delay by the lessees may be caused by reductions in revenue from
the hotels or in the net operating income of the lessees or otherwise. In
addition, all of the lessees have limited assets. Although failure on the part
of a lessee to materially comply with the terms of a lease (including failure
to pay rent when due) would give us the right to terminate such lease,
repossess the applicable property and enforce the payment obligations under
the lease, we would then be required to find another lessee to lease such
property. There can be no assurance that we would be able to enforce the
payment obligations of the defaulting lessee, find another lessee or, if
another lessee were found, that we would be able to enter into a new lease on
favorable terms.
o Our Return on Our Hotels Depends Upon the Ability of the Lessees and the
Operators to Operate and Manage the Hotels
Dependence upon Operators. To maintain our status as a REIT, we are
unable to operate any of our hotels. As a result, we are unable to directly
implement strategic business decisions with respect to the operation and
marketing of our hotels, such as decisions with respect to the setting of room
rates, repositioning of a hotel, change of franchise and brand affiliation,
food and beverage prices and certain similar matters. Although we consult with
the lessees and operators with respect to strategic business plans through the
Advisor, the lessees and operators are under no obligation to implement any of
our recommendations with respect to such matters.
o Dependence Upon the Advisor
Dependence Upon the Advisor and potential conflicts therewith. We do not
have any employees and are dependent on the Advisor for all strategic business
direction, management and administrative services. While the employees of the
Advisor devote substantially all of their time and efforts on behalf of
LaSalle Hotel Properties, certain employees of the Advisor will allocate a
limited portion of their time and efforts to other activities on behalf of
Jones Lang LaSalle. In the event that the Advisor does not perform its
obligations under the Advisory Agreement or if the Advisory Agreement were to
be terminated, we would have no employees to provide such services and no
assurance can be given that a satisfactory replacement advisor could be
engaged on acceptable terms; the failure to do so could have a material
adverse effect on our financial condition or results of operations.
Our interests and the Advisor's potentially may conflict due to the
ongoing relationships between us. Because the timing and amount of incentive
and other fees received by the Advisor may be affected by various
determinations, including the sale or disposition of properties, the Advisor
may have a conflict of interest with respect to such determinations. With
respect to the various contractual arrangements between the two entities, the
potential exists for disagreement as to the quality of services provided by
the Advisor and as to contractual compliance under the Advisory Agreement. The
Advisor, Jones Lang LaSalle and any of their affiliates are prohibited from
investing in hotels that compete directly or indirectly with LaSalle Hotel
Properties, except as provided below:
o in the case of an affiliate, that is a "registered investment adviser"
under the Investment Advisers Act of 1940, as amended, and such affiliate
makes such acquisition or gives such advice in the ordinary course of
management activities for securities investments;
o acquires a company or other entity which owns or provides asset management
services with respect to competitive hotels, provided that is not a
material activity of such company or entity and that such company or
entity does not engage in activities relating to additional competitive
hotels;
o invests in debt or debt securities; or
o is engaged in consulting, development, financing, disposition or facility
related services with respect to competitive hotels.
Also, a limited number of hotels advised by Jones Lang LaSalle, or in which
Jones Lang LaSalle held an interest on the date of our initial public offering
were excluded from this prohibition.
In addition, our chairman, Stuart L. Scott, also serves as an officer and
director of Jones Lang LaSalle and the Advisor. Jon E. Bortz, Michael D.
Barnello and Hans S. Weger (who are also officers and directors of the
Advisor) also serve as our executive officers. Messrs. Scott, Bortz and
Barnello, as well as certain other officers and Trustees of LaSalle Hotel
Properties and directors of the Advisor, also own shares (and/or options or
other rights to acquire shares) in Jones Lang LaSalle, either directly or
indirectly.
o Our Performance and the Value of Our Common Shares are Subject to Risks
Associated With the Hotel Industry
Competition for Guests, Increases in Operating Costs, Dependence on
Travel and Economic Conditions Could Affect Our Cash Flow. Our hotels will be
subject to all operating risks common to the hotel industry. These risks
include:
o competition for guests from other hotels;
o increases in operating costs due to inflation and other factors, which may
not be offset in the future by increased room rates;
o dependence on business and leisure travelers, which demand may fluctuate and
be seasonal;
o increases in energy costs, airline fares and other expenses related to
travel, which may deter travelling; and
o adverse effects of general and local economic conditions.
These factors could adversely affect the ability of the lessees to
generate revenues and to make rent payments to us and therefore our ability to
make distributions to our shareholders.
Unexpected Operating Costs Could Adversely Affect Our Cash Flow. Hotels
require ongoing renovations and other capital improvements, including periodic
replacement or refurbishment of furniture, fixtures and equipment ("FF&E").
Under the terms of our leases, we are obligated to pay the cost of certain
capital expenditures at our hotels and to pay for periodic replacement or
refurbishment of FF&E. If capital expenditures exceed our expectations, there
can be no assurance that sufficient sources of financing will be available to
fund such expenditures. The additional cost of such expenditures could have an
adverse effect on cash available for distribution. In addition, we may acquire
hotels in the future that require significant renovation. Renovation of hotels
involves certain risks, including the possibility of environmental problems,
construction cost overruns and delays, uncertainties as to market demand or
deterioration in market demand after commencement of renovation and the
emergence of unanticipated competition from other hotels.
Conditions of Franchise Agreements and Brand Licensing Agreements Could
Adversely Affect Us. Two of our hotels are subject to franchise agreements and
seven are subject to brand licensing agreements. In addition, hotels in which
we invest subsequently may be operated pursuant to franchise and brand
agreements. The continuation of such franchise or brand agreements is subject
to specified operating standards and other terms and conditions. Licensors
typically inspect licensed properties periodically to confirm adherence to
operating standards. Action or inaction on our part or by any of the lessees
or the operators could result in a breach of such standards or other terms and
conditions of the franchise or brand licenses and could result in the loss or
cancellation of a franchise or brand license. It is possible that a licensor
could condition the continuation of a franchise or brand license on the
completion of capital improvements which our Board of Trustees determines are
too expensive or otherwise unwarranted in light of general economic conditions
or the operating results or prospects of the affected hotel. In that event,
our Board of Trustees may elect to allow the franchise or brand license to
lapse. In any case, if a license is terminated, LaSalle Hotel Properties and
the lessee may seek to obtain a suitable replacement license or to operate the
hotel independent of a franchise or brand license. The loss of a franchise or
brand license could have a material adverse effect upon the operations or the
underlying value of the hotel covered by the license because of the loss of
associated name recognition, marketing support and centralized reservation
systems provided by the licensor, or due to any penalties payable upon early
termination of a license.
o Covenants Under Our Credit Facility and Absence of Limitations on
Indebtedness Could Adversely Affect Our Financial Condition
Currently we have a policy of incurring debt only if upon such incurrence
our total funded indebtedness would not exceed 50% of "Aggregate Asset Value."
For purposes of this policy, Aggregate Asset Value is defined as the sum of
(a) the EBITDA for the preceding four quarters (reduced by the applicable FF&E
reserves for the relevant period) of hotels that we owned for more than four
quarters times 10, and (b) the investment amount (which shall include the
purchase price, including assumed indebtedness, and all acquisition costs) for
all hotels owned for less than four quarters and 95% of all capital
expenditures with respect to such hotels,. As of December 31, 1998, this Ratio
was 37.3%.
Requirements of Our Credit Facility could adversely affect our financial
condition and our ability to make distributions. We have obtained a senior
unsecured credit facility from Societe Generale, Southwest Agency and Bank of
Montreal, which provides for a maximum borrowing amount of up to $235 million
(the "Credit Facility"), which matures on April 30, 2001. There can be no
assurance that we will be able to renew the Credit Facility upon maturity or
that if renewed, the terms will not be less favorable. At March 31, 1999
$169.2 million was outstanding under the Credit Facility. Borrowings under the
Credit Facility bear interest at floating rates equal to LIBOR plus an
applicable margin or an "Adjusted Base Rate" plus an applicable margin, at our
election. At March 31, 1999 the weighted average interest rate was
approximately 6.7% for LIBOR borrowings. We did not have any Adjusted Base
Rate borrowings outstanding at March 31, 1999.
Our ability to borrow under the Credit Facility is subject to certain
financial covenants, including covenants relating to limitations on unsecured
and secured borrowings, minimum interest and fixed charge coverage ratios and
a minimum equity value. We rely on borrowings under the Credit Facility to
finance acquisitions, capital improvements, working capital and general
corporate purposes and, if we are unable to borrow under the Credit Facility,
it could adversely affect our financial condition. The Credit Facility also
contains a financial covenant limiting the amount of distributions that we may
make to holders of our common shares during any fiscal quarter.
Although we presently are in compliance with the covenants under the
Credit Facility, there is no assurance that we will continue to be in
compliance or that we will be able to service our indebtedness or pay
distributions to our shareholders.
As described above, our Credit Facility contains financial covenants
which limit the ability of the Operating Partnership to incur additional
indebtedness. However, our organizational documents do not contain any
limitation on the amount of indebtedness we may incur. Accordingly, our Board
of Trustees could alter or eliminate this policy and would do so, for example,
if it were necessary in order for us to continue to qualify as a REIT. If this
policy were changed, we could become more highly leveraged, resulting in
higher interest payments that could adversely affect the ability to pay
distributions to our shareholders and could increase the risk of default on
the Operating Partnership's existing indebtedness.
o Our Performance and Value are Subject to Real Estate Industry Conditions
Because Real Estate Investments are Illiquid, We May Not Be Able to Sell
Properties When Appropriate. Real estate investments generally cannot be sold
quickly. We may not be able to vary our portfolio promptly in response to
economic or other conditions. In addition, provisions of the Code limit a
REIT's ability to sell properties in some situations when it may be
economically advantageous to do so, thereby adversely affecting returns to our
shareholders.
Liability for Environmental Matters Could Adversely Affect Our Financial
Condition. Federal, state and local laws and regulations relating to the
protection of the environment may require a current or previous owner or
operator of real estate to investigate and clean up hazardous or toxic
substances or petroleum product releases at a property. An owner of real
estate is liable for the costs of removal or remediation of certain hazardous
or toxic substances on or in the property. These laws often impose such
liability without regard to whether the owner knew of, or caused, the presence
of the contaminants. Clean-up costs and the owner's liability generally are
not limited under the enactments and could exceed the value of the property
and/or the aggregate assets of the owner. The presence of or the failure to
properly remediate the substances may adversely affect the owner's ability to
sell or rent the property or to borrow using the property as collateral.
Persons who arrange for the disposal or treatment of hazardous or toxic
substances may also be liable for the clean-up costs of the substances at a
disposal or treatment facility, whether or not such facility is owned or
operated by the person. Even if more than one person was responsible for the
contamination, each person covered by the environmental laws may be held
responsible for the clean-up costs incurred. In addition, third parties may
sue the owner or operator of a site for damages and costs resulting from
environmental contamination emanating from that site.
Environmental laws also govern the presence, maintenance and removal of
asbestos-containing materials ("ACMs"). These laws impose liability for
release of ACMs into the air and third parties may seek recovery from owners
or operators of real properties for personal injury associated with ACMs. In
connection with the ownership (direct or indirect), operation, management and
development of real properties, we may be considered an owner or operator of
properties containing ACMs. Having arranged for the disposal or treatment of
contaminants we may be potentially liable for removal, remediation and other
costs, including governmental fines and injuries to persons and property.
Certain Leases and Rights of First Refusal may Constrain Us from Acting
in the Best Interests of Shareholders. The Le Meridien New Orleans hotel and
the San Diego Paradise Point Resort are each subject to ground leases with a
third party lessor. Any proposed sale of the LeMeridien New Orleans hotel or
the San Diego Paradise Point Resort by the Operating Partnership or any
proposed assignment of the Operating Partnership's leasehold interest in
either of the ground leases will require the consent of the third party
lessor. As a result, LaSalle Hotel Properties and the Operating Partnership
may not be able to sell, assign, transfer or convey the Operating
Partnership's interest in the Le Meridien New Orleans hotel or the San Diego
Paradise Point Resort without the consent of such third party lessor, even if
such transactions may be in the best interests of our shareholders. The Le
Meridien New Orleans is also subject to an air space lease with the City of
New Orleans with respect to the balconies located at the hotel. As a result,
LaSalle Hotel Properties and the Operating Partnership may not be able to
sell, assign, transfer or convey the Operating Partnership's interest in the
Le Meridien New Orleans hotel without the consent of the City of New Orleans.
Le Meridien Dallas is subject to a right of first refusal in favor of the
owner of the balance of the condominium units. In addition, we will be subject
to certain rights of first refusal with respect to the following Hotels:
Radisson Hotel South and Plaza Tower, Marriott Seaview Resort and LaGuardia
Airport Marriott.
The Costs of Compliance with the Americans with Disabilities Act Could
Adversely Affect Our Cash Flow. Under the Americans with Disabilities Act of
1990 (the "ADA"), all public accommodations are required to meet certain
Federal requirements related to access and use by disabled persons. A
determination that we are not in compliance with the ADA could result in
imposition of fines or an award of damages to private litigants. If we were
required to make modifications to comply with the ADA, our ability to make
expected distributions to our shareholders could be adversely affected.
o Failure to qualify as a REIT would be costly
We have operated (and intend to operate) so as to qualify as a REIT under
the Code beginning with our taxable year ended December 31, 1998. Although our
management believes that we are organized and operated in a manner to so
qualify, no assurance can be given that we will qualify or remain qualified as
a REIT.
