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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON NOVEMBER 12, 1999
REGISTRATION 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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WESTERN PROPERTIES TRUST
(Exact name of registrant as specified in its charter)
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California
(State or other jurisdiction of incorporation or organization)
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94-6100058
(I.R.S. Employer Identification Number)
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2200 Powell Street, Suite 600
Emeryville, California 94608
(510) 597-0160
(Address, including zip code, and telephone number, including area code,
of registrant's principal executive offices)
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Bradley N. Blake
Chief Executive Officer
Western Properties Trust
2200 Powell Street, Suite 600
Emeryville, California 94608
(510) 597-0160
COPY TO:
Peter T. Healy, Esq.
O'Melveny & Myers LLP
275 Battery Street, Suite 2600
San Francisco, California 94111
(415) 984-8833
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
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Approximate date of commencement of proposed sale to the public: From time
to time after the effective date of this registration statement, as determined
by the Unitholders.
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,
other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. /X/
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If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) 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 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 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. / /
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CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
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PROPOSED MAXIMUM PROPOSED MAXIMUM AMOUNT OF
TITLE OF SECURITIES BEING AMOUNT TO BE AGGREGATE OFFERING AGGREGATE OFFERING REGISTRATION FEE
REGISTERED (1) REGISTERED (2) PRICE PER SHARE (3) PRICE (3) (4)
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<S> <C> <C> <C> <C>
Common Shares of
Beneficial Interest
(without par value) 1,432,364 shares $ 10.40625 $14,905,537 $4,144
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</TABLE>
(1) This registration statement is filed to register the issuance from time to
time by Western Properties Trust (formerly known as Western Investment
Real Estate Trust) ("Western Properties") of its Common Shares of
Beneficial Interest, without par value ("Common Shares"), if and to the
extent that the current holders (the "Unitholders") of units of limited
partnership interest ("Units") in Western/Kienow, L.P. (the "DownREIT
Partnership"), a limited partnership in which Western Properties is the
sole general partner, tender such Units for redemption and Western
Properties elects, pursuant to the terms of the agreement of limited
partnership of the DownREIT Partnership (the "Partnership Agreement") to
acquire such Units for Common Shares. The DownREIT Partnership issued the
Units on October 30, 1998, in connection with its acquisition of an
indirect ownership interest in certain neighborhood shopping centers and
other real estate in the Portland, Oregon metropolitan area owned by
Kienow's Food Stores, Inc. ("Kienow's"). Pursuant to the Partnership
Agreement, the Unitholders may tender their units for redemption to the
DownREIT Partnership at any time on or after October 30, 1999. In such
event, Western Properties may elect to acquire the tendered Units in
exchange for Common Shares registered hereby, on a one-for-one basis, or
for cash. If the DownREIT Partnership (rather than Western Properties)
redeems the tendered Units, or if Western Properties acquires tendered
Units for cash, the Common Shares shall not be issued.
(2) Pursuant to Rule 416 under the Securities Act, this registration statement
also registers the currently indeterminate number of additional Common
Shares as may be issuable upon redemption of the Unitholders' Units as a
result of anti-dilution adjustments.
(3) Estimated solely for purposes of calculating the registration fee pursuant
to Rule 457(c), based on the average high ($10.50) and low ($10.3125)
sales prices of the Common Shares on the American Stock Exchange on
November 9, 1999 (which is a date within five business days prior to the
date of filing of this registration statement).
(4) Calculated pursuant to Section 6(b)(2) of the Securities Act.
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THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON THE DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS
REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH
SECTION 8(a) OF THE SECURITIES ACT, OR UNTIL THE REGISTRATION STATEMENT SHALL
BECOME EFFECTIVE ON THE DATE AS THE SECURITIES AND EXCHANGE COMMISSION,
ACTING PURSUANT TO SECTION 8(a) MAY DETERMINE.
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<PAGE>
PROSPECTUS
1,432,364 SHARES
WESTERN PROPERTIES TRUST
COMMON SHARES OF BENEFICIAL INTEREST
We are Western Properties Trust, a real estate investment trust
focused on owning, redeveloping, developing and operating community and
neighborhood shopping centers and other real estate in a number of markets in
the western United States. Because we are organized as a trust, our common
equity interests are called "shares of beneficial interest" rather than
shares of stock; however our common shares are comparable in most ways to
shares of stock, see "Description of Our Common Shares."
This prospectus relates to our possible issuance of common shares to
the limited partners of Western/Kienow, L.P., a limited partnership in which
we are the sole general partner. We are not affiliated with any of the
limited partners. The limited partners acquired their units of limited
partnership interest on October 30, 1998, in connection with the
partnership's acquisition of an indirect ownership interest in Kienow's Food
Stores, Inc. Kienow's owns six neighborhood shopping centers and other real
estate in the Portland, Oregon metropolitan area and, prior to the
acquisition, operated a dozen grocery stores in the Portland area. The
partnership agreement of Western/Kienow, L.P. gives the limited partners the
right to tender their units of limited partnership interest to the
partnership for redemption at any time on or after October 30, 1999. Upon
such tender, we have the right to acquire their tendered units in exchange
for our common shares, on a one-for-one basis, or for cash. However, our
right to acquire their tendered units in exchange for common shares is
conditioned on the common shares being registered under the Securities Act.
This prospectus is part of a registration statement we filed with the SEC to
register our issuance of such common shares. We agreed to bear the expense of
registering the common shares. We will not receive any cash proceeds from
the issuance of the common shares, but we will receive the tendered units.
Receiving such units will increase our ownership interest in the
partnership. The limited partners are under no obligation to tender their
units for redemption and we are under no obligation to acquire tendered units
in exchange for common shares. Our registration of these common shares does
not necessarily imply that we will issue all or any portion of these common
shares.
Our common shares are traded on the American Stock Exchange under
the symbol "WIR." On November 10, 1999, the last reported sale price for the
common shares on the American Stock Exchange was $10.25 per share.
INVESTING IN OUR COMMON SHARES INVOLVES A NUMBER OF RISKS. IN
CONSIDERING WHETHER TO INVEST, YOU SHOULD CAREFULLY CONSIDER THE MATTERS
DISCUSSED UNDER "RISK FACTORS," BEGINNING ON PAGE 3 OF THIS PROSPECTUS.
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 NOVEMBER 12, 1999
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YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED IN THIS DOCUMENT OR TO
WHICH THIS DOCUMENT REFERS. WE HAVE NOT AUTHORIZED ANYONE TO PROVIDE YOU WITH
INFORMATION THAT IS DIFFERENT. THIS PROSPECTUS IS NOT AN OFFER TO SELL THESE
SECURITIES IN ANY PLACE WHERE THE OFFER OR SALE TO YOU IS NOT PERMITTED. YOU
SHOULD NOT ASSUME THAT THE INFORMATION CONTAINED IN THIS PROSPECTUS IS
CORRECT ON ANY DATE AFTER THE DATE OF THIS PROSPECTUS, EVEN IF THIS
PROSPECTUS IS GIVEN TO YOU OR THESE SECURITIES ARE OFFERED OR SOLD TO YOU ON
A LATER DATE.
TABLE OF CONTENTS
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<S> <C>
Table Of Contents.........................................................2
Note Regarding Forward-Looking Statements.................................2
Risk Factors..............................................................3
The Company..............................................................10
Use Of Proceeds..........................................................11
Description Of Our Common Shares.........................................11
Federal Income Tax Considerations........................................13
Registration Rights Of The Unitholders...................................21
Plan Of Distribution.....................................................22
Experts..................................................................22
Legal Matters............................................................22
Incorporation Of Certain Information By Reference........................23
Where You Can Find More Information......................................24
</TABLE>
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NOTE REGARDING FORWARD-LOOKING STATEMENTS
This prospectus, including the information incorporated in it by
reference, contains forward-looking statements within the meaning of Section 27A
of the Securities Act and Section 21E of the Exchange Act. Forward-looking
statements are those that predict or describe future events or trends and that
do not relate solely to historical matters. You can generally identify
forward-looking statements as statements containing the words "will," "shall,"
"believe," "expect," "anticipate," "intend," "estimate," "assume" or other
similar expressions.
YOU SHOULD NOT RELY ON OUR FORWARD-LOOKING STATEMENTS BECAUSE THE
MATTERS THEY DESCRIBE ARE SUBJECT TO KNOWN AND UNKNOWN RISKS, UNCERTAINTIES AND
OTHER UNPREDICTABLE FACTORS, MANY OF WHICH ARE BEYOND OUR CONTROL. Many relevant
risks are described under the caption "Risk Factors" in this prospectus, as well
as throughout our disclosure documents, and you should consider the important
factors listed there as you read this prospectus.
Our actual results, performance or achievements may differ materially
from the anticipated results, performance or achievements that are expressed or
implied by our forward-looking statements. We assume no responsibility to update
our forward-looking statements.
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RISK FACTORS
AN INVESTMENT IN OUR COMMON SHARES INVOLVES VARIOUS RISKS. PROSPECTIVE
INVESTORS SHOULD CAREFULLY CONSIDER THE FOLLOWING RISK FACTORS IN CONJUNCTION
WITH THE OTHER INFORMATION CONTAINED IN THIS PROSPECTUS BEFORE PURCHASING OUR
COMMON SHARES.
OUR INVESTMENTS ARE SUBJECT TO A NUMBER OF RISKS BEYOND OUR CONTROL.
Our investments in neighborhood shopping centers and other retail
and commercial properties are subject to varying degrees of risk that are
beyond our control and that may affect our ability to pay operating and other
expenses, make property improvements and make distributions to our
shareholders. Income from our properties may be adversely affected by a
number of factors beyond our control including:
- the national economic climate;
- the regional economic climate, which may be adversely impacted
by plant closings, industry slowdowns and other factors and
which may affect us directly (by reducing the willingness of
tenants to enter into new leases) or indirectly (by reducing
our current tenants' income and thereby reducing their ability
to pay rent to us);
- local real estate conditions such as an oversupply of, or a
reduction in demand for, retail and commercial space;
- perceptions by retailers or shoppers of declining safety,
convenience or attractiveness of our retail spaces and the
surrounding neighborhoods;
- decisions by customers of our grocery, drug store and other
tenants to shop with on-line internet merchants rather than
to visit our tenants' neighborhood locations;
- the quality, philosophy and performance of our tenants'
management; and
- increased costs of maintenance, insurance and operations,
which increases may not necessarily be passed-through fully to
tenants.
Income from our properties and their values are also affected by
factors such as government regulations and changes in zoning or tax laws,
interest rate levels, the availability of financing and potential liability
under environmental and other laws. In addition, the number of prospective
buyers interested in purchasing income-producing properties is limited.
Therefore, if we sell one of our properties, we may receive less money than
we invested in the property.
IF WE FAIL TO ATTRACT AND RETAIN RENT-PAYING TENANTS, OUR INCOME MAY DECREASE.
Our income and funds available for distribution will depend on our
ability to continue to lease space in our properties on economically
favorable terms. In addition, as substantially all of our income is derived
from rentals of real property, our income and funds available for
distribution could be adversely affected if a significant number of our
tenants were unable to meet their obligations to us. In the event of default
by a tenant, we may experience delays in enforcing our rights as a landlord
and may incur substantial costs in protecting our investment. We are subject
to the risks that leases may not be renewed, space may not be relet or the
terms of renewal or reletting, including the cost of required renovations,
may be less favorable than current lease terms and this risk is particularly
pronounced for our larger tenants. For example, one of our tenants, Raley's,
leased 22 supermarket locations from us and accounted for approximately 20%
of our revenues for the year
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ended December 31, 1998 and any impairment of the rental payments from
Raley's could have a material adverse affect on our income and cash flow.
Additionally, we expect to incur costs in making improvements or repairs
required by new or renewing tenants and we expect to incur costs associated
with brokerage commissions payable in connection with the reletting of space.
