AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON APRIL 15, 1999
REGISTRATION STATEMENT NO. 333-
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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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
incorporation or organization) identification number)
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.|_|
If this Form is a post-effective amendment filed pursuant to Rule
462(c) under the Securities Act, check the following box and list the
Securities Act registration statement number of the earlier effective
registration statement for the same offering.|_|
If delivery of the prospectus is expected to be made pursuant to Rule
434, please check the following box.|X|
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<TABLE>
<CAPTION>
CALCULATION OF REGISTRATION FEE
- ----------------------------- -------------------- -------------------------- ----------------------- ---------------------
Title of Class of Proposed Maximum Proposed Maximum
Securities to be Amount To Be Aggregate Price per Aggregate Offering Amount of
Registered(1) Registered Common Share(1) Price(1) Registration Fee(1)
- ----------------------------- -------------------- -------------------------- ----------------------- ---------------------
- ----------------------------- -------------------- -------------------------- ----------------------- =====================
<S> <C> <C> <C> <C>
Common Shares of Beneficial
Interest, $.01 par value
per share 4,462,292 $12.875 $57,452,010 $15,972
- ----------------------------- -------------------- -------------------------- ----------------------- =====================
(1) Estimated solely for purposes of calculating the registration fee in
accordance with the Rule 457(c) based on the average of the high and
low reported sales prices on the New York Stock Exchange on April 12,
1998.
</TABLE>
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.
<PAGE>
SUBJECT TO COMPLETION
PRELIMINARY PROSPECTUS DATED APRIL 15, 1999
PROSPECTUS
4,462,292 SHARES
LASALLE HOTEL PROPERTIES
COMMON SHARES OF BENEFICIAL INTEREST
-----------------
This Prospectus relates to:
o the possible issuance by LaSalle Hotel Properties of up to 3,181,723 common
shares to holders of up to 3,181,723 units of limited partnership interest
in LaSalle Hotel Operating Partnership, L.P., if and to the extent that
such holders redeem their units and we issue them common shares in exchange
therefor; and
o the possible issuance by LaSalle Hotel Properties of up to 1,280,569 common
shares to holders of up to 1,280,569 options to purchase common shares upon
their exercise.
This Prospectus also relates to:
o the offer and sale from time to time by certain shareholders of up to
3,181,723 common shares issued to shareholders in exchange for units of
limited partnership interest in LaSalle Hotel Operating Partnership, L.P.;
and
o the offer and sale from time to time by certain shareholders of up to
1,280,569 common shares issued to shareholders upon their exercise of
options to purchase common shares.
We are registering these shares as required under the terms of certain
agreements between the selling shareholders and us.
The registration of the shares does not necessarily mean that any of
the shares will be offered or sold by the selling shareholders. We will receive
no proceeds from any sales of the common shares, but will incur expenses in
connection with the offering. See "Selling Shareholders" and "Plan of
Distribution."
Our common shares are listed on the New York Stock Exchange (the
"NYSE") under the symbol "LHO."
The terms of the securities 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 "Restrictions on Ownership of Capital Shares."
SEE "RISK FACTORS" BEGINNING ON PAGE 3 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 .
<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 ret urns 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; and
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. (the "Operating
Partnership"), a Delaware limited 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, Suite 900 NW
Washington, DC 20005 and our telephone number at that location is (202)
222-2600.
RISK FACTORS
An investment in our common shares involves various risks.
o SPECIAL CONSIDERATIONS APPLICABLE TO REDEEMING UNIT HOLDERS
TAX CONSEQUENCES OF REDEMPTION OF UNITS. Your exercise of your unit
redemption right will be treated for tax purposes as a sale of the units you
redeem. Such a sale will be fully taxable to you in an amount equal to the cash
or the value of the common shares received in the exchange plus the amount of
the Operating Partnership's nonrecourse liabilities considered allocable to the
redeemed units at the time of the redemption. It is possible that the amount of
gain you will be required to recognize, or even the tax liability resulting
from such gain, could exceed the amount of cash or the value of the common
shares you receive upon such redemption. See "Redemption of Units - Tax
Consequences of Redemption." In addition, because the price of common shares
fluctuates, the price you receive when you sell your common shares may not
equal the value of your units at the time of redemption.
POTENTIAL CHANGE IN INVESTMENT UPON REDEMPTION OF UNITS. If you
exercise your unit redemption right, we will determine whether you receive cash
or common shares in exchange for your units. If you receive common shares, you
will become a shareholder of LaSalle Hotel Properties rather than a holder of
units in the Operating Partnership. Although an investment in our common shares
is substantially equivalent to an investment in the Operating Partnership's
units, there are some differences between ownership of units and ownership of
common shares. These differences include form of organization, investor rights
and federal income tax consequences. These differences, some of which may be
material to you, are discussed in "Redemption of Units - Comparison of
Ownership of Units and common shares."
o OUR ABILITY TO MAKE DISTRIBUTIONS ON OUR COMMON SHARES DEPENDS UPON THE
ABILITY OF THE LESSEES TO MAKE RENT PAYMENTS UNDER OUR LEASES
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;
o and 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.
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 CHARTER 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:
STOCK 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 actually or constructively own
more than 10% in value of our shares, and, at the same time, actually or
constructively own 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 (as defined in the Code), 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, common
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 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 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.
Under the Maryland General Corporation Law, as amended (the "Maryland Law"),
certain "business combinations" (including certain issuances of equity
securities) between a Maryland REIT such as LaSalle Hotel Properties and any
person who owns 10% or more of the voting power of the REIT's shares or an
affiliate thereof are prohibited for five years after the most recent date on
which the interested shareholder became an interested shareholder. Thereafter,
any such business combination must be approved by two super-majority votes
unless, among other conditions, the REIT's common shareholders receive a
minimum price (as defined by Maryland Law) for their shares and the
consideration is received in cash or in the same form as previously paid by the
interested shareholder for its common shares.
EFFECT OF MARYLAND CONTROL SHARE ACQUISITION STATUTE. In addition to
certain provisions of our Declaration of Trust, the Maryland control share
acquisition statutes may have the effect of discouraging a third party from
making an acquisition proposal for LaSalle Hotel Properties. Maryland Law
provides that "control shares" of a Maryland corporation acquired in a "control
share acquisition" have no voting rights except to the extent approved by a
vote of two-thirds of the votes eligible under the statute to be cast on the
matter. "Control shares" are voting shares, which, if aggregated with all other
such shares previously acquired by the acquiror or in respect of which the
acquiror is able to exercise or direct the exercise of voting power (except
solely by virtue of a revocable proxy), 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 of all voting power. Control
shares do not include shares that the acquiring person is then 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 voting rights are not approved at a meeting of shareholders then,
subject to certain conditions and limitations, the issuer may redeem any or all
of the control shares (except those for which voting rights have previously
been approved) for fair value. If voting rights for control shares are approved
at a shareholders' meeting and the acquiror becomes entitled to vote a majority
of the shares entitled to vote, all other shareholders may exercise appraisal
rights. The fair value of the shares as determined for purposes of such
appraisal rights may not be less than the highest price per share paid by the
acquiror in the control share acquisition.
