<PAGE> 1
Filed Pursuant to Rule 424(B)(2)
Registration No. 33-63523
PROSPECTUS SUPPLEMENT
(TO PROSPECTUS DATED NOVEMBER 9, 1995)
(IRT LOGO)
IRT PROPERTY COMPANY
1,500,000 COMMON SHARES
------------------------
The 1,500,000 shares of Company common stock, par value $1.00 per share
(the "Common Stock"), offered hereby are offered directly by the Company (the
"Offering") to HBK Finance L.P., a Delaware limited partnership ("HBK"), in
partial consideration for the repurchase and cancellation of $54,799,000
aggregate principal amount of the Company's 7.3% Convertible Subordinated
Debentures due August 15, 2003 (the "Debentures") presently owned by HBK. The
Company's Common Stock is listed on the New York Stock Exchange (the "NYSE")
under the symbol "IRT." On January 15, 1997, the last reported sale price of the
Common Stock on the NYSE was $11.875 per share. See "Plan of Offering."
SEE "RISK FACTORS" ON PAGES S-3 TO S-6 FOR CERTAIN FACTORS RELEVANT
TO AN INVESTMENT IN THE COMMON STOCK
------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED BY 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.
<TABLE>
<CAPTION>
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- -------------------------------------------------------------------------------------------------
Underwriting
Price to Discounts and Proceeds to
Public Commissions Company(1)
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Per Share......................... $11.05 $0 $11.05
- -------------------------------------------------------------------------------------------------
Total............................. $16,575,000 $0 $16,575,000
- -------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------
</TABLE>
(1) Before deducting estimated expenses of $45,000 payable by the Company.
------------------------
The Common Stock offered hereby is offered directly by the Company to HBK.
It is expected that delivery of the shares of Common Stock offered hereby will
be made to HBK on or about January 17, 1997 versus delivery of the Debentures to
the Company pursuant to an agreement between the Company and HBK. See
"Prospectus Supplement Summary -- The Offering" and "Plan of Offering."
------------------------
THE DATE OF THIS PROSPECTUS SUPPLEMENT IS JANUARY 16, 1997.
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CERTAIN MATTERS DISCUSSED UNDER THE CAPTIONS "PROSPECTUS SUPPLEMENT
SUMMARY"; "RISK FACTORS"; "THE COMPANY"; AND "TAXATION," AND ELSEWHERE IN THIS
PROSPECTUS SUPPLEMENT, THE ATTACHED PROSPECTUS, AND THE INFORMATION INCORPORATED
BY REFERENCE HEREIN, INCLUDING, WITHOUT LIMITATION, DEMOGRAPHIC PROJECTIONS,
STRATEGIC INITIATIVES, AND TAX CONSIDERATIONS, MAY CONSTITUTE FORWARD-LOOKING
STATEMENTS FOR PURPOSES OF THE SECURITIES ACT OF 1933 (THE "SECURITIES ACT") AND
THE SECURITIES EXCHANGE ACT OF 1934, AND AS SUCH MAY INVOLVE KNOWN AND UNKNOWN
RISKS, UNCERTAINTIES AND OTHER FACTORS WHICH MAY CAUSE THE ACTUAL RESULTS,
PERFORMANCE OR ACHIEVEMENTS OF THE COMPANY TO BE MATERIALLY DIFFERENT FROM
FUTURE RESULTS, PERFORMANCE OR ACHIEVEMENTS EXPRESSED OR IMPLIED BY SUCH
FORWARD-LOOKING STATEMENTS. IMPORTANT FACTORS THAT COULD CAUSE THE ACTUAL
RESULTS, PERFORMANCE OR ACHIEVEMENTS OF THE COMPANY TO DIFFER MATERIALLY FROM
THE COMPANY'S EXPECTATIONS ARE DISCLOSED IN THIS PROSPECTUS ("CAUTIONARY
STATEMENTS"), INCLUDING, WITHOUT LIMITATION, THOSE STATEMENTS MADE IN
CONJUNCTION WITH THE FORWARD-LOOKING STATEMENTS INCLUDED UNDER "RISK FACTORS"
AND OTHERWISE HEREIN. ALL FORWARD-LOOKING STATEMENTS ATTRIBUTABLE TO THE COMPANY
ARE EXPRESSLY QUALIFIED IN THEIR ENTIRETY BY THE CAUTIONARY STATEMENTS.
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PROSPECTUS SUPPLEMENT SUMMARY
The following summary is qualified in its entirety by the more detailed
information included elsewhere in this Prospectus Supplement and the
accompanying Prospectus, or incorporated herein or therein by reference. Unless
the context otherwise requires, all references in this Prospectus Supplement to
the "Company" or "IRT" shall mean IRT Property Company and its subsidiaries on a
consolidated basis, as well as their respective predecessors.