Leases on a total of approximately 7% of the leased square footage of our
properties (excluding Kienow's properties which are being redeveloped and
retenanted) as of December 31 1998 will expire on or prior to December 31,
2000. Our financial condition, results of operations, cash flow and our
ability to pay distributions on, and the market price of, our common shares
could be adversely affected if we are unable promptly to relet or renew the
leases for all or a substantial portion of expiring leases or if the rental
rates upon renewal or reletting are significantly lower than current or
expected rates.
THE BANKRUPTCY OF ONE OR MORE MAJOR TENANTS WOULD CAUSE OUR INCOME TO DECREASE.
In the various industries in which our tenants operate, there have
been a number of recent bankruptcies, including a few of our tenants. Our
properties are not insulated from the risk of tenant-bankruptcies, and the
bankruptcy or insolvency of one of our major tenants could have a material
adverse effect on the property in which the tenant is located and the income
produced by that property. Our leases generally do not contain restrictions
designed to ensure the creditworthiness of a tenant, although we do consider
the creditworthiness of each tenant prior to executing the lease.
IF WE FAIL TO COMPETE EFFECTIVELY AGAINST OTHER PROPERTY OWNERS IN OUR
ATTEMPTS TO ATTRACT AND RETAIN TENANTS AND IN OUR ATTEMPTS TO PURCHASE
ATTRACTIVE PROPERTIES, OUR INCOME AND PROFITS MAY DECLINE.
Numerous owners of properties compete with us to attract tenants and
numerous companies compete with us to acquire attractive properties. We
compete for tenants primarily on the basis of location, rental rates,
services provided and the design and condition of our properties. In some of
the geographic areas in which we own properties, the available supply of
space for lease exceeds the demand by prospective tenants. In those
circumstances, the rents we may charge tenants may decline and the costs and
expenses we incur on the tenant's behalf may increase, resulting in a decline
in our income and cash flow.
Additionally, we compete for quality properties with other investors
and engage in a continuing effort to identify desirable properties for
acquisition. If the number of prospective buyers for the types of properties
we consider acquiring increases, the prices of those properties may increase
and the yields may decrease.
IF OUR OPERATING COSTS INCREASE BY A GREATER AMOUNT THAN OUR RENTAL INCOME,
THEN OUR PROFITS WILL DECREASE.
Our properties are subject to operating risks common to commercial
real estate in general, any of which may adversely affect operating income.
For example, our properties are subject to increases in operating expenses,
such as security, taxes, landscaping, insurance, repairs and maintenance.
While most of our tenants are currently obligated to pay many of these costs,
we cannot assure you that our tenants will pay the costs they owe us
or, upon renewal, will agree to continue to pay those costs. If operating
expenses increase, local market conditions may limit the extent to which
rents may be increased to meet increased expenses without decreasing
occupancy rates. While we implement cost-saving incentive measures at each of
our properties, if any of the above problems occur, our ability to make
distributions on, and the market price of, our common shares could be
adversely affected.
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WE MAY BE UNABLE TO COMPLETE DEVELOPMENT AND REDEVELOPMENT PROJECTS ON
ADVANTAGEOUS TERMS.
The real estate development business, including the renovation and
rehabilitation of existing properties, involves significant risks. As of
September 30, 1999, we are involved in the early stages of two development
projects in the San Francisco Bay Area. The first project is located in
Walnut Creek, California (the "Cal Fed Project") where we intend to acquire
and redevelop three parcels, which comprise the majority of a city block. The
second project is located in Redwood City, California (the "On Broadway
Project"), which is a project contemplated with the city's redevelopment
agency. We intend to finance both projects through joint ventures, property
disposition proceeds and/or through third-party construction loans.
Our development projects involve significant risks, including the
following:
- As of September 30, 1999, we do not have sufficient financing
in place to meet our anticipated commitments to both
development projects. We cannot assure you that we will be
able to obtain financing on favorable terms for development
projects and we may not complete construction on schedule or
within budget, resulting in increased debt service expense and
construction costs and delays in leasing such properties and
generating cash flow.
- We may not be able to obtain, or we may experience delays in
obtaining, all necessary zoning, land-use, building, occupancy
and other required governmental permits and authorizations. In
particular, with respect to the Cal Fed Project, we may need
to rely on the City of Walnut Creek's willingness to assist in
our acquisition of the applicable properties by exercising the
city's power of condemnation; however, the City may not
commence such process or it may be subject to significant
legal or other delays.
- New or renovated properties may perform below anticipated
levels, producing cash flow below budgeted amounts;
- Substantial renovation as well as new development activities,
regardless of whether or not they are ultimately successful,
typically require a substantial portion of management's time
and attention which could divert management's time from our
day-to-day operations.
- Activities that we finance through construction loans involve
the risk that, upon completion of construction, we may not be
able to obtain permanent financing or we may not be able to
obtain permanent financing on advantageous terms.
These risks could have an adverse effect on our financial condition,
results of operations and cash flow and our ability to pay distributions on, and
the market price of, our common shares.
MARKET CONDITIONS AND THE COST OF FINANCING MAY LIMIT OUR GROWTH RATE.
Various elements of our business and growth strategies will require
additional capital. There can be no assurance that funds will be available to us
on terms satisfactory to us when needed. To the extent that we raise additional
equity capital, it could have a dilutive effect on existing shareholders.
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WE ARE SUBJECT TO RISKS AND LIABILITIES IN CONNECTION WITH PROPERTIES AND
PROJECTS OWNED THROUGH PARTNERSHIPS AND LIMITED LIABILITY COMPANIES.
As of September 30, 1999, we had an ownership interest in two
partnerships and one limited liability company (an "LLC") with third
parties. On September 30, 1999, we owned 11 properties through these
entities. We may make additional investments through partnerships and LLCs in
the future.
The ownership of properties through a partnership structure with
third parties involves certain risks which may include one or more of the
following:
- Our partners could become bankrupt, in which event we could be
generally liable for the partnership liabilities of our
third-party partners.
- Our partners could at any time have economic interests or
goals which are inconsistent with our economic interests and
goals.
- Our partners may take actions contrary to our instructions,
requests, policies or objectives.
- Our partnerships often contain restrictions on the ability of
a partner to sell its interest, which may result in a purchase
or sale of our interest at a disadvantageous time or on
disadvantageous terms.
The occurrence of one or more of the events described above could
have an adverse effect on our financial condition, results of operations and
cash flow and our ability to pay distributions on, and the market price of,
our common shares.
IF WE SUFFER AN UNINSURED LOSS, OUR INCOME AND CASH FLOW MAY DECREASE.
We carry comprehensive liability and casualty insurance with respect
to all of our properties, with policy specifications, insured limits and
deductibles on terms and amounts which we believe are adequate and
customarily carried by others for similar properties. There are, however,
certain types of losses, such as losses arising from acts of war or relating
to pollution or for earthquake or flood, that we generally do not insure
because they are either uninsurable or not economically insurable. Most of
our properties are located in California and Nevada near active earthquake
fault lines. In the event of a major earthquake, any of our properties in the
area of the earthquake could suffer substantial damage or destruction. Should
an uninsured loss or a loss in excess of insured limits occur, we could lose
our capital invested in a property, as well as the anticipated future revenue
from that property. Nevertheless, we would continue to be obligated on any
obligations related to that property. Any of those losses could adversely
affect our business and our financial condition, as well as adversely affect
our ability to make distributions on, and the market price of, our common
shares.
THE RISE OF ON-LINE COMMERCE MAY DECREASE OUR TENANTS' INCOME, THEREBY
INCREASING THE RISK THAT THEY MAY NOT BE ABLE TO MAKE TIMELY RENT PAYMENTS TO
US AND MAY NOT BE ABLE TO RENEW THEIR LEASES ON TERMS FAVORABLE TO US.
Most of our retail tenants depend upon in-store sales for the
majority of their revenues. In addition, many of the smaller retail tenants
in our neighborhood shopping centers depend upon the foot traffic generated
by the shopping center's anchor tenant (which generally is a grocery or drug
store). Recently, on-line merchants such as Webvan, Peapod and Drugstore.Com
have begun competing against such neighborhood grocery and drug stores, and
other specialized on-line merchants compete against our smaller retail
tenants. If our tenants' customers reduce their in-store shopping by ordering
products on-
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line from other merchants, the foot traffic at our neighborhood shopping
centers and other properties may decrease and our tenants' revenues may
decline. Such a decline in our tenants' revenues creates a risk that they
will not be able to make timely rent payments to us, and that any renewal of
their lease may be on less favorable terms to us than otherwise would have
been the case. If our tenants fail to make timely rent payments, we may be
unable to meet our financial obligations under our outstanding notes and our
line of credit. If a number of our tenants default on their rent payments or
renew their leases on terms less favorable to us, our business and financial
condition, as well as our ability to make distributions on, and the market
price of, our common shares could be adversely affected.
WE COULD SUFFER ENVIRONMENTAL LIABILITIES, WHICH WOULD RESULT IN A DECREASE
IN OUR INCOME, CASH FLOW AND PROPERTY VALUES.
Under various federal, state and local environmental laws, we may be
required to investigate and clean-up hazardous or toxic substances or
petroleum product releases at our current and former properties, often
regardless of whether we caused or even knew about such environmental
condition. Such duties may be imposed solely because of our current or
previous ownership or operation of the real estate. We may also be held
liable to a governmental entity or to third parties for property damage and
for investigation and clean-up costs incurred by those parties in connection
with any such contamination. In addition, applicable environmental laws allow
for the imposition of liens on contaminated sites in favor of the government
for damages and costs it incurs in connection with the contamination. Such
liens or the presence of hazardous substances on our property or our failure
to properly remediate the contamination may adversely affect our ability to
borrow against, sell or rent the affected property.
WE MAY INCUR COSTS IN COMPLYING WITH THE AMERICANS WITH DISABILITIES ACT AND
SIMILAR LAWS.
The Americans with Disabilities Act generally requires that all
places of public accommodation, including our properties, be made accessible
to disabled persons. Although we believe that our properties are
substantially in compliance with the present requirements of the Americans
with Disabilities Act, we may incur additional costs in complying with the
Americans with Disabilities Act. A number of additional federal, state and
local laws exist which also may require modifications to our properties.
These laws may also restrict certain further renovations of our properties.
Additional legislation may impose further burdens or restrictions on us with
respect to access by disabled persons.
IN ACQUIRING REAL PROPERTIES, WE INCUR A RISK THAT THE STRUCTURE OF A
PARTICULAR TRANSACTION SHALL NOT PERMIT US THE FLEXIBILITY TO TAKE AN ACTION
WITH RESPECT TO THE ACQUIRED PROPERTY THAT MIGHT OTHERWISE BE IN THE BEST
INTEREST OF OUR SHAREHOLDERS.
We may acquire properties (or an economic interest in properties) or
other real estate companies when we believe that an acquisition is consistent
with our business strategies. In addition, in certain circumstances we create
and use units of so-called "downREIT" partnerships as consideration for
acquisitions from tax-sensitive sellers. In connection with those
acquisitions, we sometimes agree to certain restrictions on our ability to
sell, or reduce the mortgage indebtedness on, those acquired assets,
including agreeing not to sell properties for significant periods of time.
These transactions may increase our indebtedness, which may impair our
ability to take actions that would otherwise be in the best interests of our
shareholders.
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THE ILLIQUIDITY OF THE MARKET IN WHICH WE OPERATE IMPEDES OUR FLEXIBILITY IN
RESPONDING TO MARKET CHANGES.