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.
REDEMPTION OF UNITS
Generally, each limited partner of the Operating Partnership other
than LaSalle Hotel Properties and certain of its affiliates has the right to
require the redemption of its units beginning on the first anniversary of the
issuance of such units. In addition, if LaSalle Hotel Properties intends to
make an extraordinary distribution of cash or property to its shareholders or
effect a merger, a sale of all or substantially all of its assets or any other
similar extraordinary transaction, then each limited partner may exercise its
unit redemption right, regardless of the length of time it has held its units,
during the period commencing on the date LaSalle Hotel Properties gives notice
of such intention and ending on the record date to determine shareholders
eligible to receive such distribution or to vote on such transaction or, if no
record date is applicable, at least twenty business days before the
consummation of such transaction. A limited partner may exercise its unit
redemption right by giving written notice to the Operating Partnership and
LaSalle Hotel Properties. The units specified in such notice shall be redeemed
on the tenth business date following the date on which LaSalle Hotel Properties
receives the redemption notice or, in the case of the exercise of a unit
redemption right in connection with an extraordinary transaction, the date on
which the Operating Partnership and LaSalle Hotel Properties receive the
redemption notice.
LaSalle Hotel Properties has the right to assume the Operating
Partnership's obligation with respect to a unit redemption right on a one
common share for one unit basis. If LaSalle Hotel Properties does not exercise
its right, a limited partner which exercises its unit redemption right will
receive cash from the Operating Partnership in an amount equal to the market
value of the units to be redeemed. The market value of a unit for this purpose
will be equal to the average of the closing price of one common share on the
NYSE for the ten trading days before the day on which the redemption notice was
given. If LaSalle Hotel Properties elects to acquire units tendered by a
limited partner exercising the unit redemption right. LaSalle Hotel Properties
will either, at its option, pay cash in the amount specified above or issue a
number of common shares equal to the number of units tendered for redemption,
adjusted to take into account prior share dividends or subdivision or
combination of common shares. Upon exercise of the unit redemption right, the
limited partner's right to receive distributions on the units redeemed will
cease. At least 1,000 units (or all remaining units owned by the limited
partner if less than 1,000 units) must be redeemed each time the unit
redemption right is exercised. No redemption or exchange can occur if delivery
of common shares therefor would be prohibited either under the provisions of
LaSalle Hotel Properties' Declaration of Trust designed to protect LaSalle
Hotel Properties' REIT qualification or under applicable federal or state
securities laws. LaSalle Hotel Properties will at times reserve and keep
available out of its authorized but unissued common shares, solely for the
purpose of effecting the issuance of common shares pursuant to the unit
redemption right, a sufficient number of common shares as shall from time to
time be sufficient for the redemption of all outstanding units not owned by
LaSalle Hotel Properties.
TAX CONSEQUENCES OF REDEMPTION
The following discussion summarizes certain Federal income tax
considerations that may be relevant to a unitholder should such unitholder
exercise their right to redeem units.
TAX TREATMENT OF EXCHANGE OR REDEMPTION OF UNITS. If we elect to
purchase units tendered for redemption, the Operating Partnership's Partnership
Agreement provides that each of the unitholder, the Operating Partnership and
LaSalle Hotel Properties shall treat the transaction between the unitholder and
us as a sale of units by the unitholder at the time of such redemption. Such
sale will be fully taxable to the unitholder and the unitholder will be treated
as realizing for tax purposes an amount equal to the sum of the cash or the
value of the common shares received plus the amount of any Operating
Partnership liabilities allocable to the redeemed units at the time of the
redemption. The determination of the amount of gain or loss is discussed more
fully below. If we do not elect to purchase a unitholder's units tendered for
redemption and the Operating Partnership redeems such units for cash that we
contribute to the Operating Partnership to effect such redemption, the
redemption likely would be treated for tax purposes as a sale of such units to
us in a fully taxable transaction, although the matter is not free from doubt.
In that event, the unitholder would be treated as realizing an amount equal to
the sum of the cash received plus the amount of any Operating Partnership
liabilities allocable to the redeemed units at the time of the redemption. The
determination of the amount and character of gain or loss in the event of such
a sale is discussed more fully below. See "--Tax Treatment of Disposition of
units by a Limited Partner Generally."
If we do not elect to purchase units tendered for redemption and the
Operating Partnership redeems a unitholder's units for cash that is not
contributed by us to effect the redemption, then, barring the application of
certain disguised sale rules described below, the tax consequences would be the
same as described in the previous paragraph if all of the unitholder's units
are redeemed. However, if the Operating Partnership redeems less than all of
the unitholder's units, the unitholder would not be permitted to recognize any
loss occurring on the transaction and would recognize taxable gain only to the
extent that the cash, plus the amount of any Operating Partnership liabilities
allocable to the redeemed units, exceeded the unitholder's adjusted basis in
all of its units (including those not redeemed) immediately before the
redemption.
If we contribute cash to the Operating Partnership to effect a
redemption, and in the unlikely event that the redemption transaction is
treated as the redemption of a unitholder's units by the Operating Partnership
rather than a sale of units to us, the income tax consequences to the
unitholder would be as described in the preceding paragraph.
Even in the case of a cash redemption of units by the Operating
Partnership that is not treated as a sale of the units redeemed, it is possible
that the redemption could be subject to certain disguised sale rules. Under
Section 707(a)(2)(B) of the Code and the Treasury Regulations thereunder (the
"Disguised Sale Regulations"), a contribution by a partner of property to a
partnership and a transfer of money or other consideration by the partnership
to the partner (including certain reductions in the partner's share of
liabilities) may be treated as a sale, in whole or in part, of such property by
the partner to the partnership based on all of the facts and circumstances. The
Disguised Sale Regulations further provide that, in general, where the
contribution of property by the partner and the transfer of money or other
consideration by the partnership are made within two years of each other, the
transfers are presumed to be a sale of the property by the partner to the
partnership unless the facts and circumstances clearly establish that the
transfers do not constitute a sale. Accordingly, if units redeemed by a
unitholder had been received by the unitholder in return for a transfer of
property to the Operating Partnership less than two years before the
redemption, it is likely that the redemption would be treated as a disguised
sale of the transferred property. In such case, the unitholder would be treated
as though he had sold the property to the Operating Partnership on the date of
the transfer of the property and received on such date an obligation of the
Operating Partnership to transfer money or other consideration to the
unitholder.