THE COMPANY
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, Georgia, IRT is a self-administered and self-managed real
estate investment trust ("REIT"), with acquisition, redevelopment, financing,
property management and leasing capabilities. As of September 30, 1996, on a
cost basis, approximately 97% of the Company's investment portfolio was located
in the Southeastern United States and such investments consisted primarily of
neighborhood and community shopping centers. The Company owned, at December 1,
1996, 83 shopping centers, including four free-standing Wal-Marts (two of which
were subsequently sold) and certain other small commercial properties. As of
December 1, 1996, the Company's shopping centers contained in excess of 8.4
million square feet of leasable space, which was approximately 94% leased. See
"The Company -- Properties."
The Company's focus on neighborhood and community shopping centers in the
Southeastern United States provides it with a high degree of market familiarity
and promotes greater efficiencies in the Company's acquisition, property
management and leasing activities. Such focus facilitates the Company in
establishing and maintaining strong working relationships with major national
and regional retailers which serve the Southeastern market. The Company's
leading tenants include supermarkets such as Publix, Kroger, Winn-Dixie,
Delchamps, Harris Teeter and Food Lion, drug stores such as Revco, Eckerd and
K&B, and national retailers such as Wal-Mart and Kmart.
IRT's strategy has been to acquire and operate high-quality, well-located
shopping centers which are anchored by supermarkets, drug stores and other
consumer necessity or value-oriented retailers. The Company also intends to
pursue a strategy which contemplates supplementing its traditional business with
several new initiatives. These new initiatives include developing neighborhood
and community shopping centers, whether for the Company's own account or in
strategic alliances with prominent Southeastern shopping center developers, and
greater emphasis on redeveloping and expanding existing centers. In 1996, the
Company began taking a more active approach to the disposition of certain of its
properties. In addition, the Company intends to pursue co-investment
opportunities with respect to Southeastern shopping centers where a taxable
affiliate would manage the shopping center after its acquisition or development,
thereby providing management fee income in addition to an investment return. The
Company evaluates from time to time various potential property acquisitions,
both directly and indirectly through mergers, acquisitions and combinations with
companies engaged in similar business. See "Risk Factors -- Uncertainty of
Meeting Acquisition Objectives and New Business Initiatives" and "Recent
Developments."
The Company's Southeastern shopping centers are spread among 62 counties in
10 states. Based on data provided by McGraw Hill/DRI, for the period from 1997
to 2001, the weighted average population growth rate in the Company's
Southeastern counties is estimated to be 5.1% compared to an estimated growth
rate of 3.7% for the United States as a whole. In addition, based on data
provided by McGraw Hill/DRI, these Southeastern counties are projected to have a
weighted average growth rate in nonfarm employment of 7.6% over the same period,
compared to an estimated national average of 5.6%.
Since its founding in 1969, the Company has successfully operated and grown
through three major real estate recessions. Senior management has an average of
23 years of real estate experience, with a combined total of over 160 years. The
Company's Common Stock has been publicly traded since 1971.
The Company has entered into an underwriting agreement (the "Underwriting
Agreement") with PaineWebber Incorporated ("PaineWebber") dated January 8, 1997
wherein PaineWebber has agreed to
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purchase on a "firm commitment" basis, but subject to customary conditions,
4,000,000 shares of Company Common Stock in an underwritten public offering (the
"Underwritten Public Offering"). On January 14, 1997, the Company issued
4,000,000 shares of its Common Stock and received estimated net proceeds of
$42,562,000 from the Underwritten Public Offering. The Company, pursuant to the
Underwriting Agreement, also has granted PaineWebber an option on up to 653,747
shares at $11.25 per share solely to cover over-allotments, which option has not
been exercised as of the date of this Prospectus Supplement.
The Company's principal executive offices are located at 200 Galleria
Parkway, Suite 1400, Atlanta, Georgia 30339, telephone (770) 955-4406.
DISTRIBUTIONS
IRT has paid 76 consecutive quarterly distributions to its shareholders.
The current annual dividend rate is $0.90 per share. See "Distributions."
RISK FACTORS
An investment in the Common Stock involves various risks, many of which are
related to real estate activities generally, and prospective investors should
carefully consider the matters discussed under "Risk Factors" prior to any
investment in the Company.