Equity and debt real estate investments are relatively illiquid and,
therefore, tend to limit our ability to vary our portfolio promptly in
response to changes in economic or other conditions. In addition, the
Internal Revenue Code generally limits our ability to sell those properties
that we have held for fewer than four years. The limitation in the Internal
Revenue Code and related regulations may affect our ability to sell
properties without adversely affecting returns to our shareholders. The
relative illiquidity of our holdings, Internal Revenue Code prohibitions and
related regulations could impede our ability to respond to adverse changes in
the performance of our investments and could adversely affect our financial
condition, results of operations and cash flow and our ability to make
distributions on, and the market price of, our common shares.
OUR ROLE AS THE GENERAL PARTNER OF THE WESTERN/KIENOW, L.P. MAY CONFLICT WITH
THE INTERESTS OF OUR SHAREHOLDERS.
As the general partner of Western/Kienow, L.P., we have fiduciary
obligations to that partnership's limited partners, the discharge of which
may conflict with the interests of our shareholders.
WE ARE SUBJECT TO THE RISKS OF MAKING LOANS SECURED BY REAL ESTATE.
As of September 30, 1999, we had invested as a lender in three notes
secured by mortgages on real property. Through such date we had advanced
$16.9 million of our total funding commitment of $36 million. We are
considering increasing our aggregate commitment to as much as $51.5 million.
These loans are secured by properties in Walnut Creek (commonly known as the
"Plaza Escuela Project"), Dublin and Concord, California. In the future, we
may make more of this type of investment. In general, the risks of investing
in mortgages include:
- Borrowers may not have adequate cash flow to be able to make
periodic debt service payments or pay principal when due.
- The value of the mortgaged property may be less than the
principal amount of the notes secured thereby.
- The interest rate payable on the notes may be lower than our
costs of funds to acquire the notes.
- Borrowers may not have the ability to pay the principal
balance at maturity of the loan.
In any of the foregoing events, our income and our ability to make distributions
on, and the market price of, our common shares could be adversely affected.
WE COULD SUFFER ADVERSE TAX CONSEQUENCES IF WE FAIL AT ANY TIME TO QUALIFY AS
A REIT.
We intend at all times to operate so as to qualify as a REIT for
federal income tax purposes. Although we believe that we are organized and
operate in that manner, no assurance can be given that we shall remain
qualified as a REIT. This is because qualification as a REIT involves the
application of complex Internal Revenue Code provisions for which there are
only limited judicial and administrative interpretations. The determination
of various factual matters and circumstances not entirely within our control
may affect our ability to qualify as a REIT. If in any taxable year we fail
to qualify as a REIT, we
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shall be subject to federal and state income tax on our taxable income at
regular corporate rates. In addition, unless we are entitled to relief under
certain statutory provisions, we would be disqualified from treatment as a
REIT for the four taxable years following the year during which qualification
is lost. The additional tax liability resulting from our failure to qualify
as a REIT would significantly reduce or eliminate the cash flow available for
distribution to our shareholders.
BECAUSE OUR DECLARATION OF TRUST CONTAINS CERTAIN LIMITS ON WHO MAY OWN OUR
COMMON SHARES, IT WILL BE VERY DIFFICULT FOR SOMEONE ELSE TO TAKE CONTROL OF
US, EVEN IF SUCH CHANGE OF CONTROL MIGHT BE IN THE BEST INTERESTS OF OUR
SHAREHOLDERS.
For us to maintain our qualification as a REIT, not more than 50% in
value of our outstanding shares may be owned, directly or indirectly, by five
or fewer persons. Our declaration of trust includes provisions authorizing
our board of trustees to refuse to effect any transfer of our shares of
beneficial interest that would jeopardize our status as a REIT. These
provisions may have the effect of delaying, deferring or preventing someone
from taking control of us, even though that change of control could involve a
premium price for our shareholders or otherwise could be in our shareholders'
best interests.
OUR DEBT FINANCING MAY ADVERSELY IMPACT OUR SHAREHOLDERS.
We are subject to the risks associated with debt financing,
including the risk that our cash flow will be insufficient to meet required
payments of principal and interest.
Our current indebtedness bears interest at both fixed rates and
floating rates. As of September 30, 1999, our aggregate outstanding
indebtedness of $211.8 million consisted of $134.6 million in fixed rate,
long-term debt and $77.2 million of borrowings under our variable rate,
unsecured bank line. Over the next five and ten years, approximately $136.9
million and $186.9 million, respectively, of our indebtedness will mature.
It is our intention to repay such indebtedness with a combination of the sale
of assets and/or the issuance of new debt or equity securities, both of which
will be dependent on market conditions. For future financings, we intend to
seek the most attractive financing arrangements available at the time, which
may involve either fixed or floating interest rates. With respect to floating
rate indebtedness, increases in interest rates could adversely affect our
operating income, funds available for distribution and ability to meet our
debt service obligations.
As of September 30, 1999, we had one secured loan of approximately
$9.9 million, which was secured by a mortgage on one of our properties.
However, if amounts due under our bank line are not paid at maturity, the
bank, at its option, can require us to provide security interests in our
properties. Our agreements executed in connection with our senior notes and
bank line of credit contain covenants, including minimum shareholder's
equity, maximum ratio of debt to net worth and income coverage requirements,
which impose limitations on us, including limitations on our ability to incur
additional debt. Also, we are tenants-in-common in two properties where our
co-owner, as the sole borrower, is obligated under a note that is secured by
its interest in the property. If mortgage payments are not made by the sole
borrower, the lender could commence foreclosure proceedings on the property,
which could result in a loss to us.
One of our requirements to qualify as a REIT under the Internal
Revenue Code is that we must distribute to our shareholders at least 95% of
our taxable income each year (determined without regard to net capital gains
and the dividends paid deduction). If our cash flow is not sufficient to fund
such a distribution, we may have to borrow funds on a short-term basis or
liquidate investments in order to raise enough cash to fund the distribution
and thereby maintain our REIT status. Such borrowing or liquidation may be on
disadvantageous terms and not otherwise in our best interests. As a result
our ability to pursue our broader business strategy may be adversely affected.
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FAILURE TO RESOLVE THE YEAR 2000 PROBLEM COULD HAVE AN ADVERSE EFFECT ON OUR
RESULTS OF OPERATIONS.
Many existing computer programs and embedded technologies use two
digits rather than four to define the applicable year. Consequently, our
computer equipment, software and devices with embedded technology that are
time-sensitive may recognize a date using "00" as the year 1900 rather than
the year 2000. This may result in system failure or erroneous data that may
disrupt our operations. We have initiated a Year 2000 compliance program that
includes a review of both our information technology and non-information
technology systems, as well as inquiries to our major vendors, key tenants,
banks and other parties we have significant business dealings with. During
1998 and 1999, we have undertaken and substantially completed the conversion
and upgrade of our management system.
Based on currently available information, we believe that the Year
2000 issue shall not pose significant operational problems for us. However,
if we fail to properly identify all Year 2000 issues, or if our assessment,
remediation and testing are not effected in a timely manner, the Year 2000
issue may adversely affect our results of operations or our relationships
with tenants or other third parties. Additionally, we can not assure you that
the Year 2000 issues of third parties shall not have an adverse impact on our
results of operations. For further Year 2000 readiness disclosure, see
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" contained in our most recent Annual Report on Form 10-K and in
our most recent Quarterly Report on Form 10-Q.
THE COMPANY
We are Western Properties Trust ("Western Properties"), a real
estate investment trust ("REIT") formerly known as Western Investment Real
Estate Trust. We focus on owning, redeveloping, developing and operating
community and neighborhood shopping centers and other real estate in a number
of markets in the western United States. Western Properties was founded in
1962. We are self-administered, which means that our operating decisions are
made by our officers under the supervision of our board of trustees.
Effective October 30, 1998, we acquired control of Kienow's Food Stores,
Inc., an Oregon corporation ("Kienow's"). Kienow's is a Portland,
Oregon-based landlord of neighborhood shopping centers and other properties,
whose principal assets are its real estate properties. Kienow's is now an
unconsolidated indirect subsidiary of ours. The acquisition was accomplished
using a newly formed downREIT limited partnership, named Western/Kienow, L.P.
(the "DownREIT Partnership"). The DownREIT Partnership is a Delaware limited
partnership that we control in our capacity as its sole general partner. In
this prospectus, the term "Company" generally includes Western Properties,
the DownREIT Partnership, Kienow's and a partnership in which Western
Properties has a controlling financial interest. As of September 30, 1999,
the Company holds 63 real estate investments. Those investments are comprised
of 49 properties owned directly, three notes secured by real estate (i.e.,
mortgages) and 11 properties owned by Kienow's. The 63 properties contain an
aggregate of approximately 5.6 million leasable square feet. Included in this
total are 9 properties held for sale comprising 262,000 leasable square feet.
The Company evaluates performance and makes resource-allocation decisions on
an individual property basis. For financial reporting purposes the Company
has grouped its properties into three segments: shopping centers;
single-tenant retail; and other commercial properties. Investments
principally consist of direct investments in real estate and also include
three loans secured by real estate. The Company leases a substantial portion
of its total gross leasable area on a long-term, triple net basis. Most of
the shopping centers owned by the Company have a grocery store as an anchor
tenant.
We have elected to be taxed as a REIT for federal income tax
purposes. If we continue to comply with the REIT qualification requirements
under the Internal Revenue Code of 1986, as amended (the "Internal Revenue
Code"), we will not generally be required to pay income tax at the corporate
level.
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Our executive offices are located in the San Francisco Bay Area at
2200 Powell Street, Suite 600, Emeryville, California 94608 and our telephone
number is (510) 597-0160. Additionally, we maintain regional offices in
Granite Bay and Fresno, California and Portland, Oregon.
THE DOWNREIT PARTNERSHIP
The DownREIT Partnership's principal asset is its indirect interest
in Kienow's. The limited partners of the DownREIT Partnership are the prior
stockholders of Kienow's who accepted units of limited partnership interest
in the DownREIT Partnership ("Units") in exchange for their interest in
Kienow's. Each of the limited partners of the DownREIT Partnership has the
right to tender his or her Units to the DownREIT Partnership for cash. Upon
such a tender, we have the right to acquire the tendered Units, either for
cash or for our common shares on a one-for-one basis under certain terms and
conditions. This prospectus relates to the common shares we may issue to the
limited partners in exchange for their Units in the DownREIT Partnership. The
limited partners' redemption right was not exercisable during the first year
following issuance of the Units and became exercisable on October 30, 1999.
See "Registration Rights of the Unitholders."
USE OF PROCEEDS
We will not receive any cash proceeds from our issuance of the
common shares covered by this prospectus, but instead we will receive Units
in the DownREIT Partnership. Receiving those Units will increase our
ownership interest in the DownREIT Partnership.
DESCRIPTION OF OUR COMMON SHARES
The description of our common shares of beneficial interest ("Common
Shares") set forth below does not purport to be complete and is qualified in
its entirety by reference to our declaration of trust, as amended, restated
and supplemented through the date hereof (our "Charter"), a copy of which is
incorporated by reference as an exhibit to the registration statement of
which this prospectus is a part. See "Where You Can Find More Information."
GENERAL
Under our Charter, we have authority to issue an unlimited number of
Common Shares, without par value, and up to 2,000,000 preferred shares of
beneficial interest, without par value ("Preferred Shares"). On September 30,
1999, we had issued and outstanding 17,231,349 Common Shares. No Preferred
Shares are currently outstanding. In addition, on October 30, 1999, there
were 1,432,364 units of limited partnership interest in the DownREIT
Partnership outstanding, which units are exchangeable for Common Shares on a
one-for-one basis.
Subject to the preferential rights of any outstanding class of
Preferred Shares, the holders of Common Shares are entitled to those
distributions as may be declared from time to time by our board of trustees
from funds available therefor and, upon liquidation, are entitled to receive
pro rata all assets of the Company available for distributions to those
holders. All Common Shares issued pursuant to this prospectus shall be fully
paid and nonassessable and the holders thereof shall not have preemptive
rights. However, our Charter prohibits us from issuing warrants, options or
similar evidences of a right to buy our shares unless issued to all of our
security holders ratably (or unless in connection with an employee stock
option plan).