If we fail to qualify as a REIT in any taxable year, we will be subject
to federal income tax (including any applicable alternative minimum tax) on
our taxable income at regular corporate rates. Moreover, unless entitled to
relief under certain statutory provisions, we also will be disqualified from
treatment as a REIT for the four taxable years following the year during which
qualification was lost. This treatment would significantly reduce net earnings
available to service indebtedness, make investments or pay distributions to
shareholders because of the additional tax liability to us for the years
involved. Also, we would not then be required to pay distributions to our
shareholders.
o The Ability of Our Shareholders to Effect a Change in Control is Limited
Potential Anti-Takeover Effect of Certain Provisions of Maryland Law and
Our Declaration of Trust and Bylaws. Certain provisions of Maryland law and of
our Articles of Amendment and Restatement of Declaration of Trust (the
"Declaration of Trust ") and Bylaws may have the effect of discouraging a
third party from making an acquisition proposal for LaSalle Hotel Properties
and could delay, defer or prevent a transaction or a change in control of
LaSalle Hotel Properties under circumstances that could give the holders of
common shares the opportunity to realize a premium over the then prevailing
market price of the common shares. Such provisions include the following:
Share Ownership Limit in Our Declaration of Trust Could Inhibit Changes
in Control. In order for us to maintain our qualification as a REIT under the
Code, not more than 50% in value of our outstanding shares may be owned,
directly or indirectly, by five or fewer individuals (as defined in the Code
to include certain entities) at any time during the last half of our taxable
year. Furthermore, if any person were to own actually or constructively more
than 10% in value of our shares, and, at the same time, to own actually or
constructively 10% or more of the shares of a corporate lessee, or a 10% or
greater interest in the assets or profits of a noncorporate lessee, then the
lessee could become a related party tenant, which could result in loss of our
REIT status. For the purpose of preserving our REIT qualification, among other
reasons, our Declaration of Trust prohibits direct or indirect ownership
(taking into account applicable ownership provisions of the Code) of more than
9.8% of any class of our outstanding shares by any person (the "Ownership
Limitation"). Generally, the shares owned by affiliated owners will be
aggregated for purposes of the Ownership Limitation. Although our Board of
Trustees presently has no intention of doing so, the Board of Trustees could
waive these restrictions if evidence satisfactory to the Board of Trustees and
the our tax counsel were presented that the changes in ownership would not
then or in the future jeopardize our status as a REIT and the Board of
Trustees otherwise decided such action would be in our best interests. Shares
acquired or transferred in breach of the limitation will be automatically
transferred to a trust for the exclusive benefit of one or more charitable
organizations and the purchaser-transferee shall not be entitled to vote or to
participate in dividends or other distributions. In addition, shares acquired
or transferred in breach of the limitation may be purchased from such trust by
us for the lesser of the price paid and the average closing price for the ten
trading days immediately preceding redemption. A transfer of shares to a
person who, as a result of the transfer, violates the Ownership Limitation
will be void.
The Ownership Limitation could have the effect of delaying, deferring or
preventing a transaction or a change in control of LaSalle Hotel Properties in
which holders of some, or a majority, of the shares might receive a premium
for their shares over the then prevailing market price or which such holders
might believe to be otherwise in their best interests.
Potential Effects of Staggered Board Could Inhibit Changes in Control.
Our Board of Trustees is divided into three classes of trustees. The initial
terms of the first, second and third classes will expire in 1999, 2000 and
2001, respectively. Trustees of each class will be chosen for three year terms
upon the expiration of the current class terms, and, beginning in 1999 and
each year thereafter, one class of trustees will be elected by the
shareholders. A trustee may be removed, with or without cause, by the
affirmative vote of 75% of the votes entitled to be cast for the election of
trustees, which super-majority vote may have the effect of delaying, deferring
or preventing a change of control of LaSalle Hotel Properties. The staggered
terms of trustees may reduce the possibility of a tender offer or an attempt
to change control of LaSalle Hotel Properties even though a tender offer or
change in control might be in the best interests of the shareholders.
Issuances of Preferred Shares Could Inhibit Changes in Control. Our
Declaration of Trust authorizes our Board of Trustees to issue up to 20
million preferred shares, to reclassify unissued shares, and to establish the
preferences, conversion and other rights, voting powers, restrictions,
limitations and restrictions on ownership, limitations as to dividends or
other distributions, qualifications, and terms and conditions of redemption
for each such class or series of any preferred shares issued. As of March 31,
1999, we had no preferred shares outstanding.
Certain Provisions of Maryland Law Could Inhibit Changes in Control. The
Maryland General Corporation Law (the "Maryland Law") establishes special
requirements for "business combinations" between a Maryland corporation,
including a Maryland REIT such as LaSalle Hotel Properties, and "interested
shareholders" unless exemptions are applicable. An interested shareholder is
any person who beneficially owns ten percent or more of the voting power of
our then-outstanding voting stock. Among other things, Maryland Law prohibits,
for a period of five years, a merger or other similar transactions between us
and an interested shareholder, unless the Board of Trustees approved the
transaction prior to the party becoming an interested shareholder. The
five-year period runs from the most recent date on which the interested
shareholder became an interested shareholder. The law also requires a
supermajority shareholder vote for such transactions after the end of the
five-year period. This means that the transaction must be approved by at
least:
o 80% of the votes entitled to be cast by holders of outstanding voting
shares; and
o 66% of the votes entitled to be cast by holders of outstanding voting
shares other than shares held by the interested shareholder with whom
the business combination is to be effected.
The business combination statute could have the effect of discouraging
offers to acquire us and of increasing the difficulty of consummating any such
offers, even if our acquisition would be in our shareholders' best interests.
Effect of Maryland Control Share Acquisition Statute. Maryland Law
provides that "control shares" of a Maryland corporation, including a Maryland
REIT such as LaSalle Hotel Properties, acquired in a "control share
acquisition" have no voting rights except to the extent approved by a
shareholder vote. Two-thirds of the shares eligible to vote must vote in favor
of granting the "control shares" voting rights. "Control shares" are shares of
stock that, taken together with all other shares of stock the acquiror
previously acquired, would entitle the acquiror to exercise voting power in
electing trustees within one of the following ranges of voting power: (i)
one-fifth or more but less than one-third, (ii) one-third or more but less
than a majority, or (iii) a majority. Control shares do not include shares of
stock the acquiring person is entitled to vote as a result of having
previously obtained shareholder approval. A "control share acquisition" means
the acquisition of control shares, subject to certain exceptions.
If a person who has made (or proposes to make) a control share
acquisition satisfies certain conditions (including agreeing to pay expenses),
he may compel the Board of Directors to call a special meeting of shareholders
to be held within 50 days to consider the voting rights of the shares. If such
a person makes no request for a meeting, we have the option to present the
question at any shareholders' meeting.
If voting rights are not approved at a meeting of shareholders then we
may redeem any or all of the control shares (except those for which voting
rights have previously been approved) for fair value. We will determine the
fair value of the shares, without regard to voting rights, as of the date of
either:
o the last control share acquisition; or
o any meeting where shareholders considered and did not approve voting
rights of the control shares.
If voting rights for control shares are approved at a shareholders'
meeting and the acquiror becomes entitled to vote a majority of the shares of
stock entitled to vote, all other shareholders may exercise appraisal rights.
This means that you would be able to redeem your stock back to us for fair
value. Under Maryland law, the fair value may not be less than the highest
price per share paid in the control share acquisition. Furthermore, certain
limitations otherwise applicable to the exercise of dissenters' rights would
not apply in the context of a control share acquisition.
The control share acquisition statute would not apply to shares acquired
in a merger, consolidation, or share exchange if we were a party to the
transaction.
Our Bylaws contain a provision exempting from the control share
acquisition statute any and all acquisitions by any persons of our shares.
There can be no assurance that such provision will not be amended or
eliminated at any point in the future. If the foregoing exemption in our
Bylaws is rescinded, the control share acquisition statute could have the
effect of delaying, deferring, preventing or otherwise discouraging offers to
acquire LaSalle Hotel Properties and of increasing the difficulty of
consummating any such offer.
Approval of Unitholders Required for Certain Business Combinations. The
Partnership Agreement provides that we may not generally engage in any merger,
consolidation or other combination with or into another person or sale of all
or substantially all of our assets, or any reclassification, or any
recapitalization or change of outstanding common shares (a "Business
Combination"), unless the holders of units will receive, or have the
opportunity to receive, the same consideration per unit as holders of common
shares receive per common share in the transaction; if holders of units will
not be treated in such manner in connection with a proposed Business
Combination, we may not engage in such transaction unless unitholders holding
more than 50% of the units vote to approve the Business Combination. In
addition, as provided in the Partnership Agreement, we will not consummate a
Business Combination with respect to which we conducted a vote of the
shareholders unless the matter would have been approved had holders of units
been able to vote together with the shareholders on the transaction. The
foregoing provisions of the Partnership Agreement would under no circumstances
enable or require us to engage in a Business Combination which required the
approval of our shareholders if our shareholders did not in fact give the
requisite approval. Rather, if our shareholders did approve a Business
Combination, we would not consummate the transaction unless (i) we as general
partner first conduct a vote of unitholders (including us) on the matter, (ii)
we vote the units held by us in the same proportion as our shareholders voted
on the matter at the shareholder vote, and (iii) the result of such vote of
the unitholders (including our proportionate vote of units) is that had such
vote been a vote of shareholders, the Business Combination would have been
approved by the shareholders. As a result of these provisions of the
Partnership Agreement, a third party may be inhibited from making an
acquisition proposal that it would otherwise make, or we, despite having the
requisite authority under our Declaration of Trust, may not be authorized to
engage in a proposed Business Combination.
o Property Ownership Through Partnerships and Joint Ventures Could Limit Our
Control of those Investments
Partnership or joint venture investments may involve risks not otherwise
present for investments made solely by us, including the possibility that our
partners or co-venturer might become bankrupt, that our partners or
co-venturer might at any time have different interests or goals than we do,
and that our partners or co-venturer may take action contrary to our
instructions, requests, policies or objectives, including our policy with
respect to maintaining our qualification as a REIT. Other risks of joint
venture investments include impasse on decisions, such as a sale, because
neither our partner or co-venturer nor us would have full control over the
partnership or joint venture. There is no limitation under our organizational
documents as to the amount of funds that may be invested in partnerships or
joint ventures.
o Tax Consequences Upon a Sale or Refinancing of Properties May Result in
Conflicts of Interest for LaSalle Hotel Properties and Jones Lang LaSalle
Holders of units of limited partnership of the Operating Partnership or
co-owners of properties not owned entirely by us may suffer different and more
adverse tax consequences than we will upon the sale or refinancing of our
properties. We may have different objectives from these co-owners and holders
of limited partnership units regarding the appropriate pricing and timing of
any sale or refinancing of these properties. While LaSalle Hotel Properties,
as the sole general partner of the Operating Partnership, has the exclusive
authority as to whether and on what terms to sell or refinance each property
owned solely by the Operating Partnership, the trustees and officers of
LaSalle Hotel Properties who have interests in limited partnership units may
seek to influence us not to sell or refinance the properties, even though such
a sale might otherwise be financially advantageous to us, or may seek to
influence us to refinance a property with a higher level of debt.
Policies with respect to conflicts of interest may not be successful. We
have adopted policies designed to eliminate or minimize conflicts of interest.
These policies include the approval of all transactions in which trustees or
officers of LaSalle Hotel Properties have a conflicting interest by a majority
of the trustees who are neither officers nor affiliated with us. These
policies do not prohibit sales of assets to or from affiliates, but would
require the sales to be approved by the independent trustees of LaSalle Hotel
Properties. However, there is no assurance that these policies will be
successful and, if they are not successful, decisions could be made that might
fail to reflect fully the interests of all of our shareholders.
o Risk of Impact of Year 2000 Issue on Our Operations and Financial Results
The "Year 2000 Issue" is the result of computer programs and systems
having been designed and developed to use two digits, rather than four, to
define the applicable year. As a result, these computer programs and systems
may recognize a date using "00" as the year 1900 rather than the year 2000.
This could result in system failure or miscalculations causing disruptions of
operations, including, among other things, a temporary inability to process
transactions, pay invoices or engage in similar normal business activities.
Our year 2000 project is estimated to be completed not later than
September 30, 1999, which is prior to any anticipated impact on our operating
systems. Additionally, we have received assurances from our contractors that
all of our building management and mechanical systems are currently year 2000
ready or will be ready prior to any impact on those systems. However, we
cannot guarantee that all contractors will comply with their assurances and
therefore we may not be able to determine year 2000 readiness of those
contractors. At that time, we will determine the extent to which we will be
able to replace non compliant contractors. We believe that with modifications
to existing software and conversion to new software, the year 2000 issue will
not pose significant operational problems for our computer systems. However,
if modifications and conversions are not made, or are not completed timely,
the year 2000 issue could have a material impact on our operations.
To date, we have expended less than $0.1 million and expect to expend an
additional $0.2 million in connection with upgrading building management,
mechanical and computer systems. The costs of the project and the date on
which we believe we will complete the year 2000 modifications are based on our
management's best estimates, which were derived utilizing numerous assumptions
of future events, including the continued availability of certain resources
and other factors. However, there can be no guarantee that these estimates
will be achieved and actual results could differ materially from those
anticipated. Specific factors that might cause material differences include,
but are not limited to the availability and costs of personnel trained in this
area, the ability to locate and correct all relevant computer codes, and
similar uncertainties.
WHERE YOU CAN FIND MORE INFORMATION
We file annual, quarterly and current reports, proxy statements and other
information with the Securities and Exchange Commission (the "SEC"). You may
read and copy any reports, statements or other information we file at the
SEC's public reference rooms located at Judiciary Plaza, 450 Fifth Street,
N.W., Washington, D.C. 20549, Citicorp Center, 500 West Madison Street, Suite
1400, Chicago, IL 60661 and 7 World Trade Center, Suite 1300, New York, NY
10048. Please call the SEC at 1-800-SEC-0330 for further information on the
public reference rooms. Our SEC filings are also available to the public from
commercial document retrieval services and at the web site maintained by the
SEC at "http://www.sec.gov."
We have filed a Registration Statement on Form S-3, of which this
prospectus is a part, to register the securities with the SEC. As allowed by
SEC rules, this Prospectus does not contain all the information you can find
in the Registration Statement or the exhibits to the Registration Statement.
The SEC allows us to "incorporate by reference" information into this
Prospectus, which means that we can disclose important information to you by
referring you to another document filed separately with the SEC. The
information incorporated by reference is deemed to be part of this Prospectus,
except for any information superseded by information in this Prospectus. This
Prospectus incorporates by reference the documents set forth below that we
have previously filed with the SEC. These documents contain important
information about us, our business and our finances.
