<PAGE> 1
Filed pursuant to Rule 424(b)(4)
Registration No. 33-63523
PROSPECTUS SUPPLEMENT
(To Prospectus Dated November 9, 1995)
[IRT LOGO]
$50,000,000
IRT PROPERTY COMPANY
7.45% NOTES DUE 2001
---------------------
The Notes will mature on April 1, 2001. Interest on the Notes is payable on
April 1 and October 1 of each year, commencing on October 1, 1996. See
"Description of Notes -- Principal and Interest." The Notes are not redeemable
prior to maturity. The Notes are senior unsecured obligations of the Company and
will rank equally with all unsecured and unsubordinated indebtedness of the
Company. The Notes will contain certain restrictions on the Company's ability to
incur additional indebtedness. See "Description of Notes -- Certain Covenants."
The Notes will be represented by one or more Global Securities (as defined
herein) registered in the name of The Depository Trust Company ("DTC") or its
nominee. Interests in the Global Securities will be shown on, and transfers
thereof will be effected only through, records maintained by DTC and its
participants. Except as described in "Description of Notes -- Book-Entry
System," Notes in definitive form will not be issued. The Notes will trade in
DTC's Same-Day Funds Settlement System until maturity, and secondary market
trading activity in the Notes will therefore settle in immediately available
funds. All payments of principal and interest will be made by the Company in
immediately available funds. See "Description of Notes -- Same-Day Settlement
and Payment."
---------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS SUPPLEMENT.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
---------------------
THE ATTORNEY GENERAL OF THE STATE OF NEW YORK HAS NOT PASSED ON OR
ENDORSED THE MERITS OF THIS OFFERING. ANY REPRESENTATION
TO THE CONTRARY IS UNLAWFUL.
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------
PRICE UNDERWRITING PROCEEDS
TO DISCOUNTS AND TO
PUBLIC COMMISSIONS(1) COMPANY(2)
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Per Note................................. 99.833% .60% 99.233%
- -----------------------------------------------------------------------------------------------
Total.................................... $49,916,500 $300,000 $49,616,500
- -----------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------
</TABLE>
(1) The Company has agreed to indemnify the Underwriter against certain
liabilities, including liabilities under the Securities Act of 1933, as
amended.
(2) Before deducting estimated expenses of $185,000 payable by the Company.
---------------------
The Notes are offered by the Underwriter, subject to prior sale, when, as
and if delivered to and accepted by the Underwriter, and subject to its right to
reject any order in whole or in part. It is expected that delivery of the Notes
will be made on or about March 26, 1996 through the book-entry facilities of DTC
against payment therefor in immediately available funds.
ALEX. BROWN & SONS
INCORPORATED
THE DATE OF THIS PROSPECTUS SUPPLEMENT IS MARCH 21, 1996.
<PAGE> 2
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITER MAY OVERALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE NOTES OFFERED
HEREBY AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET.
SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
No person has been authorized to give any information or to make any
representations other than those contained or incorporated by reference in this
Prospectus Supplement or the Prospectus, and, if given or made, such information
or representations must not be relied upon as having been authorized. This
Prospectus Supplement and the Prospectus do not constitute an offer to sell or
the solicitation of an offer to buy any securities other than the securities to
which they relate or any offer to sell or the solicitation of any offer to buy
such securities in any jurisdiction in which such offer or solicitation is
unlawful. Neither the delivery of this Prospectus Supplement nor the Prospectus
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 or
incorporated by reference herein or therein is correct as of any time subsequent
to the date of such information.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PROSPECTUS SUPPLEMENT PAGE
----
<S> <C>
Prospectus Summary.................................................................... S-3
The Company........................................................................... S-9
Use of Proceeds....................................................................... S-9
Capitalization........................................................................ S-9
Business.............................................................................. S-12
Properties............................................................................ S-16
Management............................................................................ S-23
Selected Consolidated Financial Data.................................................. S-24
Management's Discussion and Analysis of Financial Condition and Results of
Operations.......................................................................... S-26
Description of Notes.................................................................. S-31
Certain Federal Income Tax Considerations to the Company of Its REIT Election......... S-37
Underwriting.......................................................................... S-39
Experts............................................................................... S-39
Legal Opinions........................................................................ S-39
PROSPECTUS
Available Information................................................................. 2
Incorporation of Certain Documents by Reference....................................... 2
The Company........................................................................... 3
Use of Proceeds....................................................................... 3
Certain Ratios........................................................................ 3
Description of Debt Securities........................................................ 4
Description of Common Stock........................................................... 16
Plan of Distribution.................................................................. 17
Experts............................................................................... 18
Legal Opinions........................................................................ 18
</TABLE>
S-2
<PAGE> 3
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by the detailed
information and consolidated financial information appearing elsewhere in this
Prospectus Supplement and the accompanying Prospectus or incorporated herein or
therein by reference.
THE COMPANY
IRT Property Company (the "Company" or "IRT"), is an owner, operator and
redeveloper of neighborhood and community shopping centers, primarily in the
Southeastern United States. Founded in 1969 and based in Atlanta, IRT is a
self-administered and self-managed real estate investment trust ("REIT"). The
Company seeks to acquire and operate well-located, high quality shopping centers
containing necessity-oriented retailers and service providers, and to diversify
the credit risk within its portfolio.
NECESSITY-ORIENTED SHOPPING CENTERS
The Company owns 82 retail properties totaling 8.7 million square feet of
retail space. The properties are anchored by prominent necessity goods tenants
(e.g. supermarkets and drug stores) and national value retailing chains. At
December 31, 1995, the shopping center portfolio was 92% leased. During the last
ten years, the portfolio has never been less than 92% leased. The Company's
revenue is derived from over 1,050 leases to 750 different tenants, with no
single tenant or corporate entity accounting for more than 7.9% of the Company's
1995 revenues. For the five years from 1991 to 1995, credit loss has averaged
less than 1.0%.
STRONG DEMOGRAPHIC MARKETS
The Southeast has been and continues to be one of the most vibrant growth
regions of the United States. The areas in which the Company has investments are
economically diverse and encompass service, technology, tourism, manufacturing,
shipping and agricultural sectors. The Company's shopping centers in the
Southeast are spread among 60 counties in 10 states. Population and non-farm
employment growth forecasts indicate that the Southeast in general, and the
Company's counties in particular, will outpace national growth rates as a whole
in the coming years. According to information compiled by McGraw Hill/DRI, for
the period from 1996 to 2000, population growth in the 60 counties in which the
Company's portfolio is concentrated is expected to be 5.9% as compared to a 3.6%
growth rate for the United States as a whole while non-farm employment growth in
these counties is projected to be 8.1% as compared to 6.4% for the United States
as a whole. Moreover, the high-growth states of Florida, Georgia, North Carolina
and Tennessee account for 66% of the Company's portfolio on a cost basis.
GROWTH THROUGH ACQUISITION AND REDEVELOPMENT
The Company believes that its access to capital, operating expertise and 25
years of acquisition experience give it a competitive advantage in making new
acquisitions at favorable prices. In making new investments, the Company follows
established procedures that include conservative underwriting and extensive due
diligence. During 1994 and 1995, the Company bought 17 shopping centers
containing more than 1.8 million square feet of retail space for approximately
$115 million. Based on net operating income, these acquisitions yielded a 10.5%
return on cost in 1995.
The Company is pro-active in its redevelopment and expansion programs,
continually reviewing existing properties for potential improvements. The
Company owns additional expansion land at 14 of its shopping centers, and
management believes it can acquire expansion land at various other shopping
centers. In 1994 and 1995, the Company invested approximately $7.6 million in
the redevelopment and expansion of five shopping centers. The Company expects to
commence
S-3
<PAGE> 4
redevelopment or expansion activity at four additional shopping centers in 1996,
with completion dates in both 1996 and 1997.
CONSERVATIVE CAPITAL STRUCTURE; ACCESS TO CAPITAL
Maintaining a conservative capital structure that allows the Company
continued cost-effective access to the capital markets has been and continues to
be an important element of IRT's growth strategy. The Company's financial
position as of December 31, 1995 demonstrates management's discipline in
applying conservative capital policies:
- - Total debt to total market capitalization totaled 48% (30% assuming the
Company's 7.3% convertible subordinated debentures are converted).
- - Long-term floating rate debt was 8% of total market capitalization. Management
intends to prudently use variable rate debt, primarily as a bridge to more
permanent equity or debt financing.
- - Debt service coverage for the 12-month period ended December 31, 1995 was
2.50:1. Management does not expect the coverage ratio to change materially as
a result of this offering, as net proceeds from this offering will be used to
retire existing debt.
As market conditions permit, the Company would expect to access the public
and private equity and debt markets in order to repay debt and to make
additional real estate acquisitions. Since October 1992, the Company has
completed two public common stock offerings and one unsecured convertible
subordinated notes offering, raising a total of approximately $196 million. In
addition, the Company has converted and increased its $50 million secured
revolver to a $100 million unsecured facility.
EXPERIENCED SHOPPING CENTER OPERATORS
Since its founding in 1969, the Company has successfully operated and grown
through three major real estate recessions. The Company believes its management
has the experience and expertise necessary to preserve values and enhance future
operating performance. Senior management has an average of 22 years of real
estate experience with a combined total of over 150 years. IRT is a fully
integrated operating company with professional experts in development,
acquisitions, finance, property management and leasing. The Company manages and
leases its properties internally through four Southeastern offices.
S-4
<PAGE> 5
THE OFFERING
SECURITIES OFFERED................... $50 million aggregate principal
amount of 7.45% Notes due 2001 (the
"Notes").
MATURITY............................. April 1, 2001
INTEREST PAYMENT
DATES.............................. Semi-annually on April 1 and October
1, commencing October 1, 1996.
RANKING.............................. The Notes will be senior unsecured
obligations of the Company and will
rank equally with the Company's other
unsecured and unsubordinated
indebtedness. The Notes will be
effectively subordinated to mortgages
and other secured indebtedness of the
Company and to indebtedness and other
liabilities of the Company's
subsidiaries. The Notes will be
senior to the Company's 7.3%
Convertible Subordinated Debentures
due 2003 (the "Convertible
Debentures"), $84.9 million of which
was outstanding on December 31, 1995.
USE OF PROCEEDS...................... The net proceeds from the sale of the
Notes are estimated to be
approximately $49.4 million. The
proceeds will be used primarily to
repay borrowings under the Company's
$100 million revolving credit
facility, which totaled $48 million
as of March 21, 1996 ($36 million as
of December 31, 1995). Any excess
proceeds will be used for general
corporate purposes. See "Use of
Proceeds."
LIMITATION ON INCURRENCE OF DEBT..... The Notes contain various covenants
including the following:
- Neither the Company nor any
Subsidiary (as defined) may incur
any Debt (as defined) if, after
giving effect thereto, the
aggregate principal amount of all
outstanding Debt of the Company and
its Subsidiaries on a consolidated
basis is greater than 60% of the
sum of (i) the Total Assets (as
defined) of the Company and its
Subsidiaries as of the end of the
most recent calendar quarter and
(ii) the purchase price of any real
estate assets or mortgages
receivable acquired, and the amount
of any securities offering proceeds
received (to the extent that such
proceeds were not used to acquire
real estate assets or mortgages
receivable or used to reduce Debt),
by the Company or any Subsidiary
since the end of such calendar
quarter, including those proceeds
obtained in connection with the
incurrence of such additional Debt.
S-5
<PAGE> 6
- Neither the Company nor any
Subsidiary may incur any Debt
secured by any mortgage or other
lien upon any of the property of
the Company or any Subsidiary if,
after giving effect thereto, the
aggregate principal amount of all
outstanding Debt of the Company and
its Subsidiaries on a consolidated
basis which is secured by any
mortgage or other lien on the
property of the Company or any
Subsidiary is greater than 40% of
the sum of (i) the Total Assets of
the Company and its Subsidiaries as
of the end of the most recent
calendar quarter and (ii) the
purchase price of any real estate
assets or mortgages receivable
acquired, and the amount of any
securities offering proceeds
received (to the extent that such
proceeds were not used to acquire
real estate assets or mortgages
receivable or used to reduce Debt),
by the Company or any Subsidiary
since the end of such calendar
quarter, including those proceeds
obtained in connection with the
incurrence of such additional Debt.
- The Company and its Subsidiaries
may not at any time own Total
Unencumbered Assets (as defined)
equal to less than 150% of the
aggregate outstanding principal
amount of the Unsecured Debt (as
defined) of the Company and its
Subsidiaries on a consolidated
basis.
- Neither the Company nor any
Subsidiary may incur any Debt, if,
after giving effect thereto, the
ratio of Consolidated Income
Available for Debt Service (as
defined) to the Annual Service
Charge (as defined) for the four
consecutive fiscal quarters most
recently ended prior to the date on
which such additional Debt is to be
incurred shall have been less than
1.5:1 on a pro forma basis after
giving effect to certain
assumptions.
For a more complete description of
the terms of and definitions used in
the foregoing limitations, see
"Description of Notes -- Certain
Covenants."
S-6
<PAGE> 7
SUMMARY CONSOLIDATED FINANCIAL DATA
The following table sets forth summary consolidated financial data for the
Company and is qualified by, and should be read in conjunction with, the
information included under (i) "Capitalization," "Selected Consolidated
Financial Data" and "Management's Discussion and Analysis of Financial Condition
and Results of Operations" included elsewhere in this Prospectus Supplement, and
(ii) "Management's Discussion and Analysis of Financial Condition and Results of
Operations" and the consolidated financial statements included in the Company's
Annual Report on Form 10-K, as amended, for the fiscal year ended December 31,
1995, incorporated herein by reference. See "Available Information" and
"Incorporation of Certain Documents by Reference" in the accompanying
Prospectus.
<TABLE>
<CAPTION>
AS OF AND FOR THE YEARS ENDED DECEMBER 31,
-------------------------------------------------------
1995 1994 1993 1992 1991
------- ------- ------- ------- -------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C>
OPERATING DATA
Revenues:
Income from rental properties...... $58,008 $44,681 $41,607 $30,785 $25,281
Interest........................... 900 3,268 2,258 2,103 2,341
Interest on direct financing
leases.......................... 1,288 1,253 1,198 1,119 1,064
------- ------- ------- ------- -------
60,196 49,202 45,063 34,007 28,686
------- ------- ------- ------- -------
Expenses:
Operating expenses of rental
properties...................... 12,734 10,319 10,023 7,541 6,081
Interest........................... 17,572 14,553 13,092 10,796 8,970
Depreciation....................... 10,427 8,214 7,669 6,202 5,396
Amortization of debt costs......... 446 446 212 70 70
General and administrative......... 3,467 2,881 2,295 1,956 1,908
------- ------- ------- ------- -------
44,646 36,413 33,291 26,565 22,425
------- ------- ------- ------- -------
Earnings before gain (loss) on real
estate investments.............. 15,550 12,789 11,772 7,442 6,261
------- ------- ------- ------- -------
Gain (loss) on real estate
investments:
Gain (loss) on sales of
properties...................... 173 300 4,557 7,112 1,135
Valuation loss..................... -- (4,125) -- (3,565) --
------- ------- ------- ------- -------
173 (3,825) 4,557 3,547 1,135
------- ------- ------- ------- -------
Earnings before extraordinary
items........................... 15,723 8,964 16,329 10,989 7,396
Extraordinary items:
Gain (loss) on extinguishment of
debt............................ (137) 3,748 (1,441) (15) --
Gain on purchase of debentures..... -- -- -- -- 17
------- ------- ------- ------- -------
Net earnings............... $15,586 $12,712 $14,888 $10,974 $ 7,413
======== ======== ======== ======== ========
</TABLE>
S-7
<PAGE> 8
<TABLE>
<CAPTION>
AS OF AND FOR THE YEARS ENDED DECEMBER 31,
-------------------------------------------------------
1995 1994 1993 1992 1991
------- ------- ------- ------- -------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C>
OTHER DATA
Funds from operations(1)............. $26,621 $21,616 $19,826 $13,848 $11,866
Net cash flows from (used in)--
Operating activities............... 25,947 22,512 19,116 14,275 10,196
Investing activities............... (7,769) (99,052) (16,991) (55,115) (4,207)
Financing activities............... (20,003) (248) (76,371) 40,247 (5,837)
Ratio of earnings to fixed
charges(2)......................... 1.85x 1.58x 2.20x 1.99x 1.78x
Ratio of funds from operations before
fixed charges to fixed
charges(1)(2)...................... 2.44x 2.39x 2.45x 2.24x 2.25x
Ratio of Debt to Total Assets(3)..... 46% 47% 43% 38% 40%
Ratio of secured Debt to Total
Assets(3).......................... 21% 28% 23% 36% 37%
Ratio of Total Unencumbered Assets to
Unsecured Debt(3).................. 267% 370% 343% 2757% 1639%
Ratio of Consolidated Income
Available for Debt Service to
Annual Service Charge(3)........... 2.50x 2.47x 2.50x 2.27x 2.29x
Percent leased....................... 92% 93% 93% 93% 93%
</TABLE>
<TABLE>
<CAPTION>
AS OF DECEMBER 31,
-------------------------------------------------------------------
1995 1994 1993 1992 1991
----------- ----------- ----------- ----------- -----------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C>
BALANCE SHEET DATA
Net real estate investments..... $418,505 $418,553 $315,404 $293,446 $180,628
Total assets.................... 427,398 428,579 402,319 297,591 184,628
Mortgage notes payable.......... 99,188 105,107 98,879 115,379 72,866
7.3% convertible subordinated
debentures.................... 84,905 86,250 86,250 5,730 5,730
Indebtedness to banks........... 36,000 26,000 -- 1,200 7,000
Total liabilities............... 228,768 225,541 191,984 129,017 91,017
Total shareholders' equity...... 198,630 203,038 210,335 168,574 93,611
</TABLE>
- ---------------
(1) Funds from operations is defined as net cash flows from operating activities
before changes in accrued assets and liabilities. Management believes funds
from operations should be considered along with, but not as an alternative
to, net income as defined by generally accepted accounting principles as a
measure of the Company's operating performance. Funds from operations does
not represent cash generated from operating activities in accordance with
generally accepted accounting principles and is not necessarily indicative
of cash available to fund cash needs.
(2) For purposes of computing these ratios, earnings have been calculated by
adding fixed charges (excluding capitalized interest) to income before
income taxes and extraordinary items. Fixed charges consist of interest
costs, whether expensed or capitalized, the interest component of rental
expense, and amortization of debt costs, discounts and issue costs, whether
expensed or capitalized.
(3) For a description of each ratio, see "Description of Notes -- Certain
Covenants."
S-8
<PAGE> 9
THE COMPANY
IRT Property Company is an owner, operator and redeveloper of neighborhood
and community shopping centers, primarily in the Southeastern United States.
Founded in 1969 and based in Atlanta, IRT is a self-administered and
self-managed REIT. The Company currently owns 82 retail properties containing
approximately 8.7 million square feet of leasable space, approximately 92% of
which was leased at December 31, 1995. See "Properties." The principal executive
offices of the Company are located at 200 Galleria Parkway, Suite 1400, Atlanta,
Georgia 30339, telephone (770) 955-4406.
USE OF PROCEEDS
The net proceeds to the Company from the sale of the Notes are estimated to
be approximately $49.4 million. The proceeds will be used primarily to repay
borrowings under the Company's $100 million revolving credit facility, which
totaled $48 million as of March 21, 1996 ($36 million as of December 31, 1995).
Any excess proceeds will be used for general corporate purposes.
The revolving credit facility matures on January 4, 1999 and borrowings
thereunder bear interest, at the Company's option, at either (i) the prime rate
or (ii) the adjusted London Interbank Offered Rates ("LIBOR") plus a 1.5% margin
(which margin is subject to adjustment based on the rating of the Company's
senior unsecured long-term debt obligations).