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The holders of Common Shares are entitled to one vote per share on
all matters voted on by shareholders, including elections of trustees, and,
except as otherwise required by law or provided in any resolution adopted by
our board of trustees with respect to any class of Preferred Shares
establishing the powers, designations, preferences and relative,
participating, option or other special rights of that series, the holders of
those Common Shares exclusively possess all voting power. The Charter does
not provide for cumulative voting in the election of trustees.
The Charter provides for a staggered board of trustees consisting of
three classes. Each class holds office until the third annual meeting for
selection of trustees following the election of that class.
TRANSFER AGENT AND REGISTRAR
The transfer agent, registrar and dividend disbursing agent for the
Common Shares is ChaseMellon Shareholder Services, L.L.C., New York, New York.
RESTRICTIONS ON OWNERSHIP
The Common Shares are freely transferable, except that the board of
trustees may refuse to transfer shares if, in the opinion of the trustees,
the proposed transfer would jeopardize our qualification as a real estate
investment trust under the Internal Revenue Code. For Western Properties to
qualify as a REIT under the Internal Revenue Code, it must meet certain
requirements concerning the ownership of its outstanding shares of capital
stock. Specifically, not more than 50% in value of the Company's outstanding
shares of capital stock may be owned, directly or indirectly, by five or
fewer individuals (as defined in the Internal Revenue Code to include certain
entities) during the last half of a taxable year, and the Company 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. See "Federal Income Tax Considerations."
Because our board of trustees believes it is essential for us to
qualify as a REIT, the Charter permits the board of trustees to refuse to
transfer shares, if in the opinion of the trustees, the proposed transfer
would jeopardize our qualification as a REIT for any reason, including the
violation of the Internal Revenue Code restrictions described above and under
"Federal Income Tax Considerations."
PREFERRED SHARES
We are authorized to issue up to 2,000,000 Preferred Shares, without
par value. No Preferred Shares are outstanding as of the date hereof. Under
our Charter, Preferred Shares may be issued from time to time, in one or more
series, as authorized by the board of trustees. Subject to limitations
prescribed by California law and our Charter, the board of trustees is
authorized to fix the number of shares constituting each series of Preferred
Shares and the designations, powers, preferences and relative, participating,
optional or other special rights and qualifications, limitations or
restrictions thereon, including those provisions as may be desired concerning
voting, redemption, dividends, dissolution or the distribution of assets,
conversion or exchange, and any other subjects or matters as may be fixed by
resolution of the board of trustees or a duly authorized committee thereof.
The Preferred Shares shall, when issued, be fully paid and nonassessable.
Because the board of trustees has the power to establish the terms and
conditions of each series of Preferred Shares, it may afford the holders of
any series of Preferred Shares power, preferences and rights, voting or
otherwise, senior to the rights of holders of Common Shares. The issuance of
Preferred Shares could have the effect of delaying or preventing a change in
control of Western Properties.
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FEDERAL INCOME TAX CONSIDERATIONS
The following summary of material federal income tax considerations
that may be relevant to a prospective holder of Common Shares in Western
Properties is based on current law. This discussion does not purport to
address all aspects of taxation that may be relevant to particular
shareholders in light of their personal investment or tax circumstances, or
to certain types of shareholders subject to special treatment under the
federal income tax laws, including insurance companies, tax-exempt
organizations (except as described below), financial institutions or
broker-dealers, foreign corporations and persons who are not citizens or
residents of the United States (except as described below).
The statements in this discussion are based on current provisions of
the Internal Revenue Code, existing, temporary, and currently proposed
Treasury Regulations promulgated under the Internal Revenue Code, the
legislative history of the Internal Revenue Code, existing administrative
rulings and practices of the IRS, and judicial decisions. No assurance can be
given that future legislative, judicial, or administrative actions or
decisions, which may be retroactive in effect, shall not affect the accuracy
of any statements in this prospectus with respect to the transactions entered
into or contemplated prior to the effective date of those changes.
EACH PROSPECTIVE PURCHASER IS ADVISED TO CONSULT HIS OWN TAX ADVISOR
REGARDING THE SPECIFIC TAX CONSEQUENCES TO HIM OF THE PURCHASE, OWNERSHIP AND
SALE OF THE SECURITIES AND OF THE COMPANY'S ELECTION TO BE TAXED AS A REAL
ESTATE INVESTMENT TRUST, INCLUDING THE FEDERAL, STATE, LOCAL, FOREIGN AND
OTHER TAX CONSEQUENCES OF THE PURCHASE, OWNERSHIP, SALE AND ELECTION AND OF
POTENTIAL CHANGES IN APPLICABLE TAX LAWS.
TAXATION OF THE COMPANY
GENERAL.
Western Properties elected to be taxed as a REIT under Sections 856
through 860 of the Internal Revenue Code in 1962 and has not revoked its
election. Western Properties believes that it is organized and operates in a
manner so as to qualify for taxation as a REIT under the Internal Revenue
Code, and intends to operate in that manner, but no assurance can be given
that it shall operate in a manner so as to qualify or remain qualified as a
REIT.
The REIT provisions of the Internal Revenue Code are highly
technical and complex. The following sets forth the material aspects of the
sections that govern the federal income tax treatment of a REIT and its
shareholders. This summary is qualified in its entirety by the applicable
Internal Revenue Code provisions, rules and regulations promulgated
thereunder, and administrative and judicial interpretations thereof.
O'Melveny & Myers LLP has acted as tax counsel to the Company.
In the opinion of O'Melveny & Myers LLP, Western Properties'
organization and method of operation shall enable it to meet the requirements
for qualification and taxation as a REIT under the Internal Revenue Code for
its current taxable year and for future years. It must be emphasized that
this opinion is based on various assumptions and is conditioned upon certain
representations made by the Company as to factual matters, including a REIT
qualification analysis provided by the Company. In addition, this opinion is
based upon the factual representations of the Company concerning its business
and properties as set forth in this prospectus. Moreover, qualification and
taxation as a REIT depends upon Western Properties having met, and its
continuing ability to meet, through actual annual operating results, the
distribution level tests, diversity of stock ownership test, and the various
other qualification tests imposed under the Internal Revenue Code discussed
below, the results of which were not and shall
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not be reviewed by O'Melveny & Myers LLP. Accordingly, no assurance can be
given that the actual results of the Company's operation for any particular
taxable year satisfied or shall satisfy those requirements. See "-Failure to
Qualify." The opinion letter of O'Melveny & Myers LLP is filed as an exhibit
to the registration statement of which this prospectus is a part.
In any year in which Western Properties qualifies as a REIT, in
general it shall not be subject to federal income tax on that portion of its
taxable income or capital gain which is distributed to shareholders. Western
Properties shall, however, be subject to tax at normal corporate rates upon
any taxable income or capital gain not distributed.
Notwithstanding its qualification as a REIT, Western Properties may
also be subject to taxation in certain other circumstances. If Western
Properties should fail to satisfy the 75% or the 95% gross income test, as
discussed below, and nonetheless maintains its qualification as a REIT
because certain other requirements are met, it shall be subject to a 100% tax
on the gross income attributable to the greater of the amount by which it
fails either the 75% or the 95% test, multiplied by a fraction intended to
reflect its profitability. Western Properties shall also be subject to a tax
of 100% on net income from "prohibited transactions," which "prohibited
transactions" are, in general, certain sales or other dispositions of
property held primarily for sale to customers in the ordinary course of
business, other than foreclosure property and, if Western Properties has (i)
net income from the sale or other disposition of "foreclosure property"
(generally, property acquired by reason of a default on indebtedness or a
lease) which is held primarily for sale to customers in the ordinary course
of business or (ii) other non-qualifying income from foreclosure property, it
shall be subject to tax on that income from foreclosure property at the
highest corporate rate. In addition, if Western Properties should fail to
distribute during each calendar year at least the sum of (i) 85% of its REIT
ordinary income for that year, (ii) 95% of its REIT capital gain net income
for that year, and (iii) any undistributed taxable income from prior years,
it would be subject to a 4% excise tax on the excess of a required
distribution over the amounts actually distributed. Western Properties may
also be subject to the corporate "alternative minimum tax," on its items of
tax preference, as well as tax in certain situations not presently
contemplated.
REQUIREMENTS FOR QUALIFICATION.
The Internal Revenue Code defines a REIT as a corporation, trust or
association (i) which is managed by one or more trustees or directors, (ii)
the beneficial ownership of which is evidenced by transferable shares, or by
transferable certificates of beneficial interest, (iii) which would be
taxable as a domestic corporation, but for Sections 856 through 860 of the
Internal Revenue Code, (iv) which is neither a financial institution nor an
insurance company subject to certain provisions of the Internal Revenue Code,
(v) the beneficial ownership of which is held by 100 or more persons, (vi)
during the last half of each taxable year not more than 50% in value of the
outstanding stock of which is owned, directly or constructively, by five or
fewer individuals (as defined in the Internal Revenue Code to include certain
entities), and (vii) which meets certain other tests, described below,
regarding the nature of its income and assets. The Internal Revenue Code
provides that conditions (i) to (iv), inclusive, must be met during the
entire taxable year and that condition (v) must be met during at least 335
days of a taxable year of 12 months, or during a proportionate part of a
taxable year of less than 12 months. Conditions (v) and (vi) shall not apply
until after the first taxable year for which an election is made to be taxed
as a REIT. Additionally, for any taxable year of Western Properties beginning
after August 5, 1997, if Western Properties complies with Treasury
Regulations requiring the maintenance of records to ascertain ownership of
its outstanding stock and Western Properties does not know or have reason to
know that it failed to satisfy condition (vi), it shall be treated as having
satisfied that condition for any applicable taxable year.
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Western Properties believes that it has issued sufficient shares to
allow it to satisfy conditions (v) and (vi). In addition, Western Properties'
Charter grants the trustees the right to refuse to recognize a transfer of
shares if, in their opinion, the proposed transfer would jeopardize Western
Properties' qualification as a REIT under the share ownership requirements
described in conditions (v) and (vi) above, or otherwise.
Western Properties currently has one wholly-owned corporate
subsidiary, Western Asset Management Services, and may have additional
corporate subsidiaries in the future. Internal Revenue Code Section 856(i)
provides that a corporation that is a "qualified REIT subsidiary" shall not
be treated as a separate corporation, and all assets, liabilities, and items
of income, deduction and credit of a "qualified REIT subsidiary" shall be
treated as assets, liabilities, and items of income, deduction and credit of
the REIT. A "qualified REIT subsidiary" is a corporation, all of the capital
stock of which is held by the REIT. Thus, in applying the requirements
described herein, any "qualified REIT subsidiaries" owned by Western
Properties shall be ignored, and all assets, liabilities, and items of
income, deduction, and credit of those subsidiaries shall be treated as
assets, liabilities and items of income, deduction and credit of Western
Properties. Western Properties' current wholly-owned subsidiary is a
"qualified REIT subsidiary." Western Properties' wholly-owned subsidiary
therefore shall not be subject to federal corporate income taxation, although
it may be subject to state and local taxation.
In the case of a REIT which is a partner in a partnership, Treasury
Regulations provide that the REIT shall be deemed to own its proportionate
share of the assets of the partnership and shall be deemed to be entitled to
the income of the partnership attributable to its share. In addition, the
assets and gross income of the partnership retain the same character in the
hands of the REIT for purposes of Section 856 of the Internal Revenue Code,
including for purposes of satisfying the gross income tests and the asset
tests. Thus, Western Properties' proportionate share of the assets,
liabilities and items of income of the DownREIT Partnership shall be treated
as assets, liabilities and items of income of Western Properties for purposes
of applying the requirements described herein.