SEC Filings (File No. 1-14045) Period
- ------------------------------ ------
Annual Report on Form 10-K Year ended December 31, 1998
Registration Statement on Form 8-A Filed April 21, 1998
Any documents which we file pursuant to Sections 13(a), 13(c), 14 or
15(d) of the Securities Exchange Act of 1934, as amended (the "Exchange Act")
after the date of this Prospectus but before the end of any offering of
securities made under this Prospectus will also be considered to be
incorporated by reference.
If you request, either orally or in writing, we will provide you with a
copy of any or all documents which are incorporated by reference. Such
documents will be provided to you free of charge, but will not contain any
exhibits, unless those exhibits are incorporated by reference into the
document. Written requests should be addressed to LaSalle Hotel Properties,
1401 Eye Street, NW, Suite 900, Washington, DC 20005, Attn: Raymond D. Martz,
Director of Finance. Oral requests should be made to Mr. Martz at (202)
222-2600.
USE OF PROCEEDS
Unless otherwise specified in the applicable prospectus supplement, the
net proceeds to us, from the sale of the securities offered by the applicable
prospectus supplement will be used for the repayment of existing indebtedness,
the development or acquisition of additional hotel properties as suitable
opportunities arise and the renovation, expansion and improvement of our
existing hotel properties, in each case, as described in detail in the
prospectus supplement depending on the circumstances at the time of the
related offering, and for other general corporate purposes.
DESCRIPTION OF COMMON SHARES
General
Under Title 8 of the Corporations and Associations Article of the
Annotated Code of Maryland ("Maryland REIT Law"), a shareholder is not
personally liable for our obligations solely as a result of being a
shareholder. Our Declaration of Trust provides that no shareholder shall be
liable for any debt or obligation of ours by reason of being a shareholder nor
shall any shareholder be subject to any personal liability in tort, contract
or otherwise to any person in connection with our property or affairs by
reason of being a shareholder. Our Bylaws further provide that we shall
indemnify each present or former shareholder against any claim or liability to
which the shareholder may become subject by reason of being or having been a
shareholder and that we shall reimburse each shareholder for all reasonable
expenses incurred by him or her in connection with any such claim or
liability. However, with respect to tort claims, contractual claims where
shareholder liability is not so negated, claims for taxes and certain
statutory liability, the shareholders may, in some jurisdictions, be
personally liable to the extent that such claims are not satisfied by us.
Inasmuch as we carry public liability insurance which we consider adequate,
any risk of personal liability to shareholders is limited to situations in
which our assets plus our insurance coverage would be insufficient to satisfy
the claims against us and our shareholders.
Our Declaration of Trust provides that we may issue 100 million common
shares of beneficial interest, par value $0.01 per share. In addition, units
of limited partnership interest in the Operating Partnership may be redeemed
for cash or, at our option, common shares on a one-for-one basis. On March 31,
1999, there were 15,240,563 common shares outstanding.
All of the common shares offered hereby have been duly authorized and
will be fully paid and nonassessable. Subject to the preferential rights of
any other shares of beneficial interest and to the provisions of our
Declaration of Trust regarding restrictions on transfers of shares of
beneficial interest, holders of common shares are entitled to receive
distributions if, as and when authorized and declared by our Board of Trustees
out of assets legally available therefor and to share ratably in our assets
legally available for distribution to our shareholders in the event of our
liquidation, dissolution or winding up after payment of, or adequate provision
for, all our known debts and liabilities.
Subject to the provisions of our Declaration of Trust regarding
restrictions on transfer of shares of beneficial interest, each outstanding
common share entitles the holder to one vote on all matters submitted to a
vote of shareholders, including the election of trustees, and, except as
provided with respect to any other class or series of shares of beneficial
interest, the holders of common shares will possess the exclusive voting
power. There is no cumulative voting in the election of trustees, which means
that the holders of a majority of the outstanding common shares can elect all
of the trustees then standing for election and the holders of the remaining
shares of beneficial interest, if any, will not be able to elect any trustees.
Holders of common shares have no preferences, conversion, sinking fund,
redemption rights or preemptive rights to subscribe for any securities of
LaSalle Hotel Properties. Subject to the exchange provisions of our
Declaration of Trust regarding restrictions on transfer, common shares have
equal distribution, liquidation and other rights.
Certain Provisions of the Declaration of Trust
Pursuant to the Maryland REIT Law, a Maryland real estate investment
trust generally cannot dissolve, amend its declaration of trust or merge,
unless approved by the affirmative vote of shareholders holding at least
two-thirds of the shares entitled to vote on the matter unless a lesser
percentage (but not less than a majority of all of the votes entitled to be
cast on the matter) is set forth in the trust's declaration of trust. Our
Declaration of Trust provides that the Board of Trustees, with the approval of
a majority of the votes entitled to be cast at a meeting of shareholders, may
amend our Declaration of Trust from time to time to increase or decrease the
aggregate number of shares or the number of shares of any class that we have
the authority to issue. Our Declaration of Trust also provides that a merger
transaction or termination of the trust must be approved, at a meeting of the
shareholders called for that purpose, by the affirmative vote of not less than
sixty-six and two-thirds percent (66 2/3%) of all the votes entitled to be
cast on the matter. Under the Maryland REIT Law, a declaration of trust may
permit the trustees by a two-thirds vote to amend the declaration of trust
from time to time to qualify as a REIT under the Code or the Maryland REIT Law
without the affirmative vote of the shareholders. Our Declaration of Trust
permits such action by our Board of Trustees.
Our Board of Trustees is divided into three classes of trustees, serving
staggered three year terms. At each annual meeting of shareholders, the class
of trustees to be elected at the meeting will be elected for a three-year term
and the trustees in the other two classes will continue in office. We believe
that classified trustees will help to assure the continuity and stability of
our Board of Trustees and our business strategies and policies as determined
by our Board of Trustees. The use of a staggered board may delay or defer a
change in control of LaSalle Hotel Properties or removal of incumbent
management.
Restrictions on Ownership
In order to qualify as a REIT under the Code, not more than 50% in value
of our outstanding shares may be owned, directly or indirectly, by five or
fewer individuals (as defined in the Code to include certain entities) during
the last half of a taxable year and our shares must be beneficially owned by
100 or more persons during at least 335 days of a taxable year of 12 months
(or during a proportionate part of a shorter taxable year). To satisfy the
above ownership requirements and certain other requirements for qualification
as a REIT, our Board of Trustees has adopted, and our shareholders prior to
the IPO approved, a provision in our Declaration of Trust restricting the
ownership or acquisition of common shares. See "Restrictions on Ownership of
Capital Shares."
Transfer Agent and Registrar
The transfer agent and registrar for our common shares is Harris Trust
and Savings Bank.
DESCRIPTION OF PREFERRED SHARES
General
Our Declaration of Trust provides that we may issue up to 20 million
preferred shares, $.01 par value per share. On March 31, 1999 there were no
preferred shares outstanding.
The statements made hereunder relating to the preferred shares are
summaries of the anticipated material terms thereof and do not purport to be
complete and are subject to, and are qualified in their entirety by reference
to, the applicable provisions of our Declaration of Trust and Bylaws and any
applicable articles supplementary to our Declaration of Trust designating
terms of a series of preferred shares (a "Designating Amendment").
The issuance of preferred shares could adversely affect the voting power,
dividend rights and other rights of holders of common shares. Although our
Board of Trustees has no intention at the present time, it could establish a
series of preferred shares that could, depending on the terms of the series,
delay, defer or prevent a transaction or a change in control of LaSalle Hotel
Properties that might involve a premium price for the common shares or
otherwise be in the best interest of the holders thereof. Management believes
that the availability of preferred shares will provide us with increased
flexibility in structuring possible future financing and acquisitions and in
meeting other needs that might arise.
Terms
Subject to the limitations prescribed by our Declaration of Trust, our
Board of Trustees is authorized to fix the number of shares constituting each
series of preferred shares and the designations and powers, preferences and
relative, participating, optional or other special rights and qualifications,
limitations or restrictions thereof, including the provisions as may be
desired concerning voting, redemption, dividends, dissolution or the
distribution of assets, conversion or exchange, and other subjects or matters
as may be fixed by resolution of our Board of Trustees. The preferred shares
will, when issued, be fully paid and nonassessable and will have no preemptive
rights.
Reference is made to the prospectus supplement relating to the series of
preferred shares offered thereby for the specific terms thereof, including:
o The title and stated value of the preferred shares;
o The number of preferred shares, the liquidation preference per
preferred share and the offering price of the preferred shares;
o The dividend rate(s), period(s) and/or payment date(s) or method(s)
of calculation thereof applicable to the preferred shares;
o The date from which dividends on the preferred shares shall
accumulate, if applicable;
o The procedures for any auction and remarketing, if any, for the
preferred shares;
o The provision for a sinking fund, if any, for the preferred shares;
o The provisions for redemption, if applicable, of the preferred shares;
o Any listing of the preferred shares on any securities exchange;
o The terms and conditions, if applicable, upon which the preferred
shares may or will be convertible into our common shares, including
the conversion price or manner of calculation thereof;
o The relative ranking and preferences of the preferred shares as to
dividend rights and rights upon our liquidation, dissolution or
winding up of our affairs;
o Any limitations on direct or beneficial ownership and restrictions on
transfer, in each case as may be appropriate to preserve our status
as a REIT;
o A discussion of material federal income tax considerations applicable
to the preferred shares; and
o Any other specific terms, preferences, rights, limitations or
restrictions of the preferred shares.
Rank
Unless otherwise specified in the applicable prospectus supplement, the
preferred shares will, with respect to dividend rights and rights upon our
liquidation, dissolution or winding up, rank:
(1) senior to our common shares and to all classes or series of equity
securities issued by us the terms of which provide that the equity
securities shall rank junior to the preferred shares;
(2) on a parity with all classes or series of equity securities issued
by us, other than those referred to in clauses (1) and (3); and
(3) junior to all classes or series of equity securities issued by us
which the terms of the preferred shares provide will rank senior
to it. The term "equity securities" does not include convertible
debt securities.
Dividends
Unless otherwise specified in the applicable prospectus supplement, the
preferred shares will have the rights with respect to payment of dividends set
forth below.
Holders of the preferred shares of each series will be entitled to
receive, when, as and if declared by our Board of Trustees, out of assets
legally available for payment, cash dividends in the amounts and on the dates
as will be set forth in, or pursuant to, the applicable prospectus supplement.
Each dividend shall be payable to holders of record as they appear on our
share transfer books on the record dates as shall be fixed by our Board of
Trustees.
Dividends on any series of preferred shares may be cumulative or
non-cumulative, as provided in the applicable prospectus supplement.
Dividends, if cumulative, will be cumulative from and after the date set forth
in the applicable prospectus supplement. If our Board of Trustees fails to
declare a dividend payable on a dividend payment date on any series of
preferred shares for which dividends are non-cumulative, then the holders of
the series of preferred shares will have no right to receive a dividend in
respect of the related dividend period and we will have no obligation to pay
the dividend accrued for the period, whether or not dividends on the series of
preferred shares are declared payable on any future dividend payment date.
If preferred shares of any series are outstanding, no full dividends will
be declared or paid or set apart for payment on any of our capital shares of
any other series ranking, as to dividends, on a parity with or junior to the
preferred shares of the series for any period unless:
o if the series of preferred shares has a cumulative dividend, full
cumulative dividends have been or contemporaneously are declared and
paid or declared and a sum sufficient for the payment thereof set
apart for the payment for all past dividend periods and the then
current dividend period; or
o if the series of preferred shares do not have a cumulative dividend,
full dividends for the then current dividend period have been or
contemporaneously are declared and paid or declared and a sum
sufficient for the payment thereof set apart for the payment on the
preferred shares of the series.
When dividends are not paid in full (or a sum sufficient for the full
payment is not so set apart) on preferred shares of any series and the shares
of any other series of preferred shares ranking on a parity as to dividends
with the preferred shares of the series, all dividends declared upon preferred
shares of the series and any other series of preferred shares ranking on a
parity as to dividends with the preferred shares shall be declared pro rata so
that the amount of dividends declared per preferred share of the series and
the other series of preferred shares shall in all cases bear to each other the
same ratio that accrued dividends per share on the preferred shares of the
series and the other series of preferred shares (which shall not include any
accumulation in respect of unpaid dividends for prior dividend periods if the
preferred shares do not have a cumulative dividend) bear to each other. No
interest, or sum of money in lieu of interest, shall be payable in respect of
any dividend payment or payments on preferred shares of the series which may
be in arrears.
Except as provided in the immediately preceding paragraph, unless (1) if
the series of preferred shares has a cumulative dividend, full cumulative
dividends on the preferred shares of the series have been or contemporaneously
are declared and paid or declared and a sum sufficient for the payment thereof
set apart for payment for all past dividend periods and the then current
dividend period, and (2) if the series of preferred shares does not have a
cumulative dividend, full dividends on the preferred shares of the series have
been or contemporaneously are declared and paid or declared and a sum
sufficient for the payment thereof set apart for payment for the then current
dividend period, no dividends (other than in common shares or other capital
shares ranking junior to the preferred shares of the series as to dividends
and upon liquidation) shall be declared or paid or set aside for payment or
other distribution shall be declared or made upon the common shares, or any
other of the capital shares of LaSalle Hotel Properties ranking junior to or
on a parity with the preferred shares of the series as to dividends or upon
liquidation, nor shall any shares of common shares, or any other capital
shares of LaSalle Hotel Properties ranking junior to or on a parity with the
preferred shares of the series as to dividends or upon liquidation, be
redeemed, purchased or otherwise acquired for any consideration (or any moneys
be paid to or made available for a sinking fund for the redemption of any
shares) by LaSalle Hotel Properties except:
(1) by conversion into or exchange for other capital shares of LaSalle
Hotel Properties ranking junior to the preferred shares of the series as to
dividends and upon liquidation; or
(2) redemption's for the purpose of preserving our status as a REIT.
Redemption
If so provided in the applicable prospectus supplement, the preferred
shares will be subject to mandatory redemption or redemption at our option, as
a whole or in part, in each case upon the terms, at the times and at the
redemption prices set forth in the prospectus supplement.