CAPITALIZATION
CAPITAL STRUCTURE
The following table sets forth the capitalization of the Company as of
December 31, 1995, and as adjusted to give effect to this offering of Notes and
to the application of the net proceeds therefrom as described under "Use of
Proceeds":
<TABLE>
<CAPTION>
DECEMBER 31, 1995
-----------------------
ACTUAL AS ADJUSTED
-------- -----------
(in thousands)
<S> <C> <C>
Debt:
Mortgage notes payable............................................. $99,188 $ 92,918(1)
7.30% convertible subordinated debentures.......................... 84,905 84,905
7.45% senior unsecured notes....................................... -- 50,000
Indebtedness to banks.............................................. 36,000 --
-------- -----------
Total debt...................................................... 220,093 227,823
-------- -----------
Shareholders' equity:
Common stock, $1 par value, 75,000,000 shares authorized;
25,689,002 shares issued and outstanding, actual and as
adjusted........................................................ 25,689 25,689
Additional paid-in-capital......................................... 200,318 200,318
Cumulative distributions in excess of net earnings................. (27,377) (27,377)
-------- -----------
Total shareholders' equity...................................... 198,630 198,630
-------- -----------
Total capitalization.......................................... $418,723 $ 426,453
========= ==========
</TABLE>
- ---------------
(1) Reduction reflects repayment on March 1, 1996 of a $6,270,451 mortgage note
payable from borrowings under the revolving credit facility.
S-9
<PAGE> 10
SUMMARY OF INDEBTEDNESS
The following table sets forth the mortgage indebtedness of the Company as
of December 31, 1995:
<TABLE>
<CAPTION>
HISTORICAL
COST OF
PRINCIPAL COLLATERAL
BALANCE INTEREST MATURITY PROPERTIES
INVESTMENT (IN THOUSANDS) RATE DATE (IN THOUSANDS)
---------------------- --------------- ------ --------- ---------------
<S> <C> <C> <C> <C>
Douglas Commons....... $ 6,270 9.780% 3/01/96(1)(2) $ 8,609
Chestnut Square....... 1,051 13.875 5/01/96(1) 1,417
Lawrence Commons...... 2,739 9.375 8/01/96(1) 3,459
Spanish Quarter
Apartments
Phase I............. 102 8.500 9/20/96 5,153(3)
Phase II............ 816 8.250 7/15/02
Stadium Plaza......... 3,850(4) 9.500 11/01/96 4,463
Seven Hills........... 3,800(4) 9.750 2/01/97 4,897
Delchamps Plaza....... 3,233 9.375 8/01/97(1) 4,515
Paulding Commons...... 8,733 7.600 8/01/97(1)(5) 12,962
Smyrna Village........ 4,172 7.600 8/01/97(1)(5) 5,846
South Beach Regional.. 15,366 7.600 8/01/97(1)(5) 21,849
Tarpon Heights........ 2,383(4) 11.000 3/01/98 2,825
Pinhook Plaza......... 7,422 9.875 1/01/00(1) 11,092
Macland Pointe........ 3,834 7.750 2/01/00(1) 6,113
Plaza Acadienne....... 2,389 10.250 7/01/00(1) 2,930
Thomasville Commons... 5,583 9.625 6/01/02(1) 7,173
Elmwood Oaks.......... 7,500(4) 8.375 6/01/05 11,126
North Village
Center.............. 2,779(6) 8.125 3/15/09 3,284
Spalding Village...... 11,377(7) 8.194 9/01/10(1) 15,383
Village at
Northshore.......... 5,710 9.000 7/01/13(8) 8,268
--------------- ---------------
99,109 $ 141,364
============
Interest
Premium........ 79(9)
---------------
$99,188
=============
</TABLE>
- ---------------
(1) Balloon payment at maturity.
(2) The Douglas Commons mortgage was repaid at maturity.
(3) Balance represents the carrying value of the mortgage note receivable
secured by Spanish Quarter Apartments before deducting $1,068,000 of
deferred income taxes.
(4) Interest only. Entire principal due at maturity.
(5) The Company has the option to extend for two additional years.
(6) Although the Company is a partner or joint venturer in this investment, 100%
of the mortgage note payable is recorded for financial reporting purposes.
(7) Interest only through 09/01/00; then principal and interest of $1,158,448
annually for the last 10 years.
(8) Callable anytime after 07/30/03.
(9) For financial reporting purposes, mortgage indebtedness is valued assuming
current interest rates at the dates of acquisition.
S-10
<PAGE> 11
The following table sets forth the debt obligations of the Company as of
December 31, 1995, and pro forma to give effect to this offering of Notes and to
the application of the net proceeds therefrom as described under "Use of
Proceeds":
<TABLE>
<CAPTION>
DECEMBER 31, 1995
-----------------------
ACTUAL PRO FORMA
-------- ---------
(in thousands)
<S> <C> <C>
1996................................................. $ 15,187 $ 8,917 (1)
1997................................................. 35,733(2) 35,733 (2)
1998................................................. 3,267 3,267
1999................................................. 36,959(3) 959
2000................................................. 12,776 12,776
2001................................................. 867 50,867
2002................................................. 5,990 5,990
2003................................................. 85,664(4) 85,664 (4)
Thereafter........................................... 23,650 23,650
-------- --------
$220,093 $227,823
======== ========
</TABLE>
- ---------------
(1) Reduction reflects repayment on March 1, 1996 of a $6,270,451 mortgage note
payable from borrowings under the revolving credit facility.
(2) The Company has the right to extend $27.7 million of this amount for two
additional years.
(3) Actual balance includes $36 million outstanding as of December 31, 1995
($48 million as of March 21, 1996) on the $100 million revolving credit
facility maturing January 4, 1999. Not later than June 30th of each year
commencing June 30, 1996, the Company may request to extend the maturity
date for an additional twelve-month period beyond the existing maturity
date.
(4) Balance includes $84.9 million of Convertible Debentures due August 15,
2003. The Convertible Debentures are convertible at any time prior to
maturity into common stock of the Company at $11.25 per share, subject to
adjustment in certain events. The Company has the option to redeem the
Convertible Debentures at par at any time after August 15, 1996.
S-11
<PAGE> 12
BUSINESS
NECESSITY-ORIENTED SHOPPING CENTERS
The Company's investment strategy is to acquire and operate well-located,
high quality neighborhood and community shopping centers containing primarily
necessity-oriented retailers and service providers. The retail portfolio of 82
properties contains 73 shopping centers which are owned and operated by the
Company and nine retail properties which are owned and leased under "net leases"
to the tenants or operators thereof. The Company's shopping centers are
typically anchor-tenant driven, and its principal anchor tenants are prominent
national or regional supermarket chains and national value retailers. Nine
different supermarket chains and two national value retailing chains comprise 11
of the 15 tenants which accounted for 1% or more of the Company's 1995 revenues.
Together, supermarkets accounted for 30% of such revenues, while value retailers
and drugstores accounted for 15% and 5%, respectively. No single tenant
accounted for more than 7.9% of 1995 revenues. As of December 31, 1995, the
Company had over 1,050 separate leases with 750 different tenants. The following
table lists every tenant which accounted for 1% or more of the Company's 1995
revenues:
<TABLE>
<CAPTION>
PERCENT
OF
TENANTS STORES REVENUES
----------------------------------------------------------- ------ ----------
<S> <C> <C>
Wal-Mart................................................... 13 7.84%
Kmart...................................................... 9 6.76
Delchamps.................................................. 10 6.66
Harris Teeter.............................................. 13 5.48
Kroger..................................................... 7 5.11
Publix..................................................... 7 4.10
Winn-Dixie................................................. 5 2.34
Food Lion.................................................. 6 1.90
K & B Drugs................................................ 8 1.47
Bruno's.................................................... 3 1.21
Bi-Lo...................................................... 4 1.15
Eckerd Drugs............................................... 9 1.14
Cato....................................................... 16 1.07
Ingles..................................................... 4 1.05
Revco/Rite Aid............................................. 12 1.00
</TABLE>
The Company believes it has achieved a substantial diversification of
credit risk within the shopping center sector of the real estate industry, and
it further believes that the high quality of its shopping center locations
serves to significantly reduce the risk of losing financially weak tenants.
SOUTHEAST GEOGRAPHIC FOCUS
The Company focuses its investment activity in the Southeastern United
States, one of the most economically vibrant regions of the country. The
Southeastern portfolio includes 77 separate properties which account for 97% of
the Company's total investment portfolio on a cost basis. These properties are
located in 60 different counties in 10 Southeastern states, providing a
diversified economic base which includes service, technology, tourism,
manufacturing, shipping and agriculture. Population and non-farm employment
growth forecasts indicate that the Southeast in general, and the Company's
counties in particular, will outpace national growth rates as a whole in the
coming years. According to information compiled by McGraw Hill/DRI, for the
period from 1996 to 2000, population growth in the 60 counties in which the
Company's portfolio is concentrated is expected to be 5.9% as compared to a 3.6%
growth rate for the United States as a whole while non-farm employment growth in
these counties is projected to be 8.1% as compared to 6.4% for the United States
as a whole.
S-12
<PAGE> 13
The following table lists the 10 Southeastern states in which the Company
has thus far focused its efforts, and the percentage of the Company's real
estate assets, on a cost basis, located in each state:
<TABLE>
<CAPTION>
PERCENTAGE OF
REAL ESTATE
STATE ASSETS
---------------------------------------------------------------- -------------
<S> <C>
Florida......................................................... 25%
Louisiana....................................................... 21
Georgia......................................................... 20
North Carolina.................................................. 16
Tennessee....................................................... 5
Virginia........................................................ 3
South Carolina.................................................. 3
Alabama......................................................... 2
Mississippi..................................................... 1
Kentucky........................................................ 1
--
Total Southeast....................................... 97%
===========
</TABLE>
The Company believes that it has achieved a broad diversification of
economic risk within a vibrant and growing region. In addition, it believes that
a concentration within one region enhances tenant relationships and contributes
to portfolio and property management efficiencies.
VALUE ADDED INVESTMENT STRATEGY
The Company seeks to acquire and operate shopping centers which will
produce attractive initial yields and which also have potential for improvement
in yields over time. It then seeks to take advantage of that potential through a
"hands-on" management and leasing effort and a pro-active approach to potential
redevelopment and expansion opportunities.
Acquisitions are subjected to an extensive underwriting and due diligence
process which takes into account both the quality of the income stream and the
anticipated costs associated with operating a property or portfolio of
properties. The Company addresses both the location and credit aspects of
potential purchases, with primary emphasis on location within a particular
market area, as well as design and structural considerations. Traditionally, the
Company has acquired properties through mergers, portfolio acquisitions and
individual property purchases. During 1994 and 1995, the Company acquired 17
shopping centers containing more than 1.8 million square feet of space for
prices aggregating approximately $115 million. Based on net operating income,
these acquisitions yielded a 10.5% return on cost in 1995.
The Company's redevelopment and expansion strategy is engineered primarily
around the needs of existing and prospective tenants. During 1994 and 1995, the
Company invested approximately $7.6 million in the redevelopment and expansion
of five shopping centers. The Company expects to commence redevelopment or
expansion activity at four additional shopping centers in 1996, with completion
dates in both 1996 and 1997. The Company owns additional expansion land at 14 of
its shopping centers, and management believes it can acquire expansion land at
various other shopping centers. It is the Company's policy to periodically
review each such potential expansion site, and to review every shopping center
for redevelopment opportunities, based upon market trends and tenant needs.
INTERNAL PROPERTY MANAGEMENT AND LEASING
Substantially all of the Company's operating shopping centers are managed
and leased directly by the Company through its offices in Atlanta, Charlotte,
Orlando and New Orleans. The Company's policies of pro-active leasing and
careful analysis of operating costs are designed to maximize
S-13
<PAGE> 14
operating results at its properties. Such activity also includes periodic
reviews of investments in order to determine whether or not, because of
demographic patterns, economic utility or other considerations, a property
should be considered for sale.
Through continued aggressive property management and leasing activities,
IRT believes that it can enhance rental income and funds from operations. The
Company expects to experience revenue growth as a result of the leasing of
presently vacant space and increases in rental rates.
For the years 1996 to 2005 the following percentages (based on square
footage) of the Company's retail space leases expire, providing the opportunity
to increase rental rates at a greater rate than is generally available during a
lease term:
<TABLE>
<CAPTION>
YEAR PERCENTAGE
---- ----------
<S> <C>
1996 7%
1997 9%
1998 9%
1999 4%
2000 4%
2001 3%
2002 1%
2003 2%
2004 3%
2005 5%
</TABLE>
Local shop leases are generally for terms of 3 to 5 years and generally
provide for some rental increases during their terms. Most tenant leases provide
for recovery of some portion of a property's operating expenses. Most small shop
tenants are required to reimburse their full proportionate share of such
expenses, while anchor tenant leases require operating expense reimbursements on
a basis that ranges from a fixed contribution to a full pro rata share.
CAPITAL STRUCTURE; ACCESS TO CAPITAL
The Company seeks to maintain a conservative capital structure with
manageable levels of debt and debt service and believes that the current
economic environment presents the opportunity to improve its capital structure
by reducing interest costs while at the same time repaying a significant amount
of secured debt with unsecured debt. For a more complete description of the
Company's capital structure, see "Capitalization" and "Selected Consolidated
Financial Data."
As market conditions permit, the Company would expect to access the public
and private equity and debt markets in order to repay debt and to make
additional real estate acquisitions. Since October 1992, the Company has
completed two public common stock offerings and one unsecured convertible
subordinated notes offering, raising a total of approximately $196 million.
The Company recently converted and increased its $50 million secured
revolver to a $100 million unsecured facility. The Company maintains this
unsecured facility in order to take advantage of acquisitions or other
opportunities as they arise, but it is the Company's policy to use variable rate
debt conservatively and primarily as a bridge to more permanent equity or debt
financing.
As of December 31, 1995, total debt to total market capitalization equalled
48% (30% assuming the convertible subordinated debentures are converted).
Long-term floating rate debt was 8% of total market capitalization. Debt service
coverage for the 12-month period ended December 31, 1995 was 2.50:1. Management
does not expect the coverage ratio to change materially as a result of this
offering, as net proceeds from this offering will be used to retire existing
debt.
S-14
<PAGE> 15
MANAGEMENT
The Company's policies and strategies are carried out by a management team
experienced in almost every aspect of the shopping center business, including
construction and development, acquisitions, finance, property management and
leasing. Senior management has over 150 years of experience in the real estate
business, and averages over 22 years of such experience. As a public REIT since
1971, the Company has operated and continued to grow through three major real
estate recessions. The Company believes it has a management team with the
extensive and diverse experience necessary to establish and maintain the
strategies and policies required to further enhance the Company's performance
and financial condition.
S-15
<PAGE> 16
PROPERTIES
The following table lists all of the Company's real estate investments as
of December 31, 1995, with shopping centers grouped by state and metropolitan
markets (dollar amounts in thousands):
<TABLE>
<CAPTION>
YEAR
COMPANY PERCENT COMPLETED, NET BOOK MAJOR TENANTS
DATE OWNED GROSS LEASED RENOVATED OR VALUE ---------------------------------------
DESCRIPTION ACQUIRED LEASABLE AREA 12/31/95 EXPANDED 12/31/95 TENANT SQUARE FEET
- -------------------- -------- ----------------- -------- ------------ -------- ------------------- -----------------
<S> <C> <C> <C> <C> <C> <C> <C>
SHOPPING CENTERS
ALABAMA
West Gate 6/74 & 64,378 sq. ft. 97% 1974 & 1995 $ 4,014 Winn-Dixie 44,000
Plaza......... 1/85 K&B Drugs 12,000
Mobile, AL
ARIZONA
Valley West 3/86 478,180 sq. ft. 41% 1973 5,305 Montgomery Ward 131,469
Mall(1)....... Heilig-Meyers 34,600
Glendale, AZ
FLORIDA
DAYTONA BEACH
Masonova 6/79 157,955 sq. ft. 42% 1969 940
Plaza(2)....
Daytona Beach,
FL
New Smyrna 8/92 118,451 sq. ft. 98% 1987 9,771 Publix 42,112
Beach Walgreens 13,070
Regional.... Beall's Outlet 8,000
New Smyrna
Beach, FL
Old Kings 5/88 84,759 sq. ft. 100% 1988 5,199 Wal-Mart 54,233
Commons.....
Palm Coast, FL
FT. LAUDERDALE
Countryside 6/94 173,161 sq. ft. 100% 1986, 1988 16,279 Eckerd Drugs 10,356
Shops....... & 1991 Publix 39,795
Cooper City, J. Byrons 44,000
FL
Westgate 6/94 104,893 sq. ft. 95% 1984 & 1988 8,883 Winn-Dixie 36,320
Square...... Walgreens 13,000
Sunrise, FL
FT. WALTON BEACH
Ft. Walton 7/86 48,248 sq. ft. 100% 1986 2,087 Food World 42,848
Beach
Plaza.......
Ft. Walton
Beach, FL
JACKSONVILLE
South Beach 8/92 289,319 sq. ft. 98% 1990 & 1991 20,310 Kmart 86,479
Regional.... Stein Mart 35,077
Jacksonville Beall's 35,500
Beach, FL Food Lion 29,000
NAPLES
Gulf Gate 6/79 173,259 sq. ft. 88% 1969 & 1974 2,015 Publix 29,120
Plaza....... Beall's Outlet 17,500
Naples, FL Store 15,138
JoAnn Fabrics
ORLANDO
Hoffner 6/79 39,370 sq. ft. 20% 1972 428
Plaza(2)....
Orlando, FL
PENSACOLA
Parkmore 12/92 159,067 sq. ft. 100% 1986 & 1992 7,825 Wal-Mart 90,399
Plaza....... Delchamps 49,968
Milton, FL
Pensacola 7/86 56,098 sq. ft. 100% 1985 1,831 Food World 42,848
Plaza.......
Pensacola, FL
</TABLE>
S-16
<PAGE> 17
<TABLE>
<CAPTION>
YEAR
COMPANY PERCENT COMPLETED, NET BOOK MAJOR TENANTS
DATE OWNED GROSS LEASED RENOVATED OR VALUE ---------------------------------------
DESCRIPTION ACQUIRED LEASABLE AREA 12/31/95 EXPANDED 12/31/95 TENANT SQUARE FEET
- -------------------- -------- ----------------- -------- ------------ -------- ------------------- -----------------
<S> <C> <C> <C> <C> <C> <C> <C>
SARASOTA -
BRADENTON
North River 12/92 & 177,128 sq. ft. 99% 1988 & 1993 $ 9,729 Kmart 94,841
Village 12/93 Publix 42,112
Center...... Walgreens 13,500
Ellenton, FL Beall's 9,000
Venice 6/79 144,850 sq. ft. 93% 1971 & 1979 1,326 TJX 77,117
Plaza(3).... Kash & Karry 22,200
Venice, FL Rite Aid 7,500
TAMPA - ST.
PETERSBURG -
CLEARWATER
Chelsea 7/93 81,144 sq. ft. 100% 1992 6,596 Publix 48,890
Place....... Eckerd Drugs 9,504
New Port
Richey, FL
Palm Gardens.. 6/79 52,670 sq. ft. 100% 1970 1,263 Food Lion 34,050
Largo, FL
Seven Hills... 7/93 64,890 sq. ft. 100% 1991 4,712 Publix 48,890
Spring Hill,
FL
GEORGIA
ATLANTA
Douglas 8/92 97,027 sq. ft. 95% 1988 8,082 Kroger 59,431
Commons.....
Douglasville,
GA
Macland 1/93 79,699 sq. ft. 100% 1992 & 1993 5,759 Publix 55,999
Pointe......
Marietta, GA
Paulding 8/92 192,391 sq. ft. 99% 1991 12,053 Kmart 86,479
Commons..... Kroger 49,700
Dallas, GA
Spalding 8/92 235,318 sq. ft. 100% 1989 14,312 Kmart 86,479
Village..... Kroger 59,431
Griffin, GA J.C. Penney's 33,796
Wesley Chapel 12/92 170,792 sq. ft. 100% 1989 10,378 Wal-Mart 91,124
Crossing.... Ingles 32,000
Decatur, GA Big B Drugs 8,468
COLUMBUS
Stadium 8/92 70,475 sq. ft. 99% 1988 4,237 Piggly Wiggly 30,625
Plaza....... Big B Drugs 10,950
Phenix City,
AL
MACON
Watson 12/92 & 227,747 sq. ft. 98% 1989 & 1993 12,240 Wal-Mart 122,382
Central..... 10/93 Winn-Dixie 45,000
Warner Robins,
GA
VARIOUS
Colony 2/88 50,000 sq. ft. 100% 1987 2,345 Food Lion 25,000
Square......