INCOME TESTS.
In order to qualify and maintain qualification as a REIT, Western
Properties annually must satisfy two gross income requirements. First, at
least 75% of Western Properties' gross income (excluding gross income from
prohibited transactions) for each taxable year must be derived directly or
indirectly from investments relating to real property or mortgages on real
property (including "rents from real property" and, in certain circumstances,
interest) or from certain types of temporary investments. Second, at least
95% of Western Properties' gross income (excluding gross income from
prohibited transactions) for each taxable year must be derived from its real
property investments, dividends, interest and gain from the sale or
disposition of stock or securities (or from any combination of the foregoing).
Rents received by Western Properties shall qualify as "rents from
real property" in satisfying the gross income requirements for a REIT
described above only if several conditions are met. First, the amount of rent
must not be based in whole or in part on the income or profits of any person.
However, an amount received or accrued generally shall not be excluded from
the term "rents from real property" solely by reason of being based on a
fixed percentage or percentages of receipts or sales. Second, the Internal
Revenue Code provides that rents received from a tenant shall not qualify as
"rents from real property" in satisfying the gross income tests if the REIT,
or an owner of 10% or more of the REIT, directly or constructively owns 10%
or more of that tenant (a "Related Party Tenant"). Third, if rent
attributable to personal property, leased in connection with a lease of real
property, is greater than 15% of the total rent received under the lease,
then the portion of rent attributable to that personal property shall not
qualify as "rents from real property." Finally, for rents received to qualify
as "rents from real property," the REIT generally must not operate or manage
the property or furnish or render services to the
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tenants of that property, other than through an independent contractor from
whom the REIT derives no revenue; provided, however, Western Properties may
directly perform certain services that are "usually or customarily rendered"
in connection with the rental of space for occupancy only and are not
otherwise considered "rendered to the occupant" of the property. For taxable
years beginning after August 5, 1997, Western Properties may operate or
manage the property or furnish or render services to the tenants of that
property without disqualifying any rents received from that property as
"rents from real property," provided that any amounts received or accrued
(directly or indirectly) by Western Properties for any of those activities or
services do not exceed 1% of all amounts received or accrued (directly or
indirectly) with respect to that property. However, any amounts received or
accrued (directly or indirectly) by Western Properties for any of those
activities or services shall not qualify as "rents from real property," even
to the extent those amounts do not exceed the 1% threshold. The Company does
not and shall not (i) charge rent for any property that is based in whole or
in part on the income or profits of any person (except by reason of being
based on a percentage of receipts or sales, as described above), (ii) rent
any property to a Related Party Tenant, (iii) derive rental income
attributable to personal property (other than personal property leased in
connection with the lease of real property, the amount of which is less than
15% of the total rent received under the lease), or (iv) perform services
considered to be rendered to the occupant of the property, other than through
an independent contractor from whom Western Properties derives no revenue
(subject to the 1% de minimis rule discussed above).
The term "interest" generally does not include any amount received
or accrued (directly or indirectly) if the determination of that amount
depends in whole or in part on the income or profits of any person. However,
an amount received or accrued generally shall not be excluded from the term
"interest" solely by reason of being based on a fixed percentage or
percentages of receipts or sales.
If Western Properties fails to satisfy one or both of the 75% or 95%
gross income tests for any taxable year, it may nevertheless qualify as a
REIT for that year if it is entitled to relief under certain provisions of
the Internal Revenue Code. These relief provisions shall be generally
available if Western Properties' failure to meet those tests was due to
reasonable cause and not due to willful neglect, Western Properties attaches
a schedule of the sources of its income to its return, and any incorrect
information on the schedule was not due to fraud with intent to evade tax. It
is not possible, however, to state whether in all circumstances Western
Properties would be entitled to the benefit of these relief provisions. As
discussed above in "General," even if these relief provisions apply, a tax
would be imposed with respect to the excess net income.
ASSET TESTS.
Western Properties, at the close of each quarter of its taxable
year, must also satisfy three tests relating to the nature of its assets.
First, at least 75% of the value of Western Properties' total assets must be
represented by real estate assets (including (i) its allocable share of real
estate assets held by partnerships in which Western Properties owns an
interest and (ii) stock or debt instruments held for not more than one year
purchased with the proceeds of a stock offering or long-term (at least five
years) debt offering of Western Properties), cash, cash items and government
securities. Second, not more than 25% of Western Properties' total assets may
be represented by securities other than those in the 75% asset class. Third,
of the investments not included in the 75% asset class, the value of any one
issuer's securities owned by Western Properties may not exceed 5% of the
value of Western Properties' total assets, and Western Properties may not own
more than 10% of any one issuer's outstanding voting securities (except for
its ownership interest in the stock of a qualified REIT subsidiary).
If Western Properties should fail to satisfy the asset tests at the
end of a calendar quarter, that failure would not cause it to lose its REIT
status if (i) it satisfied all of the asset tests at the close of the
preceding calendar quarter and (ii) the discrepancy between the value of
Western Properties' assets and
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the asset requirements either did not exist immediately after the acquisition
of any particular asset or was not wholly or partly caused by that
acquisition (i.e., the discrepancy arose from changes in the market values of
its assets). If the condition described in clause (ii) of the preceding
sentence were not satisfied, Western Properties still could avoid
disqualification by eliminating any discrepancy within 30 days after the
close of the quarter in which it arose.
ANNUAL DISTRIBUTION REQUIREMENTS.
Western Properties, in order to qualify as a REIT, is required to
distribute dividends (other than capital gain dividends) to its shareholders
in an amount at least equal to (i) the sum of (a) 95% of Western Properties'
"REIT taxable income" (computed without regard to the dividends paid
deduction and Western Properties' net capital gain) and (b) 95% of the net
income (after tax), if any, from foreclosure property, minus (ii) the sum of
certain items of noncash income. Those distributions must be paid in the
taxable year to which they relate, or in the following taxable year if
declared before Western Properties timely files its tax return for the year
and if paid on or before the first regular dividend payment after the
declaration. To the extent that Western Properties does not distribute all of
its net capital gain or distributes at least 95%, but less than 100%, of its
"REIT taxable income," as adjusted, it shall be subject to tax thereon at
regular ordinary and capital gain corporate tax rates. Western Properties may
elect to retain and pay taxes on all or a portion of its net long-term
capital gains for that year, in which case, Western Properties' shareholders
would include in their income as long-term capital gains their proportionate
share of the undistributed capital gains. The shareholders would be treated
as having paid their proportionate share of the capital gains tax paid by
Western Properties, which amounts would be credited or refunded to the
shareholders. Furthermore, if Western Properties should fail to distribute
during each calendar year at least the sum of (i) 85% of its REIT ordinary
income for the year, (ii) 95% of its REIT capital gain income for the year,
and (iii) any undistributed taxable income from prior periods, Western
Properties shall be subject to a 4% excise tax on the excess of the required
distribution over the amounts actually distributed. For taxable years of
Western Properties beginning after August 5, 1997, Western Properties may
elect to retain and pay taxes on all or a portion of its net long-term
capital gains for the year, in which case its shareholders would include in
income their proportionate share of that undistributed long-term capital gain
and claim a credit for their share of the taxes paid by Western Properties.
Western Properties intends to make timely distributions sufficient to satisfy
this annual distribution requirement.
It is possible that Western Properties, from time to time, may not
have sufficient cash or other liquid assets to meet the 95% distribution
requirement due to timing differences between (i) the actual receipt of
income and actual payment of deductible expenses and (ii) the inclusion of
that income and deduction of those expenses in arriving at taxable income of
Western Properties. In the event that those timing differences occur, in
order to meet the 95% distribution requirement, Western Properties may find
it necessary to arrange for short-term, or possibly long-term, borrowings or
to pay dividends in the form of taxable stock dividends.
Under certain circumstances, Western Properties may be able to
rectify a failure to meet the distribution requirement for a year by paying
"deficiency dividends" to shareholders in a later year, which may be included
in Western Properties' deduction for dividends paid for the earlier year.
Thus, Western Properties may be able to avoid being taxed on amounts
distributed as deficiency dividends; however, Western Properties shall be
required to pay interest based upon the amount of any deduction taken for
deficiency dividends.
17
<PAGE>
FAILURE TO QUALIFY
If Western Properties fails to qualify for taxation as a REIT in any
taxable year, and the relief provisions do not apply, Western Properties
shall be subject to tax (including any applicable alternative minimum tax) on
its taxable income at regular corporate rates. Distributions to shareholders
in any year in which Western Properties fails to qualify shall not be
deductible by Western Properties nor shall they be required to be made. In
that event, to the extent of current and accumulated earnings and profits,
all distributions to shareholders shall be taxable as ordinary income, and,
subject to certain limitations of the Internal Revenue Code, corporate
distributees may be eligible for the dividends received deduction. Unless
entitled to relief under specific statutory provisions, the Company shall
also be disqualified from taxation as a REIT for the four taxable years
following the year during which qualification was lost. It is not possible to
state whether in all circumstances the Company would be entitled to that
statutory relief.
TAXATION OF TAXABLE DOMESTIC SHAREHOLDERS
As long as Western Properties qualifies as a REIT, distributions
made to its taxable domestic shareholders out of current or accumulated
earnings and profits (and not designated as capital gain dividends) shall be
taken into account by them as ordinary income and shall not be eligible for
the dividends received deduction for corporations. Distributions (or, net
long-term capital gains retained by Western Properties) that are designated
as capital gain dividends shall be taxed as long-term capital gain (to the
extent they do not exceed Western Properties' actual net capital gain for the
taxable year) without regard to the period for which the stockholder has held
its stock. However, corporate shareholders may be required to treat up to 20%
of certain capital gain dividends as ordinary income. Distributions in excess
of current and accumulated earnings and profits shall not be taxable to a
stockholder to the extent that they do not exceed the adjusted basis of the
stockholder's shares, but rather shall reduce the adjusted basis of those
shares. To the extent that those distributions exceed the adjusted basis of a
stockholder's shares they shall 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
stockholder. In addition, any dividend declared by Western Properties in
October, November or December of any year payable to a stockholder of record
on a specified date in any of those months shall be treated as both paid by
Western Properties and received by the stockholder on December 31 of that
year, provided that the dividend is actually paid by Western Properties
during January of the following calendar year. Shareholders may not include
in their individual income tax returns any net operating losses or capital
losses of Western Properties.
In general, any loss upon a sale or exchange of shares by a
stockholder who has held those shares for six months or less (after applying
certain holding period rules), shall be treated as a long-term capital loss
to the extent of distributions from Western Properties required to be treated
by the stockholder as long-term capital gain.
BACKUP WITHHOLDING
Western Properties shall report to its domestic shareholders and the
Internal Revenue Service the amount of dividends paid during each calendar
year, and the amount of tax withheld, if any. Under the backup withholding
rules, a stockholder may be subject to backup withholding at the rate of 31%
with respect to dividends paid unless the holder (a) is a corporation or
comes within certain other exempt categories and, when required, demonstrates
this fact, or (b) provides a taxpayer identification number, certifies as to
no loss of exemption from backup withholding, and otherwise complies with
applicable requirements of the backup withholding rules. A stockholder that
does not provide Western Properties with his correct taxpayer identification
number may also be subject to penalties imposed by the Internal
18
<PAGE>
Revenue Service. Any amount paid as backup withholding shall be creditable
against the stockholder's income tax liability. In addition, Western
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 Western Properties. The Internal Revenue Service has issued final
regulations that shall alter the technical requirements relating to backup
withholding compliance as applied to foreign shareholders for distributions
made after December 31, 2000. See "-Taxation of Foreign Shareholders."