TAX TREATMENT OF DISPOSITION OF UNITS BY A LIMITED PARTNER GENERALLY.
If a unit is disposed of in a manner that is treated as a sale of the unit, the
determination of gain or loss from the sale or other disposition will be based
on the difference between the amount considered realized for tax purposes and
the tax basis in such unit. See "--Basis of Units." Upon the sale of a unit,
the "amount realized" will be measured by the sum of the cash and fair market
value of other property (E.G., common shares) received plus the amount of any
Operating Partnership liabilities allocable to the units sold. To the extent
that this amount realized exceeds the limited partner's basis for the units
disposed of, such limited partner will recognize gain. It is possible that the
amount of gain recognized or even the tax liability resulting from such gain
could exceed the amount of cash and/or the value of any other property (E.G.,
common shares) received upon such disposition.
Except as described below, any gain recognized upon a sale or other
disposition of units will be treated as gain attributable to the sale or
disposition of a capital asset (assuming the units were held by the limited
partner as a capital asset). To the extent, however, that the amount realized
upon the sale of a unit attributable to a limited partner's share of
"unrealized receivables" of the Operating Partnership (as defined in Section
751 of the Code) exceeds the basis attributable to those assets, such gain will
be treated as ordinary income. Unrealized receivables include, to the extent
not previously included in Operating Partnership income, any rights to payment
for services rendered or to be rendered. Unrealized receivables also include
amounts that would be subject to recapture as ordinary income if the Operating
Partnership had sold its assets at their fair market value at the time of the
transfer of a unit, such as "depreciation recapture" under Sections 1245 and
1250 of the Code.
BASIS OF UNITS. Generally, a limited partner's initial tax basis in
her units is increased by (i) such limited partner's share of Operating
Partnership taxable and tax-exempt income and (ii) increases in such limited
partner's allocable share of liabilities of the Operating Partnership.
Conversely, a limited partner's basis in his units is decreased (but not below
zero) by (A) such limited partner's share of Operating Partnership
distributions, (B) decreases in such limited partner's allocable share of
liabilities of the Operating Partnership, (C) such limited partner's share of
losses of the Operating Partnership and (D) such limited partner's share of
nondeductible expenditures of the Operating Partnership that are not chargeable
to capital.
COMPARISON OF OWNERSHIP OF UNITS AND COMMON SHARES
An investment in our common shares is substantially equivalent
economically to an investment in the Operating Partnership's units. A holder of
common shares receives the same distribution that a holder of a unit receives
and shareholders and unitholders generally share on an equivalent basis in the
risks and rewards of ownership of LaSalle Hotel Properties. There are, however,
some differences between ownership of units and ownership of common shares,
some of which may be material to investors. The comparisons below are intended
to assist holders of units in understanding how their investment will be
changed if their units are redeemed for common shares.
<PAGE>
OPERATING PARTNERSHIP LASALLE HOTEL PROPERTIES
Form of Organization and Assets Owned
The Operating Partnership is a LaSalle Hotel Properties is a
Delaware limited partnership. The Maryland real estate investment
Operating Partnership owns, directly trust. We have elected to be taxed as
and through a subsidiary, our hotels a REIT under the Code and intend to
and other assets. The Operating continue to meet the requirements for
Partnership is not permitted to take qualifications as a REIT. LaSalle
any action which could adversely Hotel Properties' only significant
affect our REIT status. asset is its interest in the
Operating Partnership, which gives
LaSalle Hotel Properties an indirect
investment in the hotels owned by the
Operating Partnership. Under the
Operating Partnership's partnership
agreement, LaSalle Hotel Properties
may not, directly or indirectly,
enter into or conduct any business
other than in connection with the
ownership, acquisition and
disposition of partnership interests
as the general partner or limited
partner and the management of the
business of the Operating Partnership
and such activities as are incidental
thereto, without the consent of the
unaffiliated limited partners.
Additional Equity
The Operating Partnership is LaSalle Hotel Properties' Board of
authorized to issue units and other Trustees may authorize issuances from
partnership interests in one or more time to time of shares of beneficial
classes or series, with such interest of any class or series, or
designations, preferences and securities or rights convertible into
relative participating, optional or shares, for such consideration as the
other special rights, powers and Board of Trustees determines.
duties as determined by LaSalle Hotel
Properties. The Operating Partnership
may issue units and other partnership
interests to LaSalle Hotel Properties
in exchange for the proceeds raised
by an offering by LaSalle Hotel
Properties of comparable shares.
Borrowing Policies
The Operating Partnership has no The Operating Partnership's
restrictions on borrowings, and partnership agreement prohibits
LaSalle Hotel Properties is LaSalle Hotel Properties from
authorized to borrow money on behalf incurring debt unless it lends the
of the Operating Partnership. LaSalle net proceeds to the Operating
Hotel Properties has adopted a policy Partnership. LaSalle Hotel Properties
of incurring debt, either directly or has a Board of Trustees policy that
through the Operating Partnership, it will not incur indebtedness other
only if upon such incurrence the than short-term trade, employee
Company's total funded indebtedness compensation, distributions payable
would not exceed 50% of "Aggregate or similar indebtedness that will be
Asset Value." See "Risk Factors." paid in the ordinary course of
business. Indebtedness to fund
acquisitions and other business
activities is instead incurred by the
Operating Partnership.
Management Control
Management of the Operating The business and affairs of LaSalle
Partnership is exclusively vested in Hotel Properties are managed under
LaSalle Hotel Properties, as general the direction of the Board of
partner. LaSalle Hotel Properties has Trustees and the Advisor directs the
full power and authority to do all day-to-day activities of LaSalle
things it deems necessary or Hotel Properties. The policies
desirable to conduct the business of adopted by the Board of Trustees may
the Operating Partnership, subject to be altered or eliminated without a
the consent of certain of the limited vote of the shareholders.
partners in connection with actions Accordingly, except for their vote in
that adversely affect such limited the elections of trustees,
partners and the consent of the shareholders have no control over the
holders of a majority of partnership ordinary business policies of LaSalle
interests in connection with the Hotel Properties. A trustee, other
sale, exchange, transfer or other than a trustee elected by the holders
disposition of all assets of the of a class or series of shares of
Operating Partnership through a beneficial interest other than common
merger, consolidation or otherwise. shares, may be removed only with
LaSalle Hotel Properties is under no cause by a majority vote of
obligation to consider the tax shareholders.
consequences to limited partners when
making decisions for the benefit of
the Operating Partnership. The
limited partners have no power to
remove LaSalle Hotel Properties as
general partner.