Fitzgerald, GA
Commerce 12/92 100,668 sq. ft. 100% 1988 4,173 Wal-Mart 50,968
Crossing.... Ingles 32,000
Commerce, GA
Heritage 6/93 159,362 sq. ft. 100% 1991 & 1992 8,246 Kmart 86,479
Walk........ Bi-Lo 30,623
Milledgeville, Goody's 25,000
GA
West Towne 3/90 89,596 sq. ft. 92% 1988 5,180 Bruno's Foodmax 44,512
Square......
Rome, GA
</TABLE>
S-17
<PAGE> 18
<TABLE>
<CAPTION>
YEAR
COMPANY PERCENT COMPLETED, NET BOOK MAJOR TENANTS
DATE OWNED GROSS LEASED RENOVATED OR VALUE ---------------------------------------
DESCRIPTION ACQUIRED LEASABLE AREA 12/31/95 EXPANDED 12/31/95 TENANT SQUARE FEET
- -------------------- -------- ----------------- -------- ------------ -------- ------------------- -----------------
<S> <C> <C> <C> <C> <C> <C> <C>
KENTUCKY
Scottsville 8/92 38,450 sq. ft. 99% 1986 $ 2,286 Goody's 19,500
Square......
Bowling Green,
KY
LOUISIANA
BATON ROUGE
Bluebonnet 12/94 89,879 sq. ft. 99% 1983 7,933 Delchamps 33,387
Village..... K&B Drugs 15,000
Baton Rouge,
LA
Millervillage 12/94 94,559 sq. ft. 93% 1983 & 1992 7,476 Delchamps 56,052
Shopping K&B Drugs 15,000
Center......
Baton Rouge,
LA
Sherwood 12/94 75,607 sq. ft. 81% 1972, 1988 1,946 Sav-A-Center 22,500
South....... & 1992 Eckerd Drugs 12,000
Baton Rouge, Cloth World 9,750
LA
Siegen 12/94 115,762 sq. ft. 100% 1988 6,264 Kmart 92,079
Village.....
Baton Rouge,
LA
HOUMA
Tarpon 1/95 56,605 sq. ft. 85% 1982 2,773 Delchamps 28,092
Heights..... Eckerd Drugs 8,905
Galliano, LA
LAFAYETTE
Ambassador 12/94 193,982 sq. ft. 83% 1980 & 1991 9,582 Kmart 83,067
Row......... K&B Drugs 18,580
Lafayette, LA
Ambassador Row 12/94 155,483 sq. ft. 78% 1986 & 1991 11,375 Delchamps 54,084
Courtyards... Marshalls 22,500
Lafayette, LA
Pinhook 12/94 190,319 sq. ft. 97% 1979 & 1992 10,879 Kmart 72,897
Plaza....... Delchamps 42,599
Lafayette, LA
Plaza 12/94 105,419 sq. ft. 100% 1980 2,855 Delchamps 28,092
Acadienne(4).. K&B Drugs 15,000
Eunice, LA
The 12/94 68,012 sq. ft. 97% 1976 & 1994 3,725 Campo Concept Store 30,975
Boulevard... Piccadilly 10,440
Lafayette, LA
NEW ORLEANS
Country Club 1/95 64,686 sq. ft. 81% 1982 4,017 Delchamps 33,387
Plaza....... K&B Drugs 8,450
Slidell, LA
The Crossing.. 12/94 113,989 sq. ft. 100% 1988 & 1993 4,481 Albertson's 58,432
Slidell, LA Campo Concept Store 20,000
Piccadilly 11,250
Elmwood 1/92 130,284 sq. ft. 100% 1989 10,477 Wal-Mart 95,079
Oaks........ Blockbuster Music 12,045
Harahan, LA Western Auto 10,560
Village at 12/94 144,373 sq. ft. 100% 1988 & 1993 8,109 Delchamps 51,348
Northshore.. Service Merchandise 50,000
Slidell, LA
MISSISSIPPI
Delchamps 4/88 66,857 sq. ft. 100% 1987 3,710 Delchamps 42,057
Plaza....... K&B Drugs 15,000
Pascagoula, MS
</TABLE>
S-18
<PAGE> 19
<TABLE>
<CAPTION>
YEAR
COMPANY PERCENT COMPLETED, NET BOOK MAJOR TENANTS
DATE OWNED GROSS LEASED RENOVATED OR VALUE ------------------------------------
DESCRIPTION ACQUIRED LEASABLE AREA 12/31/95 EXPANDED 12/31/95 TENANT SQUARE FEET
- -------------------- -------- ----------------- -------- ------------ -------- ---------------- ---------------
<S> <C> <C> <C> <C> <C> <C> <C>
NORTH CAROLINA
ASHEVILLE
Asheville 4/86 49,800 sq. ft. 100% 1967 $ 295 The Paty Company 49,800
Plaza(5)....
Asheville, NC
CHARLOTTE - GASTONIA -
ROCK HILL
Providence 12/71 85,690 sq. ft. 89% 1973 1,978 Harris Teeter 35,702
Square...... Eckerd Drugs 9,600
Charlotte, NC
Stanley Market 1/92 40,364 sq. ft. 100% 1980 & 1991 1,644 Winn-Dixie 28,400
Place....... Revco 6,000
Stanley, NC
GREENSBORO -
WINSTON SALEM -
HIGH POINT
Thomasville 8/92 148,754 sq. ft. 100% 1991 6,636 Kmart 86,479
Commons..... Ingles 32,000
Thomasville, Revco 8,450
NC
GREENVILLE
University 12/89 56,180 sq. ft. 95% 1989 3,483 Harris Teeter 32,960
Center...... Kerr Drugs 9,720
Greenville, NC
HICKORY - MORGANTON -
LENOIR
Taylorsville 8/86 & 48,537 sq. ft. 95% 1982 & 1988 2,073 Harris Teeter 31,137
Shopping 12/88
Center......
Taylorsville,
NC
RALEIGH - DURHAM -
CHAPEL HILL
Centre Pointe 12/92 & 163,642 sq. ft. 100% 1989 & 1993 8,528 Wal-Mart 91,155
Plaza....... 12/93 Winn-Dixie 38,547
Smithfield, NC
Riverview 3/72 130,058 sq. ft. 87% 1973 & 1994 4,622 Kroger 53,538
Shopping Upchurch Drugs 10,000
Center......
Durham, NC
Willowdaile 8/86 & 120,815 sq. ft. 93% 1986 6,864 Harris Teeter 27,985
Shopping 12/87 Carmike Cinemas 25,383
Center...... Kerr Drugs 9,600
Durham, NC
WILMINGTON
The 8/86 & 81,544 sq. ft. 90% 1986 & 1990 6,247 Harris Teeter 28,000
Galleria.... 12/87 Kerr Drugs 9,600
Wrightsville
Beach, NC
VARIOUS
Chadwick 1/92 31,700 sq. ft. 100% 1985 1,341 Food Lion 25,000
Square......
Hendersonville,
NC
Chestnut 1/92 39,640 sq. ft. 100% 1985 1,305 Food Lion 21,000
Square...... Eckerd Drugs 8,640
Brevard, NC
Eden Centre... 11/94 56,355 sq. ft. 100% 1991 3,443 Food Lion 29,000
Eden, NC Revco 8,450
First Street 8/94 52,230 sq. ft. 93% 1989 2,947 Harris Teeter 32,960
Station..... Eckerd Drugs 8,640
Albemarle, NC
</TABLE>
S-19
<PAGE> 20
<TABLE>
<CAPTION>
YEAR
COMPANY PERCENT COMPLETED, NET BOOK MAJOR TENANTS
DATE OWNED GROSS LEASED RENOVATED OR VALUE ---------------------------------------
DESCRIPTION ACQUIRED LEASABLE AREA 12/31/95 EXPANDED 12/31/95 TENANT SQUARE FEET
- -------------------- -------- ----------------- -------- ------------ -------- ------------------- -----------------
<S> <C> <C> <C> <C> <C> <C> <C>
Forest Hills 8/90 74,180 sq. ft. 98% 1990 $ 4,994 Harris Teeter 32,960
Centre...... Eckerd Drugs 8,640
Wilson, NC
Plaza North... 8/92 47,240 sq. ft. 97% 1986 2,306 Bi-Lo 25,590
Revco 8,450
Hendersonville,
NC
Shelby 4/86 103,000 sq. ft. 75% 1972 705 Big Lots 30,000
Plaza(4).... Heilig-Meyers 25,000
Shelby, NC
SOUTH CAROLINA
VARIOUS
Abbeville 4/86 59,525 sq. ft. 53% 1970 327 Revco 6,500
Plaza(2)....
Abbeville, SC
Carolina 5/89 36,560 sq. ft. 100% 1989 2,023 Harris Teeter 32,960
Place.......
Hartsville, SC
Chester 4/86 & 71,443 sq. ft. 66% 1967 & 1992 1,776 Bi-Lo 30,623
Plaza....... 2/92 Revco 5,500
Chester, SC
Lancaster 4/86 77,400 sq. ft. 100% 1971 756 Bi-Lo 19,200
Plaza....... Revco 6,600
Lancaster, SC
Lancaster 8/86 & 29,047 sq. ft. 100% 1963 & 1987 1,243 Harris Teeter 24,045
Shopping 12/87
Center......
Lancaster, SC
Litchfield 8/86 42,201 sq. ft. 98% 1984 2,118 Harris Teeter 24,806
Landing..... Eckerd Drugs 8,640
North
Litchfield, SC
North Village 8/86 60,356 sq. ft. 98% 1984 2,676 Harris Teeter 24,806
Center(3)... Revco 10,500
North Myrtle
Beach, SC
TENNESSEE
NASHVILLE
Smyrna 8/92 83,334 sq. ft. 98% 1992 5,434 Kroger 59,214
Village.....
Smyrna, TN
VARIOUS
Lawrence 8/92 52,295 sq. ft. 100% 1987 3,227 Kroger 37,245
Commons.....
Lawrenceburg,
TN
Forrest 12/92 214,450 sq. ft. 98% 1987 11,570 Wal-Mart 65,930
Gallery..... Kroger 48,780
Tullahoma, TN Ira A. Watson 32,680
VIRGINIA
LYNCHBURG
Waterlick 10/89 98,694 sq. ft. 97% 1973 & 1988 5,436 Harris Teeter 30,780
Plaza....... Crafts 'N More 22,260
Lynchburg, VA Revco 10,500
VARIOUS
Smyth Valley 12/92 126,841 sq. ft. 99% 1989 6,627 Wal-Mart 65,930
Crossing.... Ingles 32,000
Marion, VA
Harris 6/88 & 36,535 sq. ft. 100% 1981 & 1989 2,039 Harris Teeter 36,535
Teeter(5)... 6/89
Lexington, VA
----------------- -------- -----------------
TOTAL FOR 75 7,963,571 sq. ft. 398,069 5,053,409
SHOPPING CENTERS..
</TABLE>
S-20
<PAGE> 21
<TABLE>
<CAPTION>
YEAR
COMPANY PERCENT COMPLETED, NET BOOK MAJOR TENANTS
DATE OWNED GROSS LEASED RENOVATED OR VALUE ---------------------------------------
DESCRIPTION ACQUIRED LEASABLE AREA 12/31/95 EXPANDED 12/31/95 TENANT SQUARE FEET
- -------------------- -------- ----------------- -------- ------------ -------- ------------------- -----------------
<S> <C> <C> <C> <C> <C> <C> <C>
NET LEASED WAL-MARTS
Wal-Mart Stores, 6/85 54,223 sq. ft. 100% 1985 1,313 Wal-Mart 54,223
Inc...........
Mathews, LA
Wal-Mart Stores, 6/85 64,890 sq. ft. 100% 1985 1,673 Wal-Mart 64,890
Inc...........
Fremont, NE
Wal-Mart Stores, 6/85 & 83,249 sq. ft. 100% 1985 2,483 Wal-Mart 83,249
Inc........... 1/91
Kearney, NE
Wal-Mart Stores, 7/85 53,571 sq. ft. 100% 1985 1,464 Wal-Mart 53,571
Inc...........
Marble Falls, TX
LAND PURCHASE
LEASEBACKS
Lawrence County 5/71 135,605 sq. ft. 100% 1971 436 N/A N/A
Shopping
Center........
Sybene, OH
Grand Marche 9/72 200,585 sq. ft. 100% 1969 251 N/A N/A
Shopping
Center........
Lafayette, LA
Manatee County 5/71 120,500 sq. ft. 100% 1971 242 N/A N/A
Shopping
Center........
Bradenton, FL
----------------- --------
TOTAL FOR 82 8,676,194 sq. ft. $405,931
SHOPPING CENTERS..
=============== ==========
APARTMENT
Whitehall Kent 6/79 188 units 95% 1968 $ 1,507 N/A N/A
Apartments....
Kent, OH
INDUSTRIAL
PROPERTIES
Industrial 6/79 109,810 sq. ft. 72% 1956 & 1963 322 Schneider National 49,922
Buildings.....
Charlotte, NC
Plasti-Kote..... 6/79 41,000 sq. ft. 100% 1961 & 1966 81 Plasti-Kote Company 41,000
Medina, OH
BANKS
The Old Phoenix 12/84 73,074 sq. ft. 100% Various 2,164 Old Phoenix 73,074
National National Bank
Bank..........
Ten Branch Banks
Medina County,
OH
</TABLE>
- ---------------
(1) Valley West Mall is under a contract of sale with closing scheduled for
March 29, 1996.
(2) Masonova Plaza, Hoffner Plaza and Abbeville Plaza represent candidates for
sale or redevelopment.
(3) The Company owns a 54.5% interest in North Village Center and a 75% interest
in Venice Plaza Shopping Center, which are consolidated for financial
reporting purposes and minority interests recorded.
(4) Subject to ground leases expiring in 1997 for Shelby Plaza and 1998 and 2008
for Plaza Acadienne. The Company has an option to purchase the land at
Shelby Plaza for $265,000 in 1997.
(5) Asheville Plaza and Harris Teeter shopping center investments represent net
leased properties not managed or operated by the Company.
S-21
<PAGE> 22
MORTGAGE LOAN INVESTMENTS
The Company had mortgage loan investments in four properties aggregating
$8,499,210 as of December 31, 1995. Interest rates on such investments range
from 8.63% to 12.38% with maturity dates from 1998 to 2009. One of the Company's
four mortgage loan investments totaling $5,152,932 is a purchase-money mortgage
taken back on the sale of a former equity investment, Spanish Quarter
Apartments. The Spanish Quarter Apartments mortgage loan investment is
subordinate to $917,598 of mortgage debt owed by the Company. All of the
Company's mortgage loan investments are current, and the Company considers all
such loans to be well secured.
ENVIRONMENTAL MATTERS
Investments in real property create a potential for environmental liability
on the part of the owner of or any mortgage lender on such real property. If
hazardous substances are discovered on or emanating from any of the Company's
properties, the owner or operator of the property (including the Company) may be
held strictly liable for all costs and liabilities relating to such hazardous
substances.
Phase I environmental site assessments (which generally did not include
environmental sampling, monitoring or laboratory analysis) were implemented by
the Company with respect to those properties which the Company acquired from
1989 to the present, prior to the acquisition of such properties. The Company
has not commissioned independent environmental analyses with respect to
properties acquired prior to 1989, except as required pursuant to a former
secured revolving term loan. No assurance can be given that hazardous substances
are not located on any of the properties. However, the Company has no reason to
believe that any environmental contamination has occurred nor any violation of
any applicable environmental law, statute, regulation or ordinance exists that
would have a material adverse effect on the Company's results of operations,
financial position or liquidity. The Company presently carries no insurance
coverage for the types of environmental risks described above.
For a more complete description of various environmental matters, reference
is made to the Company's Annual Report on Form 10-K, as amended, for the year
ended December 31, 1995, and particularly to "Item 1. Business -- Regulation"
and to Note 16 to the consolidated financial statements.
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<PAGE> 23
MANAGEMENT
The directors and executive officers of the Company are:
<TABLE>
<CAPTION>
YEARS
ASSOCIATED
WITH
NAME AGE COMPANY PRINCIPAL OCCUPATION
- ----------------------------------- ---- ---------- ---------------------------------------
<S> <C> <C> <C>
Donald W. MacLeod.................. 70 27 Chairman and Chief Executive Officer.
Thomas H. McAuley.................. 50 9 President and Chief Operating Officer;
Director.
Mary M. Thomas..................... 49 25 Executive Vice President and Chief
Financial Officer; Director.
Homer B. Gibbs, Jr................. 63 20 Director; Former Vice Chairman, Mid-
South Financial Corporation, a
Nashville, Tennessee mortgage banking
firm.
Samuel W. Kendrick................. 55 3 Director; President, Ruddick Investment
Company, an affiliate of Harris Teeter,
Inc., a Charlotte, North Carolina real
estate development and venture capital
firm.
Bruce A. Morrice................... 62 10 Director; Managing Director, Morrice
Financial Corporation, a Dallas, Texas
real estate finance and investment
firm.
James H. Nobil..................... 65 20 Director; President JLJ Realty, Inc., a
Florida property management firm.
Louis P. Wolfort................... 79 26 Director; Former Chairman of the Board,
First National Mortgage Corporation, a
New Orleans, Louisiana mortgage banking
firm.
W. Benjamin Jones III.............. 45 19 Executive Vice President.
Robert E. Mitzel................... 47 8 Executive Vice President.
Lee A. Harris...................... 37 9 Senior Vice President and Secretary.
James G. Levy...................... 37 2 Vice President and Treasurer.
Daniel F. Lovett................... 49 2 Vice President.
Nanette B. Cook.................... 38 4 Vice President.
Rosemary C. Beck................... 40 9 Vice President.
E. Denton Williams III............. 63 3 Vice President.
William E. Novick.................. 40 2 Vice President.
</TABLE>
S-23
<PAGE> 24
SELECTED CONSOLIDATED FINANCIAL DATA
The following table sets forth selected consolidated financial data for the
Company and is qualified by, and should be read in conjunction with the
information included under (i) "Capitalization" and "Management's Discussion and
Analysis of Financial Condition and Results of Operations" included elsewhere in
this Prospectus Supplement and (ii) "Management's Discussion and Analysis of
Financial Condition and Results of Operations" and the consolidated financial
statements included in the Company's Annual Report on Form 10-K, as amended, for
the fiscal year ended December 31, 1995, incorporated herein by reference. See
"Available Information" and "Incorporation of Certain Documents by Reference" in
the accompanying Prospectus.