TAXATION OF TAX-EXEMPT SHAREHOLDERS
In Revenue Ruling 66-106, 1966-1 C.B. 151, the Internal Revenue
Service ruled that amounts distributed by a REIT to a tax-exempt employees'
pension trust did not constitute "unrelated business taxable income"
("UBTI"). Revenue rulings are interpretive in nature and subject to
revocation or modification by the IRS. However, based upon Revenue Ruling
66-106 and the analysis therein, distributions by Western Properties to a
stockholder that is a tax-exempt entity should not constitute UBTI, provided
that the tax-exempt entity has not financed the acquisition of its shares
with "acquisition indebtedness" within the meaning of the Internal Revenue
Code and the shares are not otherwise used in an unrelated trade or business
of the tax-exempt entity.
In certain circumstances, a pension trust that owns more than 10% of
Western Properties stock shall be required to treat a percentage of the
dividends received from Western Properties as UBTI (the "UBTI Percentage").
The UBTI Percentage is the gross income derived by Western Properties from an
unrelated trade or business (determined as if Western Properties were a
pension trust) divided by Western Properties' gross income for the year in
which the dividends are paid. The UBTI Percentage rule shall apply to a
pension trust holding more than 10% of Western Properties' stock only if (i)
the UBTI Percentage is at least 5%, (ii) Western Properties qualifies as a
REIT by reason of the modification of the 5/50 Rule that allows the
beneficiaries of the pension trust to be treated as holding shares of Western
Properties in proportion to their actuarial interests in the pension trust
and (iii) either (A) one pension trust owns more than 25% of the value of
Western Properties' stock or (B) a group of pension trusts individually
holding more than 10% of the value of Western Properties' stock collectively
owns more than 50% of the value of Western Properties' stock.
TAXATION OF FOREIGN SHAREHOLDERS
The rules governing United States federal income taxation of
nonresident alien individuals, foreign corporations, foreign partnerships and
other foreign shareholders (collectively, "Non-U.S. Shareholders") are
complex and no attempt shall be made herein to provide more than a summary of
the rules. Prospective Non-U.S. Shareholders should consult with their own
tax advisors to determine the impact of federal, state and local income tax
laws with regard to an investment in shares, including any reporting
requirements.
Distributions by the Company that are not attributable to gain from
sales or exchanges of United States real property interests and not
designated by Western Properties as capital gains dividends shall be treated
as dividends of ordinary income to the extent that they are made out of
current or accumulated earnings and profits. The distributions, ordinarily,
shall be subject to a withholding tax equal to 30% of the gross amount of the
distribution unless an applicable tax treaty reduces or eliminates that tax.
However, if income from the investment in the Common Shares is treated as
effectively connected with the conduct by the Non-U.S. Stockholder of a
United States trade or business, the Non-U.S. Shareholder generally shall be
subject to a tax at graduated rates, in the same manner as U.S. shareholders
are taxed with respect to those dividends (and may also be subject to the 30%
branch profits tax in the case of a Non-U.S. Shareholder that is a foreign
corporation). Western Properties expects to withhold United
19
<PAGE>
States income tax at the rate of 30% on the gross amount of any of those
dividends made to a Non-U.S. Shareholders unless (i) a lower treaty rate
applies or (ii) the Non-U.S. Shareholder files an IRS Form 4224 with Western
Properties certifying that the investment to which the distribution relates
is effectively connected to a United States trade or business of the Non-U.S.
Shareholder. Lower treaty rates applicable to dividend income may not
necessarily apply to dividends from a REIT, however. The Internal Revenue
Service has issued final regulations that shall modify the manner in which
Western Properties complies with the withholding requirements for
distributions made after December 31, 2000. Distributions in excess of
current and accumulated earnings and profits of Western Properties shall not
be taxable to a stockholder to the extent that they do not exceed the
adjusted basis of the stockholder's shares, but rather shall reduce the
adjusted basis of those shares. To the extent that the distributions exceed
the adjusted basis of a Non-U.S. Shareholder's shares, they shall give rise
to tax liability if the Non-U.S. Shareholder otherwise is subject to tax on
any gain from the sale or disposition of his Western Properties shares (as
described below). If it cannot be determined at the time a distribution is
made whether or not the distribution shall be in excess of current and
accumulated earnings and profits, the distribution shall be subject to
withholding at the same rate applicable to dividends. However, amounts thus
withheld are refundable if it is subsequently determined that the
distribution was, in fact, in excess of current and accumulated earnings and
profits of the Company.
In August 1996, the U.S. Congress passed the Small Business Job
Protection Act of 1996, which requires Western Properties to withhold 10% of
any distribution in excess of its current and accumulated earnings and
profits. That statute is effective for distributions made after August 20,
1996. Consequently, although Western Properties intends to withhold at a rate
of 30% on the entire amount of any distribution, to the extent that it does
not do so, any portion of a distribution not subject to withholding at a rate
of 30% shall be subject to withholding at a rate of 10%.
For any year in which Western Properties qualifies as a REIT,
distributions (or for taxable years beginning after December 31, 1997, net
long-term capital gains retained and designated as capital gain dividends by
Western Properties) that are attributable to gain from sales or exchanges by
Western Properties of United States real property interests shall be taxed to
a Non-U.S. Stockholder under provisions of the Foreign Investment in Real
Property Tax Act of 1980, as amended ("FIRPTA"). Under FIRPTA, these
distributions are taxed to a Non-U.S. Shareholder as if the gain were
effectively connected with a United States trade or business. Non-U.S.
Shareholders would thus be taxed at the same capital gain rates applicable to
U.S. shareholders (subject to applicable alternative minimum tax and a
special alternative minimum tax in the case of nonresident alien
individuals). Also, distributions subject to FIRPTA may be subject to a 30%
branch profits tax in the hands of a foreign corporate stockholder not
entitled to treaty relief or exemption. Western Properties is required by
applicable Treasury Regulations to withhold 35% of any distribution that
could be designated by it as a capital gains dividend. This amount 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 shall not be taxed under FIRPTA if Western 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. However, because the
shares of Western Properties are publicly-traded, no assurance can be given
that Western Properties shall continue to be a "domestically-controlled
REIT." In addition, a Non-U.S. Shareholder that owns, actually or
constructively, 5% or less of Western Properties' stock throughout a
specified "look back" period shall not recognize gain on the sale of his
stock taxable under FIRPTA if the shares are traded on an established
securities market. Furthermore, gain not subject to FIRPTA shall be taxable
to a Non-U.S. Shareholder if (i) investment in the shares is effectively
connected with the Non-U.S. Shareholder's United States trade or business, in
which case the Non-U.S. Shareholder shall be subject to the same treatment as
U.S. shareholders with respect to the gain (except that a stockholder that is
a foreign corporation may also be subject to the 30% branch profits tax), or
(ii)
20
<PAGE>
the Non-U.S. Shareholder is a nonresident alien individual who was present in
the United States for 183 days or more during the taxable year and has a "tax
home" in the United States, in which case the nonresident alien individual
shall be subject to a 30% tax on the individual's capital gains. If the gain
on the sale of shares were to be subject to taxation under FIRPTA, the
Non-U.S. Shareholder shall be subject to the same treatment as U.S.
shareholders with respect to the gain (subject to applicable alternative
minimum tax and a special alternative minimum tax in the case of nonresident
alien individuals and, in the case of foreign corporations, subject to the
possible application of the 30% branch profits tax).
STATE AND LOCAL TAXES
Western Properties, its subsidiaries, the DownREIT Partnership, or
Western Properties' shareholders may be subject to state and local tax in
various states and localities, including those states and localities in which
it or they transact business, own property, or reside. The state tax
treatment of the Company and our shareholders in those jurisdictions may
differ from the federal income tax treatment described above. Consequently,
prospective shareholders should consult their own tax advisors regarding the
effect of state and local tax laws upon an investment in the Common Shares.
REGISTRATION RIGHTS OF THE UNITHOLDERS
All of the Unitholders currently hold Units in the DownREIT
Partnership. The Units were issued to them in connection with our acquisition
of Kienow's on October 30, 1998.
The Partnership Agreement gives the Unitholders the right to tender
their Units to the DownREIT Partnership for redemption at any time on or
after October 30, 1999. Upon such tender, we have the right to acquire their
tendered Units in exchange for Common Shares, on a one-for-one basis, or for
cash. However, our right to acquire their tendered Units in exchange for
Common Shares is conditioned on the Common Shares being registered under the
Securities Act. This prospectus is part of a registration statement we filed
with the SEC to register the issuance of such Common Shares. In the
Partnership Agreement, we agreed to bear our proportionate share of the
expense of registering the Common Shares. The Unitholders are under no
obligation to tender their Units for redemption and we are under no
obligation to acquire tendered Units in exchange for Common Shares. Our
registration of these Common Shares does not necessarily imply that we shall
issue all or any portion of these Common Shares.
In the Partnership Agreement, we agreed to use our best efforts to
have the registration declared effective under the Securities Act and to keep
the registration continuously effective until a date agreed upon by us and a
majority of the limited partners or until the time as all of the shares
registered pursuant to the registration have been issued pursuant to that
registration. We further agreed to supplement or make amendments to the
registration, if required by the rules, regulations or instructions
applicable to the registration form utilized by us or by the Securities Act.
Under the Partnership Agreement, we and the DownREIT Partnership are
each required to pay our proportionate share of expenses in connection with
the registration, including, without limitation, the following: (1) all
expenses incident to filing with the National Association of Securities
Dealers, Inc.; (2) registration fees; (3) printing expenses; (4) accounting
and legal fees and expenses, except to the extent Unitholders elect to engage
accountants or attorneys in addition to the accountants and attorneys engaged
by the Company; (5) accounting expenses incident to or required by that
registration or qualification; and (6) expenses of complying with the
securities or blue sky laws of any jurisdiction; PROVIDED, HOWEVER, neither
we nor the DownREIT Partnership shall be liable for (A) any direct
out-of-pocket costs incurred by the Unitholders in connection with the
registration, or (B) any other fees or expenses incurred by the
21
<PAGE>
Unitholders in connection with that registration, which according to the
written instructions of any regulatory authority either the DownREIT
Partnership or we are not permitted to pay.
This summary of the Unitholders' registration rights is qualified in
its entirety by the provisions of the Partnership Agreement, which is
incorporated by reference as an exhibit to the registration statement of
which this prospectus is a part.
PLAN OF DISTRIBUTION
We are registering our possible issuance of Common Shares to the
Unitholders of the DownREIT Partnership in exchange for the Unitholders'
Units in that partnership. The purpose of this registration is to comply with
our registration obligation under the Partnership Agreement, as described
under "Registration Rights of the Unitholders." Any Common Shares issued
under this prospectus shall be issued directly to the Unitholders and not
through any broker or dealer. We shall not receive any cash proceeds from our
issuance of the Common Shares. We or the DownREIT Partnership shall bear all
costs, expenses and fees in connection with this registration, except as
described under "Registration Rights of the Unitholders."
Our Common Shares are traded on the American Stock Exchange under
the symbol "WIR."
EXPERTS
The consolidated financial statements of Western Properties Trust
(formerly Western Investment Real Estate Trust) as of December 31, 1998 and
1997 and for each of the years in the three-year period ended December 31,
1998, have been incorporated by reference herein and in the registration
statement 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.
LEGAL MATTERS
The validity of the securities registered hereby shall be passed
upon for the Company by O'Melveny & Myers LLP, San Francisco, California.
22
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INCORPORATION OF CERTAIN INFORMATION BY REFERENCE
The SEC allows us to "incorporate by reference" the information we
file with it. This means that we can disclose important information to you by
referring you to those documents. The information incorporated by reference
is considered to be part of this prospectus and the information we file later
with the SEC shall automatically update and supersede this information.