The prospectus supplement relating to a series of preferred shares that
is subject to mandatory redemption will specify the number of preferred shares
that we will redeem in each year commencing after a date to be specified, at a
redemption price per share to be specified, together with an amount equal to
all accumulated and unpaid dividends thereon (which shall not, if the
preferred shares do not have a cumulative dividend, include any accumulation
in respect of unpaid dividends for prior dividend periods) to the date of
redemption. The redemption price may be payable in cash or other property, as
specified in the applicable prospectus supplement. If the redemption price for
preferred shares of any series is payable only from the net proceeds of the
issuance of our capital shares, the terms of the preferred shares may provide
that, if no capital shares shall have been issued or to the extent the net
proceeds from any issuance are insufficient to pay in full the aggregate
redemption price then due, the preferred shares shall automatically and
mandatorily be converted into the applicable capital shares of LaSalle Hotel
Properties pursuant to conversion provisions specified in the applicable
prospectus supplement.
Notwithstanding the foregoing, unless (1) if the series of preferred
shares has a cumulative dividend, full cumulative dividends on all shares of
any series of preferred shares shall have been or contemporaneously are
declared and paid or declared and a sum sufficient for the payment thereof set
apart for payment for all past dividend periods and the then current dividend
period, and (2) if the series of preferred shares does not have a cumulative
dividend, full dividends on the preferred shares of any series have been or
contemporaneously are declared and paid or declared and a sum sufficient for
the payment thereof set apart for payment for the then current dividend
period, no shares of any series of preferred shares shall be redeemed unless
all outstanding preferred shares of the series is simultaneously redeemed;
provided, however, that the foregoing shall not prevent the purchase or
acquisition of preferred shares of the series to preserve our status as a REIT
or pursuant to a purchase or exchange offer made on the same terms to holders
of all outstanding preferred shares of the series. In addition, unless (1) if
the series of preferred shares has a cumulative dividend, full cumulative
dividends on all outstanding shares of any series of preferred shares have
been or contemporaneously are declared and paid or declared and a sum
sufficient for the payment thereof set apart for payment for all past dividend
periods and the then current dividend period, and (2) if the series of
preferred shares do not have a cumulative dividend, full dividends on the
preferred shares of any series have been or contemporaneously are declared and
paid or declared and a sum sufficient for the payment thereof set apart for
payment for the then current dividend period, we shall not purchase or
otherwise acquire, directly or indirectly, any preferred shares of the series
(except by conversion into or exchange for our capital shares ranking junior
to the preferred shares of the series as to dividends and upon liquidation);
provided, however, that the foregoing shall not prevent the purchase or
acquisition of preferred shares of the series to preserve our status as a REIT
or pursuant to a purchase or exchange offer made on the same terms to holders
of all outstanding preferred shares of the series.
If fewer than all of the outstanding preferred shares of any series are
to be redeemed, the number of shares to be redeemed will be determined by us
and the shares may be redeemed pro rata from the holders of record of the
shares in proportion to the number of the shares held or for which redemption
is requested by the holder (with adjustments to avoid redemption of fractional
shares) or by lot or in any other reasonable manner.
Notice of redemption will be mailed at least 30 days but not more than 60
days before the redemption date to each holder of record of preferred shares
of any series to be redeemed at the address shown on the share transfer books.
Each notice shall state:
o the redemption date;
o the number of shares and series of the preferred shares to be redeemed;
o the redemption price;
o the place or places where certificates for the preferred shares are
to be surrendered for payment of the redemption price;
o that dividends on the shares to be redeemed will cease to accumulate on
the redemption date; and
o the date upon which the holder's conversion rights, if any, as to the
shares shall terminate.
If fewer than all the preferred shares of any series are to be redeemed,
the notice mailed to each holder thereof shall also specify the number of
preferred shares to be redeemed from each holder. If notice of redemption of
any preferred shares has been given and if the funds necessary for redemption
have been set aside by LaSalle Hotel Properties in trust for the benefit of
the holders of any preferred shares so called for redemption, then from and
after the redemption date dividends will cease to accumulate on the preferred
shares, and all rights of the holders of the preferred shares will terminate,
except the right to receive the redemption price.
Liquidation Preference
Upon any voluntary or involuntary liquidation, dissolution or winding up
of our affairs (referred to herein as a "liquidation"), before any
distribution or payment shall be made to the holders of our common shares or
any other class or series of our capital shares ranking junior to the
preferred shares of the series in the distribution of assets upon any
liquidation, dissolution or winding up of LaSalle Hotel Properties, the
holders of the preferred shares shall be entitled to receive out of our assets
legally available for distribution to shareholders liquidating distributions
in the amount of the liquidation preference per share (set forth in the
applicable prospectus supplement), plus an amount equal to all dividends
accumulated and unpaid thereon (which shall not include any accumulation in
respect of unpaid dividends for prior dividend periods if the preferred shares
do not have a cumulative dividend). After payment of the full amount of the
liquidating distributions to which they are entitled, the holders of preferred
shares will have no rights or claim to any remaining assets. In the event
that, upon any voluntary or involuntary liquidation, dissolution or winding
up, our available assets are insufficient to pay the amount of the liquidating
distributions on all outstanding preferred shares of the series and the
corresponding amounts payable on all shares of other classes or series of our
capital shares ranking on a parity with the preferred shares in the
distribution of assets, then the holders of the preferred shares and all other
classes or series of capital shares shall share ratably in any distribution of
assets in proportion to the full liquidating distributions to which they would
otherwise be respectively entitled.
The consolidation or merger of LaSalle Hotel Properties with or into any
other entity, or the merger of another entity with or into LaSalle Hotel
Properties, or a statutory share exchange by LaSalle Hotel Properties, or the
sale, lease or conveyance of all or substantially all of the property or
business of LaSalle Hotel Properties, shall not be deemed to constitute a
liquidation, dissolution or winding up of LaSalle Hotel Properties.
Voting Rights
Holders of the preferred shares will not have any voting rights, except
as set forth below or as otherwise from time to time required by law or as
indicated in the applicable prospectus supplement.
Whenever dividends on any series of preferred shares shall be in arrears
for six or more quarterly periods, the holders of the preferred shares (voting
separately as a class with all other series of preferred shares upon which
like voting rights have been conferred and are exercisable) will be entitled
to vote for the election of two additional trustees of LaSalle Hotel
Properties at a special meeting called by the holders of record of at least
ten percent (10%) of any series of preferred shares so in arrears, unless the
request is received less than 90 days before the date fixed for the next
annual or special meeting of shareholders, or at the next annual meeting of
shareholders, and at each subsequent annual meeting until (i) if the series of
preferred shares has a cumulative dividend, all dividends accumulated on the
preferred shares for the past dividend periods and the then current dividend
period shall have been fully paid or declared and a sum sufficient for the
payment thereof set aside for payment or (ii) if the series of preferred
shares does not have a cumulative dividend, four quarterly dividends shall
have been fully paid or declared and a sum sufficient for the payment thereof
set aside for payment. In these cases, the entire Board of Trustees of LaSalle
Hotel Properties will be increased by two trustees.
Unless provided otherwise for any series of preferred shares, so long as
any preferred shares remain outstanding, we will not, without the affirmative
vote or consent of the holders of at least two-thirds of the preferred hares
of the series outstanding at the time, given in person or by proxy, either in
writing or at a meeting (the series voting separately as a class):
(1) authorize or create, or increase the authorized or issued amount of,
any class or series of capital shares ranking senior to the preferred shares
with respect to payment of dividends or the distribution of assets upon
liquidation, dissolution or winding up of LaSalle Hotel Properties, or
reclassify any authorized capital shares of LaSalle Hotel Properties into
preferred shares, or create, authorize or issue any obligation or security
convertible into or evidencing the right to purchase any shares; or
(2) amend, alter or repeal the provisions of our Declaration of Trust or
the Articles Supplementary for the series of preferred shares, whether by
merger, consolidation or otherwise (an "Event"), so as to materially and
adversely affect any right, preference, privilege or voting power of the
series of preferred shares or the holders thereof; provided, however, with
respect to the occurrence of any of the Events set forth in (2) above, so long
as the series of preferred shares remains outstanding with the terms thereof
materially unchanged, taking into account that upon the occurrence of an Event
LaSalle Hotel Properties may not be the surviving entity, the occurrence of
any Event shall not be deemed to materially and adversely affect the rights,
preferences, privileges or voting powers of holders of the series of preferred
shares; and provided, further, that (x) any increase in the amount of the
authorized preferred shares or the creation or issuance of any other series of
preferred shares, or (y) any increase in the amount of authorized shares of
the series of preferred shares or any other series of preferred shares, in
each case ranking on a parity with or junior to the preferred shares of the
series with respect to payment of dividends or the distribution of assets upon
liquidation, dissolution or winding up of LaSalle Hotel Properties, shall not
be deemed to materially and adversely affect the rights, preferences,
privileges or voting powers.
The foregoing voting provisions will not apply if, at or prior to the
time when the act with respect to which the vote or consent would otherwise be
required shall be effected, all outstanding shares of the series of preferred
shares shall have been converted, redeemed or called for redemption and
sufficient funds shall have been deposited in trust to effect the redemption.
Conversion Rights
The terms and conditions, if any, upon which any series of preferred
shares are convertible into common shares will be set forth in the applicable
prospectus supplement. The terms will include the number of common shares into
which the preferred shares are convertible, the conversion price (or manner of
calculation thereof), the conversion period, provisions as to whether
conversion will be at the option of the holders of the preferred shares, the
events requiring an adjustment of the conversion price and provisions
affecting conversion in the event of the redemption of the preferred shares.
Shareholder Liability
As discussed above under "Description of Common Shares--General," under
the Maryland REIT Law, a shareholder, including holders of preferred shares,
is not personally liable for the obligations of the Company solely as a result
of his status as a shareholder. Our Declaration of Trust provides that no
shareholder shall be liable for any debt or obligation of ours by reason of
being a shareholder nor shall any shareholder be subject to any personal
liability in tort, contract or otherwise to any person in connection with our
property or affairs by reason of being a shareholder. Our Bylaws further
provide that we shall indemnify each present or former shareholder against any
claim or liability to which the shareholder may become subject by reason of
being or having been a shareholder and that we shall reimburse each
shareholder for all reasonable expenses incurred by him or her in connection
with any such claim or liability. However, with respect to tort claims,
contractual claims where shareholder liability is not so negated, claims for
taxes and certain statutory liability, the shareholders may, in some
jurisdictions, be personally liable to the extent that such claims are not
satisfied by us. Inasmuch as we carry public liability insurance which we
consider adequate, any risk of personal liability to shareholders is limited
to situations in which our assets plus our insurance coverage would be
insufficient to satisfy the claims against us and our shareholders.
Restrictions on Ownership
As discussed below under "Restrictions on Ownership of Capital Shares,"
in order for us to qualify as a REIT under the Code, not more than 50% in
value of our outstanding capital shares may be owned, directly or indirectly,
by five or fewer individuals (as defined in the Code to include certain
entities) during the last half of a taxable year. Therefore, the Articles
Supplementary for each series of preferred shares may contain provisions
restricting the ownership and transfer of the preferred shares. The applicable
prospectus supplement will specify any additional ownership limitation
relating to a series of preferred shares.
Registrar and Transfer Agent
Unless otherwise specified in the applicable prospectus supplement, the
registrar and transfer agent for the preferred shares will be Harris Trust and
Savings Bank.
DESCRIPTION OF DEPOSITARY SHARES
General
We may issue receipts ("Depositary Receipts") for Depositary Shares, each
of which will represent a fractional interest or a share of a particular
series of a class of preferred shares, as specified in the applicable
prospectus supplement. Preferred shares of each series of each class
represented by Depositary Shares will be deposited under a separate Deposit
Agreement (each, a "Deposit Agreement") among LaSalle Hotel Properties, the
depositary named therein (the depositary or its successor, the "Preferred
Share Depositary") and the holders from time to time of the Depositary
Receipts. Subject to the terms of the Deposit Agreement, each owner of a
Depositary Receipt will be entitled, in proportion to the fractional interest
of a share of the particular series of a class of preferred shares represented
by the Depositary Shares evidenced by the Depositary Receipt, to all the
rights and preferences of the preferred shares represented by the Depositary
Shares, including dividend, voting, conversion, redemption and liquidation
rights.
The Depositary Shares will be evidenced by Depositary Receipts issued
pursuant to the applicable Deposit Agreement. Immediately following the
issuance and delivery of the preferred shares by us to the Preferred Share
Depositary, we will cause the Preferred Share Depositary to issue, on our
behalf, the Depositary Receipts. Copies of the applicable form of Deposit
Agreement and Depositary Receipt may be obtained from us upon request.
Dividends and Other Distributions
The Preferred Share Depositary will distribute all cash dividends or
other cash distributions received in respect of the preferred shares to the
record holders of the Depositary Receipts evidencing the related Depositary
Shares in proportion to the number of the Depositary Receipts owned by the
holder, subject to certain obligations of holders to file proofs, certificates
and other information and to pay certain charges and expenses to the Preferred
Share Depositary.
In the event of a distribution other than in cash, the Preferred Share
Depositary will distribute property received by it to the record holders of
Depositary Receipts entitled thereto, subject to certain obligations of
holders to file proofs, certificates and other information and to pay certain
charges and expenses to the Preferred Share Depositary, unless the Preferred
Share Depositary determines that it is not feasible to make the distribution,
in which case the Preferred Share Depositary may, with our approval, sell the
property and distribute the net proceeds from the sale to holders.
Withdrawal of Shares
Upon surrender of the Depositary Receipts at the corporate trust office
of the Preferred Share Depositary (unless the related Depositary Shares have
previously been called for redemption), the holders thereof will be entitled
to delivery at the office, to or upon the holder's order, of the number of
whole or fractional preferred shares and any money or other property
represented by the Depositary Shares evidenced by the Depositary Receipts.
Holders of Depositary Receipts will be entitled to receive whole or fractional
shares of the related preferred shares on the basis of the proportion of
preferred shares represented by each Depositary Share as specified in the
applicable prospectus supplement, but holders of the preferred shares will not
thereafter be entitled to receive Depositary Shares therefor. If the
Depositary Receipts delivered by the holder evidence a number of Depositary
Shares in excess of the number of Depositary Shares representing the number of
preferred shares to be withdrawn, the Preferred Share Depositary will deliver
to the holder at the same time a new Depositary Receipt evidencing the excess
number of Depositary Shares.