<TABLE>
<CAPTION>
AS OF AND FOR THE YEARS ENDED DECEMBER 31,
----------------------------------------------------
1995 1994 1993 1992 1991
-------- -------- -------- -------- --------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C>
OPERATING DATA
Revenues:
Income from rental properties......... $ 58,008 $ 44,681 $ 41,607 $ 30,785 $ 25,281
Interest.............................. 900 3,268 2,258 2,103 2,341
Interest on direct financing leases... 1,288 1,253 1,198 1,119 1,064
-------- -------- -------- -------- --------
60,196 49,202 45,063 34,007 28,686
-------- -------- -------- -------- --------
Expenses:
Operating expenses of rental
properties......................... 12,734 10,319 10,023 7,541 6,081
Interest.............................. 17,572 14,553 13,092 10,796 8,970
Depreciation.......................... 10,427 8,214 7,669 6,202 5,396
Amortization of debt costs............ 446 446 212 70 70
General and administrative............ 3,467 2,881 2,295 1,956 1,908
-------- -------- -------- -------- --------
44,646 36,413 33,291 26,565 22,425
-------- -------- -------- -------- --------
Earnings before gain (loss) on real
estate investments................. 15,550 12,789 11,772 7,442 6,261
-------- -------- -------- -------- --------
Gain (loss) on real estate investments:
Gain (loss) on sales of properties.... 173 300 4,557 7,112 1,135
Valuation loss........................ -- (4,125) -- (3,565) --
-------- -------- -------- -------- --------
173 (3,825) 4,557 3,547 1,135
-------- -------- -------- -------- --------
Earnings before extraordinary items... 15,723 8,964 16,329 10,989 7,396
Extraordinary items:
Gain (loss) on extinguishment of
debt............................... (137) 3,748 (1,441) (15) --
Gain on purchase of debentures........ -- -- -- -- 17
-------- -------- -------- -------- --------
Net earnings....................... $ 15,586 $ 12,712 $ 14,888 $ 10,974 $ 7,413
========= ========= ========= ========= =========
</TABLE>
S-24
<PAGE> 25
<TABLE>
<CAPTION>
AS OF AND FOR THE YEARS ENDED DECEMBER 31,
----------------------------------------------------
1995 1994 1993 1992 1991
-------- -------- -------- -------- --------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C>
OTHER DATA
Funds from operations(1)................ $ 26,621 $ 21,616 $ 19,826 $ 13,848 $ 11,866
Net cash flows from (used in) --
Operating activities.................. 25,947 22,512 19,116 14,275 10,196
Investing activities.................. (7,769) (99,052) (16,991) (55,115) (4,207)
Financing activities.................. (20,003) (248) (76,371) 40,247 (5,837)
Ratio of earnings to fixed charges(2)... 1.85x 1.58x 2.20x 1.99x 1.78x
Ratio of funds from operations before
fixed charges to fixed
charges(1)(2)......................... 2.44x 2.39x 2.45x 2.24x 2.25x
Ratio of Debt to Total Assets(3)........ 46% 47% 43% 38% 40%
Ratio of secured Debt to Total
Assets(3)............................. 21% 28% 23% 36% 37%
Ratio of Total Unencumbered Assets to
Unsecured Debt(3)..................... 267% 370% 343% 2,757% 1,639%
Ratio of Consolidated Income Available
for Debt Service to Annual Service
Charge(3)............................. 2.50x 2.47x 2.50x 2.27x 2.29x
Percent leased.......................... 92% 93% 93% 93% 93%
</TABLE>
<TABLE>
<CAPTION>
AS OF DECEMBER 31,
----------------------------------------------------
1995 1994 1993 1992 1991
-------- -------- -------- -------- --------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C>
BALANCE SHEET DATA
Net real estate investments............. $418,505 $418,553 $315,404 $293,446 $180,628
Total assets............................ 427,398 428,579 402,319 297,591 184,628
Mortgage notes payable.................. 99,188 105,107 98,879 115,379 72,866
7.3% convertible subordinated
debentures............................ 84,905 86,250 86,250 5,730 5,730
Indebtedness to banks................... 36,000 26,000 -- 1,200 7,000
Total liabilities....................... 228,768 225,541 191,984 129,017 91,017
Total shareholders' equity.............. 198,630 203,038 210,335 168,574 93,611
</TABLE>
- ---------------
(1) Funds from operations is defined as net cash flows from operating activities
before changes in accrued assets and liabilities. Management believes funds
from operations should be considered along with, but not as an alternative
to, net income as defined by generally accepted accounting principles as a
measure of the Company's operating performance. Funds from operations does
not represent cash generated from operating activities in accordance with
generally accepted accounting principles and is not necessarily indicative
of cash available to fund cash needs.
(2) For purposes of computing these ratios, earnings have been calculated by
adding fixed charges (excluding capitalized interest) to income before
income taxes and extraordinary items. Fixed charges consist of interest
costs, whether expensed or capitalized, the interest component of rental
expense, and amortization of debt costs, discounts and issue costs, whether
expensed or capitalized.
(3) For a description of each ratio, see "Description of Notes -- Certain
Covenants."
S-25
<PAGE> 26
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
The following is a summary of "Management's Discussion and Analysis of
Financial Condition and Results of Operations" included in the Company's Annual
Report on Form 10-K, as amended, for the fiscal year ended December 31, 1995,
incorporated herein by reference.
RESULTS OF OPERATIONS FOR THE YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
The $13,327,000 increase in income from rental properties during 1995 was
primarily due to approximately $13,619,000 of income earned from the 17 shopping
centers acquired during 1994 and 1995 and the recent property expansions and
redevelopments funded by the Company. This was partially offset by $862,000 less
income earned from the investments sold and targeted for sale during 1995.
Similarly, the $3,074,000 increase in income from rental properties during 1994
was due to approximately $4,646,000 of income earned from the 19 shopping
centers acquired during 1993 and 1994 and the recent property expansions
purchased or funded by the Company. This was partially offset by $1,332,000 less
income earned from the investments sold during 1993 and 1994 as well as
approximately $240,000 less income due to the ongoing redevelopment of two
shopping center investments.
The percentage leased of the Company's shopping center investments remained
stable at 93% at December 31, 1993 and 1994, and decreased to 92% in 1995. The
average occupancy of the Company's Ohio apartment investment increased from 89%
in 1993 to 92% in 1994, and decreased to 90% in 1995. Percentage rentals
received from shopping center investments, excluding percentage rentals received
from the four Wal-Mart investments classified as direct financing leases,
totaled approximately $755,000 in 1993, $470,000 in 1994 and $576,000 in 1995.
The decrease in interest income during 1995 was primarily the result of the
investment of the remaining proceeds of the Company's 1993 public offerings in
December 1994. During 1994, the Company earned approximately $2,388,000 on
short-term money market investments.
During 1993 and 1992, three of the Company's mortgage loan investments were
repaid in full. These loan repayments resulted in decreased interest income of
$421,000 in 1994. The decrease was more than offset by a $1,541,000 increase in
interest earned on short-term investments in 1994.
The increases in interest on direct financing leases in 1995 and 1994 were
primarily due to the receipt of percentage rentals from the four Wal-Mart
investments, which were approximately $347,000, $292,000 and $219,000 during
1995, 1994 and 1993, respectively. Wal-Mart has ceased operations in two of the
four Wal-Mart investments, from which the Company received $215,000, $189,000
and $138,000 of percentage rentals during 1995, 1994 and 1993, respectively.
Wal-Mart remains liable under the leases which expire in January 2011 and
continues to pay base rentals, but no further percentage rentals are anticipated
to be earned from these two facilities.
The increases in operating expenses of rental properties and depreciation
during 1995 and 1994 were primarily due to property acquisitions and
dispositions during the three-year period. The Company acquired two shopping
center investments in 1995, 15 in 1994 and four in 1993. The additional
operating expenses and depreciation related to these centers was partially
offset by the sale of three shopping center investments in 1995 and the sale of
an apartment investment in October 1993. Depreciation also increased in 1995 and
1994 due to two property redevelopments and four property expansions purchased
or funded during 1995, 1994 and 1993.
The 1995, 1994 and 1993 acquisitions also resulted in increased interest
expense on mortgages in 1995 and 1994. The increase in 1995 was partially offset
by (a) the repayment of a $1,750,000 variable rate mortgage in May 1995, (b) the
refinancing of a $9,000,000 mortgage in June 1995, reducing the face of the
mortgage to $7,500,000 and the interest rate from 9.75% to 8.375%, (c) the
maturity of a 9.5% fully amortized mortgage note payable in August 1995, (d) the
refinancing of a $12,330,000 mortgage in September 1995, reducing the face of
the mortgage to $11,377,000 and the
S-26
<PAGE> 27
interest rate from 9.375% to 8.194%, (e) the repayment of an $860,000 mortgage
at 13.875% (discounted to 9.5% for financial reporting purposes) in November
1995, and (f) the repayment of a $1,774,000 variable rate interest only mortgage
in December 1995. The increase in 1994 was fully offset by the repayment of 11
mortgage notes payable during 1993 aggregating $22,816,000 of principal with
interest rates ranging from 7% to 13.625%. The 1995 and 1994 increases were
further offset by the refinancing of one mortgage note payable in February 1994
which reduced the interest rate from 12.625% to 8.125% and the prepayment of the
9.5% mortgage secured by Valley West Mall in June 1994.
The $3,764,000 increase in interest on debentures during 1994 was primarily
due to the 7.3% convertible subordinated debentures issued in August 1993.
Similarly, the issuance of the 7.3% debentures resulted in an increase in
amortization of debt cost of $234,000 during 1994.
The Company had average borrowings under its revolving term loan of
$33,507,000, $789,000 and $6,494,000 during 1995, 1994 and 1993, respectively,
which resulted in increased interest on bank debt during 1995 and decreased
interest on bank debt during 1994. The interest rate on the $50 million secured
revolver was, at the option of the Company, either prime or 1.25% over adjusted
LIBOR. The $50 million revolver was replaced December 15, 1995 with a $100
million unsecured revolver with an interest rate, at the option of the Company,
of either LIBOR plus an Applicable Margin or prime. The current Applicable
Margin for LIBOR borrowings is 1.5%.
The increases in general and administrative expenses in 1995 and 1994 were
primarily due to the costs of increased administrative and property management
personnel as well as increased shareholder relations costs. The increase in 1995
was also due to increased state franchise taxes and director's fees, the
appointment of a new President and Chief Operating Officer, as well as
approximately $97,000 of costs incurred in due diligence on potential mergers
and acquisitions which were not consummated. The increase in 1994 was also due
to increased professional services.
The amount of gains recognized on sales of investments have fluctuated and
in the future may continue to fluctuate depending upon sales activity in any
given year. During 1995, 1994 and 1993, the Company recognized gains on sales of
properties of approximately $173,000, $257,000 and $4,557,000, respectively. The
gain in 1994 was more than offset by $4,125,000 of reductions in carrying values
of certain investments, primarily Valley West Mall. These adjustments to
carrying value were a result of the Company's quarterly evaluations of its
individual investments based on current and forecasted net operating income of
the investment, competition resulting from new properties in the market place
and other changes in the local economy. The development of a new mall which
would directly compete with Valley West Mall was announced in 1992, and in
November 1992, one of the anchor tenants at Valley West gave notice to terminate
its lease effective November 1993. Based on this lease termination and the
predicted impact of the new mall when opened on the tenants of Valley West, the
Company determined that a permanent impairment of $3,565,000 had occurred and
reflected such writedown in its financial statements during the fourth quarter
of 1992. The new mall opened for business in October 1993, the terminating
tenant ceased operations in November 1993, and another anchor tenant changed its
business to an outlet concept. After a concerted leasing effort which commenced
in 1992, review of tenant sales reductions since the opening of the new mall,
meetings with the City and potential purchasers of the center, and restructuring
of the Company's ownership in this investment, including prepayment of the
mortgage and negotiations with the land lessor concerning a joint venture or the
ultimate purchase of the underlying land, the Company determined that a further
permanent impairment of the value of this mall had developed. An additional
indicator of value was the discount received by the Company in the prepayment of
the underlying mortgage debt in June 1994. Accordingly, the Company recorded an
additional writedown of this investment in June 1994.
During 1995, the Company replaced its $50 million secured revolving term
loan with a $100 million unsecured revolving term loan and recognized an
extraordinary loss on the extinguishment of the old revolver of $137,000. During
1994, the Company recognized an extraordinary gain
S-27
<PAGE> 28
of approximately $3,748,000 on the purchase of the 9.5% mortgage note payable
secured by Valley West Mall. The mortgage had an outstanding balance of
$8,248,000 and was purchased for $4,500,000. During 1993, the Company recognized
extraordinary losses of approximately $1,440,000 on the prepayment of nine
mortgage notes payable totaling $21,896,000 with interest rates ranging from
9.3% to 13.625%. This extraordinary loss included $186,000 of unamortized net
interest discounts and $1,254,000 of prepayment penalties.
FUNDS FROM OPERATIONS
The Company currently defines funds from operations as net cash flows from
operating activities before changes in accrued assets and liabilities. During
the first quarter of 1995, the National Association of Real Estate Investment
Trusts ("NAREIT") adopted a White Paper recommending certain changes to the
calculation of funds from operations. NAREIT defines funds from operations as
net income before gains (losses) on real estate investments and extraordinary
items plus depreciation and amortization of capitalized leasing costs.
Management believes funds from operations should be considered along with, but
not as an alternative to, net income as defined by generally accepted accounting
principles as a measure of the Company's operating performance. Funds from
operations does not represent cash generated from operating activities in
accordance with generally accepted accounting principles and is not necessarily
indicative of cash available to fund cash needs.
The following data is presented with respect to the calculation of funds
from operations under the NAREIT definition and the Company's current definition
for the years ended December 31, 1995, 1994 and 1993:
<TABLE>
<CAPTION>
1995 1994 1993
----------- ----------- -----------
<S> <C> <C> <C>
Net earnings....................................... $15,585,791 $12,711,600 $14,888,298
Depreciation..................................... 10,427,268 8,214,192 7,668,797
Loss (gain) on real estate investments........... (173,025) 3,825,418 (4,556,511)
Extraordinary loss (gain)........................ 137,260 (3,748,095) 1,440,478
Amortization of convertible debenture costs...... 366,391 -- --
Amortization of capitalized leasing income....... 198,163 166,019 172,418
----------- ----------- -----------
Funds from operations -- NAREIT.................. 26,541,848 21,169,134 19,613,480
Amortization of debt costs --
Convertible debentures........................ -- 371,664 140,273
Other debt.................................... 79,516 74,790 72,148
----------- ----------- -----------
Funds from operations -- Company................. $26,621,364 $21,615,588 $19,825,901
============ ============ ============
</TABLE>
Amortization of convertible debenture costs is added to funds from
operations under the NAREIT definition when assumed conversion of the debentures
is dilutive. Weighted average shares outstanding were 33,156,750, 25,349,303 and
22,457,131 for the years ended December 31, 1995, 1994 and 1993, respectively,
with conversion of the debentures dilutive and therefore assumed in 1995 only.
During 1994 and 1993, the Company had an average of approximately
$57,000,000 and $25,000,000, respectively, of the proceeds of the August 1993
equity and debenture offerings invested in short-term money market investments
earning an average interest rate of approximately 4.2% and 3.4%, respectively.
This resulted in temporary dilution in funds from operations. This temporary
dilution ceased when the remaining cash was invested in higher-yielding real
estate investments on December 21, 1994.
In addition, funds from operations for 1995, 1994 and 1993 did not include
rental income received through the rental guarantees related to major portfolio
acquisitions completed in July and
S-28
<PAGE> 29
December 1992. Rental income covered by the guarantees for 17 centers totaled
approximately $64,000, $510,000 and $838,000 for 1995, 1994 and 1993,
respectively.
LIQUIDITY AND CAPITAL RESOURCES
In 1995 and 1994, the Company's dividends, mortgage amortization payments
and capital improvements were funded primarily by funds from operations and also
through supplemental funding from mortgage financing, available cash
investments, bank borrowings and other sources. The Company believes that
dividends, mortgage amortization payments and necessary capital improvements
will continue to be funded primarily by funds from operations. Other planned
activities, including property acquisitions, certain capital improvement
programs and debt repayments are expected to be funded to the extent necessary
by bank borrowings, mortgage financing, periodic sales or exchanges of existing
properties and public or private offerings of stock or debt.
For a description of the Company's mortgage debt, reference is made to
"Capitalization -- Summary of Indebtedness" and to Note 6 to the consolidated
financial statements incorporated herein by reference. For a description of
commitments and contingencies, reference is made to Notes 15 and 16 to the
consolidated financial statements incorporated herein by reference.
On August 31, 1993, the Company completed concurrent public offerings of
4,127,580 shares of its common stock and $86,250,000 of 7.3% convertible
subordinated debentures for net proceeds aggregating approximately $126,330,000.
The Company has a shelf registration statement covering up to $200 million
of common stock, senior debt and subordinated debt. The Company intends to use
the net proceeds of any offerings under such shelf registration to repay debt;
to improve, expand or redevelop its properties; to acquire additional
properties; and for working capital.
On November 1, 1990, the Company obtained a $25,000,000 secured revolving
term loan maturing November 1, 1995. On July 31, 1992, the loan agreement was
modified to increase the commitment from $25,000,000 to $50,000,000 and to
extend the maturity from November 1, 1995 to August 1, 1997. The interest rate
on this loan was either prime or 1.25% over adjusted LIBOR, at the option of the
Company. As of December 31, 1994, the borrowings under this credit facility
totaled $26,000,000. On December 15, 1995, the Company terminated this
$50,000,000 secured revolving term loan.
On December 15, 1995, the Company obtained a $100,000,000 unsecured
revolving term loan maturing January 4, 1999. Not later than June 30 of each
year commencing June 30, 1996, the Company may request to extend the maturity
date for an additional twelve-month period beyond the existing maturity date.
The interest rate is, at the option of the Company, either prime, fluctuating
daily or LIBOR plus the "Applicable Margin" (currently 1.5%), which is subject
to adjustment based upon the rating of the senior unsecured long-term debt
obligations of the Company. The Company may borrow, repay and/or reborrow under
this loan at any time. As of December 31, 1995, the borrowings under this credit
facility totaled $36,000,000. For additional information on this revolving term
loan, reference is made to Note 8 to the consolidated financial statements
incorporated herein by reference.
The Company's 7.3% convertible subordinated debentures are convertible into
common stock of the Company at any time prior to maturity on August 15, 2003 at
$11.25 per share, subject to adjustment in certain events. In March 1995,
$1,345,000 of the Company's 7.3% convertible subordinated debentures were
converted into 119,554 shares of common stock at $11.25 per share. The remaining
$84,905,000 of debentures was outstanding as of December 31, 1995. As of
December 31, 1994, the entire issue of $86,250,000 of debentures was
outstanding. On August 1, 1993, the Company's 2% convertible subordinated
debentures were redeemed in full at a premium of 45% over par. For additional
information on the debentures, reference is made to Note 7 to the consolidated
financial statements incorporated herein by reference.
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<PAGE> 30
The Company's Dividend Reinvestment Plan allows shareholders to elect to
reinvest all or a portion of their distributions in newly issued shares of the
Company at 95% of the market price of the shares. During 1995, 1994 and 1993,
the Company received net proceeds under this plan of $1,107,000, $938,000 and
$1,249,000, respectively. For additional information on the Dividend
Reinvestment Plan, reference is made to Note 11 to the consolidated financial
statements incorporated herein by reference.
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<PAGE> 31
DESCRIPTION OF NOTES
The following description of the particular terms of the Notes offered
hereby supplements, and to the extent inconsistent therewith replaces, the
description of the general terms and provisions of the "Senior Securities" set
forth in the accompanying Prospectus, to which reference is hereby made.
GENERAL
The Notes constitute a separate series of Senior Securities (which are more
fully described in the accompanying Prospectus) to be issued under an Indenture,
dated as of November 9, 1995 (the "Original Indenture"), as supplemented by
Supplemental Indenture No. 1 dated as of March 26, 1996, (the "Supplemental
Indenture" and together with the Original Indenture, the "Indenture") between
the Company and SunTrust Bank, Atlanta (the "Trustee"). The Indenture has been
filed as an exhibit to (or incorporated by reference into) the Registration
Statement of which this Prospectus Supplement is a part and is available for
inspection at the offices of the Company. The Indenture is subject to, and
governed by, the Trust Indenture Act of 1939, as amended (the "TIA"). The
statements made hereunder relating to the Indenture and the Notes to be issued
thereunder are summaries of certain provisions thereof, do not purport to be
complete and are subject to, and are qualified in their entirety by reference
to, all provisions of the Indenture and such Notes. All section references
appearing herein are to sections of the Indenture, and capitalized terms used
but not defined herein shall have the respective meanings set forth in the
Indenture.
The Notes will be limited to an aggregate principal amount of $50 million
and will be direct, senior unsecured obligations of the Company and will rank
equally with all other unsecured and unsubordinated indebtedness of the Company
from time to time outstanding. The Notes will be effectively subordinated to
mortgages and other secured indebtedness of the Company and to indebtedness and
other liabilities of any Subsidiaries which may be formed by the Company in the
future. Accordingly, such prior indebtedness will have to be satisfied in full
before holders of the Notes will be able to realize any value from the secured
or indirectly-held properties. The Notes will be senior to the Company's
Convertible Debentures to the extent provided in the indenture dated as of
August 15, 1993 governing the terms of the Convertible Debentures.