Fiduciary Duties
Under Delaware law, LaSalle Hotel Under Maryland law, the trustees must
Properties, as general partner, is perform their duties in good faith,
required to exercise good faith and in a manner that they reasonably
integrity in all dealings with believe to be in the best interests
respect to partnership affairs. Under of LaSalle Hotel Properties and with
the Operating Partnership's the care of an ordinarily prudent
partnership agreement, however, the person in a like position. Trustees
limited partners expressly of LaSalle Hotel Properties who act
acknowledge that LaSalle Hotel in such a manner generally will not
Properties, as general partner, is be liable to LaSalle Hotel Properties
acting on behalf of the Operating for monetary damages arising from
Partnership. LaSalle Hotel Properties their activities.
is under no obligation to consider
the tax consequences to, or the
separate interests of, the limited
partners.
Management Liability and Indemnification
LaSalle Hotel Properties is not LaSalle Hotel Properties is required
liable for monetary damages for by its bylaws to indemnify, to the
losses sustained, liabilities maximum extent permitted by Maryland
incurred, or benefits not derived by law, (a) any trustee, officer or
the limited partners so long as it shareholder or any former trustee,
acts in good faith. LaSalle Hotel officer or shareholder (including any
Properties' liability in any event is individual who, while a trustee,
limited to its interest in the officer or shareholder and at the
Operating Partnership. The Operating express request of LaSalle Hotel
Partnership has indemnified LaSalle Properties, serves or has served
Hotel Properties and its trustees and another corporation, partnership,
officers, and such other persons as joint venture, trust, employee
LaSalle Hotel Properties may from benefit plan or any other enterprise
time to time designate, to the as a director, officer, shareholder,
fullest extent provided by Delaware partner or trustee of such
law, from and against any loss or corporation, partnership, joint
damage, including legal fees and venture, trust, employee benefit plan
court costs incurred by such person or other enterprise) who has been
by reason of anything it may do or successful, on the merits or
refrain from doing for or on behalf otherwise, in the defense of a
of the Operating Partnership or in proceeding to which he was made a
connection with its business or party by reason of service in such
affairs unless it is established that capacity, against reasonable
(i) the act or omission of the expenses, incurred by him in
indemnified person was material to connection with the proceeding or (b)
the matter giving rise to the any trustee or officer or any former
proceeding and either was committed trustee or officer against any claim
in bad faith or was the result of or liability to which he may become
active and deliberate dishonesty; subject by reason of such status.
(ii) such party actually received an
improper personal benefit; or (iii)
in the case of any criminal
proceeding, such party had reasonable
cause to believe the act was
unlawful. The reasonable expenses
incurred by an indemnified person may
be reimbursed by the Operating
Partnership in advance of the final
disposition of the proceeding upon
receipt by the Operating Partnership
of an affirmation by the indemnified
person of his, her or its good faith
belief that the standard of conduct
necessary for indemnification has
been met and an undertaking by such
indemnitee to repay the amount if it
is determined that such standard was
not met.
Anti-Takeover Provisions
Except as described below under The Declaration of Trust and bylaws
"Voting Rights," LaSalle Hotel of LaSalle Hotel Properties and
Properties has exclusive management Maryland corporate law contain
power over the business and affairs provisions that may have the effect
of the Operating Partnership. LaSalle of delaying or discouraging an
Hotel Properties may not be removed unsolicited proposal for the
by the limited partners. The acquisition of LaSalle Hotel
partnership agreement permits limited Properties or the removal of
partners to transfer all or any incumbent management. These
portion of their interests in the provisions include (i) the staggered
Operating Partnership subject to terms of the Board of Trustees; (ii)
certain exceptions. LaSalle Hotel authorized capital shares that may be
Properties cannot transfer its classified and issued at the
partnership interests except in a discretion of the Board of Trustees,
transaction in which substantially including securities having superior
all of the assets of the surviving voting rights to the common shares;
entity consist of units. The (iii) a requirement that trustees may
partnership agreement does not, be removed only for cause and only by
however, prevent a transaction in a vote of a majority of the
which another entity acquires control outstanding common shares; and (iv)
of LaSalle Hotel Properties and that provisions designed to avoid
other entity owns assets and conducts concentration of share ownership in a
businesses outside the Operating manner that would jeopardize LaSalle
Partnership. Hotel Properties' REIT status.
Voting Rights
Limited partners have voting rights Holders of common shares are entitled
only as to the dissolution of the to vote on the election and removal
Operating Partnership, the sale of of trustees, amendments of the
all or substantially all of its Declaration of Trust, and any
assets and amendments to the proposal for the merger or
partnership agreement. Generally, consolidation, or the sale or
LaSalle Hotel Properties is entitled disposition of substantially all of
to vote its interest in the Operating the property, of LaSalle Hotel
Partnership and controls all Properties. Each holder of common
decisions relating to the operation shares is entitled to one vote per
and management of the Operating share. Holders of common shares do
Partnership. As of March 31, 1999, not have cumulative voting rights.
LaSalle Hotel Properties owned
approximately 82.7% of the units. As
units are redeemed by partners, or if
LaSalle Hotel Properties acquires
additional units in exchange for the
proceeds of offerings of its
securities, LaSalle Hotel Properties'
percentage ownership of the units
will increase. If additional units
are issued to third parties, LaSalle
Hotel Properties' percentage
ownership of the units will decrease.
Amendment of the Partnership Agreement or the Declaration of Trust
Amendments to the partnership The Declaration of Trust may be
agreement may be proposed by LaSalle amended by a vote of two-thirds of
Hotel Properties or by limited all of the votes entitled to be cast
partners holding 25% or more of the on the matter if the amendment is in
outstanding units. Generally, the connection with a transaction,
partnership agreement may be amended approval of which requires by law the
with the approval of LaSalle Hotel affirmative vote of shareholders, and
Properties and limited partners pursuant to which LaSalle Hotel
(including LaSalle Hotel Properties) Properties' business and assets will
holding a majority of the units. be combined with those of one or more
Certain provisions regarding, among entities by merger, sale or other
other things, the rights and duties transfer of assets, consolidation or
of LaSalle Hotel Properties as share exchange.] Amendments not in
general partner or the dissolution of connection with such business
the Operating Partnership, may not be combination transactions require a
amended without the approval of a vote of two-thirds of all of the
majority of the units not held by votes entitled to be cast on the
LaSalle Hotel Properties. Amendments matter. Amendments to change the
that would convert a limited number of authorized shares of
partner's interest into a general beneficial interest require the
partner's interest, modify the approval of holders of a majority of
limited liability of a limited all votes cast at a meeting of
partner, alter the interest of a shareholders at which a quorum is
partner in profits or losses or the present. The trustees, by a
rights to receive any distribution, two-thirds vote, may amend the
or alter the unit redemption right, Declaration of Trust without the
must be approved by LaSalle Hotel consent of shareholders as necessary
Properties and each limited partner for LaSalle Hotel Properties to
that would be adversely affected by qualify as a REIT.
such amendment.