Redemption of Depositary Shares
Whenever we redeem preferred shares held by the Preferred Share
Depositary, the Preferred Share Depositary will redeem as of the same
redemption date the number of Depositary Shares representing the preferred
shares so redeemed, provided we shall have paid in full to the Preferred Share
Depositary the redemption price of the preferred shares to be redeemed plus an
amount equal to any accrued and unpaid dividends thereon to the date fixed for
redemption. The redemption price per Depositary Share will be equal to the
redemption price and any other amounts per share payable with respect to the
preferred shares. If less than all the Depositary Shares are to be redeemed,
the Depositary Shares to be redeemed will be selected by the Preferred Share
Depositary by lot.
After the date fixed for redemption, the Depositary Shares so called for
redemption will no longer be deemed to be outstanding and all rights of the
holders of the Depositary Receipts evidencing the Depositary Shares so called
for redemption will cease, except the right to receive any moneys payable upon
redemption and any money or other property to which the holders of the
Depositary Receipts were entitled upon redemption upon surrender thereof to
the Preferred Share Depositary.
Voting of the Underlying Preferred Shares
Upon receipt of notice of any meeting at which the holders of the
preferred shares are entitled to vote, the Preferred Share Depositary will
mail the information contained in the notice of meeting to the record holders
of the Depositary Receipts evidencing the Depositary Shares which represent
the preferred shares. Each record holder of Depositary Receipts evidencing
Depositary Shares on the record date (which will be the same date as the
record date for the preferred shares) will be entitled to instruct the
Preferred Share Depositary as to the exercise of the voting rights pertaining
to the amount of preferred shares represented by the holder's Depositary
Shares. The Preferred Share Depositary will vote the amount of preferred
shares represented by the Depositary Shares in accordance with the
instructions, and we will agree to take all reasonable action which may be
deemed necessary by the Preferred Share Depositary in order to enable the
Preferred Share Depositary to do so. The Preferred Share Depositary will
abstain from voting the amount of preferred shares represented by the
Depositary Shares to the extent it does not receive specific instructions from
the holders of Depositary Receipts evidencing the Depositary Shares.
Liquidation Preference
In the event of our liquidation, dissolution or winding up, whether
voluntary or involuntary, each holder of a Depositary Receipt will be entitled
to the fraction of the liquidation preference accorded each preferred share
represented by the Depositary Share evidenced by the Depositary Receipt, as
set forth in the applicable prospectus supplement.
Conversion of Preferred Shares
The Depositary Shares, as such, are not convertible into common shares or
any other securities or property of ours. Nevertheless, if so specified in the
applicable prospectus supplement relating to an offering of Depositary Shares,
the Depositary Receipts may be surrendered by holders thereof to the Preferred
Share Depositary with written instructions to the Preferred Share Depositary
to instruct us to cause conversion of the preferred shares represented by the
Depositary Shares evidenced by Depositary Receipts into whole common shares,
other preferred shares of ours or other capital shares of ours, and we have
agreed that upon receipt of instructions and any amounts payable in respect
thereof, it will cause the conversion thereof utilizing the same procedures as
those provided for delivery of preferred shares to effect the conversion. If
the Depositary Shares evidenced by a Depositary Receipt are to be converted in
part only, one or more new Depositary Receipts will be issued for any
Depositary Shares not to be converted. No fractional common shares will be
issued upon conversion, and if the conversion will result in a fractional
share being issued, an amount will be paid in cash by us equal to the value of
the fractional interest based upon the closing price of the common shares on
the last business day prior to the conversion.
Amendment and Termination of the Deposit Agreement
The form of Depositary Receipt evidencing the Depositary Shares which
represent the preferred shares and any provision of the Deposit Agreement may
at any time be amended by agreement between us and the Preferred Share
Depositary. However, any amendment that materially and adversely alters the
rights of the holders of Depositary Receipts will not be effective unless the
amendment has been approved by the existing holders of at least a majority of
the Depositary Shares evidenced by the Depositary Receipts then outstanding.
The Deposit Agreement may be terminated by us upon not less than 30 days'
prior written notice to the Preferred Share Depositary if (1) the termination
is to preserve our status as a REIT or (2) a majority of each class of
preferred shares affected by the termination consents to the termination,
whereupon the Preferred Share Depositary shall deliver or make available to
each holder of Depositary Receipts, upon surrender of the Depositary Receipts
held by the holder, the number of whole or fractional preferred shares as are
represented by the Depositary Shares evidenced by Depositary Receipts. In
addition, the Deposit Agreement will automatically terminate if (1) all
outstanding Depositary Shares shall have been redeemed, (2) there shall have
been a final distribution in respect of the related preferred shares in
connection with any liquidation, dissolution or winding up of LaSalle Hotel
Properties and the distribution shall have been distributed to the holders of
Depositary Receipts evidencing the Depositary Shares representing the
preferred shares or (iii) each related preferred share shall have been
converted into capital share of LaSalle Hotel Properties not so represented by
Depositary Shares.
Charges of Preferred Shares Depositary
We will pay all transfer and other taxes and governmental charges arising
solely from the existence of the Deposit Agreement. In addition, we will pay
the fees and expenses of the Preferred Share Depositary in connection with the
performance of its duties under the Deposit Agreement. However, holders of
Depositary Receipts will pay the fees and expenses of the Preferred Share
Depositary for any duties requested by the holders to be performed which are
outside of those expressly provided for in the Deposit Agreement.
Resignation and Removal of Depositary
The Preferred Share Depositary may resign at any time by delivering to us
notice of its election to do so, and we may at any time remove the Preferred
Share Depositary, any resignation or removal to take effect upon the
appointment of a successor Preferred Share Depositary. A successor Preferred
Share Depositary must be appointed within 60 days after delivery of the notice
of resignation or removal and must be a bank or trust company having its
principal office in the United States and having a combined capital and
surplus of at least $50,000,000.
Miscellaneous
The Preferred Share Depositary will forward to holders of Depositary
Receipts any reports and communications from LaSalle Hotel Properties which
are received by the Preferred Share Depositary with respect to the related
preferred shares.
Neither LaSalle Hotel Properties nor the Preferred Share Depositary will
be liable if the Preferred Share Depositary is prevented from or delayed in,
by law or any circumstances beyond its control, performing its obligations
under the Deposit Agreement. The obligations of LaSalle Hotel Properties and
the Preferred Share Depositary under the Deposit Agreement will be limited to
performing specified duties thereunder in good faith and without negligence,
gross negligence or willful misconduct, and LaSalle Hotel Properties and the
Preferred Share Depositary will not be obligated to prosecute or defend any
legal proceeding in respect of any Depositary Receipts, Depositary Shares or
preferred shares represented thereby unless satisfactory indemnity is
furnished. LaSalle Hotel Properties and the Preferred Share Depositary may
rely on written advice of counsel or accountants, or information provided by
persons presenting the preferred shares represented thereby for deposit,
holders of Depositary Receipts or other persons believed to be competent to
give information, and on documents believed to be genuine and signed by a
proper party.
If the Preferred Share Depositary shall receive conflicting claims,
requests or instructions from any holders of Depositary Receipts, on the one
hand, and from LaSalle Hotel Properties, on the other hand, the Preferred
Share Depositary shall be entitled to act on claims, requests or instructions
received from LaSalle Hotel Properties.
RESTRICTIONS ON OWNERSHIP OF CAPITAL SHARES
Restrictions on Ownership and Transfer
For us to qualify as a REIT under the Code, no more than 50% in value of
our outstanding shares of beneficial interest may be owned, actually or
constructively, by five or fewer individuals (as defined in the Code to
include certain entities) during the last half of a taxable year (other than
the first year for which an election to be treated as a REIT has been made) or
during a proportionate part of a shorter taxable year. In addition, if we, or
an owner of 10% or more in value of our shares, actually or constructively
owns 10% or more of a tenant of ours (or a tenant of any partnership in which
we are a partner), the rent we receive (either directly or through any such
partnership) from such tenant will not be qualifying income for purposes of
the REIT gross income tests of the Code. A REIT's shares also must be
beneficially owned by 100 or more persons during at least 335 days of a
taxable year of twelve months or during a proportionate part of a shorter
taxable year (other than the first year for which an election to be treated as
a REIT has been made).
Because our Board of Trustees believes it is desirable for us to qualify
as a REIT, our Declaration of Trust, subject to certain exceptions, provides
that no holder may own, or be deemed to own by virtue of the attribution
provisions of the Code, more than the Ownership Limit. The ownership
attribution rules under the Code are complex and may cause shares owned
actually or constructively by a group of related individuals and/or entities
to be owned constructively by one individual or entity. As a result, the
acquisition of less than 9.8% of the shares (or the acquisition of an interest
in an entity that owns, actually or constructively, shares) by an individual
or entity, could, nevertheless cause that individual or entity, or another
individual or entity, to own constructively in excess of 9.8% of the
outstanding shares and thus subject such shares to the Ownership Limit. The
Board of Trustees may grant an exemption from the Ownership Limit with respect
to one or more persons who would not be treated as "individuals" for purposes
of the Code if such person submits to the Board information satisfactory to
the Board, in its reasonable discretion, demonstrating that (i) such person is
not an individual for purposes of the Code, (ii) such ownership will not cause
a person who is an individual to be treated as owning shares in excess of the
Ownership Limit, applying the applicable constructive ownership rules, and
(iii) such ownership will not otherwise jeopardize our status as a REIT. As a
condition of such waiver, the Board of Trustees may, in its reasonable
discretion, require undertakings or representations from the applicant to
ensure that the conditions in clauses (i), (ii) and (iii) of the preceding
sentence are satisfied and will continue to be satisfied as long as such
person owns shares in excess of the Ownership Limit. Under certain
circumstances, the Board of Trustees may, in its sole and absolute discretion,
grant an exemption for individuals or entities to acquire any series or class
of Preferred Shares in excess of the Ownership Limit, provided that certain
conditions are met and any representations and undertakings that may be
required by the Board of Trustees are made. In either circumstance, prior to
granting any exemption, the Board of Trustees must receive a ruling from the
Internal Revenue Service or advice of counsel, in either case in form and
substance satisfactory to the Board of Trustees, as it may deem necessary or
advisable in order to determine or ensure our status as a REIT.
Our Declaration of Trust further prohibits (a) any person from actually
or constructively owning shares of beneficial interest that would result in
our being "closely held" under Section 856(h) of the Code or otherwise cause
us to fail to qualify as a REIT and (b) any person from transferring shares of
beneficial interest of ours if such transfer would result in shares of
beneficial interest being owned by fewer than 100 persons.
Any person who acquires or attempts or intends to acquire actual or
constructive ownership of shares of beneficial interest of ours that will or
may violate any of the foregoing restrictions on transferability and ownership
is required to give us notice immediately and to provide us with such other
information as we may request in order to determine the effect of such
transfer on our status as a REIT.
If any purported transfer of our shares of beneficial interest or any
other event would otherwise result in any person violating the Ownership Limit
or the other restrictions in our Declaration of the Trust, then any such
purported transfer will be void and of no force or effect with respect to the
purported transferee (the "Prohibited Transferee") as to that number of shares
that exceeds the Ownership Limit (referred to as "Excess Shares") and the
Prohibited Transferee shall acquire no right or interest (or, in the case of
any event other than a purported transfer, the person or entity holding record
title to any such shares in excess of the Ownership Limit (the "Prohibited
Owner") shall cease to own any right or interest) in such Excess Shares. Any
such Excess Shares described above will be transferred automatically, by
operation of law, to a trust, the beneficiary of which will be a qualified
charitable organization selected by us (the "Beneficiary"). Such automatic
transfer shall be deemed to be effective as of the close of business on the
Business Day (as defined in the Declaration of Trust) prior to the date of
such violating transfer. Within 20 days of receiving notice from us of the
transfer of shares to the trust, the trustee of the trust (who shall be
designated by us and be unaffiliated with us and any Prohibited Transferee or
Prohibited Owner) will be required to sell such Excess Shares to a person or
entity who could own such shares without violating the Ownership Limit, and
distribute to the Prohibited Transferee an amount equal to the lesser of the
price paid by the Prohibited Transferee for such Excess Shares or the sales
proceeds received by the trust for such excess shares. In the case of any
Excess Shares resulting from any event other than a transfer, or from a
transfer for no consideration (such as a gift), the trustee will be required
to sell such Excess Shares to a qualified person or entity and distribute to
the Prohibited Owner an amount equal to the lesser of the fair market value of
such Excess Shares as of the date of such event or the sales proceeds received
by the trust for such Excess Shares. In either case, any proceeds in excess of
the amount distributable to the Prohibited Transferee or Prohibited Owner, as
applicable, will be distributed to the Beneficiary. Prior to a sale of any
such Excess Shares by the trust, the trustee will be entitled to receive, in
trust for the Beneficiary, all dividends and other distributions paid by us
with respect to such Excess Shares, and also will be entitled to exercise all
voting rights with respect to such Excess Shares. Subject to Maryland law,
effective as of the date that such shares have been transferred to the trust,
the trustee shall have the authority (at the trustee's sole discretion and
subject to applicable law) (i) to rescind as void any vote cast by a
Prohibited Transferee prior to the discovery by us that such shares have been
transferred to the trust and (ii) to recast such vote in accordance with the
desires of the trustee acting for the benefit of the Beneficiary. However, if
we have already taken irreversible corporate action, then the trustee shall
not have the authority to rescind and recast such vote. Any dividend or other
distribution paid to the Prohibited Transferee or Prohibited Owner (prior to
the discovery by us that such shares had been automatically transferred to a
trust as described above) will be required to be repaid to the trustee upon
demand for distribution to the Beneficiary. If the transfer to the trust as
described above is not automatically effective (for any reason) to prevent
violation of the Ownership Limit, then the Declaration of Trust provides that
the transfer of the Excess Shares will be void.