As of December 31, 1995, on a pro forma basis after giving effect to the
issuance of the Notes offered hereby and the application of the proceeds
therefrom as described under "Use of Proceeds," the total outstanding
indebtedness of the Company was approximately $227.8 million, of which
approximately $92.9 million was secured and $84.9 million consisted of the
Convertible Debentures. The Company may incur additional indebtedness, including
secured indebtedness, subject to the provisions described below under "Certain
Covenants -- Limitations on Incurrence of Debt."
The Notes will only be issued in fully registered form in denominations of
$1,000 and integral multiples thereof.
PRINCIPAL AND INTEREST
The Notes will bear interest at 7.45% per annum and will mature on April 1,
2001. The Notes will bear interest from March 26, 1996 or from the immediately
preceding Interest Payment Date (as defined below) to which interest has been
paid, payable semi-annually in arrears on April 1 and October 1 of each year,
commencing on October 1, 1996 (each, an "Interest Payment Date"), to the persons
in whose name the applicable Notes are registered in the Security Register on
the preceding March 15 or September 15 (whether or not a Business Day, as
defined below), as the case may be (each, a "Regular Record Date"). Interest on
the Notes will be computed on the basis of a 360-day year of twelve 30-day
months.
If any Interest Payment Date or Stated Maturity falls on a day that is not
a Business Day, the required payment shall be made on the next Business Day as
if it were made on the date such payment was due and no interest shall accrue on
the amount so payable for the period from and after such Interest Payment Date
or the Maturity Date, as the case may be. "Business Day" means any day,
S-31
<PAGE> 32
other than a Saturday or Sunday, on which banks in the City of New York or in
the City of Atlanta are not required or authorized by law or executive order to
close.
The principal of and interest on the Notes will be payable at the corporate
trust office of SunTrust Bank, Atlanta (the "Paying Agent") in the City of
Atlanta, Georgia, initially located at 58 Edgewood Avenue, Room 400, Atlanta,
Georgia 30303 or Chemical-Mellon Shareholder Services, Inc., 120 Broadway, 33rd
Floor, New York, New York 10271, provided that, at the option of the Company,
payment of interest may be made by check mailed to the address of the Person
entitled thereto as it appears in the Security Register or by wire transfer of
funds to such Person at an account maintained within the United States (Sections
301, 307, 1001 and 1002).
CERTAIN COVENANTS
Limitations on Incurrence of Debt. The Company will not, and will not
permit any Subsidiary to, incur any Debt (as defined below) if, immediately
after giving effect to the incurrence of such additional Debt and the
application of the proceeds thereof, the aggregate principal amount of all
outstanding Debt of the Company and its Subsidiaries on a consolidated basis
determined in accordance with GAAP is greater than 60% of the sum of (without
duplication) (i) the Total Assets (as defined below) of the Company and its
Subsidiaries as of the end of the calendar quarter covered in the Company's
Annual Report on Form 10-K or Quarterly Report on Form 10-Q, as the case may be,
most recently filed with the Commission (or, if such filing is not permitted
under the Exchange Act, with the Trustee) prior to the incurrence of such
additional Debt and (ii) the purchase price of any real estate assets or
mortgages receivable acquired, and the amount of any securities offering
proceeds received (to the extent that such proceeds were not used to acquire
real estate assets or mortgages receivable or used to reduce Debt), by the
Company or any Subsidiary since the end of such calendar quarter, including
those proceeds obtained in connection with the incurrence of such additional
Debt (Section 2.4 of the Supplemental Indenture).
In addition to the foregoing limitation on the incurrence of Debt, the
Company will not, and will not permit any Subsidiary to, incur any Debt secured
by any Encumbrance upon any of the property of the Company or any Subsidiary if,
immediately after giving effect to the incurrence of such additional Debt and
the application of the proceeds thereof, the aggregate principal amount of all
outstanding Debt of the Company and its Subsidiaries on a consolidated basis
which is secured by any Encumbrance on property of the Company or any Subsidiary
is greater than 40% of the sum of (without duplication) (i) the Total Assets of
the Company and its Subsidiaries as of the end of the calendar quarter covered
in the Company's Annual Report on Form 10-K or Quarterly Report on Form 10-Q, as
the case may be, most recently filed with the Commission (or, if such filing is
not permitted under the Exchange Act, with the Trustee) prior to the incurrence
of such additional Debt and (ii) the purchase price of any real estate assets or
mortgages receivable acquired, and the amount of any securities offering
proceeds received (to the extent that such proceeds were not used to acquire
real estate assets or mortgages receivable or used to reduce Debt), by the
Company or any Subsidiary since the end of such calendar quarter, including
those proceeds obtained in connection with the incurrence of such additional
Debt. (Section 2.4 of the Supplemental Indenture).
The Company and its Subsidiaries may not at any time own Total Unencumbered
Assets (as defined below) equal to or less than 150% of the aggregate
outstanding principal amount of the Unsecured Debt of the Company and its
Subsidiaries on a consolidated basis. (Section 2.4 of the Supplemental
Indenture).
In addition to the foregoing limitations on the incurrence of Debt, the
Company will not, and will not permit any Subsidiary to, incur any Debt if the
ratio of Consolidated Income Available for Debt Service (as defined below) to
the Annual Service Charge (as defined below) for the four consecutive fiscal
quarters most recently ended prior to the date on which such additional Debt is
to be incurred shall have been less than 1.5:1 on a pro forma basis after giving
effect thereto and to the application of the proceeds therefrom, and calculated
on the assumption that (i) such Debt and any other Debt incurred by the Company
and its Subsidiaries since the first day of such four-quarter period and the
application of the proceeds therefrom, including to refinance other Debt, had
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occurred at the beginning of such period; (ii) the repayment or retirement of
any other Debt by the Company and its Subsidiaries since the first day of such
four-quarter period had been repaid or retired at the beginning of such period
(except that, in making such computation, the amount of Debt under any revolving
credit facility shall be computed based upon the average daily balance of such
Debt during such period); (iii) in the case of Acquired Debt (as defined below)
or Debt incurred in connection with any acquisition since the first day of such
four-quarter period, the related acquisition had occurred as of the first day of
such period with the appropriate adjustments with respect to such acquisition
being included in such pro forma calculation; and (iv) in the case of any
acquisition or disposition by the Company or its Subsidiaries of any asset or
group of assets since the first day of such four-quarter period, whether by
merger, stock purchase or sale, or asset purchase or sale, such acquisition or
disposition or any related repayment of Debt had occurred as of the first day of
such period with the appropriate adjustments with respect to such acquisition or
disposition being included in such pro forma calculation (Section 2.4 of the
Supplemental Indenture).
As used herein, and in the Indenture:
"Acquired Debt" means Debt of a Person (i) existing at the time such
Person becomes a Subsidiary or (ii) assumed in connection with the
acquisition of assets from such Person, in each case, other than Debt
incurred in connection with, or in contemplation of, such Person becoming a
Subsidiary or such acquisition. Acquired Debt shall be deemed to be
incurred on the date of the related acquisition of assets from any Person
or the date the acquired Person becomes a Subsidiary.
"Annual Service Charge" for any period means the maximum amount which
is payable during such period for interest on, and the amortization during
such period of any original issue discount of, Debt of the Company and its
Subsidiaries and the amount of dividends which are payable during such
period in respect of any Disqualified Stock.
"Capital Stock" means, with respect to any Person, any capital stock
(including preferred stock), shares, interests, participations or other
ownership interests (however designated) of such Person and any rights
(other than debt securities convertible into or exchangeable for corporate
stock), warrants or options to purchase any thereof.
"Consolidated Income Available for Debt Service" for any period means
Earnings from Operations (as defined below) of the Company and its
Subsidiaries plus amounts which have been deducted, and minus amounts which
have been added, for the following (without duplication): (i) interest on
Debt of the Company and its Subsidiaries, (ii) provision for taxes of the
Company and its Subsidiaries based on income, (iii) amortization of debt
discount, (iv) provisions for gains and losses on properties and property
depreciation and amortization, (v) the effect of any noncash charge
resulting from a change in accounting principles in determining Earnings
from Operations for such period and (vi) amortization of deferred charges.
"Debt" of the Company or any Subsidiary means any indebtedness of the
Company or any Subsidiary, whether or not contingent, in respect of (i)
borrowed money or evidenced by bonds, notes, debentures or similar
instruments, (ii) indebtedness for borrowed money secured by any
Encumbrance existing on property owned by the Company or any Subsidiary,
(iii) the reimbursement obligations, contingent or otherwise, in connection
with any letters of credit actually issued or amounts representing the
balance deferred and unpaid of the purchase price of any property or
services, except any such balance that constitutes an accrued expense or
trade payable, or all conditional sale obligations or obligations under any
title retention agreement, (iv) the principal amount of all obligations of
the Company or any Subsidiary with respect to redemption, repayment or
other repurchase of any Disqualified Stock or (v) any lease of property by
the Company or any Subsidiary as lessee which is reflected on the Company's
Consolidated Balance Sheet as a capitalized lease in accordance with GAAP,
to the extent, in the case of items of indebtedness under (i) through (iii)
above, that any such items (other than
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letters of credit) would appear as a liability on the Company's
Consolidated Balance Sheet in accordance with GAAP, and also includes, to
the extent not otherwise included, any obligation by the Company or any
Subsidiary to be liable for, or to pay, as obligor, guarantor or otherwise
(other than for purposes of collection in the ordinary course of business),
Debt of another Person (other than the Company or any Subsidiary) (it being
understood that Debt shall be deemed to be incurred by the Company or any
Subsidiary whenever the Company or such Subsidiary shall create, assume,
guarantee or otherwise become liable in respect thereof).
"Disqualified Stock" means, with respect to any Person, any Capital
Stock of such Person which by the terms of such Capital Stock (or by the
terms of any security into which it is convertible or for which it is
exchangeable or exercisable), upon the happening of any event or otherwise
(i) matures or is mandatorily redeemable, pursuant to a sinking fund
obligation or otherwise (other than Capital Stock which is redeemable
solely in exchange for common stock), (ii) is convertible into or
exchangeable or exercisable for Debt or Disqualified Stock or (iii) is
redeemable at the option of the holder thereof, in whole or in part (other
than Capital Stock which is redeemable solely in exchange for common
stock), in each case on or prior to the Stated Maturity of the Notes.
"Earnings from Operations" for any period means net earnings excluding
gains and losses on sales of investments, extraordinary items, and property
valuation losses, net as reflected in the financial statements of the
Company and its Subsidiaries for such period determined on a consolidated
basis in accordance with GAAP.
"Encumbrance" means any mortgage, lien, charge, pledge or security
interest of any kind.
"Subsidiary" means, with respect to any Person, any corporation or
other entity of which a majority of (i) the voting power of the voting
equity securities or (ii) the outstanding equity interests of which are
owned, directly or indirectly, by such Person. For the purposes of this
definition, "voting equity securities" means equity securities having
voting power for the election of directors, whether at all times or only so
long as no senior class of security has such voting power by reason of any
contingency.
"Total Assets" as of any date means the sum of (i) the Undepreciated
Real Estate Assets and (ii) all other assets of the Company and its
Subsidiaries determined in accordance with GAAP (but excluding accounts
receivable and intangibles).
"Total Unencumbered Assets" means the sum of (i) those Undepreciated
Real Estate Assets not subject to an Encumbrance for borrowed money and
(ii) all other assets of the Company and its Subsidiaries not subject to an
Encumbrance for borrowed money determined in accordance with GAAP (but
excluding accounts receivable and intangibles).
"Undepreciated Real Estate Assets" as of any date means the cost
(original cost plus capital improvements) of real estate assets of the
Company and its Subsidiaries on such date, before depreciation and
amortization determined on a consolidated basis in accordance with GAAP.
"Unsecured Debt" means Debt which is not secured by any Encumbrance
upon any of the properties of the Company or any Subsidiary.
See "Description of Debt Securities -- Certain Covenants" in the
accompanying Prospectus for a description of additional covenants applicable to
the Company.
DISCHARGE, DEFEASANCE AND COVENANT DEFEASANCE
The provisions of Article 14 of the Indenture relating to defeasance and
covenant defeasance, which are described under "Description of Debt
Securities -- Discharge, Defeasance and Covenant Defeasance" in the accompanying
Prospectus, will apply to the Notes. Each of the covenants described under
"-- Certain Covenants" herein and "Description of Debt Securities -- Certain
Covenants" in the accompanying Prospectus will be subject to covenant
defeasance.
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BOOK-ENTRY SYSTEM
The Notes will be issued in the form of one or more fully registered global
securities ("Global Securities") which will be deposited with, or on behalf of
DTC, and registered in the name of DTC's nominee, Cede & Co. Except under the
circumstance described below, the Notes will not be issuable in definitive form.
Unless and until it is exchanged in whole or in part for the individual Notes
represented thereby, a Global Security may not be transferred except as a whole
by DTC to a nominee of DTC or by a nominee of DTC to DTC or another nominee of
DTC or by DTC or any nominee of DTC to a successor depository or any nominee of
such successor.
Upon the issuance of a Global Security, DTC or its nominee will credit on
its book-entry registration and transfer system the respective principal amounts
of the individual Notes represented by such Global Security to the accounts of
persons that have accounts with DTC ("Participants"). Such accounts shall be
designated by the underwriters, dealers or agents with respect to the Notes.
Ownership of beneficial interests in a Global Security will be limited to
Participants or persons that may hold interests through Participants. Ownership
of beneficial interests in such Global Security will be shown on, and the
transfer of that ownership will be effected only through, records maintained by
DTC or its nominee (with respect to beneficial interests of Participants) and
records of Participants (with respect to beneficial interests of persons who
hold through Participants). The laws of some states require that certain
purchasers of securities take physical delivery of such securities in definitive
form. Such limits and laws may impair the ability to own, pledge or transfer
beneficial interest in a Global Security.
So long as DTC or its nominee is the registered owner of such Global
Security, DTC or its nominee, as the case may be, will be considered the sole
owner or holder of the Notes represented by such Global Security for all
purposes under the Indenture and the beneficial owners of the Notes will be
entitled only to those rights and benefits afforded to them in accordance with
DTC's regular operating procedures. Except as provided below, owners of
beneficial interest in a Global Security will not be entitled to have any of the
individual Notes registered in their names, will not receive or be entitled to
receive physical delivery of any such notes in definitive form and will not be
considered the owners or holders thereof under the Indenture.
Payments of principal of and any interest on, individual Notes represented
by a Global Security registered in the name of DTC or its nominee will be made
to DTC or its nominee, as the case may be, as the registered owner of the Global
Security representing such Notes. None of the Company, the Trustee, any Paying
Agent or the Security Registrar will have any responsibility or liability for
any aspect of the records relating to or payments made on account of beneficial
ownership interests in the Global Security for such Notes or for maintaining,
supervising or reviewing any records relating to such beneficial ownership
interests.
The Company expects that DTC or its nominee, upon receipt of any payment of
principal or interest in respect of a permanent Global Security representing any
Notes, immediately will credit Participants' accounts with payments in amounts
proportionate to their respective beneficial interests in the principal amount
of such Global Security as shown on the records of DTC or its nominee. The
Company also expects that payments by Participants to owners of beneficial
interests in such Global Security held through such Participants will be
governed by standing instructions and customary practices, as is the case with
securities held for the account of customers in bearer form or registered in
"street name." Such payments will be the responsibility of such Participants.
If DTC is at any time unwilling, unable or ineligible to continue as
depository and a successor depository is not appointed by the Company within 90
days, the Company will issue individual Notes in exchange for the Global
Security or Securities representing the Notes. In addition, the Company may, at
any time and in its sole discretion, determine not to have any Notes represented
by one or more Global Securities and, in such event, will issue individual Notes
in exchange for the Global Security or Securities representing the Notes.
Individual Notes so issued will be issued in
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denominations, unless otherwise specified by the Company, of $1,000 and integral
multiples thereof.
DTC has advised the Company of the following information regarding DTC: DTC
is a limited-purpose trust company organized under the New York Banking Law, a
"banking organization" within the meaning of the New York Banking Law, a member
of the Federal Reserve System, a "clearing corporation" within the meaning of
the New York Uniform Commercial Code, and a "clearing agency" registered
pursuant to the provisions of Section 17A of the Exchange Act. DTC holds
securities that its Participants deposit with DTC. DTC also facilitates the
settlement among its Participants of securities transactions, such as transfers
and pledges, in deposited securities through electronic computerized book-entry
changes in its Participants' accounts, thereby eliminating the need for physical
movement of securities certificates. Direct Participants of DTC include
securities brokers and dealers (including the Underwriters), banks, trust
companies, clearing corporations, and certain other organizations. DTC is owned
by a number of its direct Participants and by the New York Stock Exchange, Inc.,
the American Stock Exchange, Inc. and the National Association of Securities
Dealers, Inc. Access to the DTC system is also available to others such as
securities brokers and dealers, banks and trust companies that clear through or
maintain a custodial relationship with a direct Participant of DTC, either
directly or indirectly. The rules applicable to DTC and its participants are on
file with the Commission.
SAME-DAY SETTLEMENT AND PAYMENT
Settlement for the Notes will be made by the Underwriter in immediately
available funds. All payments of principal and interest in respect of the Notes
will be made by the Company in immediately available funds.
Secondary trading in long-term notes and debentures of corporate issuers is
generally settled in clearing house or next-day funds. In contrast, the Notes
will trade in DTC's Same-Day Funds Settlement System until maturity or until the
Notes are issued in certificated form, and secondary market trading activity in
the Notes will therefore be required by DTC to settle in immediately available
funds. No assurance can be given as to the effect, if any, of settlement in
immediately available funds on trading activity in the Notes.
NO PERSONAL LIABILITY
No past, present or future director, officer or shareholder of the Company
or any successor thereof shall have any liability for any obligation, covenant
or agreement of the Company contained under the Notes or the Indenture. Each
Holder of Notes by accepting such Notes waives and releases all such liability.
The waiver and release are part of the consideration for the issue of the Notes.
(Section 111).
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CERTAIN FEDERAL INCOME TAX CONSIDERATIONS
TO THE COMPANY OF ITS REIT ELECTION
The following summary of certain federal income tax considerations to the
Company is based on current law, is for general information only, and is not tax
advice. The tax treatment of a Holder of any Notes depends upon the terms of the
Notes, as well as such Holder's particular situation, and this discussion does
not attempt to address any aspects of federal income taxation relating to
Holders of Notes.
EACH INVESTOR IS ADVISED TO CONSULT SUCH INVESTOR'S OWN TAX ADVISOR
REGARDING THE TAX CONSEQUENCES TO SUCH INVESTOR OF THE ACQUISITION, OWNERSHIP
AND SALE OF THE NOTES, INCLUDING THE FEDERAL, STATE, LOCAL, FOREIGN AND OTHER
TAX CONSEQUENCES OF SUCH ACQUISITION, OWNERSHIP AND SALE AND OF POTENTIAL
CHANGES IN APPLICABLE TAX LAWS.
The Company has elected to be taxed as a REIT under Sections 856 through
860 of the Internal Revenue Code of 1986, as amended (the "Code"). The Company
believes that it was organized and has operated in such a manner as to qualify
for taxation as a REIT under the Code, and the Company intends to continue to
operate in such a manner, but no assurance can be given that it will operate in
a manner so as to qualify or remain qualified.
The provisions of the Code pertaining to REITs are highly technical and
complex. The following is a brief and general summary of certain provisions that
currently govern the federal income tax treatment of the Company. For the
particular provisions that govern the federal income tax treatment of the
Company, reference is made to Sections 856 through 860 of the Code and the
Income Tax Regulations promulgated thereunder. The following summary is
qualified in its entirety by such reference.
If the Company qualifies for tax treatment as a REIT, it will generally not
be subject to federal income taxation on its net income to the extent currently
distributed to its shareholders. This substantially eliminates the "double
taxation" (i.e., taxation at both the corporate and shareholder levels) that
typically results from the use of corporate investment vehicles.
To qualify as a REIT under the Code for a taxable year, the Company must
meet certain organization and operational requirements, which generally require
it to be an investor in real estate. The Company also must satisfy certain
ownership restrictions that limit concentration of ownership of capital stock
directly or indirectly in the hands of a few individuals. So long as the Company
qualifies for taxation as a REIT and distributes at least 95% of its REIT
taxable income (computed without regard to net capital gains or the
dividends-paid deduction) for its taxable year to its shareholders annually, the
Company itself will not be subject to federal income tax on that portion of such
income distributed to shareholders. The Company will be taxed at regular
corporate rates on all its REIT taxable income not distributed to shareholders.