THE OFFERING
Common Stock Offered by the Company...................1,500,000 shares
Common Stock Outstanding After the Offering(1).......31,283,911 shares
Use of Proceeds..................................Partial consideration
for the repurchase of $54,799,000
of Debentures presently owned by HBK
NYSE Symbol........................................................IRT
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(1) Based upon shares of Common Stock outstanding as of September 30, 1996,
excluding 7,547,111 shares issuable upon conversion of all outstanding
Debentures and 481,293 shares issuable upon the exercise of outstanding
stock options granted under the Company's stock option plans. This also
includes the sale of 4,000,000 shares of Common Stock issued pursuant to
the Company's Underwritten Public Offering, but excludes the 653,747 shares
of Common Stock subject to the underwriter's over-allotment option in
connection with the Underwritten Public Offering. Upon completion of this
Offering and the repurchase of the Debentures owned by HBK, the number of
shares of Common Stock issuable upon conversion of the Debentures will be
reduced to 2,676,088. See "The Company -- Recent
Developments -- Underwritten Public Offering."
HBK is a Delaware limited partnership with its principal office located at
777 Main Street, Suite 2750, Fort Worth, Texas 76102. As of the date of this
Prospectus Supplement, HBK has informed the Company that it owns $54,799,000
principal amount of Debentures and has an outstanding short position in
1,500,000 shares of Company Common Stock (the "HBK Short Position"). Pursuant to
a Purchase and Standstill Agreement, dated as of January 16, 1997, by and
between the Company and HBK (the "Purchase and Standstill Agreement"), the
Company has agreed to repurchase such Debentures owned by HBK at their aggregate
par value plus accrued interest calculated in accordance with the terms of such
Debentures, in exchange for the 1,500,000 shares of Common Stock offered by the
Company hereby and a cash payment of approximately $39.9 million (including
accrued interest), and HBK has agreed to use such shares of Common Stock solely
to cover the HBK Short Position. Upon completion of the Offering, the repurchase
of the Debentures owned by HBK, and the elimination of the HBK Short Position,
HBK will not own any Common Stock, Debentures or other securities of the
Company, and has agreed not to take any position with respect to Company
securities or to attempt to influence Company policies and management in the
future. See "Plan of Offering."
S-2
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RISK FACTORS
An investment in the Common Stock involves various risks. Investors should
carefully consider the following information in conjunction with the other
information contained or incorporated by reference in this Prospectus Supplement
and the attached Prospectus before making a decision to purchase Common Stock.
SUBSTANTIAL DEBT OBLIGATIONS AND TERMS OF DEBT
The Company's indebtedness includes a revolving bank line of credit,
mortgage indebtedness, senior notes and debentures. The unsecured revolving line
of credit (the "Line of Credit") is for a maximum of $100 million and bears
interest at a variable rate, and as of November 30, 1996, the Company had an
outstanding balance of approximately $13.0 million. As of November 30, 1996, the
Company had approximately $84.1 million of secured borrowings outstanding under
mortgage loans. These loans have stated rates of interest ranging from 7.60% to
11.00% per annum, with a weighted average interest rate of 8.50%. Such loans are
payable in monthly installments with maturities from February 1997 to July 2013.
The Company has outstanding $84.9 million of Debentures, which are convertible
at any time prior to maturity into shares of Common Stock at a conversion price
of $11.25 per share. Prior to this Offering, the Company had reserved 7,547,111
shares of Common Stock for conversion of the Debentures, and following the
repurchase and cancellation of the Debentures from HBK, will have 2,676,088
shares of Common Stock reserved for issuance upon conversion of the remaining
$30.1 million of Debentures to be outstanding after the purchase of Debentures
from HBK. In March 1996, the Company issued $50 million of 7.45% Senior Notes
due 2001 which will remain outstanding. See "Capitalization."
As a result of the Underwritten Public Offering, this Offering and the
Purchase and Standstill Agreement, the Company's borrowing capacity will be
increased, and Company management expects the Company to make additional draws
under its Line of Credit. The Company expects that such reborrowings and other
indebtedness will be used primarily for the purpose of completing additional
shopping center acquisitions and other expansion, development or redevelopment
activities. The Company presently has no interest rate protection agreements,
and to the extent the Company's exposure to increases in interest rates on its
variable rate debt is not hereafter reduced through interest rate protection or
cap agreements, such rate increases will adversely affect the Company's net
income and funds from operations ("FFO") and may affect the amount of
distributions it can make to its shareholders. Failure to pay secured debt
obligations when due could result in the Company losing its interest in the
properties collateralizing such secured indebtedness. See "Capitalization."