In addition, shares of beneficial interest held in the trust shall be
deemed to have been offered for sale to us, or our designee, at a price per
share equal to the lesser of (i) the price per share in the transaction that
resulted in such transfer to the trust (or, in the case of a devise or gift,
the market value at the time of such devise or gift) and (ii) the market value
of such shares on the date we, or our designee, accepts such offer. We shall
have the right to accept such offer for a period of 90 days after the transfer
of Excess Shares to the Trust. Upon such a sale to us, the interest of the
Beneficiary in the shares sold shall terminate and the trustee shall
distribute the net proceeds of the sale to the Prohibited Owner.
The foregoing restrictions on transferability and ownership will not
apply if the Board of Trustees determines that it is no longer in our best
interests to attempt to qualify, or to continue to qualify, as a REIT.
All certificates representing shares of beneficial interest shall bear a
legend referring to the restrictions described above.
Each shareholder will, upon demand, be required to disclose to us in
writing such information with respect to the direct, indirect and constructive
ownership of shares of beneficial interest as the Board of Trustees deems
reasonably necessary to comply with the provisions of the Code applicable to a
REIT, to comply with the requirements of any taxing authority or governmental
agency or to determine any such compliance.
These Ownership Limitations could have the effect of delaying, deferring
or preventing a takeover or other transaction in which holders of some, or a
majority, of common shares might receive a premium for their common shares
over the then prevailing market price or which such holders might believe to
be otherwise in their best interest.
DESCRIPTION OF WARRANTS
We may issue Warrants for the purchase of common shares or preferred
shares. Warrants may be issued independently or together with any securities
and may be attached to or separate from the securities. Each series of
Warrants will be issued under a separate warrant agreement (each, a "Warrant
Agreement") to be entered into between LaSalle Hotel Properties and a warrant
agent specified therein ("Warrant Agent"). The Warrant Agent will act solely
for LaSalle Hotel Properties in connection with the Warrants of the series and
will not assume any obligation or relationship of agency or trust for or with
any holders or beneficial owners of Warrants.
The applicable prospectus supplement will describe the following terms,
where applicable, of the Warrants in respect of which this prospectus is being
delivered:
o the title of the Warrants;
o the aggregate number of the Warrants;
o the price or prices at which the Warrants will be issued;
o the currencies in which the price or prices of the Warrants may be
payable;
o the designation, amount and terms of the Securities purchasable upon
exercise of the Warrants;
o the designation and terms of the other Securities, if any, with which
the Warrants are issued and the number of the Warrants issued with
each security;
o if applicable, the date on and after which the Warrants and the
Securities purchasable upon exercise of the Warrants will be
separately transferable;
o the price or prices at which and currency or currencies in which the
Securities purchasable upon exercise of the Warrants may be
purchased;
o the date on which the right to exercise the Warrants shall commence
and the date on which the right shall expire;
o the minimum or maximum amount of the Warrants which may be exercised at
any one time;
o information with respect to book-entry procedures, if any;
o a discussion of material federal income tax considerations; and
o any other material terms of the Warrants, including terms, procedures
and limitations relating to the exchange and exercise of the
Warrants.
FEDERAL INCOME TAX CONSIDERATIONS
Based on various assumptions and factual representations made by us
regarding our operations, in the opinion of Brown & Wood llp, our counsel,
commencing with our taxable year ended December 31, 1998, LaSalle Hotel
Properties has been organized in conformity with the requirements for
qualification as a REIT under the Code, and its method of operating enables it
to meet the requirements for qualification and taxation as a REIT. The
qualification of LaSalle Hotel Properties depends upon our ability to meet the
various requirements imposed under the Code through actual operations. Brown &
Wood llp will not review our operations, and no assurance can be given that
actual operations will meet these requirements. The opinion of Brown & Wood
llp is not binding on the IRS or any court. The opinion of Brown & Wood llp is
based upon existing law, IRS regulations and currently published
administrative positions of the IRS and judicial decisions, which are subject
to change either prospectively or retroactively.
Taxation Of LaSalle Hotel Properties
General. LaSalle Hotel Properties will elect to be taxed as a REIT under
Sections 856 through 860 of the Code commencing with its taxable year ended
December 31, 1998. In any year in which LaSalle Hotel Properties qualifies for
taxation as a REIT, it generally will not be subject to federal corporate
income taxes on net income that it distributes currently to shareholders.
However, LaSalle Hotel Properties will be subject to federal income tax in the
following circumstances.
First, it will be taxed at regular corporate rates on any undistributed
REIT taxable income, including undistributed net capital gains. Second, under
certain circumstances, it may be subject to the "alternative minimum tax" on
any items of tax preference. Third, if LaSalle Hotel Properties has (i) net
income from the sale or other disposition of certain "foreclosure property"
that is held primarily for sale to customers in the ordinary course of
business or (ii) other nonqualifying income from foreclosure property, it will
be subject to tax at the highest corporate rate on such income. Fourth, if
LaSalle Hotel Properties has net income from prohibited transactions (which
are, in general, certain sales or other dispositions of property (other than
foreclosure property) held primarily for sale to customers in the ordinary
course of business), such income will be subject to a 100% tax. Fifth, if
LaSalle Hotel Properties should fail to satisfy the 75% gross income test or
the 95% gross income test (discussed below), and nonetheless should maintain
its qualification as a REIT because certain other requirements have been met,
it will be subject to a 100% tax on the net income attributable to the greater
of either the amount by which it fails the 75% gross income test or the amount
by which it fails the 95% gross income test. Sixth, if LaSalle Hotel
Properties should fail to distribute during each calendar year at least the
sum of (i) 85% of its REIT ordinary income for such year, (ii) 95% of its REIT
capital gain net income for such year, and (iii) any undistributed taxable
income from prior periods, it would be subject to a 4% excise tax on the
excess of such required distribution over the amounts actually distributed.
Seventh, if LaSalle Hotel Properties acquires or has acquired any asset from a
C corporation (i.e., a corporation generally subject to full corporate-level
tax) in a transaction in which the basis of the asset in the acquiror's hands
is determined by reference to the basis of the asset (or any other asset) in
the hands of the C corporation and the acquiror recognizes gain on the
disposition of such asset during the 10 year period beginning on the date on
which such asset was acquired by it, then to the extent of such asset's
"Built-In Gain" (i.e., the excess of (a) the fair market value of such asset
at the time of the acquisition by LaSalle Hotel Properties over (b) the
adjusted basis in such asset, determined as of the time of such acquisition),
such gain will be subject to tax at the highest regular corporate rate
applicable, pursuant to anticipated Treasury Regulations that have not yet
been promulgated. This result with respect to the recognition of Built-In Gain
assumes that LaSalle Hotel Properties will make an election pursuant to IRS
Notice 88-19 with respect to any such acquisition.
Requirements for Qualification. The Code defines a REIT as a corporation,
trust or association (1) that is managed by one or more trustees or directors,
(2) the beneficial ownership of which is evidenced by transferable shares of
stock, or by transferable certificates of beneficial interest, (3) that would
be taxable as a domestic corporation, but for Sections 856 through 859 of the
Code, (4) that is neither a financial institution nor an insurance company
subject to certain provisions of the Code, (5) the beneficial ownership of
which is held by 100 or more persons, (6) that during the last half of each
taxable year not more than 50% in value of the outstanding stock of which is
owned, directly or indirectly, by five or fewer individuals (as defined in the
Code to include certain entities), and (7) that meets certain other tests,
described below, regarding the nature of its income and assets. The Code
provides that conditions (1) through (4), inclusive, must be met during the
entire taxable year and that condition (5) must be met during at least 335
days of a taxable year of 12 months, or during a proportionate part of a
taxable year of less than 12 months.
Income Tests. In order to maintain qualification as a REIT, LaSalle Hotel
Properties must satisfy certain gross income requirements, which are applied
on an annual basis. First, at least 75% of its gross income (excluding gross
income from prohibited transactions) for each taxable year must be derived
directly or indirectly from investments relating to real property or mortgages
on real property (including "rents from real property" and, in certain
circumstances, interest) or from certain types of temporary investments.
Second, at least 95% of its gross income (excluding gross income from
prohibited transactions) for each taxable year must be derived from the same
items which qualify under the 75% income test, and from dividends, interest
and gain from the sale or disposition of stock or securities, or from any
combination of the foregoing.
The rents received pursuant to the Participating Leases qualify as "rents
from real property" in satisfying the gross income requirements for a REIT.
Moreover, we do not anticipate receiving rents that could cause us to fail to
meet the 75% and 95% gross income tests.
If LaSalle Hotel Properties fails to satisfy one or both of the 75% or
95% gross income tests for any taxable year, it may nevertheless qualify as a
REIT for such year if it is entitled to relief under certain provisions of the
Code. It is not possible, however, to state whether in all circumstances it
would be entitled to the benefit of these relief provisions. Even if these
relief provisions were to apply, however, a 100% tax would be imposed with
respect to the "excess net income" attributable to the failure to satisfy the
75% and 95% gross income tests.
Asset Tests. At the close of each quarter of its taxable year, LaSalle
Hotel Properties must satisfy the following three tests relating to the nature
of its assets: (1) at least 75% of the value of its total assets must be
represented by "real estate assets," cash, cash items and government
securities; (2) not more than 25% of its total assets may be represented by
securities other than those in the 75% asset class; and (3) of the investments
included in the 25% asset class, the value of any one issuer's securities
(other than an interest in a partnership, shares of a "qualified REIT
subsidiary" or another REIT) owned by LaSalle Hotel Properties may not exceed
5% of the value of its total assets, and LaSalle Hotel Properties may not own
more than 10% of any one issuer's outstanding voting securities (other than an
interest in a partnership, shares of a "qualified REIT subsidiary" or another
REIT).
Annual Distribution Requirements. In order to qualify as a REIT, LaSalle
Hotel Properties is required to distribute dividends (other than capital gain
dividends) to its shareholders in an amount at least equal to (1) the sum of
(a) 95% of its "REIT taxable income" (computed without regard to the dividends
paid deduction and net capital gain) and (b) 95% of the net income (after
tax), if any, from foreclosure property, minus (2) the sum of certain items of
noncash income. In addition, if LaSalle Hotel Properties disposes of any
assets with a "Built-In Gain" (as discussed above), it may be required,
pursuant to Treasury Regulations which have not yet been promulgated, to
distribute at least 95% of the Built-In Gain (after tax), if any, recognized
on the disposition of such asset.
To the extent that LaSalle Hotel Properties does not distribute all of
its net capital gain or distributes at least 95%, but less than 100%, of its
"REIT taxable income," as adjusted, it will be subject to tax thereon at
regular ordinary and capital gain corporate tax rates. In addition, if LaSalle
Hotel Properties should fail to distribute during each calendar year at least
the sum of (1) 85% of its REIT ordinary income for such year, (2) 95% of its
REIT capital gain income for such year, and (3) any undistributed taxable
income from prior periods, LaSalle Hotel Properties would be subject to a 4%
excise tax on the excess of such required distribution over the sum of amounts
actually distributed during the calendar year by the REIT and the amount, if
any, on which the REIT paid income tax for such year.
LaSalle Hotel Properties may elect to require the shareholders to include
its undistributed net capital gains in their income by designating, in a
written notice to shareholders, those amounts as undistributed capital gains
in respect of its shareholders' shares. If LaSalle Hotel Properties makes such
an election, the shareholders will (1) include in their income as capital
gains their proportionate share of such undistributed capital gains and (2) be
deemed to have paid their proportionate share of the tax paid by LaSalle Hotel
Properties on such undistributed capital gains and thereby receive a credit or
refund for such amount. In addition, a shareholder will increase the basis in
their shares by the difference between the amount of capital gain included in
their income and the amount of the tax that LaSalle Hotel Properties is deemed
to have paid on the shareholder's behalf. The earnings and profits of LaSalle
Hotel Properties will be adjusted appropriately.
Under certain circumstances, LaSalle Hotel Properties may be able to
rectify a failure to meet the distribution requirement for a year by paying
"deficiency dividends" to shareholders in a later year, which may be included
in LaSalle Hotel Properties' deduction for dividends paid for the earlier
year. Thus, LaSalle Hotel Properties may be able to avoid being taxed on
amounts distributed as deficiency dividends; however, LaSalle Hotel Properties
will be required to pay interest based upon the amount of any deduction taken
for deficiency dividends.
Failure to Qualify. If LaSalle Hotel Properties fails to qualify for
taxation as a REIT in any taxable year, it will be subject to tax (including
any applicable alternative minimum tax) on its taxable income at regular
corporate rates. Distributions to shareholders in a year in which LaSalle
Hotel Properties fails to qualify as a REIT will not be deductible and will
not be required to be made. In addition, if LaSalle Hotel Properties fails to
qualify as a REIT, all distributions to shareholders will be taxable as
ordinary income, to the extent of current and accumulated earnings and
profits, and, subject to certain limitations of the Code, corporate
distributees may be eligible for the dividends received deduction. Unless
entitled to relief under specific statutory provisions, LaSalle Hotel
Properties will also be disqualified from taxation as a REIT for the four
taxable years following the year during which qualification was lost. It is
not possible to state whether in all circumstances LaSalle Hotel Properties
would be entitled to such statutory relief.
Taxation Of Shareholders
Investors are urged to consult their own tax advisors with respect to the
appropriateness of an investment in the securities offered hereby and with
respect to the tax consequences arising under federal law and the laws of any
state, municipality or other taxing jurisdiction, including tax consequences
resulting from the investor's own tax characteristics. In particular, foreign
investors should consult their own tax advisors concerning the tax
consequences of an investment in LaSalle Hotel Properties, including the
possibility of United States income tax withholding on our distributions.
Taxation of Taxable Domestic Shareholders. As long as LaSalle Hotel
Properties qualifies as a REIT, distributions made to LaSalle Hotel
Properties' taxable domestic shareholders out of current or accumulated
earnings and profits (and not designated as capital gain dividends) will be
taken into account as ordinary income. Corporate shareholders will not be
eligible for the dividends received deduction as to such amounts.
Distributions in excess of current and accumulated earnings and profits will
not be taxable to a shareholder to the extent that they do not exceed the
adjusted basis of the shares, but rather will reduce the adjusted basis of
such shares. To the extent that such distributions exceed the adjusted basis
of the shares, they will be included in income as long-term capital gain (or
short-term capital gain if the shares have been held for one year or less),
assuming the shares are a capital asset in the hands of the shareholder.