Vote Required to Dissolve the Operating Partnership or LaSalle Hotel Properties
Through December 31, 2048, an Subject to the provisions of any
election to dissolve Operating class or series of the shares of
Partnership requires the consent of beneficial interest at the time
limited partners (including LaSalle outstanding, LaSalle Hotel Properties
Hotel Properties) who hold 90% or may be terminated and dissolved at
more of the outstanding units. After any meeting of shareholders, by the
December 31, 2048, an election to affirmative vote of two-thirds of all
dissolve the Operating Partnership the votes entitled to be cast on the
may be made by LaSalle Hotel matter.
Properties, as general partner, in
its sole and absolute discretion,
without the consent of the limited
partners.
Vote Required to Sell Assets
LaSalle Hotel Properties has the LaSalle Hotel Properties may sell,
exclusive authority to determine lease, exchange or otherwise transfer
whether, when and on what terms the all or substantially all of its
assets of the Operating Partnership property upon approval by the Board
will be sold. A sale of all or of Trustees and, after notice to all
substantially all of the assets of shareholders entitled to vote on the
the Operating Partnership, or a matter, by the affirmative vote of
merger of the Operating Partnership not less than two-thirds of all the
with another entity, generally votes entitled to be cast on the
requires an affirmative vote of the matter. No approval of the
holders of a majority of the shareholders is required for the sale
outstanding units, including units of less than all or substantially all
held by LaSalle Hotel Properties. of LaSalle Hotel Properties' assets.
LaSalle Hotel Properties expects to
always own, directly or indirectly, a
majority of the units and thus to
control the outcome of such a vote.
Vote Required to Merge
A merger of the Operating Partnership A merger of LaSalle Hotel Properties
into another entity generally must be approved by the affirmative
requires an affirmative vote of the vote of holders of not less than
holders of a majority of the two-thirds of the common shares then
outstanding units, including units outstanding and entitled to be cast
held byLaSalle Hotel Properties. on the matter and, in certain cases,
LaSalle Hotel Properties expects to by the affirmative vote of holders of
always own, directly or indirectly, a not less than two-thirds of the
majority of the units and thus to preferred shares then outstanding.
control the outcome of such a vote.
Liability of Investors
No partner of the Operating Under the Maryland law, a shareholder
Partnership is required to make is not personally liable for the
additional capital contributions to obligations of LaSalle Hotel
the Operating Partnership, except Properties solely as a result of his
that LaSalle Hotel Properties is status as a shareholder. The
required to contribute to the Declaration of Trust provides that no
Operating Partnership the net shareholder shall be liable for any
proceeds of the sale of its common debt or obligation of LaSalle Hotel
shares and other equity interests. No Properties by reason of being a
limited or general partner is shareholder nor shall any shareholder
required to pay to the Operating be subject to any personal liability
Partnership any deficit or negative in tort, contract or otherwise to any
balance which may exist in its person in connection with the
account. property or affairs of LaSalle Hotel
Properties by reason of being a
shareholder. LaSalle Hotel
Properties' Bylaws further provide
that LaSalle Hotel Properties 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
LaSalle Hotel Properties 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 LaSalle Hotel
Properties. Inasmuch as LaSalle Hotel
Properties carries public liability
insurance which it considers
adequate, any risk of personal
liability to shareholders is limited
to situations in which LaSalle Hotel
Properties' assets plus its insurance
coverage would be insufficient to
satisfy the claims against LaSalle
Hotel Properties and its
shareholders.
Review of Investor Lists
Limited partners, upon written demand Under Maryland law, a shareholder
with a statement of the purpose of holding at least 5% OF the
such demand and at the limited outstanding common shares of LaSalle
partner's expense, are entitled to Hotel Properties may upon written
obtain a current list of the name and request inspect and copy during usual
last known address of each partner of business hours the list of the
the Operating Partnership. shareholders.
<PAGE>
THE FOLLOWING COMPARES CERTAIN OF THE INVESTMENT ATTRIBUTES AND LEGAL RIGHTS
ASSOCIATED WITH THE OWNERSHIP OF UNITS AND COMMON SHARES
UNITS COMMON SHARES
Distributions
The units constitute equity interests Common shares constitute equity
entitling each limited partner to his interests in LaSalle Hotel
pro rata share of cash distributions Properties. LaSalle Hotel Properties
made to the limited partners of the is entitled to receive its pro rata
Operating Partnership. share of distributions made by the
Operating Partnership with respect to
the units, and each shareholder is
entitled to his pro rata share of any
dividends or distributions paid with
respect to the common shares. The
distributions payable to the
shareholders are not fixed in amount
and are only paid if, when and as
declared by the Board of Trustees. In
order to qualify as a REIT, LaSalle
Hotel Properties must distribute at
least 95% of its taxable income,
excluding capital gains. Any taxable
income, including capital gains, not
distributed will be subject to
corporate income tax.
Liquidity
Limited partners generally may The common shares are freely
transfer with or the without the transferable, subject to ownership
consent of LaSalle Hotel Properties, limit contained in the Declaration of
all or any portion of their units, Trust. The common shares are listed
provided that prior written notice of on the NYSE, and a public market for
such proposed transfer is delivered the common shares exists. The breadth
to LaSalle Hotel Properties. and strength of this secondary market
depends, among other things, upon the
number of shares outstanding and the
number of shares available for future
sale, the extent of institutional
investor interest in LaSalle Hotel
Properties, the reputation of REITs
and hotel REITs generally and the
attractiveness of their equity
securities in comparison to other
equity securities, LaSalle Hotel
Properties' financial performance,
and general stock and bond market
conditions.