The Company's policy is to distribute at least 95% of its taxable income. REITs
may also incur taxes on certain categories of income (such as undistributed
capital gain income, certain income from foreclosure property, income from
prohibited transactions, i.e., sales or other dispositions of property held
primarily for sale to customers in the ordinary course of business, and income
with respect to certain assets acquired from a corporation subject to tax in a
transaction where the Company succeeds to such other corporation's basis in the
asset), the alternative minimum tax, and taxes for certain other activities.
They may also be subject to federal excise tax to the extent distributions do
not satisfy certain requirements, as well as being subject to certain state,
local and other taxes.
Failure of the Company to qualify during any taxable year as a REIT, unless
certain relief provisions were available, will result in the Company being
subject to tax (including any applicable alternative minimum tax) on its taxable
income at regular corporate rates, which could have a material adverse effect
upon Holders of the Company's Notes. If disqualified for taxation as a REIT for
a taxable year, the Company would also be disqualified for taxation as a REIT
for the next four
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taxable years, unless the failure was due to reasonable cause and not willful
neglect. In order to elect again to be taxed as a REIT, the Company would be
required to distribute all of its earnings and profits accumulated in any
non-REIT taxable year. Further, the Company might be subject to taxation on any
unrealized gain inherent in its assets at the time of such election. If
disqualified, the Company would not be able to deduct the dividends paid. Should
the failure to qualify be determined to have occurred retroactively in an
earlier tax year of the Company, substantial federal income tax liability on the
Company attributable to such nonqualifying tax years could be imposed. It is not
possible to state whether in all circumstances the Company would be entitled to
statutory relief. For example, in the event that the Company fails to meet
certain income tests of the tax law, it may nonetheless retain its qualification
as a REIT if it pays a 100% tax based upon the amount by which it failed to meet
the income tests so long as its failure was due to reasonable cause and not
willful neglect. Any such liabilities could result in the Company being unable
to pay principal and interest on the Notes and could result in the Company being
unable to pay dividends sufficient to maintain its REIT status.
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UNDERWRITING
Subject to the terms and conditions of the Underwriting Agreement, the
Underwriter, Alex. Brown & Sons Incorporated, has agreed to purchase from the
Company the entire aggregate principal amount of the Notes. The Underwriting
Agreement provides that the obligations of the Underwriter are subject to
certain conditions precedent, and that the Underwriter will purchase all Notes
offered hereby if any of such Notes are purchased.
The Company has been advised that the Underwriter proposes to offer the
Notes to the public at the initial public offering price set forth on the cover
page of this Prospectus Supplement and to certain dealers at such price less a
concession not in excess of .375% of the principal amount of the Notes. The
Underwriter may allow, and such dealers may re-allow, a concession not in excess
of .25% of the principal amount of the Notes to certain other dealers. After the
initial offering of the Notes, the offering price and other selling terms may
from time to time be varied by the Underwriter.
The Notes are a new issue of securities with no established trading market.
The Company has been advised by the Underwriter that the Underwriter intends to
make a market in the Notes but is not obligated to do so and may discontinue
market making at any time without notice. No assurance can be given as to the
liquidity of the trading market for the Notes.
The Company has agreed to indemnify the Underwriter against certain civil
liabilities, including liabilities under the Securities Act of 1933, as amended,
or to contribute to payments the Underwriter may be required to make in respect
thereof.
In the ordinary course of its business, the Underwriter has engaged, and
may in the future engage, in investment banking transactions with the Company.
EXPERTS
The audited financial statements of the Company incorporated by reference
in the accompanying Prospectus and elsewhere in the registration statement of
which this Prospectus Supplement is a part, have been audited by Arthur Andersen
LLP, independent public accountants, as indicated in their reports with respect
thereto, and are incorporated herein in reliance upon the authority of said firm
as experts in giving said reports.
LEGAL OPINIONS
The validity of the Notes offered hereby and certain other legal matters
will be passed upon for the Company by Alston & Bird, Atlanta, Georgia. Certain
legal matters will be passed upon for the Underwriter by Skadden, Arps, Slate,
Meagher & Flom, New York, New York. Skadden, Arps, Slate, Meagher & Flom will
rely upon Alston & Bird with respect to all matters of Georgia law.
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<PAGE> 41
PROSPECTUS
IRT PROPERTY COMPANY
$200,000,000
DEBT SECURITIES AND COMMON STOCK
---------------------
IRT Property Company (the "Company") may from time to time issue, in one or
more series, its (i) unsecured senior or subordinated debt securities (the "Debt
Securities") and (ii) shares of Common Stock, $1 par value ("Common Stock"),
having an aggregate initial public offering price not to exceed $200,000,000 (or
its equivalent in any other currency or composite currency based on the exchange
rate at the time of sale) in amounts, at prices and on terms to be determined at
the time of offering. The Debt Securities and Common Stock (collectively, the
"Securities") may be offered, separately or together, in separate series, in
amounts, at prices and on terms to be set forth in a supplement or supplements
to this Prospectus ("Prospectus Supplement").
The Debt Securities will be direct unsecured obligations of the Company and
may be either senior debt securities ("Senior Securities") or subordinated debt
securities ("Subordinated Securities"). The Senior Securities will rank equally
with all other unsecured and unsubordinated indebtedness of the Company. The
Subordinated Securities will be subordinated to all existing and future Senior
Debt of the Company, as defined. See "Description of Debt Securities."
The specific terms of the Securities in respect of which this Prospectus is
being delivered will be set forth in the applicable Prospectus Supplement and
will include, where applicable: (i) in the case of Debt Securities, the specific
title, aggregate principal amount, currency, form (which may be registered or
bearer, or certificated or global), authorized denominations, maturity, rate (or
manner of calculation thereof) and time of payment of interest, terms for
redemption at the option of the Company or repayment at the option of the
Holder, terms for sinking fund payments, terms for conversion into Common Stock,
additional covenants and any initial public offering price; and (ii) in the case
of Common Stock, any initial public offering price. In addition, such specific
terms may include limitations on direct or beneficial ownership and restrictions
on transfer of the Securities, in each case including limitations as may be
appropriate to preserve the status of the Company as a real estate investment
trust ("REIT") for federal income tax purposes.
The applicable Prospectus Supplement will also contain information, where
applicable, about certain United States federal income tax considerations
relating to, and any listing on a securities exchange of, the Securities covered
by such Prospectus Supplement.
The Securities may be offered directly by the Company, through agents
designated from time to time by the Company, or to or through underwriters or
dealers. If any agents or underwriters are involved in the sale of any of the
Securities, their names, and any applicable purchase price, fee, commission or
discount arrangement between or among them, will be set forth, or will be
calculable from the information set forth, in the applicable Prospectus
Supplement. See "Plan of Distribution." No Securities may be sold without
delivery of the applicable Prospectus Supplement or a term sheet describing the
method and terms of the offering of such series of Securities.
---------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
---------------------
THE ATTORNEY GENERAL OF THE STATE OF NEW YORK HAS NOT PASSED ON OR
ENDORSED THE MERITS OF THIS OFFERING. ANY REPRESENTATION TO
THE CONTRARY IS UNLAWFUL.
---------------------
THE DATE OF THIS PROSPECTUS IS NOVEMBER 9, 1995.
<PAGE> 42
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and, in accordance
therewith, files reports, proxy statements and other information with the
Securities and Exchange Commission (the "Commission"). Such reports, proxy
statements and other information can be inspected and copied at the Public
Reference Section maintained by the Commission at Room 1024, 450 Fifth Street,
N.W., Washington, D.C. 20549; Chicago Regional Office, 500 West Madison Street,
Suite 1400, Chicago, Illinois 60661; and New York Regional Office, 7 World Trade
Center, New York, New York 10048. In addition, the Common Stock is listed on the
New York Stock Exchange, Inc. ("NYSE") and similar information about the Company
can be inspected and copied at prescribed rates at the offices of the NYSE, 20
Broad Street, New York, New York 10005.
The Company has filed with the Commission a registration statement on Form
S-3 (the "Registration Statement") under the Securities Act of 1933, as amended
(the "Securities Act"), with respect to the Securities being offered hereby. For
further information with respect to the Company and the Securities offered
hereby, reference is made to the Registration Statement and exhibits thereto.
Statements contained in this Prospectus as to the contents of any contract or
other documents are not necessarily complete, and in each instance, reference is
made to the copy of such contract or documents filed as an exhibit to the
Registration Statement, each such statement being qualified in all respects by
such reference.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed by the Company with the Commission (File No.
1-7859) are incorporated in this Prospectus by reference and are made a part
hereof:
1. The Company's Annual Report on Form 10-K for the year ended
December 31, 1994, as amended and restated under Form 10-K/A Amendment No.
1 filed September 28, 1995.
2. The Company's Quarterly Reports on Form 10-Q for the quarters ended
March 31, 1995 and June 30, 1995.
3. The Company's Current Report on Form 8-K filed January 5, 1995
(date of event reported December 21, 1994), as amended by Form 8-K/A
Amendment No. 1 filed January 20, 1995 and Form 8-K/A Amendment No. 2 filed
March 1, 1995.
4. The description of the Company Common Stock contained in the
Company's prospectus dated August 5, 1991 which constitutes a part of
Registration Statement No. 33-41301 filed with the Commission.
Each document filed subsequent to the date of this Prospectus pursuant to
Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act and prior to the
termination of the offering of all Securities to which this Prospectus relates
shall be deemed to be incorporated by reference in this Prospectus and shall be
a part hereof from the date of filing of such document.
Any statement contained in a document incorporated or deemed to be
incorporated by reference herein shall be deemed to be modified or superseded
for purposes of this Prospectus to the extent that a statement herein, in any
accompanying Prospectus Supplement relating to a specific offering of Securities
or in any other subsequently filed document that is also incorporated or deemed
to be incorporated by reference herein, modifies or supersedes such statement.
Any such statement so modified or superseded shall not be deemed, except as so
modified or superseded, to constitute a part of this Prospectus or any
accompanying Prospectus Supplement. Subject to the foregoing, all information
appearing in this Prospectus and each accompanying Prospectus Supplement is
qualified in its entirety by the information appearing in the documents
incorporated by reference.
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------------------
Upon written or oral request of any person to whom a Prospectus is
delivered, the Company will provide, without charge, a copy of the documents
which have been incorporated by reference in this Prospectus. Requests for such
documents should be directed to Lee A. Harris, Senior Vice President and
Secretary, IRT Property Company, 200 Galleria Parkway, Suite 1400, Atlanta,
Georgia 30339, telephone (770) 955-4406.
THE COMPANY
The Company, founded in 1969, is a self-administered and self-managed
equity REIT which invests primarily in neighborhood and community shopping
centers which are located in the Southeastern United States and are anchored by
supermarkets, drug stores and/or discount variety stores. As of June 30, 1995,
the Company owned 83 shopping centers comprising approximately 8.7 million
square feet of leasable space.
The Company conducts its property management and leasing activities
internally through its offices in Atlanta, Charlotte, Orlando, Fort Lauderdale
and New Orleans. The Company believes that this approach promotes efficiencies
in property maintenance, leasing, cost control and the identification of
expansion and redevelopment opportunities. The Company is and has been an active
redeveloper of properties and believes it can add significantly to operating
results and values by a continued emphasis on property enhancement.
The Company conducts its operations in order to qualify as a REIT under the
Internal Revenue Code of 1986, as amended (the "Code"). The Company's principal
executive offices are located at 200 Galleria Parkway, Suite 1400, Atlanta,
Georgia 30339, and its telephone number is (770) 955-4406.
USE OF PROCEEDS
Unless otherwise specified in the applicable Prospectus Supplement for any
offering of Securities, the Company intends to use the net proceeds from the
sale of Securities offered by the Company to repay debt (including repayments of
amounts drawn on lines of credit), improve, expand or redevelop its properties,
acquire or develop additional properties and for working capital. Pending use
for the foregoing purposes, such proceeds may be invested in short-term,
interest-bearing time or demand deposits with financial institutions, cash items
or qualified government securities.
CERTAIN RATIOS
The following table sets forth the Company's consolidated ratios of
earnings to fixed charges for the periods shown:
<TABLE>
<CAPTION>
SIX MONTHS
YEARS ENDED ENDED
DECEMBER 31, JUNE 30,
--------------------------------------------- ---------------
1990 1991 1992 1993 1994 1994 1995
----- ----- ----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C> <C> <C>
Ratio of Earnings to Fixed Charges................. 2.07x 1.78x 1.99x 2.20x 1.58x 1.30x 1.86x
</TABLE>
The ratios of earnings to fixed charges were computed by dividing earnings
by fixed charges. For these purposes, earnings consist of income before
extraordinary items plus fixed charges. Fixed charges consist of interest
expense (including interest costs capitalized), amortization of debt costs and
the portion of rent expense representing an interest factor.
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DESCRIPTION OF DEBT SECURITIES
GENERAL
The Senior Securities are to be issued under an indenture (the "Senior
Indenture"), to be entered into between the Company and SunTrust Bank, Atlanta,
as Trustee, and the Subordinated Securities are to be issued under an indenture
(the "Subordinated Indenture"), also to be entered into between the Company and
SunTrust Bank, Atlanta, as Trustee. The term "Trustee" as used herein shall
refer to SunTrust Bank, Atlanta, or such other bank as the Company may appoint
as trustee pursuant to the terms of the applicable Indenture, in its or their
capacity as Trustee for the Senior Securities or the Subordinated Securities, as
appropriate. The forms of the Senior Indenture and the Subordinated Indenture
(being sometimes referred to herein collectively as the "Indentures" and
individually as an "Indenture") are filed as exhibits to the Registration
Statement. The Indentures are subject to and governed by the Trust Indenture Act
of 1939, as amended (the "TIA"), and may be supplemented from time to time
following execution. The statements made under this heading relating to the Debt
Securities and the Indentures are summaries of the provisions thereof and do not
purport to be complete and are qualified in their entirety by reference to the
Indentures and such Debt Securities. All section references below are to
sections of the Indentures and capitalized terms used but not defined herein
shall have the respective meanings set forth in the Indentures.
As of June 30, 1995, the Company had $84,905,000 aggregate principal amount
of 7.3% Convertible Subordinated Debentures outstanding due in 2003. SunTrust
Bank, Atlanta serves as the trustee under the indenture pursuant to which such
convertible subordinated debentures were issued.
TERMS
The Debt Securities will be direct, unsecured obligations of the Company.
The indebtedness represented by the Senior Securities will rank equally with all
other unsecured and unsubordinated indebtedness of the Company. The indebtedness
represented by the Subordinated Securities will be subordinated in right of
payment to the prior payment in full of the Senior Debt of the Company as
described under "Subordination."
Each Indenture provides that the Debt Securities may be issued without
limit as to aggregate principal amount, in one or more series, in each case as
established from time to time in, or pursuant to authority granted by, a
resolution of the Board of Directors of the Company or as established in one or
more indentures supplemental to such Indenture. Debt Securities may be issued
with terms different from those of Debt Securities previously issued; all Debt
Securities of one series need not be issued at the same time and, unless
otherwise provided, a series may be reopened, without the consent of the Holders
of the Debt Securities of such series, for issuances of additional Debt
Securities of such series (Section 301 of each Indenture).
Each Indenture provides that there may be more than one Trustee thereunder,
each with respect to one or more series of Debt Securities. Any Trustee under an
Indenture may resign or be removed with respect to one or more series of Debt
Securities, and a successor Trustee may be appointed to act with respect to such
series (Section 608 of each Indenture). In the event that two or more persons
are acting as Trustee with respect to different series of Debt Securities, each
such Trustee shall be a Trustee of a trust under the applicable Indenture
separate and apart from the trust administered by any other Trustee (Section 101
and Section 609 of each Indenture), and, except as otherwise indicated herein,
any action described herein to be taken by each Trustee may be taken by each
such Trustee with respect to, and only with respect to, the one or more series
of Debt Securities for which it is Trustee under the applicable Indenture.
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<PAGE> 45
Reference is made to the applicable Prospectus Supplement relating to the
series of Debt Securities being offered for the specific terms thereof,
including, but not limited to:
(1) the title of such Debt Securities and whether such Debt Securities
are Senior Securities or Subordinated Securities;
(2) the aggregate principal amount of such Debt Securities and any
limit on such aggregate principal amount;
(3) the percentage of the principal amount at which such Debt
Securities will be issued and, if other than the principal amount thereof,
the portion of the principal amount thereof payable upon declaration of
acceleration of the maturity thereof, or (if applicable) the portion of the
principal amount of such Debt Securities which is convertible into Capital
Stock (as defined in the Indentures) or the method by which any such
portion shall be determined;
(4) if convertible, any applicable limitations on the ownership or
transferability of the Common Stock into which such Debt Securities are
convertible including such limitations in connection with the preservation
of the Company's status as a REIT;
(5) the date or dates, or the method for determining such date or
dates, on which the principal of such Debt Securities will be payable and
the amount of principal payable thereon;
(6) the rate or rates (which may be fixed or variable), or the method
by which such rate or rates shall be determined, at which such Debt
Securities will bear interest, if any;
(7) the date or dates, or the method for determining such date or
dates, from which any such interest will accrue, the Interest Payment Dates
on which any such interest will be payable, the Regular Record Dates if
any, for such interest payable on any Registered Security on any Interest
Payment Dates, or the method by which such dates shall be determined, the
Persons to whom such interest shall be payable, and the basis upon which
interest shall be calculated if other than that of a 360-day year
consisting of twelve 30-day months;
(8) the place or places where the principal of (and premium or
Make-Whole Amount, if any) interest, if any, on and Additional Amounts, if
any, payable in respect of such Debt Securities will be payable, where such
Debt Securities may be surrendered for conversion or registration of
transfer or exchange and where notices or demands to or upon the Company in
respect of such Debt Securities and the applicable Indenture may be served;
(9) the period or periods within which, the price or prices (including
premium or Make-Whole Amount, if any) at which, the currency or currencies,
currency unit or units or composite currency or currencies in which and the
other terms and conditions upon which such Debt Securities may be redeemed,
as a whole or in part, at the option of the Company if the Company is to
have such an option;
(10) the obligation, if any, of the Company to redeem, repay or
purchase such Debt Securities pursuant to any sinking fund or analogous
provision or at the option of a Holder thereof, and the period or periods
within which, the date or dates on which, the price or prices at which, the
currency or currencies, currency unit or units or composite currency or
currencies in which and the other terms and conditions upon which such Debt
Securities will be redeemed, repaid or purchased, as a whole or in part,
pursuant to such obligation;
(11) if other than United States dollars, the currency or currencies
in which such Debt Securities are denominated and payable, which may be a
foreign currency or units of two or more foreign currencies or a composite
currency or currencies, and the terms and conditions relating thereto;
(12) whether the amount of payment of principal of (and premium or
Make-Whole Amount, if any) or interest, if any, on such Debt Securities may
be determined with reference to an index, formula or other method (which
index, formula or method may, but need not be,
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<PAGE> 46
based on a currency, currencies, currency unit or units, composite currency
or currencies, commodities, equity indices or other indices) and the manner
in which such amounts shall be determined;
(13) whether the principal of (and premium or Make-Whole Amount, if
any) or interest or Additional Amounts, if any, on such Debt Securities are
to be payable, at the election of the Company or a Holder thereof, in a
currency or currencies, currency unit or units or composite currency or
currencies other than that in which such Debt Securities are denominated or
stated to be payable, the period or periods within which, and the terms and
conditions upon which, such election may be made, and the time and manner
of, and identity of the exchange rate agent with responsibility for,
determining the exchange rate between the currency or currencies, currency
unit or units or composite currency or currencies in which such Debt
Securities are denominated or stated to be payable and the currency or
currencies, currency unit or units or composite currency or currencies in
which such Debt Securities are to be payable;
(14) provisions, if any, granting special rights to the Holders of
such Debt Securities upon the occurrence of such events as may be
specified;
(15) any addition to, modifications of or deletions from the terms of
such Debt Securities with respect to the Events of Default or covenants set
forth in the applicable Indenture;
(16) whether such Debt Securities will be issued in certificated or
book-entry form and terms and conditions relating thereto;
(17) whether such Debt Securities will be in registered or bearer form
and terms and conditions relating thereto, and if in registered form, the
denominations thereof if other than $1,000 and any integral multiple
thereof and, if in bearer form, the denominations thereof if other than
$5,000;
(18) the applicability, if any, of the defeasance and covenant
defeasance provisions of the applicable Indenture;
(19) the terms, if any, upon which such Debt Securities may be
convertible into Capital Stock of the Company and the terms and conditions
upon which such conversion will be effected, including, without limitation,
the initial conversion price or rate and the conversion period;
(20) whether and under what circumstances the Company will pay
Additional Amounts, if any, as contemplated in the applicable Indenture on
such Debt Securities to any Holder who is not a United States person in
respect of any tax, assessment or governmental charge and, if so, whether
the Company will have the option to redeem such Debt Securities in lieu of
paying such Additional Amounts (and the terms of any such option); and
(21) any other terms of such Debt Securities not inconsistent with the
provisions of the applicable Indenture (Section 301 of each Indenture).