Distributions that are designated as capital gain dividends will be taxed as
long-term capital gains (to the extent they do not exceed LaSalle Hotel
Properties' actual net capital gain for the taxable year) without regard to
the period for which the shareholder has held the shares.
In general, a domestic shareholder will realize capital gain or loss on
the disposition of the shares equal to the difference between (i) the amount
of cash and the fair market value of any property received on such disposition
and (ii) the shareholder's adjusted basis in the shares. Such gain or loss
generally will constitute long-term capital gain or loss if the shareholder
has held such shares for more than one year. Subject to certain exceptions,
for individuals, trusts and estates the maximum rate of tax on the net capital
gain from a disposition of the shares is 20%. The maximum rate has been
reduced to 18% for capital assets acquired after December 21, 2000 and held
for more than five years.
The maximum rate for net capital gains attributable to the sale of
depreciable real property held for more than 18 months in 25% to the extent of
the prior deductions for "unrecaptured Section 1250 gain" (i.e., depreciation
deductions not otherwise recaptured as ordinary income under the existing
depreciation recapture rules). Capital gain from the sale of depreciable real
property held for more than 18 months allocated by LaSalle Hotel Properties to
a non-corporate shareholder will be subject to the 25% rate to the extent that
the capital gain on the real property sold by LaSalle Hotel Properties does
not exceed prior depreciation deductions with respect to such property.
Loss upon a sale or exchange of the shares by a shareholder who has held
such shares for six months or less (after applying certain holding period
rules) will be treated as a long-term capital loss to the extent of
distributions from LaSalle Hotel Properties required to be treated by such
shareholder as long-term capital gain.
Backup Withholding. LaSalle Hotel Properties will report to its domestic
shareholders and the IRS the amount of dividends paid during each calendar
year, and the amount of tax withheld, if any, with respect thereto. Under the
backup withholding rules, a shareholder may be subject to backup withholding
at the rate of 31% with respect to dividends paid unless such holder (a) is a
corporation or comes within certain other exempt categories and, when
required, demonstrates this fact, or (b) provides a taxpayer identification
number and certifies as to no loss of exemption from backup withholding.
Amounts withheld as backup withholding will be creditable against the
shareholder's income tax liability. In addition, LaSalle Hotel Properties may
be required to withhold a portion of capital gain distributions made to any
shareholders who fail to certify their non-foreign status to LaSalle Hotel
Properties. See "--Taxation of Non-U.S. Shareholders" below.
Taxation of Tax-Exempt Shareholders. Distributions by LaSalle Hotel
Properties to a shareholder that is a tax-exempt entity should not constitute
"unrelated business taxable income" ("UBTI"), provided that the tax-exempt
entity has not financed the acquisition of its shares with "acquisition
indebtedness" within the meaning of the Code and the shares are not otherwise
used in an unrelated trade or business of the tax-exempt entity. However,
distributions by a REIT to a tax-exempt employee's pension trust that owns
more than 10 percent of the REIT will be treated as UBTI in an amount equal to
the percentage of gross income of the REIT that is derived from an "unrelated
trade or business" (determined as if the REIT were a pension trust) divided by
the gross income of the REIT for the year in which the dividends are paid.
This rule only applies, however, if (i) the percentage of gross income of the
REIT that is derived from an unrelated trade or business for the year in which
the dividends are paid is at least five percent, (ii) the REIT qualifies as a
REIT only because the pension trust is not treated as a single individual for
purposes of the "five-or-fewer rule", and (iii) (A) one pension trust owns
more than 25 percent of the value of the REIT or, (B) a group of pension
trusts individually holding more than 10 percent of the value of the REIT
collectively own more than 50 percent of the value of the REIT.
Taxation of Non-U.S. Shareholders. A non-U.S. shareholder is a
shareholder who is not a "U.S. Person" and who does not hold shares in
connection with the conduct of trade or business within the United States. A
U.S. Person is defined as a citizen or resident of the United States, a
corporation, partnership or other entity created or organized in or under the
laws of the United States or any State (other than a partnership that is not
treated as a U.S. Person under any applicable Treasury regulations), or an
estate whose income is subject to United States federal income tax regardless
of its source, or a trust if a court within the United States is able to
exercise primary supervision over the administration of the trust and one or
more U.S. Persons have the authority to control all substantial decisions of
the trust. Notwithstanding the preceding sentence, to the extent provided in
Treasury regulations, certain trusts in existence on August 20, 1996, and
treated as U.S. Persons prior to such date, that elect to continue to be
treated as U.S. Persons, also will be U.S. Persons. Non-U.S. shareholders
should consult with their own tax advisors to determine the impact of U.S.
Federal, state and local income tax laws with regard to an investment in
shares, including any reporting requirements.
Distributions that are not attributable to gain from sales or exchanges
by LaSalle Hotel Properties of U.S. real property interests and not designated
by LaSalle Hotel Properties as capital gain dividends will be treated as
dividends of ordinary income to the extent that they are made out of current
or accumulated earnings and profits of LaSalle Hotel Properties. Such
distributions, ordinarily, will be subject to a withholding tax equal to 30%
of the gross amount of the distribution unless an applicable tax treaty
reduces that tax. Distributions in excess of current and accumulated earnings
and profits of LaSalle Hotel Properties will not be taxable to a non-U.S.
shareholder to the extent it does not exceed the adjusted basis of the shares,
but rather will reduce the adjusted basis of such shares. To the extent that
such distributions exceed the adjusted basis of a non-U.S. shareholder's
shares, it will give rise to tax liability if the non-U.S. shareholder would
otherwise be subject to tax on any gain from the sale or disposition of his
shares as described below (in which case they also may be subject to a 30%
branch profits tax if the shareholder is a foreign corporation). If it cannot
be determined at the time a distribution is made whether or not such
distribution will be in excess of current or accumulated earnings and profits,
the entire distribution will be subject to withholding at the rate applicable
to dividends. However, the non-U.S. shareholder may seek a refund of such
amounts from the IRS if it is subsequently determined that such distribution
was, in fact, in excess of current or accumulated earnings and profits of
LaSalle Hotel Properties.
For any year in which LaSalle Hotel Properties qualifies as a REIT,
distributions that are attributable to gain from sales or exchanges by LaSalle
Hotel Properties of U.S. real property interests will be taxed to a non-U.S.
shareholder under the provisions of the Foreign Investment in Real Property
Tax Act of 1980 ("FIRPTA") at the normal capital gain rates applicable to U.S.
shareholders (subject to applicable alternative minimum tax and a special
alternative minimum tax in the case of nonresident alien individuals). Also,
distributions subject to FIRPTA may be subject to a 30% branch profits tax in
the hands of a corporate non-U.S. shareholder not entitled to treaty relief or
exemption. LaSalle Hotel Properties is required by applicable Treasury
Regulations to withhold 35% of any distribution that is or could be designated
by LaSalle Hotel Properties as a capital gain dividend. The amount withheld is
creditable against the non-U.S. shareholder's FIRPTA tax liability.
Gain recognized by a non-U.S. shareholder upon a sale of shares generally
will not be taxed under FIRPTA if LaSalle Hotel Properties is a "domestically
controlled REIT," defined generally as a REIT in which at all times during a
specified testing period less than 50% in value of the stock was held directly
or indirectly by foreign persons. If LaSalle Hotel Properties does not qualify
as a "domestically controlled REIT," a non-U.S. shareholder's sale of
securities of the LaSalle Hotel Properties generally still will not be subject
to U.S. tax under FIRPTA as a sale of a U.S. real property interest, provided
that, (i) the securities are "regularly traded" (as defined by the applicable
Treasury regulations) on an established securities market, and (ii) the
selling non-U.S. shareholder held 5% or less of LaSalle Hotel Properties'
outstanding securities at all times during a specified testing period. LaSalle
Hotel Properties believes the shares would be considered to be "regularly
traded" for this purpose, and the LaSalle Hotel Properties has no actual
knowledge of any non-U.S. shareholder that holds in excess of 5% of the
LaSalle Hotel Properties' stock.
If the gain on the sale of the shares were to be subject to tax under
FIRPTA, the non-U.S. shareholder would be subject to the same treatment as
U.S. shareholders with respect to such gain (subject to applicable alternative
minimum tax and a special alternative minimum tax in the case of nonresident
alien individuals), and the purchaser of the shares would be required to
withhold and remit to the IRS 10% of the purchase price.
Backup Withholding Tax and Information Reporting. Backup withholding tax
(which generally is a withholding tax imposed at the rate of 31% on certain
payments to persons that fail to furnish certain information under the United
States information reporting requirements) and information reporting will
generally not apply to distributions paid to non-U.S. Shareholders outside the
United States that are treated as (i) dividends subject to the 30% (or lower
treaty rate) withholding tax discussed above, (ii) capital gains dividends or
(iii) distributions attributable to gain from the sale or exchange by LaSalle
Hotel Properties of U.S. real property interests.
As a general matter, backup withholding and information reporting will
not apply to a payment of the proceeds of a sale of shares by or through a
foreign office of a foreign broker. Information reporting (but not backup
withholding) will apply, however, to a payment of the proceeds of a sale of
shares by a foreign office of a broker that (a) is a U.S. Person, (b) derives
50% or more of its gross income for certain periods from the conduct of a
trade or business in the United States or (c) is a "controlled foreign
corporation" (generally, a foreign corporation controlled by United States
shareholders) for United States tax purposes, unless the broker has
documentary evidence in its records that the holder is a non-U.S. shareholder
and certain other conditions are met, or the shareholder otherwise establishes
an exemption. Payment to or through a United States office of a broker of the
proceeds of a sale of shares is subject to both backup withholding and
information reporting unless the shareholder certifies under penalty of
perjury that the shareholder is a non-U.S. shareholder, or otherwise
establishes an exemption. A non-U.S. shareholder may obtain a refund of any
amounts withheld under the backup withholding rules by filing the appropriate
claim for refund with the IRS.
The United States Treasury has recently finalized regulations regarding
the withholding and information reporting rules. In general, these regulations
do not alter the substantive withholding and information reporting
requirements but unify certification procedures and forms and clarify and
modify reliance standards. These regulations generally will be effective for
payments made after December 31, 2000, subject to certain transition rules. A
non-U.S. shareholder should consult its own advisor regarding the effect of
the new Treasury Regulations.
PLAN OF DISTRIBUTION
LaSalle Hotel Properties may sell the securities to one or more
underwriters for public offering and sale by them or may sell the securities
to investors directly or through agents. Any underwriter or agent involved in
the offer and sale of the securities will be named in the applicable
prospectus supplement.
Underwriters may offer and sell the 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. LaSalle Hotel Properties
also may, from time to time, authorize underwriters acting as their agents to
offer and sell the securities upon the terms and conditions as are set forth
in the applicable prospectus supplement. In connection with the sale of
securities, underwriters may be deemed to have received compensation from
LaSalle Hotel Properties in the form of underwriting discounts or commissions
and may also receive commissions from purchasers of securities for whom they
may act as agent. Underwriters may sell securities to or through dealers, and
dealers may receive compensation in the form of discounts, concessions or
commissions from the underwriters and/or commissions from the purchasers for
whom they may act as agent.
Any underwriting compensation paid by LaSalle Hotel Properties to
underwriters or agents in connection with the offering of securities, and any
discounts, concessions for 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 securities may be deemed to be underwriters, and any discounts and
commissions received by them and any profit realized by them on resale of the
securities may be deemed to be underwriting discounts and commissions, under
the Securities Act. Underwriters, dealers and agents may be entitled, under
agreements entered into with LaSalle Hotel Properties, to indemnification
against and contribution toward certain civil liabilities, including
liabilities under the Securities Act.
Certain of the underwriters and their affiliates may engage in
transactions with, and perform services for, LaSalle Hotel Properties and its
subsidiaries in the ordinary course of business.
LEGAL MATTERS
The validity of the issuance of the securities offered hereby and certain
legal matters described under "Federal Income Tax Considerations" will be
passed upon for LaSalle Hotel Properties by Brown & Wood LLP, New York, New
York.
EXPERTS
The consolidated financial statements and schedule of LaSalle Hotel
Properties as of December 31, 1998 and for the period from April 29, 1998
(inception) through December 31, 1998 and the financial statements of LaSalle
Hotel Lessee, Inc. as of December 31, 1998 and for the period from April 29,
1998 (inception) through December 31, 1998 have been incorporated by reference
herein in reliance upon the reports of KPMG LLP, independent certified public
accountants, incorporated by reference herein, and upon the authority of said
firm as experts in accounting and auditing.
<PAGE>
<TABLE>
<CAPTION>
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<S> <C>
TABLE OF CONTENTS
Prospectus
Forward-Looking Statement May Prove
Inaccurate.....................................2
Lasalle Hotel Properties.......................2
Risk Factors...................................3
Where You Can Find More Information...........12
Use of Proceeds...............................13 LaSalle
Description of Common Shares..................13 Hotel
Description of Preferred Shares...............14 Properties
Description of Depositary Shares..............21
Restrictions on Ownership of Capital Shares...24
Description of Warrants.......................27
Federal Income Tax Considerations.............27
Plan of Distribution..........................33
Legal Matters.................................34
Experts.......................................34
================================================= ================================================
</TABLE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 14. Other Expenses of Issuance and Distribution
The following sets forth the estimated expenses in connection with the
issuance and distribution of the Registrant's securities being registered
hereby, other than underwriting discounts and commissions, all of which will
be borne by the Registrant:
<TABLE>
<S> <C>
Securities and Exchange Commission registration fee............ $55,600
NYSE Listing Fee............................................... 12,500
Printing and engraving expenses................................ 50,000
Legal fees and expenses........................................ 75,000
Accounting fees and expenses................................... 3,000
Blue Sky fees and expenses..................................... 2,000
Miscellaneous.................................................. 10,000
Total $208,100
</TABLE>
Item 15. Indemnification of Trustees and Officers.
The Company's officers and trustees are and will be indemnified under
Maryland and Delaware law, the Declaration of Trust and Bylaws of the Company
and the Partnership Agreement of the Operating Partnership against certain
liabilities. The Declaration of Trust of the Company requires it to indemnify
its trustees and officers to the fullest extent permitted from time to time
under Maryland law.