<PAGE>
UNITS COMMON SHARES
Taxation
The Operating Partnership is not LaSalle Hotel Properties has elected
subject to federal income taxes. to be taxed as a REIT. So long as it
Instead, each holder of units qualifies as a REIT, LaSalle Hotel
includes his allocable share of the Properties will be permitted to
Operating Partnership's taxable deduct distributions paid to its
income or loss in determining his shareholders, which effectively will
individual federal income tax reduce the "double taxation" that
liability. The maximum effective typically results when a corporation
federal tax a rate for individuals earns income and distributes that
under current law is 39.6%. income to its shareholders in the
form of dividends. LaSalle Hotel
Income and loss from the Operating Properties' noncontrolled
Partnership generally are subject to subsidiaries, however, do not qualify
the "passive activity" limitations. as REITs and thus they are subject to
Under the "passive activity" rules, federal income tax on their net
income and loss from the Operating income at normal corporate rates. The
Partnership that is considered maximum effective tax rate for
"passive income" generally can be corporations under current law is
offset against income and loss from 35%.
other investments that constitute
"passive activities," unless the Distributions paid by LaSalle hotel
Operating Partnership is considered a Properties are treated as "portfolio"
"publicly traded partnership," in income and cannot be offset with
which case income and loss from the losses from "passive activities."
Operating Partnership can be offset Distributions made by LaSalle Hotel
only against other income and loss Properties to its taxable domestic
from the Operating Partnership. Cash shareholders out of current or
distributions from the Operating accumulated earnings and profits are
Partnership are not taxable to a taken into account by them as
holder of units except to the extent ordinary income. Distributions in
they exceed such holder's basis in excess of current or accumulated
his interest in the Operating earnings and profits that are not
Partnership, which includes such designated as capital gain dividends
holder's allocable share of the are treated as a non-taxable return
Operating Partnership's debt. of basis to the extent of a
shareholder's adjusted basis in its
Each year, holders of units receive a common shares, with the excess taxed
Schedule K-1 tax form containing as capital gain. Distributions that
detailed tax information for are designated as capital gain
inclusion preparing their federal dividends generally are taxed as
income tax returns. Holders of units gains from the sale or exchange of a
are required, in some cases, to file capital asset held for more than one
state income tax returns and/or pay year, to the extent that they do not
state income taxes in which the exceed LaSalle Hotel Properties'
Operating Partnership owns even if actual net capital gain for the
they are not residents of those taxable year. For LaSalle Hotel
states. Properties' taxable years commencing
on or after January 1, 1999, LaSalle
Hotel Properties may elect to require
its shareholders to include LaSalle
Hotel Properties' undistributed net
capital gains in their income. If
LaSalle Hotel Properties so elects,
shareholders would include their
proportionate share of such gains in
their income and be deemed to have
paid their share of the tax paid by
LaSalle Hotel Properties on such
gains. Each year, shareholders will
receive Form 1099 used by
corporations to report dividends paid
to their shareholders. Shareholders
who are individuals generally are not
required to file state income tax
returns and/or pay state income taxes
outside of their state of residence
with respect to LaSalle Hotel
Properties' operations and
distributions. LaSalle Hotel
Properties' may be required to pay
state income taxes in certain states.
<PAGE>
NO PROCEEDS TO LASALLE HOTEL PROPERTIES
LaSalle Hotel Properties will not receive any of the proceeds from
sales of offered shares by the selling shareholders. All costs and expenses
incurred in connection with the registration under the Securities Act of 1933,
as amended (the "Securities Act") of the offering made hereby will be paid by
LaSalle Hotel Properties, other than any brokerage fees and commissions, fees
and disbursements of legal counsel for the selling shareholders and share
transfer and other taxes attributable to the sale of the offered shares, which
will be paid by the selling shareholders.
SELLING SHAREHOLDERS
We may issue 3,181,723 offered shares to selling shareholders holding
up to 3,181,723 units of limited partnership interest in the Operating
Partnership, if and to the extent that such selling shareholders redeem their
units and we issue them common shares in exchange therefor. We may issue
1,280,569 offered shares to three selling shareholders upon their exercise of
1,280,569 options to purchase our common shares. The following table provides
the name of each selling shareholder, the number of common shares owned by each
selling shareholder before the offering to which this Prospectus relates, and
the number of offered shares offered by each selling shareholder. The extent to
which the offered shares offered by a selling shareholder represent common
shares that may be issued by LaSalle Hotel Properties upon the exercise of the
selling shareholder's options or the redemption of the selling shareholder's
units is indicated in the footnotes to the table below. Since the selling
shareholders may sell all or some of their offered shares, no estimate can be
made of the number of offered shares that will be sold by the selling
shareholders or that will be owned by the selling shareholders upon completion
of the offering. There is no assurance that the selling shareholders will sell
any of the offered shares. The offered shares represent approximately 22.6% of
the total common shares (assuming redemption of all outstanding units and
options for common shares) outstanding as of March 31, 1999.
<PAGE>
NUMBER OF
COMMON SHARES OWNED
NAME OF SELLING SHAREHOLDER AND OFFERED HEREBY
------------------------------- --------------------
Steinhardt Realty Associates II, L.P................. 662,237(1)
New Orleans Hospitality, L.P......................... 627,093(2)
Crosstown Asset Corp. I.............................. 341,622(3)
Radisson Group, Inc.................................. 332,893(2)
NEB Hotel, L.P....................................... 324,728(2)
SRP Seaview, L.P..................................... 310,185(2)
LaSalle Recovery Venture Limited Partnership......... 301,211(2)
LaSalle Hotel Advisors, Inc.......................... 273,596(1)
LaSalle Hotel Co-Investment Incorporated............. 262,237(2)
Key West Property, L.P............................... 179,847(2)
LaSalle Strategic Investors Limited Partnership...... 167,910(2)
LaSalle Strategic Investors II Limited Partnership... 125,892(2)
Jon E. Bortz......................................... 93,000(1)
RAD Bloom, L.P....................................... 92,391(2)
Outrigger Lodging Services........................... 78,350(2)
LaSalle Investment Partnership....................... 73,555(2)
Cornelius & Lothian Limited Partnership.............. 67,059(2)
Michael D. Barnello.................................. 62,000(1)
Dallas Mer Hotel, L.P................................ 31,739(2)
Todd Noonan.......................................... 22,500(1)
Howard L. Stein...................................... 18,497(2)
Beachside Hospitality, Inc........................... 7,500(2)
Raymond D. Martz..................................... 6,250(1)
---------
Total................................................ 4,462,292
=========
(1) Common shares that may be issued by us upon the exercise of options to
purchase common shares.
(2) Common shares that may be issued by us upon the redemption of units for
common shares.
(3) Includes 180,636 common shares that may be issued by us upon the
redemption of units for common shares and 160,986 common shares that may
be issued by us upon the exercise of options to purchase common shares.
<PAGE>
DESCRIPTION OF COMMON SHARES
GENERAL
Under the Maryland law, a shareholder is not personally liable for our
obligations solely as a result of his status as a shareholder. The 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 the 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 of 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.