The following documents, which have been filed with the SEC, are
hereby incorporated by reference:
1. Annual Report on Form 10-K of the Company for the fiscal year
ended December 31, 1998, including portions of the Company's
definitive Proxy Statement incorporated therein by reference;
2. Quarterly Reports on Form 10-Q of the Company for the fiscal
quarters ended March 31, 1999, June 30, 1999 and September 30,
1999;
3. Current Reports on Form 8-K of the Company filed April 13,
1999 and August 20, 1999; and
4. The description of the Common Shares included in the Company's
registration statements and reports filed under the Exchange
Act, including any amendments or reports filed for the purpose
of updating such description.
In addition, all reports and other documents that we file with the
SEC pursuant to Section 13(a) and 13(c), 14 or 15(d) of the Exchange Act
after the date of this prospectus and prior to the termination of the
offering shall be deemed to be incorporated by reference in this prospectus
from the date of the filing of those documents, except that each time we file
a new annual report on Form 10-K, any Form 10-K, Form 10-Q or Form 8-K filed
prior to that filing shall no longer be incorporated in this prospectus. Any
statement contained in a document incorporated by reference shall be deemed
to be modified or superseded for purposes of this prospectus to the extent
that a statement contained in a later document modifies or supersedes that
statement. Any statements so modified or superseded shall not be deemed to
constitute a part of this prospectus, except as so modified or superseded.
We shall provide without charge to each person to whom this
prospectus is delivered, upon written or oral request of that person, a copy
of any or all of the documents referred to above which have been or may be
incorporated by reference in this prospectus, other than those documents'
exhibits that are not also specifically incorporated by reference. Requests
for those documents should be directed to Western Properties Trust, 2200
Powell Street, Suite 600, Emeryville, California 94608, Attention: Ms.
Barbara Donham (telephone: (510) 597-0160).
23
<PAGE>
WHERE YOU CAN FIND MORE INFORMATION
We are subject to the information requirements of the Exchange Act
and in accordance with the Exchange Act we file annual and quarterly reports,
proxy statements and other information with the SEC. Our reports, proxy
statements and most other information that we file with the SEC can be
inspected and copied at the public reference facilities maintained by the SEC
at Room 1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C.
20549, and at regional offices of the SEC located at 7 World Trade Center,
13th Floor, New York, New York 10048 and Northwestern Atrium Center, 500 West
Madison Street, Suite 1400, Chicago, Illinois 60661-2511. You may obtain
information on the operation of the SEC's public reference room by calling
1-800-SEC-0330. Copies of our filed materials can be obtained by mail from
the Public Reference Section of the SEC, 450 Fifth Street, N.W., Washington,
D.C. 20549 at prescribed rates. The SEC also maintains an Internet site that
contains our reports, proxy statements and other information as well as those
documents from other companies that file electronically with the SEC and the
address is http://www.sec.gov.
We have filed with the SEC a registration statement on Form S-3
under the Securities Act, as amended, and the rules and regulations
promulgated thereunder, with respect to the securities issued pursuant to
this prospectus. This prospectus, which is part of the registration
statement, does not contain all of the information set forth in the
registration statement and the exhibits thereto. For further information
concerning the Company and the securities issued pursuant to this prospectus,
we refer you to the registration statement and the exhibits and schedules
filed therewith, which may be obtained as described above.
No dealer, sales representative or any other person has been
authorized to give any information or to make any representations in
connection with this offering other than those contained in this prospectus
or any accompanying prospectus supplement, and, if given or made, that
information or representation must not be relied upon as having been
authorized by the Company or any underwriter. This prospectus and any
accompanying prospectus supplement do not constitute an offer to sell, or a
solicitation of an offer to buy, any securities other than the registered
securities to which they relate or an offer to, or solicitation of, any
person in any jurisdiction where that offer or solicitation would be
unlawful. Neither the delivery of this prospectus and any accompanying
prospectus supplement nor any sale made hereunder or thereunder shall, under
any circumstances, create any implication that there has been no change in
the affairs of the Company since the date hereof or thereof or that the
information contained herein or therein is correct as of any time subsequent
to the date hereof or thereof.
24
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===============================================================================
YOU SHOULD RELY ONLY ON THE INFORMATION INCORPORATED BY REFERENCE OR CONTAINED
IN THIS PROSPECTUS OR ANY SUPPLEMENT. WE HAVE NOT AUTHORIZED ANYONE ELSE TO
PROVIDE YOU WITH DIFFERENT OR ADDITIONAL INFORMATION. WE ARE NOT MAKING AN OFFER
OF THESE SECURITIES IN ANY STATE WHERE THE OFFER IS NOT PERMITTED. YOU SHOULD
NOT ASSUME THAT THE INFORMATION IN THIS PROSPECTUS OR ANY SUPPLEMENT IS ACCURATE
AS OF ANY DATE OTHER THAN THE DATE ON THE FRONT OF THOSE DOCUMENTS.
---------------------
TABLE OF CONTENTS
<TABLE>
<S> <C>
Table Of Contents..........................................................2
Note Regarding Forward-Looking Statements..................................2
Risk Factors...............................................................3
The Company...............................................................10
Use Of Proceeds...........................................................11
Description Of Our Common Shares..........................................11
Federal Income Tax Considerations.........................................13
Registration Rights Of The Unitholders....................................21
Plan Of Distribution......................................................22
Experts...................................................................22
Legal Matters.............................................................22
Incorporation Of Certain Information By Reference.........................23
Where You Can Find More Information.......................................24
</TABLE>
WESTERN
PROPERTIES
TRUST
1,432,364
COMMON SHARES
OF BENEFICIAL INTEREST
------------
PROSPECTUS
------------
NOVEMBER 12, 1999
===============================================================================
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth the costs and expenses, payable by the
Company in connection with the registration of the securities being registered.
All amounts are estimates except the SEC registration fee and the American Stock
Exchange Fee.
<TABLE>
<CAPTION>
DESCRIPTION AMOUNT
<S> <C>
SEC Registration Fee............................................... $ 4,144
American Stock Exchange Fee........................................ 17,500
Printing and Engraving............................................. 2,000
Legal Fees and Expenses............................................ 35,000
Accountants' Fees and Expenses..................................... 5,000
Miscellaneous...................................................... 5,000
-------------
TOTAL.....................................................
$68,644
=============
</TABLE>
ITEM 15. INDEMNIFICATION OF TRUSTEES AND OFFICERS.
Section 2.7 of Western Properties Trust's Declaration of Trust (the
"Charter") provides that any trustee or officer of Western Properties,
whether or not still in office, made a party to any action, suit or
proceeding or against whom a claim or liability is asserted because he is or
was a trustee or officer of Western Properties shall be indemnified and held
harmless by Western Properties against judgments, fines, amounts paid on
account thereof, whether in settlement or otherwise, and reasonable expenses,
including attorneys' fees actually and reasonably incurred by him in
connection with the defense of that action, suit or proceeding or in
connection with the appeal therein, whether or not the same proceeds to
judgment or is settled or otherwise brought to a conclusion. Those rights of
indemnification and reimbursement shall be satisfied only out of the assets
of Western Properties. Under Section 2.5 of Western Properties' Charter, no
shareholder shall be personally or individually liable for any claim against
the trustees or officers. No person shall be indemnified or reimbursed for
any claim, obligation or liability which shall have been adjudicated, or in
case of settlement, which in the opinion of counsel for Western Properties
would, if adjudicated, have likely been adjudicated to have arisen out of or
been based upon that person's willful misfeasance, bad faith, gross
negligence or reckless disregard of duty or for his failure to act in good
faith in the reasonable belief that his action was in the best interests of
Western Properties. Western Properties has entered into individual
indemnification agreements with each trustee and officer of Western
Properties.
II-1
<PAGE>
ITEM 16. EXHIBITS.
The following exhibits are part of this registration statement on
Form S-3 and are numbered in accordance with Item 601 of Regulation S-K.
<TABLE>
<CAPTION>
Exhibit No. Description
- ----------- --------------------------------------------------------------
<S> <C>
4.1 Amended and Restated Declaration of Trust (previously filed as
Exhibit 3 to Western Properties' Form 10-Q for the quarter
ended September 30, 1998 and incorporated herein by reference).
5.1 Opinion of O'Melveny & Myers LLP as to legality of the shares
being registered.
8.1 Opinion of O'Melveny & Myers LLP as to certain federal income
tax matters.
23.1 Consent of Independent Accountants.
23.2 Consent of O'Melveny & Myers LLP, which is included within the
opinions filed as Exhibits 5.1 and 8.1.
24.1 Powers of Attorney included under the caption "Signatures."
99.1 Agreement of Limited Partnership of Western/Kienow, L.P., dated
October 30, 1998 (previously filed as exhibit 10.6 to Western
Properties' Form 10-Q for the quarter ended September 30, 1998
and incorporated herein by reference).
</TABLE>
ITEM 17. UNDERTAKINGS
(a) Western Properties Trust hereby undertakes:
(1) To file, during any period in which offers or sales
are being made, a post-effective amendment to this registration statement:
(i) To include any prospectus required by Section 10(a)(3) of
the Securities Act;
(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 and of the estimated
maximum offering range may be reflected in the form of prospectus filed
with the SEC pursuant to Rule 424(b) if, in the aggregate, the changes
in volume and price represent no more than 20 percent change in the
maximum aggregate offering price set forth in the "Calculation of
Registration Fee" table in the effective registration statement;
(iii) To include any material information with respect to the
plan of distribution not previously disclosed in the registration
statement or any material change to that information in the
registration statement;
II-2
<PAGE>
PROVIDED, HOWEVER, that paragraphs (a)(1)(i) and (a)(1)(ii) do not apply
insofar as the information required to be included in a post-effective
amendment by those paragraphs is contained in periodic reports filed with or
furnished to the SEC by the registrant pursuant to Section 13 or 15(d) of the
Exchange Act incorporated by reference in the registration statement.
(2) That, for the purpose of determining any liability
under the Securities Act, each of those post-effective amendments shall be
deemed to be a new registration statement relating to the securities offered
therein, and the offering of those securities at that time shall be deemed to
be the initial BONA FIDE offering thereof.
(3) To remove from registration by means of a
post-effective amendment any of the securities being registered which remain
unsold at the termination of the offering.
(b) Western Properties Trust 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 offering therein, and
the offering of those securities at that time shall be deemed to be the
initial BONA FIDE offering thereof.
(c) Western Properties Trust hereby undertakes that, for
purposes of determining any liability under the Securities Act:
(1) the information omitted from the form of
prospectus filed as part of this registration statement in
reliance under Rule 430A and contained in a form of prospectus
filed by the Registrant pursuant to Rule 424(b) (1) or (4), or
497 (h) under the Securities Act shall be deemed to be part of
this registration statement as of the time it was declared
effective.
(2) each post-effective amendment that contains a
form of prospectus shall be deemed to be a new registration
statement relating to the securities offered therein, and the
offering of those securities at that time shall be deemed to
be the initial BONA FIDE offering thereof.
(d) Insofar as indemnification for liabilities arising
under the Securities Act may be permitted to trustees, officers and
controlling persons of the registrant pursuant to the provisions described
under Item 15 of this registration statement, or otherwise (other than
insurance), the registrant has been advised that in the opinion of the SEC
that indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification
against those liabilities, other than the payment by the registrant of
expenses incurred or paid by a director, officer or controlling person of the
registrant in the successful defense of any action, suit or proceeding, is
asserted by that director, officer or controlling person in connection with
the securities being registered, the registrant shall, 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 the
indemnification by it is against public policy as expressed in the Act and
shall be governed by the final adjudication of that issue.
II-3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act, the registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3 and has duly caused this registration
statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Emeryville, State of California, on November 11,
1999.
WESTERN PROPERTIES TRUST
By: /s/ Bradley N. Blake
---------------------------------------
Bradley N. Blake
President and Chief Executive Officer
Pursuant to the requirements of the Securities Act, this registration
statement has been signed below by the following persons in the capacities and
on the dates indicated.