The Debt Securities may provide for less than the entire principal amount
thereof to be payable upon declaration of acceleration of the maturity thereof
("Original Issue Discount Securities") (Section 502 of each Indenture). Any
special U.S. federal income tax, accounting and other considerations applicable
to Original Issue Discount Securities will be described in the applicable
Prospectus Supplement.
DENOMINATIONS, INTEREST, REGISTRATION AND TRANSFER
Unless otherwise described in the applicable Prospectus Supplement, the
Debt Securities of any series issued in registered form will be issuable in
denominations of $1,000 and integral multiples thereof. Unless otherwise
described in the applicable Prospectus Supplement, the Debt Securities of
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<PAGE> 47
any series issued in bearer form will be issuable in denominations of $5,000
(Section 302 of each Indenture).
Unless otherwise specified in the applicable Prospectus Supplement, the
principal of (and applicable premium or Make-Whole Amount, if any) and interest,
if any, on any series of Debt Securities will be payable at the corporate trust
office of the Trustee, initially located at 58 Edgewood Ave., Room 400, Atlanta,
Georgia 30303 in the case of each of the Senior Securities and the Subordinated
Securities, provided that, at the option of the Company, payment of interest may
be made by check mailed to the address of the Person entitled thereto as it
appears in the Security Register for such series or by wire transfer of funds to
such Person at an account maintained within the United States (Sections 301,
305, 307 and 1002 of each Indenture).
Any interest not punctually paid or duly provided for on any Interest
Payment Date with respect to a Debt Security ("Defaulted Interest") will
forthwith cease to be payable to the Holder on the applicable Regular Record
Date and may either be paid to the person in whose name such Debt Security is
registered at the close of business on a special record date (the "Special
Record Date") for the payment of such Defaulted Interest to be fixed by the
applicable Trustee, notice whereof shall be mailed to each Holder of such Debt
Security not less than 10 days prior to such Special Record Date, or may be paid
at any time in any other lawful manner, all as more completely described in the
applicable Indenture (Section 307 of each Indenture).
Subject to certain limitations imposed upon Debt Securities issued in
book-entry form, the Debt Securities of any series will be exchangeable for
other Debt Securities of the same series and of a like aggregate principal
amount and tenor of different authorized denominations upon surrender of such
Debt Securities at the corporate trust office of the applicable Trustee referred
to above. In addition, subject to certain limitations imposed upon Debt
Securities issued in book-entry form, the Debt Securities of any series may be
surrendered for conversion or registration of transfer or exchange at the
corporate trust office of the applicable Trustee referred to above. Every Debt
Security surrendered for conversion, registration of transfer or exchange shall
be duly endorsed or accompanied by a written instrument of transfer. No service
charge will be made for any registration of transfer or exchange of any Debt
Securities, but the Company may require payment of a sum sufficient to cover any
tax or other governmental charge payable in connection therewith (Section 305 of
each Indenture). If the applicable Prospectus Supplement refers to any transfer
agent (in addition to the applicable Trustee) initially designated by the
Company with respect to any series of Debt Securities, the Company may at any
time rescind the designation of any such transfer agent or approve a change in
the location through which any such transfer agent acts, except that the Company
will be required to maintain a transfer agent in each Place of Payment for such
series. The Company may at any time designate additional transfer agents with
respect to any series of Debt Securities (Section 1002 of each Indenture).
Neither the Company nor any Trustee shall be required to: (i) issue,
register the transfer of or exchange Debt Securities of any series during a
period beginning at the opening of business 15 days before any selection of Debt
Securities of that series to be redeemed and ending at the close of business on
the day of mailing or publication of the relevant notice of redemption; (ii)
register the transfer of or exchange any Debt Security, or portion thereof,
called for redemption, except the unredeemed portion of any Debt Security being
redeemed in part; (iii) exchange any Bearer Security selected for redemption,
except that such a Bearer Security may be exchanged for a Registered Security of
that series and like tenor, provided that such Registered Security shall be
simultaneously surrendered for redemption; or (iv) issue, register the transfer
of or exchange any Debt Security that has been surrendered for repayment at the
option of the Holder, except the portion, if any, of such Debt Security not to
be so repaid (Section 305 of each Indenture).
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<PAGE> 48
MERGER, CONSOLIDATION OR SALE
The Company may consolidate with, or sell, lease or convey all or
substantially all of its assets to, or merge with or into, any other corporation
or trust or entity provided that: (i) either the Company shall be the continuing
entity, or the successor entity (if other than the Company) formed by or
resulting from any such consolidation or merger or which shall have received the
transfer of such assets shall expressly assume payment of the principal of (and
premium or Make-Whole Amount, if any) and interest (including any Additional
Amounts), if any, on all of the Debt Securities and the due and punctual
performance and observance of all of the covenants and conditions contained in
each Indenture; (ii) immediately after giving effect to such transaction and
treating any indebtedness that becomes an obligation of the Company or any
Subsidiary as a result thereof as having been incurred by the Company or such
Subsidiary at the time of such transaction, no Event of Default under the
Indenture, and no event which, after notice or the lapse of time, or both, would
become such an Event of Default, shall have occurred and be continuing; and
(iii) an officers' certificate and legal opinion covering such conditions shall
be delivered to the Trustee (Sections 801 and 803 of each Indenture).
CERTAIN COVENANTS
Existence. Except as permitted under "Merger, Consolidation or Sale," the
Company will do or cause to be done all things necessary to preserve and keep in
full force and effect its legal existence, rights (charter and statutory) and
franchises; provided, however, that the Company shall not be required to
preserve any right or franchise if it determines that the preservation thereof
is no longer desirable in the conduct of its business (Section 1005 of each
Indenture).
Maintenance of Properties. The Company will cause all of its material
properties used or useful in the conduct of its business or the business of any
Subsidiary to be maintained and kept in good condition, repair and working order
and supplied with all necessary equipment and will cause to be made all
necessary repairs, renewals, replacements, betterments and improvements thereof,
all as in the judgment of the Company may be necessary so that the business
carried on in connection therewith may be properly and advantageously conducted
at all times; provided, however, that the Company and its Subsidiaries shall not
be prevented from selling or otherwise disposing of their properties in the
ordinary course of business (Section 1006 of each Indenture).
Insurance. The Company will keep, and will cause each of its Subsidiaries
to keep, all of its insurable properties insured against loss or damage in an
amount at least equal to their then full insurable value with financially sound
and acceptable insurance companies (Section 1007 of each Indenture).
Payment of Taxes and Other Claims. The Company will pay or discharge, or
cause to be paid or discharged, before the same shall become delinquent, (i) all
taxes, assessments and governmental charges levied or imposed upon it or any
Subsidiary or upon the income, profits or property of the Company or any
Subsidiary and (ii) all lawful claims for labor, materials and supplies which,
if unpaid, might by law become a lien upon the property of the Company or any
Subsidiary; provided, however, that the Company shall not be required to pay or
discharge or cause to be paid or discharged any such tax, assessment, charge or
claim whose amount, applicability or validity is being contested in good faith
by appropriate proceedings (Section 1008 of each Indenture).
Provision of Financial Information. Whether or not the Company is subject
to Section 13 or 15(d) of the Exchange Act, the Company will, within 15 days of
each of the respective dates by which the Company would have been required to
file annual reports, quarterly reports and other documents with the Commission
pursuant to such Section 13 and 15(d) if the Company were so subject, (i)
transmit by mail to all Holders of Debt Securities, as their names and addresses
appear in the Security Register, without cost to such Holders, copies of the
annual reports and quarterly reports that the Company would have been required
to file with the Commission pursuant to Section 13 or 15(d) of the Exchange Act
if the Company were subject to such Sections, (ii) file with
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<PAGE> 49
the applicable Trustee copies of the annual reports, quarterly reports and other
documents that the Company would have been required to file with the Commission
pursuant to Section 13 or 15(d) of the Exchange Act if the Company were subject
to such Sections and (iii) promptly upon written request and payment of the
reasonable cost of duplication and delivery, supply copies of such documents to
any prospective Holder (Section 1009 of each Indenture).
Waiver of Certain Covenants. The Company may omit to comply with any term,
provision or condition of the foregoing covenants, and with any other term,
provision or condition with respect to the Debt Securities of any series
specified in Section 301 of the Indentures (except any such term, provision or
condition which could not be amended without the consent of all Holders of Debt
Securities of such series), if before or after the time for such compliance the
Holders of at least a majority in principal amount of all outstanding Debt
Securities of such series, by Act of such Holders, either waive such compliance
in such instance or generally waive compliance with such covenant or condition
except to the extent so expressly waived, and until such waiver shall become
effective, the obligations of the Company and the duties of the Trustee in
respect of any such term, provision or condition shall remain in full force and
effect (Section 1012 of each Indenture).
Additional Covenants. Any additional covenants with respect to any series
of Debt Securities will be set forth in the Prospectus Supplement relating
thereto.
EVENTS OF DEFAULT, NOTICE AND WAIVER
Each Indenture provides that the following events are "Events of Default"
with respect to any series of Debt Securities issued thereunder: (i) default for
30 days in the payment of any installment of interest or Additional Amounts, if
any, payable on any Debt Security of such series; (ii) default in the payment of
the principal of (or premium or Make-Whole Amount, if any, on) any Debt Security
of such series at its Maturity; (iii) default in making any sinking fund payment
as required for any Debt Security of such series; (iv) default in the
performance or breach of any other covenant of the Company contained in the
Indenture (other than a covenant added to the Indenture solely for the benefit
of a series of Debt Securities issued thereunder other than such series),
continued for 60 days after written notice as provided in the applicable
Indenture; (v) default under a bond, debenture, note or other evidence of
indebtedness for money borrowed by the Company (or by any Subsidiary, the
repayment of which the Company has guaranteed or for which the Company is
directly responsible or liable as obligor or guarantor) having a principal
amount outstanding in excess of $10,000,000, (other than indebtedness which is
non-recourse to the Company or the Subsidiaries), whether such indebtedness now
exists or shall hereafter be created, which default shall have resulted in such
indebtedness becoming or being declared due and payable prior to the date on
which it would otherwise have become due and payable, without such acceleration
having been rescinded or annulled within 30 days after written notice to the
Company as provided in the Indenture; (vi) the entry by a court of competent
jurisdiction of one or more judgments, orders or decrees against the Company or
any Subsidiary in an aggregate amount (excluding amounts fully covered by
insurance) in excess of $10,000,000 and such judgments, orders or decrees remain
undischarged, unstayed and unsatisfied in an aggregate amount (excluding amounts
fully covered by insurance) in excess of $10,000,000 for a period of 60
consecutive days; (vii) certain events of bankruptcy, insolvency or
reorganization, or court appointment of a receiver, liquidator or trustee of the
Company or any Significant Subsidiary or for all or substantially all of the
property of either, and (viii) any other Event of Default provided with respect
to a particular series of Debt Securities (Section 501 of each Indenture). The
term "Significant Subsidiary" means each significant subsidiary (as defined in
Regulation S-X promulgated under the Securities Act) of the Company.
If an Event of Default under an Indenture with respect to Debt Securities
of any series at the time Outstanding occurs and is continuing, then in every
such case the applicable Trustee or the Holders of not less than 25% in
principal amount of the Outstanding Debt Securities of that series may declare
the principal amount (or, if the Debt Securities of that series are Original
Issue Discount Securities or Indexed Securities, such portion of the principal
amount as may be specified
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<PAGE> 50
in the terms thereof) of and premium or Make-Whole Amount, if any, on all of the
Debt Securities of that series to be due and payable immediately by written
notice thereof to the Company (and to the applicable Trustee if given by the
Holders). However, at any time after such a declaration of acceleration with
respect to Debt Securities of such series (or of all Debt Securities then
Outstanding under the applicable Indenture, as the case may be) has been made,
but before a judgment or decree for payment of the money due has been obtained
by the applicable Trustee, the Holders of not less than a majority in principal
amount of the Outstanding Debt Securities of such series (or of all Debt
Securities then Outstanding under the applicable Indenture, as the case may be)
may rescind and annul such declaration and its consequences if (i) the Company
shall have deposited with the applicable Trustee all required payments of the
principal of (and premium or Make-Whole Amount, if any) and interest, and any
Additional Amounts, on the Debt Securities of such series (or of all Debt
Securities then Outstanding under the applicable Indenture, as the case may be),
plus certain fees, expenses, disbursements and advances of the applicable
Trustee and (ii) all Events of Default, other than the nonpayment of accelerated
principal (or a specified portion thereof and the premium or Make-Whole Amount,
if any) or interest, with respect to Debt Securities of such series (or of all
Debt Securities then Outstanding under the applicable Indenture, as the case may
be) have been cured or waived as provided in the Indenture (Section 502 of each
Indenture). Each Indenture also provides that the Holders of not less than a
majority in principal amount of the Outstanding Debt Securities of any series
(or of all Debt Securities then Outstanding under the applicable Indenture, as
the case may be) may waive any past default with respect to such series and its
consequences, except a default (x) in the payment of principal of (or premium or
Make-Whole Amount, if any) or interest or Additional Amounts, if any, on any
Debt Security of such series or (y) in respect of a covenant or provision
contained in the applicable Indenture that cannot be modified or amended without
the consent of the Holders of each Outstanding Debt Security affected thereby
(Section 513 of each Indenture).
The Trustee is required to give notice to the Holders of Debt Securities
within 90 days of a default under the applicable Indenture unless such default
shall have been cured or waived; provided, however, that such Trustee may
withhold notice to the Holders of any series of Debt Securities of any default
with respect to such series (except a default in the payment of the principal of
(or premium or Make-Whole Amount, if any) or interest or Additional Amounts, if
any, on any Debt Security of such series or in the payment of any sinking fund
installment in respect of any Debt Security of such series) if the Responsible
Officers of such Trustee consider such withholding to be in the interest of such
Holders (Section 601 of each Indenture).
Each Indenture provides that no Holder of Debt Securities of any series may
institute any proceedings, judicial or otherwise, with respect to such Indenture
or for any remedy thereunder, except in the case of failure of the applicable
Trustee, for 60 days, to act after it has received a written request to
institute proceedings in respect of an Event of Default from the Holders of not
less than 25% in principal amount of the Outstanding Debt Securities of such
series, as well as an offer of indemnity reasonably satisfactory to it (Section
507 of each Indenture). This provision will not prevent, however, any Holder of
Debt Securities from instituting suit for the enforcement of payment of the
principal of (and premium or Make-Whole Amount, if any) and interest if any, on
or Additional Amounts, if any, payable with respect to such Debt Securities at
the respective due dates thereof (Section 508 of each Indenture).
Subject to provisions in each Indenture relating to its duties in case of
default, the Trustee is under an obligation to exercise any of its rights or
powers under such Indenture at the request or direction of any Holders of any
series of Debt Securities then Outstanding under such Indenture, unless such
Holders shall have offered to the Trustee thereunder reasonable security or
indemnity (Section 602 of each Indenture). The Holders of not less than a
majority in principal amount of the Outstanding Debt Securities of any series
(or of all Debt Securities then Outstanding under each Indenture, as the case
may be) shall have the right to direct the time, method and place of conducting
any proceeding for any remedy available to the applicable Trustee, or of
exercising any
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<PAGE> 51
trust or power conferred upon such Trustee. However, the Trustee may refuse to
follow any direction which is in conflict with any law or the applicable
Indenture, which may involve such Trustee in personal liability or which may be
unduly prejudicial to the Holders of Debt Securities of such series not joining
therein (Section 512 of each Indenture).
Within 120 days after the close of each fiscal year, the Company must
deliver to each Trustee a certificate, signed by one of several specified
officers, stating whether or not such officer has knowledge of any default under
the applicable Indenture and, if so, specifying each such default and the nature
and status thereof (Section 1010 of each Indenture).
MODIFICATION OF THE INDENTURES
Modification and amendment of an Indenture may be made only with the
consent of the Holders of not less than a majority in principal amount of all
Outstanding Debt Securities issued under such Indenture which are affected by
such modification or amendment; provided, however, that no such modification or
amendment may, without the consent of the Holder of each such Debt Security
affected thereby, (i) change the Stated Maturity of the principal of (or Premium
or Make-Whole Amount, if any), or any installment of principal of or interest or
Additional Amounts, if any, payable on, any such Debt Security, (ii) reduce the
principal amount of, or the rate or amount of interest on, or any premium or
Make-Whole Amount, payable on redemption of or any Additional Amount, if any,
payable with respect to any such Debt Security, or reduce the amount of
principal of an Original Issue Discount Security that would be due and payable
upon declaration of acceleration of the maturity thereof or would be provable in
bankruptcy, or adversely affect any right of repayment of the Holder of any such
Debt Security, (iii) change the Place of Payment, or the coin or currency, for
payment of principal of (and Premium or Make-Whole Amount, if any), or interest
on, or any Additional Amounts payable with respect to, any such Debt Security,
(iv) impair the right to institute suit for the enforcement of any payment on or
with respect to any such Debt Security, (v) reduce the percentage of the Holders
of outstanding Debt Securities of any series necessary to modify or amend the
applicable Indenture, to waive compliance with certain provisions thereof or
certain defaults and consequences thereunder or to reduce the quorum or voting
requirements set forth in the applicable Indenture, or (vi) modify any of the
foregoing provisions or any of the provisions relating to the waiver of certain
past defaults or certain covenants, except to increase the required percentage
to effect such action or to provide that certain other provisions may not be
modified or waived without the consent of the Holder of such Debt Security
(Section 902 of each Indenture).
The Holders of not less than a majority in principal amount of Outstanding
Debt Securities issued under either Indenture have the right to waive compliance
by the Company with certain covenants in such Indenture (Section 1012 of each
Indenture).
Modifications and amendments of an Indenture may be made by the Company and
the respective Trustee thereunder without the consent of any Holder of Debt
Securities for any of the following purposes: (i) to evidence the succession of
another Person to the Company as obligor under such Indenture; (ii) to add to
the covenants of the Company for the benefit of the Holders of all or any series
of Debt Securities or to surrender any right or power conferred upon the Company
in such Indenture; (iii) to add Events of Default for the benefit of the Holders
of all or any series of Debt Securities; (iv) to add or change any provisions of
an Indenture to facilitate the issuance of, or to liberalize certain terms of,
Debt Securities in bearer form, or to permit or facilitate the issuance of Debt
Securities in uncertificated form, provided that such action shall not adversely
affect the interests of the Holders of the Debt Securities of any series in any
material respect; (v) to add, change or eliminate any provisions of an
Indenture, provided that any such addition, change or elimination shall become
effective only when there are no Outstanding Debt Securities of any series
created prior thereto which are entitled to the benefit of such provision; (vi)
to secure the Debt Securities; (vii) to establish the form or terms of Debt
Securities of any series, including the provisions and procedures, if
applicable, for the conversion of such Debt Securities into Capital
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Stock of the Company; (viii) to provide for the acceptance or appointment of a
successor Trustee or facilitate the administration of the trusts under an
Indenture by more than one Trustee; (ix) to cure any ambiguity, defect or
inconsistency in an Indenture, provided that such action shall not adversely
affect the interests of Holders of Debt Securities of any series issued under
such Indenture; (x) to close an Indenture with respect to the authentication and
delivery of additional series of Debt Securities or to qualify, or maintain
qualification of, an Indenture under the TIA; or (xi) to supplement any of the
provisions of an Indenture to the extent necessary to permit or facilitate
defeasance and discharge of any series of such Debt Securities, provided that
such action shall not adversely affect the interests of the Holders of the Debt
Securities of any series in any material respect (Section 901 of each
Indenture).