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 OUR DECLARATION OF TRUST
Pursuant to the Maryland law, a Maryland real estate investment trust
generally cannot dissolve, amend its declaration of trust or merge, unless
approved by the affirmative vote or written consent 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 the 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 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 or written consent of the shareholders. Our Declaration of
Trust permits such action by the Board of Trustees.
The 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 the Board of Trustees and our business strategies and policies as
determined by the Board. 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 common shares may be owned, directly or indirectly, by
five or fewer individuals (as defined in the Code) during the last half of a
taxable year and the common 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, the
Board of Trustees has adopted, and the shareholders prior to the initial public
offering approved, a provision in the 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 the common shares is Harris Trust
and Savings Bank.
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 of our common 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 common
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 common shares (or the
acquisition of an interest in an entity that owns, actually or constructively,
common 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 common shares and thus subject such common
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 common 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.
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.
The provisions of the Code pertaining to REITs are highly technical
and complex. Under the Code, if certain requirements are met in a taxable year,
a REIT generally will not be subject to federal income tax with respect to
income that it distributes to its shareholders. If LaSalle Hotel Properties
fails to qualify during any taxable year as a REIT, unless certain relief
provisions are available, it will be subject to tax (including any applicable
alternative minimum tax) on its taxable income at regular corporate rates,
which could have a material adverse effect upon its shareholders.
TAXATION OF HOLDERS OF THE COMMON SHARES
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 capital assets held for more than one year but
not more than 18 months is 28%.
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." 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 United States 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 United States 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 United States 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 United States 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 United States tax under FIRPTA as a sale of a United States 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
United States 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 United States 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 United States 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, 1999, subject to certain transition rules.
Valid withholding certificates that are held on December 31, 1999, will remain
valid until the earlier of December 31, 2000 or the date of expiration of the
certificate under rules currently in effect (unless otherwise invalidated due
to changes in the circumstances of the person whose name is on such
certificate). A non-U.S. shareholder should consult its own advisor regarding
the effect of the new Treasury Regulations.
PLAN OF DISTRIBUTION
Any of the selling shareholders may from time to time, in one or more
transactions, sell all or a portion of the offered shares on the NYSE, in the
over-the-counter market, on any other national securities exchange on which the
common shares are listed or traded, in negotiated transactions, in underwritten
transactions or otherwise, at prices then prevailing or related to the then
current market price or at negotiated prices. The offering price of the offered
shares from time to time will be determined by the selling shareholders and, at
the time of such determination, may be higher or lower than the market price of
the common shares on the NYSE. In connection with an underwritten offering,
underwriters or agents may receive compensation in the form of discounts,
concessions or commissions from a selling shareholder or from purchasers of
offered shares for whom they may act as agents, and underwriters may sell
offered shares to or through dealers, and such dealers may receive compensation
in the form of discounts, concessions or commissions from the underwriters
and/or commissions from the purchasers for whom they may act as agents. Under
agreements that may be entered into by us, underwriters, dealers and agents who
participate in the distribution of offered shares may be entitled to
indemnification by the us against certain liabilities, including liabilities
under the Securities Act, or to contribution with respect to payments which
such underwriters, dealers or agents may be required to make in respect
thereof. The offered shares may be sold directly or through broker-dealers
acting as principal or agent, or pursuant to a distribution by one or more
underwriters on a firm commitment or best-efforts basis. The methods by which
the offered shares may be sold include: (a) a block trade in which the
broker-dealer so engaged will attempt to sell the offered shares as agent but
may position and resell a portion of the block as principal to facilitate the
transaction; (b) purchases by a broker-dealer as principal and resale by such
broker-dealer for its account pursuant to this Prospectus; (c) ordinary
brokerage transactions and transactions in which the broker solicits
purchasers; (d) an exchange distribution in accordance with the rules of the
NYSE; (e) privately negotiated transactions; and (f) underwritten transactions.
The selling shareholders and any underwriters, dealers or agents participating
in the distribution of the offered shares may be deemed to be "underwriters"
within the meaning of the Securities Act, and any profit on the sale of the
offered shares by the selling shareholders and any commissions received by an
such broker-dealers may be deemed to be underwriting commissions under the
Securities Act.
When a selling shareholder elects to make a particular offer of
offered shares, a prospectus supplement, if required, will be distributed which
will identify any underwriters, dealers or agents and any discounts,
commissions and other terms constituting compensation from such selling
shareholder and any other required information.
In order to comply with the securities laws of certain states, if
applicable, the offered shares may be sold only through registered or licensed
brokers or dealers. In addition, in certain states, the offered shares may not
be sold unless they have been registered or qualified for sale in such state or
an exemption from such registration or qualification requirement is available
and is complied with.
We have agreed to pay all costs and expenses incurred in connection
with the registration under the Securities Act of the offered shares,
including, without limitation, all registration and filing fees, printing
expenses and fees and disbursements of our counsel and accountants. The selling
shareholders will pay any brokerage fees and commissions, fees and
disbursements of legal counsel for the selling shareholders and stock transfer
and other taxes attributable to the sale of the offered shares. We also have
agreed to indemnify each of the selling shareholders and their respective
officers, directors and trustees and each person who controls (within the
meaning of the Securities Act) such selling shareholder against certain losses,
claims, damages, liabilities and expenses arising under the securities laws in
connection with this offering. Each of the selling shareholders has agreed to
indemnify us, our officers and trustees and each person who controls (within
the meaning of the Securities Act) us, and each of the other selling
shareholders, against any losses, claims, damages, liabilities and expenses
arising under the securities laws in connection with this offering with respect
to written information furnished to us by such selling shareholder; provided,
however, that the indemnification obligation is several, not joint, as to each
selling shareholder.
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>
===================================== ================================
4,462,292 SHARES
TABLE OF CONTENTS
LASALLE HOTEL
Prospectus PROPERTIES
Forward-Looking Statements May
Prove Inaccurate....................2
LaSalle Hotel Properties..............2
Risk Factors..........................3 COMMON SHARES OF BENEFICIAL INTEREST
Where You Can Find More Information..12 (PAR VALUE $.01 PER SHARE)
Redemption of Units..................13
No Proceeds to Lasalle Hotel
Properties.........................25
Selling Shareholders.................25
Description of Common Shares.........27
Restrictions on Ownership of
Capital Shares.....................28
Federal Income Tax Considerations....31
Plan of Distribution.................34
Legal Matters........................35
Experts..............................35
========================================= ==================================
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14 OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following sets forth the estimated fees and expenses payable by
the Company in connection with the issuance and distribution of the securities
being registered:
Securities and Exchange Commission Registration Fee..... $15,972
Printing and Duplicating Expenses....................... 10,000
Legal Fees and Expenses................................. 50,000
Accounting Fees and Expenses............................ 3,000
Miscellaneous........................................... 10,000
Total $88,972
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================================================================================
ITEM 15. INDEMNIFICATION OF DIRECTORS 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)
5 -- Opinion of Brown & Wood LLP as to the legality of the Securities
8 -- Opinion of Brown & Wood LLP as to tax matters.