Each of the undersigned officers and trustees of Western Properties,
hereby constitutes and appoint Bradley N. Blake and Dennis D. Ryan, and each of
them, his true and lawful attorneys-in-fact and agents, each with full power of
substitution and resubstitution, for him and in his name, place and stead, in
any and all capacities, to sign the initial filing of Western Properties'
registration statement on form S-3 any and all amendments to thereto, including
post-effective amendments, to file the same, with exhibits thereto, and other
documents in connection therewith, with the SEC, granting unto said
attorneys-in-fact and agents, and each of them, full power and authority to do
and perform each and every act and thing requisite or necessary to be done in
connection therewith, as fully to all intents and purposes as he might or could
do in person, hereby, ratifying and confirming all that each of said
attorneys-in-fact and agents, or his substitute or substitutes, may lawfully do
or cause to be done by virtue hereof.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ------------------------------------------------------------------------------------------------
<S> <C> <C>
- ----------------------------
Robert J. McLaughlin Chairman of the Board and Trustee November __, 1999
/s/ Bradley N. Blake
- ----------------------------
Bradley N. Blake President, Chief Executive Officer and
Trustee November 11, 1999
/s/ Dennis D. Ryan
- ---------------------------- Executive Vice President, Chief
Dennis D. Ryan Financial Officer and Trustee November 10, 1999
- ----------------------------
Joseph P. Colmery Trustee November __, 1999
- ----------------------------
L. Michael Foley Trustee November __, 1999
/s/ Reginald B. Oliver
- ----------------------------
Reginald B. Oliver Trustee November 10, 1999
/s/ James L. Stell
- ----------------------------
James L. Stell Trustee November 9, 1999
</TABLE>
S-1
<PAGE>
EXHIBIT INDEX
Pursuant to Item 601(a)(2) of Regulation S-K, this exhibit index
immediately precedes the exhibits.
<TABLE>
<CAPTION>
Exhibit No. Description
- ---------- --------------------------------------------------------------------------
<S> <C>
4.1 Amended and Restated Declaration of Trust (previously filed as Exhibit 3
to Western Properties' Form 10-Q for the quarter ended September 30, 1998
and incorporated herein by reference).
5.1 Opinion of O'Melveny & Myers LLP as to legality of the shares being
registered.
8.1 Opinion of O'Melveny & Myers LLP as to certain federal income tax
matters.
23.1 Consent of Independent Accountants.
23.2 Consent of O'Melveny & Myers LLP, which is included within the opinions
filed as Exhibits 5.1 and 8.1.
24.1 Powers of Attorney included under the caption "Signatures."
99.1 Agreement of Limited Partnership of Western/Kienow, L.P., dated October 30,
1998 (previously filed as exhibit 10.6 to Western Properties Form 10-Q for
the quarter ended September 30, 1998 and incorporated herein by reference).
</TABLE>
<PAGE>
[LETTERHEAD OF O'MELVENY & MYERS LLP]
Exhibit 5.1
November 12, 1999
Western Properties Trust
2200 Powell Street, Suite 600
Emeryville, CA 94608
RE: LEGALITY OF SECURITIES TO BE REGISTERED UNDER
REGISTRATION STATEMENT ON FORM S-3
Ladies and Gentlemen:
This opinion is delivered in our capacity as counsel to Western
Properties Trust f/k/a Western Investment Real Estate Trust, a California
unincorporated business association organized as a California trust (the
"Company"), in connection with the Company's registration statement on Form
S-3 (the "Registration Statement") to be filed on or around the date hereof
with the Securities and Exchange Commission (the "SEC") under the Securities
Act of 1933, as amended (the "Securities Act"), relating to the issuance of
1,432,364 shares (the "Redemption Shares") of Western Properties' sole class
of Common Shares of Beneficial Interest, without par value ("Common Shares").
The Redemption Shares may be issued by the Company if and to the extent that
certain holders (the "Unitholders") of units of limited partnership interest
("Units") in Western/Kienow, L.P. (the "DownREIT Partnership") tender their
Units to the DownREIT Partnership for redemption, and the Company exercises
its contractual right to acquire those tendered Units for Redemption Shares.
In connection with rendering this opinion, we have examined the
Company's Declaration of Trust, as amended, restated and supplemented to the
date hereof; the Agreement of Limited Partnership of the DownREIT Partnership
(the "Partnership Agreement"); such records of corporate proceedings of the
Company as we deem appropriate for the purposes of this opinion; and the
Registration Statement and the exhibits thereto.
We express no opinion concerning the laws of any jurisdictions other
than the laws of the United States of America and the State of California.
<PAGE>
Western Properties Trust, November 12, 1999 - Page 2
Based upon the foregoing, we are of the opinion that when the
Redemption Shares have been duly issued and exchanged for the Units tendered
to the DownREIT Partnership for redemption by the Unitholders as contemplated
by the Partnership Agreement, the Redemption Shares shall be validly issued,
fully paid and nonassessable.
The foregoing assumes that all requisite steps were and shall be
taken to comply with the requirements of the Securities Act and applicable
requirements of state laws regulating the offer and sale of the Units and
Redemption Shares.
We hereby consent to being named as counsel to the Company in the
Registration Statement, to the references therein to our firm under the
caption "Legal Matters" and to the inclusion of this opinion as an exhibit to
the Registration Statement. In giving this consent, we do not admit that we
are in the category of persons whose consent is required by Section 7 of the
Securities Act or the rules and regulations promulgated thereunder by the SEC.
Very truly yours,
/s/ O'MELVENY & MYERS LLP
<PAGE>
[LETTERHEAD OF O'MELVENY & MYERS LLP]
Exhibit 8.1
November 12, 1999
Western Properties Trust
2200 Powell Street, Suite 600
Emeryville, CA 94608
RE: CERTAIN FEDERAL INCOME TAX MATTERS
Ladies and Gentlemen:
This opinion is delivered in our capacity as counsel to Western
Properties Trust f/k/a Western Investment Real Estate Trust, a California
unincorporated business association organized as a California trust (the
"Company"), in connection with the Company's registration statement on Form S-3
(the "Registration Statement") to be filed on or around the date hereof with the
Securities and Exchange Commission (the "SEC") under the Securities Act of 1933,
as amended (the "Securities Act"), relating to the issuance of 1,432,364 shares
(the "Redemption Shares") of the Company's sole class of Common Shares of
Beneficial Interest, without par value ("Common Shares"). The Redemption Shares
may be issued by the Company if and to the extent that certain holders (the
"Unitholders") of units of limited partnership interests ("Units") in
Western/Kienow, L.P. (the "DownREIT Partnership") tender their Units to the
DownREIT Partnership for redemption and, pursuant to the terms of the DownREIT
Partnership (as hereinafter defined), requires the Company to acquire such
tendered Units for Redemption Shares. You have requested our opinion regarding
certain U.S. Federal income tax matters in connection with such filing.
Capitalized terms used, but not otherwise defined, herein shall have the
meanings ascribed to such terms in the Registration Statement.
In giving the opinions set forth herein, we have examined the
following: (i) the Company's Amended and Restated Declaration of Trust, as
amended, restated and supplemented; (ii) the Agreement of Limited
Partnership, of the DownREIT Partnership dated October 30, 1998 (the
"DownREIT Partnership Agreement"), in which the Company is a general partner;
(iii) that certain Officer's Certificate (the "Officer's Certificate") dated
November 12, 1999 from Dennis D. Ryan as Chief Financial Officer of the
Company; and (iv) such other documents as we have deemed necessary or
appropriate for purposes of this opinion.
<PAGE>
Western Properties Trust, November 12, 1999 - Page 2
In connection with the opinions rendered below, we have assumed,
with your consent, that:
1. each of the documents referred to above has been duly authorized,
executed, and delivered; is authentic, if an original, or is accurate, if a
copy; and has not been amended except as is set forth above;
2. during its taxable years ended December 31, 1995, 1996, 1997 and
1998, the Company has operated, and during its subsequent taxable years shall
continue to operate, in such a manner that shall make the representations
contained in the Officer's Certificate, true for such years;
3. the Company shall not make any amendments to its organizational
documents or the DownREIT Partnership Agreement after the date of this opinion
that would affect its qualification as a real estate investment trust (a "REIT")
for any taxable year; and
4. no action shall be taken by the Company, the DownREIT Partnership or
the Partners after the date hereof that would have the effect of altering the
facts upon which the opinions set forth below are based.
In connection with the opinions rendered below, we also have relied
upon the correctness of the representations contained in the Officer's
Certificate and we have no reason to believe such reliance is not reasonable.
For purposes of our opinions, we made no independent investigation of the
facts contained in the documents and assumptions set forth above, the
representations set forth in the Officer's Certificate, or the Registration
Statement. Consequently, we have relied on the Company's representations that
the information presented in such documents, or otherwise furnished to us,
accurately and completely describes all material facts relevant to our
opinions. No facts have come to our attention, however, that would cause us
to question the accuracy and completeness of such facts or documents in a
material way.
Based on the documents and assumptions set forth above, the
representations set forth in the Officer's Certificate, and the discussion in
the Registration Statement under the caption "Federal Income Tax
Considerations" (which is incorporated herein by reference), we are of the
opinion that:
(a) the Company's organization and method of operation
shall enable it to continue to qualify to be taxed as a REIT
pursuant to Sections 856 through 860 of the Internal Revenue
Code of 1986, as amended (the "Code"), for its current taxable
year ending December 31, 1999 and future taxable years; and
(b) the descriptions of the law and the legal conclusions
contained in the Registration Statement under the caption "Federal
Income Tax Considerations" are correct in all material respects, and
the discussion thereunder fairly summarizes the federal income tax
considerations that are likely to be material to a holder of the Common
Shares.
<PAGE>
Western Properties Trust, November 12, 1999 - Page 3
We shall not review on a continuing basis the Company's compliance with
the documents or assumptions set forth above, or the representations set forth
in the Officer's Certificate. Accordingly, no assurance can be given that the
actual results of the Company's operations for its 1999 and subsequent taxable
years shall satisfy the requirements for qualification and taxation as a REIT.
The foregoing opinions are based on current provisions of the Code and
the Treasury regulations thereunder (the "Regulations"), published
administrative interpretations thereof, and published court decisions. The IRS
has not issued Regulations or administrative interpretations with respect to
various provisions of the Code relating to REIT qualification. No assurance can
be given that the law shall not change in a way that shall prevent the Company
from qualifying as a REIT.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement. We also consent to the references to O'Melveny & Myers
LLP under the caption "Federal Income Tax Considerations" in the Registration
Statement. In giving this consent, we do not admit that we are in the category
of persons whose consent is required by Section 7 of the Securities Act or the
rules and regulations promulgated thereunder by the SEC.
The foregoing opinions are limited to the U.S. federal income tax
matters addressed herein, and no other opinions are rendered with respect to
other federal tax matters or to any issues arising under the tax laws of any
other country, or any state or locality. We undertake no obligation to update
the opinions expressed herein after the date of this letter. This opinion letter
is solely for the information and use of the addressees and their respective
counsel, and it may not be distributed, relied upon for any purpose by any other
person, quoted in whole or in part or otherwise reproduced in any document, or
filed with any governmental agency without our express written consent.
Respectfully submitted,
/s/ O'MELVENY & MYERS LLP
<PAGE>
Exhibit 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
Western Properties Trust
Emeryville, California
We consent to incorporation by reference in the registration
statement of our report dated February 3, 1999 relating to the consolidated
financial statements of Western Properties Trust (formerly Western Investment
Real Estate Trust) appearing in the Company's Annual Report on Form 10-K for
the year ended December 31, 1998.
We also consent to the reference to our firm under the heading
"Experts" in the Prospectus.
/s/ KPMG LLP
November 10, 1999
San Francisco, California