The Declaration of Trust of the Company authorizes it, to the maximum
extent permitted by Maryland law, to obligate itself to indemnify and to pay
or reimburse reasonable expenses in advance of final disposition of a
proceeding to (a) any present or former trustee or officer or (b) any
individual who, while a trustee of the Company and at the request of the
Company, serves or has served as a director, officer, partner, trustee,
employee or agent of another corporation, partnership, joint venture, trust,
employee benefit plan or any other enterprise from and against any claim or
liability to which such person may become subject or which such person may
incur by reason of his or her status as a present or former trustee or officer
of the Company. The Bylaws of the Company obligate it, to the maximum extent
permitted by Maryland law, to indemnify and to pay or reimburse reasonable
expenses in advance of final disposition of a proceeding to (a) any present or
former trustee or officer who is made party to the proceeding by reason of his
service in that capacity or (b) any individual who, while a trustee or officer
of the Company and at the request of the Company, serves or has served another
real estate investment trust, corporation, partnership, joint venture, trust,
employee benefit plan or any other enterprise as a trustee, director, officer
or partner of such real estate investment trust, corporation, partnership,
joint venture, trust, employee benefit plan or other enterprise and who is
made a party to the proceeding by reason of his service in that capacity,
against any claim or liability to which he may become subject by reason of
such status.
The Declaration of Trust and Bylaws also permit the Company to indemnify
and advance expenses to any person who served as a predecessor of the Company
in any of the capacities described above and to any employee or agent of the
Company or a predecessor of the Company. The Bylaws require the Company to
indemnify a trustee or officer who has been successful, on the merits or
otherwise, in the defense of any proceeding to which he is made a party by
reason of his service in that capacity.
The Maryland REIT Law permits a Maryland real estate investment trust to
indemnify and advance expenses to its trustees, officers, employees and agents
to the same extent as permitted by Maryland Law for directors and officers of
Maryland corporations. Maryland Law permits a corporation to indemnify its
present and former directors and officers, among others, against judgments,
penalties, fines, settlements and reasonable expenses actually incurred by
them in connection with any proceeding to which they may be made a party by
reason of their service in those or other capacities unless it is established
that (a) the act or omission of the director or officer was material to the
matter giving rise to the proceeding and (i) was committed in bad faith or
(ii) was the result of active and deliberate dishonesty, (b) the director or
officer actually received an improper personal benefit in money, property or
services or (c) in the case of any criminal proceeding, the director or
officer had reasonable cause to believe that the act or omission was unlawful.
However, under Maryland Law, a Maryland corporation may not indemnify for an
adverse judgment in a suit by or in the right of the corporation. In
accordance with Maryland Law, the Bylaws of the Company require it, as a
condition to advance expenses, to obtain (a) a written affirmation by the
director or officer of his good faith belief that he has met the standard of
conduct necessary for indemnification by the Company as authorized by the
Bylaws and (b) a written statement by or on his behalf to repay the amount
paid or reimbursed by the Company if it shall ultimately be determined that
the standard of conduct was not met.
The Company has entered into indemnification agreements with each of its
trustees and officers. The indemnification agreements require, among other
things, that the Company indemnify its trustees and officers to the fullest
extent permitted by law and advance to its trustees and executive officers all
related expenses, subject to reimbursement if it is subsequently determined
that indemnification is not permitted.
Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to trustees or officers pursuant to the foregoing
provisions, the Company has been informed that in the opinion of the
Commission such indemnification is against public policy as expressed in the
Act and is therefore unenforceable.
Item 16. Exhibits.
1 -- Form of Underwriting Agreement.(1)
4.1 -- Form of Common Share Certificate.(2)
4.2 -- Form of Designating Amendment for Preferred Shares.(1)
4.3 -- Form of Preferred Share Certificate.(1)
4.4 -- Form of Warrant Agreement.(1)
4.5 -- Form of Warrant.(1)
5 -- Opinion of Brown & Wood LLP as to the legality of
the Securities.(3)
8 -- Opinion of Brown & Wood LLP as to tax matters.
12.1 -- Calculation of LaSalle Hotel Properties Ratios of Earnings
to Combined Fixed Charges and Preferred Stock Dividends.(4)
23.1 -- Consent of Brown & Wood LLP (included in Exhibits 5
and 8). (3)
23.2 -- Consent of KPMG LLP. (4)
24 -- Power of attorney. (4)
- ------------
(1) To be filed by amendment or incorporated by reference in connection
with the offering of Securities.
(2) Previously filed as an exhibit to Registration Statement on Form S-11
(No. 333-45647) and incorporated herein by reference.
(3) A revised opinion will be filed by amendment or incorporated by
reference in connection with the offering of Securities.
(4) Previously filed on April 29, 1999 as an exhibit to this
Registration Statement.
Item 17. Undertakings.
(a) The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made,
a post-effective amendment to the Registration Statement;
(i) To include any prospectus required by Section 10(a)(3) of
the Securities Act;
(ii) To reflect in the prospectus any facts or events arising
after the effective date of the Registration Statement (or the most
recent post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth
in the Registration Statement. Notwithstanding the foregoing, any
increase or decrease in volume of securities offered (if the total
dollar value of securities offered would not exceed that which was
registered) and any deviation from the low or high end of the
estimated maximum offering range may be reflected in the form of
prospectus filed with the Commission pursuant to Rule 424(b) if, in
the aggregate, the changes in volume and price represent no more than
a 20% change in the maximum offering price set forth in the
"Calculation of Registration Fee" table in the effective registration
statement; and
(iii) To include any material information with respect to the
plan of distribution not previously disclosed in the Registration
Statement or any material change to such information in the
Registration Statement.
Provided, however, that paragraphs (1)(i) and (1)(ii) do
not apply if the information required to be included in a
post-effective amendment by those paragraphs is contained in
periodic reports filed by the Registrant pursuant to Section 13
or 15(d) of the Exchange Act that are incorporated by reference
in the Registration Statement.
(2) That, for the purpose of determining any liability under the
Securities Act, each such post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial
bona fide offering thereof; and
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the termination
of the offering.
(b) The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act, each filing of the
Registrant's annual report pursuant to Section 13(a) or 15(d) of the Exchange
Act (and, where applicable, each filing of an employee benefit plan's annual
report pursuant to Section 15(d) of the Exchange Act) that is incorporated by
reference in the Registration Statement shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial
bona fide offering thereof.
(c) Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to directors, officers, partners and
controlling persons of a Registrant pursuant to the foregoing provisions, or
otherwise, the Registrants have been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against public
policy as expressed in the Securities Act and is, therefore, unenforceable. In
the event that a claim for indemnification against such liabilities (other
than the payment by a Registrant of expenses incurred or paid by a director,
officer, partner or controlling person of the Registrant in the successful
defense of any action, suit or proceeding) is asserted by such director,
officer, partner or controlling person in connection with the securities being
registered, the applicable Registrant will, unless in the opinion of its
counsel the matter has been settled by controlling precedent, submit to a
court of appropriate jurisdiction the question whether such indemnification by
it is against public policy as expressed in the Securities Act and will be
governed by the final adjudication of such issue.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933,
LaSalle Hotel Properties certifies that it has reasonable grounds to believe
that it meets all of the requirements for filing on Form S-3 and has duly
caused this registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in Washington, DC, on May 10, 1999.
LASALLE HOTEL PROPERTIES
By: /s/ Hans S. Weger
------------------------------------
Hans S. Weger
Chief Financial Officer
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities and on the dates indicated.
Signature Title Date
Stuart L. Scott*
-------------------------- Chairman of the Board
Stuart L. Scott of Trustees
Jon E. Bortz* President, Chief Executive
--------------------------- Officer and Trustee
Jon E. Bortz
Darryl Hartley Leonard* Trustee
--------------------------
Darryl Hartley-Leonard
George F. Little, II* Trustee
---------------------------
George F. Little, II
Donald S. Perkins* Trustee
---------------------------
Donald S. Perkins
Shimon Topor* Trustee
---------------------------
Shimon Topor
Donald A. Washburn* Trustee
----------------------------
Donald A. Washburn
*By: /s/ Hans S. Weger May 10, 1999
-----------------------------
Hans S. Weger
Attorney-in-Fact
<PAGE>
Exhibit Index
Exhibits Description
-------- -----------
1 -- Form of Underwriting Agreement.(1)
4.1 -- Form of Common Share Certificate.(2)
4.2 -- Form of Designating Amendment for Preferred Shares.(1)
4.3 -- Form of Preferred Share Certificate.(1)
4.4 -- Form of Warrant Agreement.(1)
4.5 -- Form of Warrant.(1)
5 -- Opinion of Brown & Wood LLP as to the legality of the
Securities.(3)
8 -- Opinion of Brown & Wood LLP as to tax matters.
12.1 -- Calculation of LaSalle Hotel Properties Ratios of Earnings
to Combined Fixed Charges and Preferred Stock Dividends.(4)
23.1 -- Consent of Brown & Wood LLP (included in Exhibits 5 and 8).(3)
23.2 -- Consent of KPMG LLP. (4)
24 -- Power of attorney.(4)
- -----------------
(1) To be filed by amendment or incorporated by reference in connection
with the offering of Securities.
(2) Previously filed as an exhibit to Registration Statement on Form S-11
(No. 333-45647) and incorporated herein by reference.
(3) A revised opinion will be filed by amendment or incorporated by
reference in connection with the offering of Securities.
(4) Previously filed on April 29, 1999 as an exhibit to this Registration
Statement.
[BROWN & WOOD LLP LETTERHEAD]
May 11, 1999
LaSalle Hotel Properties
1401 Eye Street, NW, Suite 900
Washington, DC 20005
Ladies and Gentlemen:
This opinion is furnished in connection with the registration
statement on Form S-3 (the "Registration Statement"), pursuant to the
Securities Act of 1933, as amended (the "Securities Act"), relating to an
indeterminate amount of Common Shares of beneficial interest, Common Share
Warrants, Preferred Shares of beneficial interest and Depositary Shares
representing Preferred Shares (as such terms are used in the Registration
Statement), of LaSalle Hotel Properties, a Maryland real estate investment
trust (the "Company") authorized for issuance under the Company's Articles of
Amendment and Restatement of Declaration of Trust (the "Declaration of Trust
"), with an aggregate public offering price of up to $200,000,000
(collectively, the "Securities"). The Registration Statement provides that the
Securities may be offered separately or together, in separate series, in
amounts, at prices and on terms to be set forth in one or more prospectus
supplements to the prospectus contained in the Registration Statement
(collectively, the "Prospectus").
In connection with rendering this opinion, we have examined the
Declaration of Trust, and the Bylaws of the Company; such records of the
proceedings of the Company as we deemed appropriate; the Registration
Statement, and such other certificates, receipts, records and documents as we
considered necessary for the purposes of this opinion.
Based upon the foregoing, we are of the opinion that:
(a) The Common Shares have been duly authorized and, when
delivered and paid for in the manner contemplated by the Prospectus, will be
validly issued, fully paid and nonassessable.
(b) The Preferred Shares have been duly authorized and, when the
number and specific terms thereof have been duly established in accordance
with the Designating Amendment (as defined in the Prospectus) and such shares
are delivered and paid for in the manner contemplated by the Prospectus, will
be validly issued, fully paid and nonassessable.
(c) The Common Share Warrants have been duly authorized and, when
the number and specific terms thereof have been duly established and such
warrants are duly executed and delivered by the Company and countersigned by
the applicable Warrant Agent in accordance with an applicable Warrant
Agreement (as such terms are defined in the Prospectus), and when delivered
and paid for in the manner contemplated in the Prospectus, will constitute
legally issued, valid and binding obligations of the Company and will entitle
the holders thereof to the rights specified in the Warrant Agreement.
The foregoing assumes that all requisite steps will be taken to comply
with the requirements of the Securities Act and applicable requirements of
state laws regulating the offer and sale of securities.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and the reference to our firm under the caption "Legal
Matters" in the Prospectus.
Very truly yours,
/s/ BROWN & WOOD, LLP
May 11, 1999
LaSalle Hotel Properties
1401 Eye Street, NW, Suite 900
Washington, DC 20005
Ladies and Gentlemen:
You have requested our opinion concerning certain federal income tax
matters with respect to LaSalle Hotel Properties (the "Company") in connection
with the Form S-3 Registration Statement filed by the Company with the
Securities and Exchange Commission (the "SEC") on April 29, 1999 (the
"Registration Statement"), as amended through the date hereof.
This opinion is based, in part, upon various assumptions and
representations, including representations made by the Company as to factual
matters set forth in the Registration Statement, in the registration statement
on Forms S-11 and S-3 previously filed by the Company with the SEC and in a
letter delivered to us by the Company today. This opinion is also based upon
the Internal Revenue Code of 1986, as amended (the "Code"), the Treasury
Regulations promulgated thereunder and existing administrative and judicial
interpretations thereof, all as they exist at the date of this letter. All of
the foregoing statues, regulations and interpretations are subject to change,
in some circumstances with retroactive effect. Any changes to the foregoing
authorities might result in modifications of our opinions contained herein.
Based on the foregoing, we are of the opinion that, commencing with
the Company's taxable year ended December 31, 1998, the Company has been
organized in conformity with the requirements for qualification and taxation
as a real estate investment trust (a "REIT") under the Code and the proposed
method of operation of the Company will enable the Company to meet the
requirements for qualification and taxation as a REIT.
We express no opinion with respect to the transactions described
herein and in the Registration Statement other than those expressly set forth
herein. Furthermore, the Company's qualification as a REIT will depend on the
Company's making a timely election for REIT status and meeting, in its actual
operations, the applicable asset composition, source of income, shareholder
diversification, distribution and other requirements of the Code and Treasury
Regulations necessary for an entity to qualify as a REIT. We will not review
these operations and no assurance can be given that the actual operations of
the Company and its affiliates will meet these requirements or the
representations made to us with respect thereto.
This opinion is furnished to you solely for your use in connection
with the Registration Statement. We hereby consent to the filing of this
opinion as Exhibit 8 to the Registration Statement and to the use of our name
in connection with the material discussed therein under the caption "Federal
Income Tax Considerations."
Very truly yours,
/s/ BROWN & WOOD, LLP