23.1 -- Consent of Brown & Wood LLP (included in Exhibits 5 and 8).
23.2 -- Consent of KPMG LLP.
24 -- Power of attorney (included on the signature
page of this Registration Statement).
- ---------------
(1) To be filed by amendment or incorporated by reference in connection with
the offered shares.
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 April 14, 1999.
LASALLE HOTEL PROPERTIES
By: /s/ Hans S. Weger
---------------------
Hans S. Weger
Chief Financial Officer
KNOW ALL MEN BY THESE PRESENTS, that we, the undersigned officers and
trustees of LaSalle Hotel Properties hereby severally constitute Jon E. Bortz,
Michael D. Barnello and Hans S. Weger, and each of them singly, our true and
lawful attorneys with full power to them, and each of them singly, to sign for
us and in our names in the capacities indicated below, the Registration
Statement filed herewith and any and all amendments to said Registration
Statement, and generally to do all such things in our names and in our
capacities as officers and trustees to enable LaSalle Hotel Properties to
comply with the provisions of the Securities Act of 1933, as amended, and all
requirements of the Securities and Exchange Commission, hereby ratifying and
confirming our signatures as they may be signed by our said attorneys, or any
of them, to said Registration Statement and any and all amendments thereto.
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.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
<S> <C> <C>
Chairman of the Board of Trustees
/s/ Stuart L. Scott April 14, 1999
- ------------------------------
Stuart L. Scott
President, Chief Executive Officer
/s/ Jon E. Bortz and Trustee April 14, 1999
- ------------------------------
Jon E. Bortz
Trustee
/s/ Darryl Hartley Leonard April 14, 1999
- -------------------------------
Darryl Hartley-Leonard
/s/ George F. Little, II Trustee April 14, 1999
- -------------------------------
George F. Little, II
/s/ Donald S. Perkins Trustee April 14, 1999
- -------------------------------
Donald S. Perkins
/s/ Shimon Topor Trustee April 14, 1999
- -------------------------------
Shimon Topor
/s/ Donald A. Washburn Trustee April 14, 1999
- -------------------------------
Donald A. Washburn
</TABLE>
<PAGE>
EXHIBIT INDEX
EXHIBITS DESCRIPTION PAGE
-------- ----------- ----
1 -- Form of Underwriting Agreement.(1)
5 -- Opinion of Brown & Wood LLP as to the legality of the
Securities.
8 -- Opinion of Brown & Wood LLP as to tax matters.(2)
23.1 -- Consent of Brown & Wood LLP (included in Exhibits 5
and 8).
23.2 -- Consent of KPMG LLP
24 -- Power of attorney (included on the signature
page of this Registration Statement).
- -----------------
(1) To be filed by amendment or incorporated by reference in connection with
the offered shares.
(2) To be filed by amendment.
Exhibit 5
[BROWN & WOOD LLP LETTERHEAD]
April 15, 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
4,462,292 common shares of beneficial interest, $.01 par value per share (the
"Common Shares"), 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 "). The Common Shares registered pursuant to the Registration
Statement relate (i) to the possible issuance by the Company of up to 3,181,723
Common Shares (the "Redemption Shares"), if and to the extent that the Company
elects to issue such Redemption Shares to holders of limited partner interests
("OP Units") of LaSalle Hotel Operating Partnership, L.P. (the "Operating
Partnership"), upon the tender of such outstanding OP Units for redemption
pursuant to Section 8.6 of the Partnership Agreement (defined below); (ii) to
the possible issuance by the Company of up to 1,280,569 Common Shares ("Option
Shares") to holders of up to 1,280,569 common share purchase rights (the
"Common Share Purchase Rights") upon their exercise; (iii) the offer and sale
from time to time of any Redemption Shares that may be issued to and held by
persons who may be affiliates of the Company; and (iv) the offer and sale from
time to time of any Option Shares that may be issued to and held by persons who
may be affiliates of the Company.
In connection with rendering this opinion, we have examined the
Declaration of Trust and the Bylaws of the Company; the Amended and Restated
Agreement of Limited Partnership of the Operating Partnership (the "Partnership
Agreement"); 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. In our examination, we have assumed the genuineness of all signatures,
the legal capacity of natural persons, the authenticity of all documents
submitted to us as certified, photostatic or facsimile copies, the authenticity
of the originals of such copies and the authenticity of telephonic
confirmations of public officials and others. As to facts material to our
opinion, we have relied upon certificates or telephonic confirmations of public
officials and certificates, documents, statements and other information of the
Company or representatives or officers thereof.
Based upon the foregoing, we are of the opinion that:
(1) When the Registration Statement has become effective under the
Securities Act and the Redemption Shares have been duly issued and exchanged
for Units tendered to the Operating Partnership for redemption in accordance
with the provisions of the Partnership Agreement as described in the
Registration Statement, such Redemption Shares will be validly issued, fully
paid and nonassessable.
(2) When the Registration Statement has become effective under the
Securities Act and the Option Shares have been duly issued in exchanged for the
consideration specified therefore in the Common Share Purchase Rights between
the Company and holders thereof, such Option Shares will be validly issued,
fully paid and nonassessable.
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
<PAGE>
Exhibit 23.2
The Board of Trustees
LaSalle Hotel Properties
We consent to incorporation by reference in the Registration Statement on Form
S-3 of LaSalle Hotel Properties of our report dated January 18, 1999 relating
to the consolidated balance sheet of LaSalle Hotel Properties as of December
31, 1998 and the related consolidated statements of income, shareholders'
equity, and cash flows for the period from April 29 (inception) through
December 31, 1998 and the related financial statement schedule and our report
dated March 17, 1999 relating to the balance sheet of LaSalle Hotel Lessee,
Inc. as of December 31, 1998 and the related statements of operations,
stockholders' equity (deficit), and cash flows for the period from April 29,
1998 (inception) through December 31, 1998, which reports appear in the
December 31, 1998 annual report on Form 10-K of LaSalle Hotel Properties and to
the reference to our firm under the heading "Experts" in the prospectus.
Chicago, Illinois
April 15, 1999 /s/ KPMG LLP