SUBORDINATION
Upon any distribution to creditors of the Company in a liquidation,
dissolution, bankruptcy, insolvency or reorganization, the payment of the
principal of and interest on the Subordinated Securities will be subordinated to
the extent provided in the Subordinated Indenture in right of payment to the
prior payment in full of all Senior Debt (Sections 1601 and 1602 of the
Subordinated Indenture), but the obligation of the Company to make payment of
the principal of and interest on the Subordinated Securities will not otherwise
be affected (Section 1608 of the Subordinated Indenture). No payment of
principal or interest may be made on the Subordinated Securities at any time if
a default on Senior Debt exists that permits the holders of such Senior Debt to
accelerate its maturity and the default is the subject of judicial proceedings
or the Company receives notice of the default (Section 1603 of the Subordinated
Indenture). The Company may resume payments on the Subordinated Securities when
the default is cured or waived, or 120 days pass after the notice is given if
the default is not the subject of judicial proceedings, if the subordination
provisions of the Subordinated Indenture otherwise permit payment at that time
(Section 1603 of the Subordinated Indenture). After all Senior Debt is paid in
full and until the Subordinated Securities are paid in full, Holders will be
subrogated to the rights of holders of Senior Debt to the extent that
distributions otherwise payable to Holders have been applied to the payment of
Senior Debt (Section 1607 of the Subordinated Indenture). By reason of such
subordination, in the event of a distribution of assets upon insolvency, certain
general creditors of the Company may recover more, ratably, than Holders of the
Subordinated Securities.
Senior Debt is defined in the Subordinated Indenture as the principal,
premium, if any, unpaid interest (including interest accruing on or after the
filing of any petition in bankruptcy or for reorganization relating to the
Company whether or not a claim for post-filing interest is allowed in such
proceeding), fees, charges, expenses, reimbursement and indemnification
obligations, and all other amounts payable under or in respect of the following
indebtedness of the Company for money borrowed, whether any such indebtedness
exists as of the date of the Subordinated Indenture or is created, incurred,
assumed or guaranteed after such date:
(1) any debt (i) for money borrowed, or (ii) evidenced by a bond,
note, debenture, or similar instrument (including purchase money
obligations) given in connection with the acquisition of any business,
property or assets, whether by purchase, merger, consolidation or
otherwise, but shall not include any account payable or other obligation
created or assumed in the ordinary course of business in connection with
the obtaining of materials or services, or (iii) which is a direct or
indirect obligation which arises as a result of banker's acceptances or
bank letters of credit issued to secure obligations of the Company, or to
secure the payment of revenue bonds issued for the benefit of the Company,
whether contingent or otherwise;
(2) any debt of others described in the preceding clause (1) which he
Company has guaranteed or for which it is otherwise liable;
(3) the obligation of the Company as lessee under any lease of
property which is reflected on the Company's balance sheet as a capitalized
lease; and
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(4) any deferral, amendment, renewal, extension, supplement or
refunding of any liability of the kind described in any of the preceding
clauses (1), (2), and (3);
provided, however, that, in computing the indebtedness of the Company, there
shall be excluded any particular indebtedness if, upon or prior to the maturity
thereof, there shall have been deposited with a depository in trust money (or
evidence of indebtedness if permitted by the instrument creating such
indebtedness) in the necessary amount to pay, redeem or satisfy such
indebtedness as it becomes due, and the amount so deposited shall not be
included in any computation of the assets of the Company provided, further, that
in computing the indebtedness of the Company hereunder, there shall be excluded
(i) any such indebtedness, obligation or liability referred to in clauses (1)
through (4) above as to which, in the instrument creating or evidencing the same
or pursuant to which the same is outstanding, it is provided that such
indebtedness, obligation or liability is not superior in right of payment to the
Subordinated Securities, or ranks pari passu with the Subordinated Securities,
(ii) any such indebtedness, obligation or liability which is subordinated to
indebtedness of the Company to substantially the same extent as or to a greater
extent than the Subordinated Securities are subordinated and (iii) the
Subordinated Securities. (Section 101 of the Subordinated Indenture). At June
30, 1995, Senior Debt aggregated approximately $137.6 million. There are no
restrictions in the Subordinated Indenture upon the creation of additional
Senior Debt or other indebtedness.
DISCHARGE, DEFEASANCE AND COVENANT DEFEASANCE
Under each Indenture, the Company may discharge certain obligations to
Holders of any series of Debt Securities issued thereunder that have not already
been delivered to the applicable Trustee for cancellation and that either have
become due and payable or will become due and payable within one year (or
scheduled for redemption within one year) by irrevocably depositing with the
applicable Trustee, in trust, funds in such currency or currencies, currency
unit or units or composite currency or currencies in which such Debt Securities
are payable in an amount sufficient to pay the entire indebtedness on such Debt
Securities in respect of principal (and premium or Make-Whole Amount, if any)
and interest and any Additional Amounts payable to the date of such deposit (if
such Debt Securities have become due and payable) or to the Stated Maturity or
Redemption Date, as the case may be (Section 401 of each Indenture).
Each Indenture provides that, if the provisions of Article Fourteen thereof
are made applicable to the Debt Securities of or within any series pursuant to
Section 301 of such Indenture, the Company may elect either (i) to defease and
be discharged from any and all obligations with respect to such Debt Securities
(except for the obligation to pay Additional Amounts, if any, upon the
occurrence of certain events of tax, assessment or governmental charge with
respect to payments on such Debt Securities and the obligations to register the
transfer or exchange of such Debt Securities, to replace temporary or mutilated,
destroyed, lost or stolen Debt Securities, to maintain an office or agency in
respect of such Debt Securities and to hold moneys for payment in trust)
("defeasance") (Section 1402 of each Indenture) or (ii) to be released from its
obligations with respect to such Debt Securities under Sections of each
Indenture described under "Certain Covenants" or, if provided pursuant to
Section 301 of each Indenture, its obligations with respect to any other
covenant, and any omission to comply with such obligations shall not constitute
a default or an Event of Default with respect to such Debt Securities ("covenant
defeasance") (Section 1403 of each Indenture), in either case upon the
irrevocable deposit by the Company with the applicable Trustee, in trust, of an
amount, in such currency or currencies, currency unit or units or composite
currency or currencies in which such Debt Securities are payable at Stated
Maturity, or Government Obligations (as defined below), or both, applicable to
such Debt Securities which through the scheduled payment of principal and
interest in accordance with their terms will provide money in an amount
sufficient to pay the principal of (and premium or Make-Whole Amount, if any)
and interest and any Additional Amounts on such Debt Securities, and any
mandatory sinking fund or analogous payments thereon, on the scheduled due dates
therefor.
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Such a trust may only be established if, among other things, the Company
has delivered to the applicable Trustee an Opinion of Counsel (as specified in
each Indenture) to the effect that the Holders of such Debt Securities will not
recognize income, gain or loss for United States federal income tax purposes as
a result of such defeasance or covenant defeasance and will be subject to United
States federal income tax on the same amounts, in the same manner and at the
same times as would have been the case if such defeasance or covenant defeasance
had not occurred, and such Opinion of Counsel, in the case of defeasance, must
refer to and be based upon a ruling of the Internal Revenue Service or a change
in applicable United States federal income tax laws occurring after the date of
such Indenture (Section 1404 of each Indenture).
"Government Obligations" means securities which are (i) direct obligations
of the United States of America or the government which issued the Foreign
Currency in which the Debt Securities of a particular series are payable, for
the payment of which its full faith and credit is pledged or (ii) obligations of
a Person controlled or supervised by and acting as an agency or instrumentality
of the United States of America or the government which issued the Foreign
Currency in which the Debt Securities of such series are payable, the payment of
which is unconditionally guaranteed as a full faith and credit obligation by the
United States of America or such other government, which, in either case, are
not callable or redeemable at the option of the issuer thereof, and shall also
include a depository receipt issued by a bank or trust company as custodian with
respect to any such Government Obligation or a specific payment of interest on
or principal of any such Government Obligation held by such custodian for the
account of the holder of a depository receipt, provided that (except as required
by law) such custodian is not authorized to make any deduction from the amount
payable to the holder of such depository receipt from any amount received by the
custodian in respect of the Government Obligation or the specific payment of
interest on or principal of the Government Obligation evidenced by such
depository receipt (Section 101 of each Indenture).
Unless otherwise provided in the applicable Prospectus Supplement, if after
the Company has deposited funds and/or Government Obligations to effect
defeasance or covenant defeasance with respect to Debt Securities of any series,
(i) the Holder of a Debt Security of such series is entitled to, and does, elect
pursuant to Section 301 of either Indenture or the terms of such Debt Security
to receive payment in a currency, currency unit or composite currency other than
that in which such deposit has been made in respect of such Debt Security, or
(ii) a Conversion Event (as defined below) occurs in respect of the currency,
currency unit or composite currency in which such deposit has been made, the
indebtedness represented by such Debt Security shall be deemed to have been, and
will be, fully discharged and satisfied through the payment of the principal of
(and premium or Make-Whole Amount, if any) and interest and any Additional
Amounts on such Debt Security as they become due out of the proceeds yielded by
converting the amount so deposited in respect of such Debt Security into the
currency, currency unit or composite currency in which such Debt Security
becomes payable as a result of such election or such cessation of usage based on
the applicable market exchange rate (Section 1405 of each Indenture).
"Conversion Event" means the cessation of use of (i) a currency, currency
unit or composite currency issued by the government of one or more countries
other than the United States (other than the European Currency Unit ("ECU") or
other currency unit) both by the government of the country that issued such
currency and for the settlement of transactions by a central bank or other
public institutions of or within the international banking community, (ii) the
ECU both within the European Monetary System and for the settlement of
transactions by public institutions of or within the European Communities or
(iii) any currency unit or composite currency other than the ECU for the
purposes for which it was established (Section 101 of each Indenture). Unless
otherwise provided in the applicable Prospectus Supplement, all payments of
principal of (and premium or Make-Whole Amount, if any) and interest and any
Additional Amounts on any Debt Security that is payable in a Foreign Currency
that ceases to be used by its government of issuance shall be made in United
States dollars.
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In the event the Company effects covenant defeasance with respect to any
Debt Securities and such Debt Securities are declared due and payable because of
the occurrence of any Event of Default other than the Event of Default descried
in clause (iv) under "Events of Default, Notice and Waiver" with respect to
Sections 1004 to 1009, inclusive, of either Indenture (which Sections would no
longer be applicable to such Debt Securities) or described in clause (vii) under
"Events of Default, Notice and Waiver" with respect to a covenant as to which
there has been covenant defeasance, the amount in such currency, currency unit
or composite currency in which such Debt Securities are payable, and Government
Obligations on deposit with the Trustee, will be sufficient to pay amounts due
on such Debt Securities at the time of their Stated Maturity but may not be
sufficient to pay amounts due on such Debt Securities at the time of the
acceleration resulting from such Event of Default. However, the Company would
remain liable to make payment of such amounts due at the time of acceleration.
The applicable Prospectus Supplement may further describe the provisions,
if any, permitting such defeasance or covenant defeasance, including any
modifications to the provisions described above, with respect to the Debt
Securities of or within a particular series.
CONVERSION RIGHTS
The terms and conditions, if any, upon which the Debt Securities are
convertible into Capital Stock will be set forth in the applicable Prospectus
Supplement relating thereto. Such terms will include whether such Debt
Securities are convertible into Capital Stock, the conversion price (or manner
of calculation thereof), the conversion period, provisions as to whether
conversion will be at the option of the Holders or the Company, the events
requiring an adjustment of the conversion price and provisions affecting
conversion in the event of the redemption of such Debt Securities and any
restrictions on conversion, including restrictions directed at maintaining the
Company's REIT status.
BOOK ENTRY SYSTEM
The Debt Securities of a series may be issued in whole or in part in the
form of one or more global securities ("Global Securities") that will be
deposited with, or on behalf of, a depository (the "Depository") identified in
the Prospectus Supplement relating to such series. Global Securities, if any,
issued in the United States are expected to be deposited with the Depository
Trust Company, as Depository. Global Securities may be issued in fully
registered form and may be issued in either temporary or permanent form. The
specific terms of the depositary arrangement with respect to a series of Debt
Securities, if any, will be described in the applicable Prospectus Supplement
relating to such series.
GOVERNING LAW
The Indentures are governed by and shall be construed in accordance with
the laws of the State of Georgia.
REDEMPTION OF SECURITIES
The Indentures provide that the Debt Securities may be redeemed at any time
at the option of the Company, in whole or in part, for certain reasons including
those intended to protect the Company's status as a REIT. Debt Securities may
also be subject to optional or mandatory redemption on terms and conditions
described in the applicable Prospectus Supplement.
From and after notice has been given as provided in the Indenture, if funds
for the redemption of any Debt Securities called for redemption shall have been
made available on such redemption date, such Debt Securities will cease to bear
interest on the date fixed for such redemption specified in such notice, and the
only right of the Holders of the Debt Securities will be to receive payment of
the Redemption Price.
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DESCRIPTION OF COMMON STOCK
This summary of certain terms and provisions of the Common Stock does not
purport to be complete and is subject to, and qualified in its entirety by
reference to, the terms and provisions of the Company's Articles of
Incorporation, as amended (the "Articles"), and By-laws, as amended, which are
filed as exhibits to the Registration Statement of which this Prospectus is a
part.
The Company is authorized to issue an aggregate of 75,000,000 shares of
Common Stock. As of October 1, 1995, there were 25,652,281 shares of Common
Stock outstanding held by approximately 4,000 shareholders of record. All
outstanding shares of Common Stock are fully paid and nonassessable.
GENERAL
Shareholders of the Company do not have preemptive rights. Shareholders of
record are entitled to cast one vote for each share held on all matters
presented for a vote of shareholders. Cumulative voting for the election of
directors is not permitted. When a quorum is present at any meeting, the vote of
the holders of a majority of the shares present, either in person or by proxy,
shall decide any question properly brought before such meeting, except on
matters where the Georgia Business Corporation Code requires the vote of the
holders of a majority of all outstanding shares, such as amending the Articles.
The Board of Directors may, in its discretion, cause to be distributed
ratably among the shareholders such portion of the cash available from
operations, net profits, capital surplus or assets as it may from time to time
deem proper.
Except as outlined below under "Restriction on Ownership/REIT
Qualification, "the shares are freely transferable and there are no conversion,
sinking fund, redemption or similar provisions regarding the shares.
RESTRICTION ON OWNERSHIP/REIT QUALIFICATION
The Articles contain provisions restricting transfer of shares and
authorizing the directors to call shares for purchase as appropriate to maintain
the Company's qualification as a REIT under the Code. Among the requirements for
REIT qualification, the Company must have at least 100 shareholders, and five or
fewer individuals may not own directly or indirectly 50% or more of the
outstanding shares. In addition, 95% of the Company's gross annual income must
come from qualifying sources, including principally "rents from real property"
with the Code specifically excluding from the definition of such term any rents
received from any tenant which itself owns, or which is more than 10% owned by
any individual who owns, more than 10% of the shares. The Articles authorize the
directors to refuse to transfer shares and to call for the purchase of shares so
as to prevent concentrations of ownership potentially disqualifying the Company
as a REIT or potentially disqualifying income as "rents from real property." The
Articles also void any purported transfer of shares which would result in
ownership by less than 100 shareholders, or would result in five or fewer
individuals directly or indirectly owning more than 50% of the Company, or would
result in any tenant or 10% or more owner of a tenant owning more than 10% of
the Company; and further provide that the purported transferee of any such
shares shall be deemed never to have had an interest therein or alternatively
shall be deemed to have acquired and to be holding such shares for and on behalf
of the Company. Any call for purchase of any shares pursuant to the aforesaid
provisions of the Articles would most likely be from one or more holders of
significant blocks whose concentrated ownership is considered by the directors
to threaten the Company's REIT status.
RIGHTS UPON LIQUIDATION
In the event of liquidation of the Company, shareholders are entitled to
share ratably in the assets available for distribution after payment of all
liabilities.
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TRANSFER AGENT AND REGISTRAR
SunTrust Bank, Atlanta, Atlanta, Georgia, serves as the Company's Transfer
Agent and Registrar. The Common Stock is listed on the NYSE (Symbol: IRT).
PLAN OF DISTRIBUTION
The Company may sell Securities to or through underwriters, and also may
sell Securities directly to other purchasers or through designated agents. Any
such underwriter or agent involved in the offer and sale of the Securities will
be named in the applicable Prospectus Supplement.
The distribution of the Securities may be effected from time to time in one
or more transactions at a fixed price or prices, which may be changed, or at
market prices prevailing at the time of sale, at prices related to such
prevailing market prices or at negotiated prices. The Company also may, from
time to time, authorize underwriters acting as the Company's agents to offer and
sell the Securities upon the terms and conditions set forth in any Prospectus
Supplement.
In connection with the sale of Securities, underwriters may receive
compensation from the Company or from purchasers of Securities, for whom they
may act as agents, in the form of discounts, concessions or commissions.
Underwriters may sell Securities to or through dealers, and such dealers may
receive compensation in the form of discounts, concessions or commissions from
the underwriters and/or commissions from the purchasers for whom they may act as
agents. Underwriters, dealers and agents that participate in the distribution of
Securities may be deemed to be underwriters, and any discounts or commissions
they receive from the Company, and any profit on the resale of Securities they
realize may be deemed to be underwriting discounts and commissions under the
Securities Act. Any such underwriter or agent will be identified, and any such
compensation received from the Company will be described, in the applicable
Prospectus Supplement.
Unless otherwise specified in the related Prospectus Supplement, each
series of Securities will be a new issue with no established trading market,
other than the Common Stock which is listed on the NYSE. Any Common Stock sold
pursuant to a Prospectus Supplement will be listed on such exchange, subject to
official notice of issuance. The Company may elect to list any series of Debt
Securities on an exchange, but is not obligated to do so. It is possible that
one or more underwriters may make a market in a series of Securities, but will
not be obligated to do so and may discontinue any market making at any time
without notice. Therefore, no assurance can be given as to the liquidity of the
trading market for the Securities.
Under agreements the Company may enter into, underwriters, dealers and
agents who participate in the distribution of Securities may be entitled to
indemnification by the Company against certain liabilities, including
liabilities under the Securities Act.
Underwriters, dealers and agents may engage in transactions with, or
perform services for, or be customers of, the Company in the ordinary course of
business.
If so indicated in the applicable Prospectus Supplement, the Company will
authorize underwriters or other persons acting as the Company's agents to
solicit offers by certain institutions to purchase Securities from the Company
pursuant to contracts providing for payment and delivery on a future date.
Institutions with which such contracts may be made include commercial and
savings banks, insurance companies, pension funds, investment companies,
educational and charitable institutions and others, but in all cases such
institutions must be approved by the Company. The obligations of any purchaser
under any such contract will be subject to the condition that the purchase of
the Securities shall not at the time of delivery be prohibited under the laws of
the jurisdiction to which such purchaser is subject. The underwriters and such
other agents will not have any responsibility in respect of the validity or
performance of such contracts.
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EXPERTS
The consolidated financial statements and related financial statement
schedules incorporated in this Prospectus by reference from the Company's Annual
Report on Form 10-K for the year ended December 31, 1994, as amended and
restated on Form 10-K/A Amendment No. 1 filed September 28, 1995, have been
audited by Arthur Andersen LLP, independent auditors, as stated in their report
which is incorporated herein by reference, and have been so incorporated in
reliance upon the reports of such firm given upon their authority as experts in
accounting and auditing.
LEGAL OPINIONS
The legality of the Securities offered hereby as well as certain federal
income tax matters will be passed upon for the Company by Alston & Bird.
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