Based upon the Company's outstanding indebtedness of $232 million as of
November 30, 1996 and its equity capitalization of $290 million (based upon the
closing price of its Common Stock of $11.25 on January 8, 1997), the Company's
total market capitalization prior to the Underwritten Public Offering and this
Offering was approximately $522 million, and its ratio of debt to total market
capitalization was approximately 44.4%. On this basis, applying the
approximately $42.6 million of net proceeds to the Company from the sale of the
Common Stock in the Underwritten Public Offering and the issuance of the Common
Stock offered hereby valued at approximately $16.5 million to the repurchase and
cancellation of approximately $54.8 million of Debentures held by HBK and to the
reduction of borrowings under the Line of Credit, the Company's outstanding debt
would be reduced to approximately $173 million, and its ratio of debt to total
market capitalization would be reduced to approximately 32.9%. This further
assumes no conversion of the approximately $30.1 million principal amount of
Debentures that would remain outstanding after the repurchase and cancellation
of the Debentures held by HBK.
The Company believes that the ratio of debt to total market capitalization
is a useful factor to consider in evaluating a REIT's debt level because this
ratio is an indicator of a REIT's ability to borrow funds. The Company believes
that using the ratio of debt to book value of assets is not as useful as an
indicator of a REIT's debt level because the book value of a REIT's assets
indicates only the depreciated value of its properties without consideration of
the market value of such assets at a particular point in time. The use of the
ratio of debt to total market capitalization of a REIT is more variable than the
ratio of debt to book value because it is dependent on the REIT's current stock
price. Accordingly, there is no assurance that using the
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ratio of debt to total market capitalization to evaluate the Company's debt
level will accurately predict the Company's risks, including its ability to
incur additional borrowings.
The foregoing risks associated with the debt obligations of the Company may
adversely affect the market price of the Common Stock and may inhibit the
Company's ability to raise capital and issue equity in both the public and
private markets.
REAL ESTATE INVESTMENT CONSIDERATIONS
Dependence on the Southeast and the Retail Industry
As of September 30, 1996, substantially all (97% on a cost basis) of the
Company's investment portfolio was located in the Southeastern United States,
and such investments consisted predominantly of community and neighborhood
shopping centers. The Company's performance therefor is linked to economic
conditions in the Southeast and in the local markets for retail space generally.
The market for retail space has been adversely affected by the ongoing
consolidation in the retail sector, the adverse financial condition of certain
large companies in this sector and excess retail space in certain markets. To
the extent that these conditions affect the market rents for retail space, they
could result in a reduction of net income and FFO and thus affect the amount of
distributions the Company can make to its shareholders.
Financial Condition and Bankruptcy of Tenants
Since substantially all of the Company's income has been, and is expected
to continue to be, derived from rental income from retail shopping centers, the
Company's net income, FFO and cash required for debt service and distributions
to shareholders could be adversely affected if a significant number of tenants
were unable to meet their obligations to the Company or if the Company were
unable to lease, on economically favorable terms, a material amount of space in
its shopping centers. In addition, in the event of default by a tenant, the
Company may experience delays and incur substantial costs in enforcing its
rights as landlord.
At any time, a tenant of the Company's properties may seek the protection
of the bankruptcy laws, which could result in the rejection and termination of
the tenant's lease. Such an event could cause a reduction of net income, FFO and
cash required for debt service and distributions to shareholders. No assurance
can be given that any tenant which has filed for bankruptcy protection will
continue making payments under its lease, that additional tenants will not file
for bankruptcy protection in the future or, if any tenants file, that they will
continue to make rental payments in a timely manner. In addition, tenants may,
from time to time, experience a downturn in their business, which may weaken
their financial condition and result in a reduction of, or failure to make,
rental payments when due. If a lessee or sublessee defaults in its obligations
to the Company, the Company may experience delays in enforcing its rights as
lessor or sublessor and may incur substantial costs and significant delays
associated with protecting its investment, including costs incurred in
renovating and re-leasing the property.
Vacancies and Lease Renewals; Tenant Closings
In the normal course of the Company's business, tenant leases at its
properties routinely expire. Some of these lease expirations provide the Company
with the opportunity to increase rentals or to lease such space to stronger
tenants. In other cases, there may be no immediately foreseeable strong tenancy
for the space, and the space may remain vacant for a longer period than
anticipated or may be re-leased at less favorable rents. In certain instances,
the tenant may, without violating the lease, elect to cease operations at the
leased location. Although such tenant would continue to be responsible for its
rental obligations, any percentage rents payable to the Company under such lease
may no longer be due, and such closures could adversely affect the traffic to
the related center and to other tenants. The Company and its properties are
subject to competitive and economic conditions over which the Company has no
control. Accordingly, there is no assurance that the effects of possible
vacancies or lease renewals at the Company's properties may not reduce the
rental income, net income, FFO and cash required for debt service and
distributions to shareholders below levels anticipated by the Company. See "The
Company -- Properties -- Shopping Center Lease Expirations."
S-4
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Possible Environmental Liabilities
Under various federal, state and local laws, ordinances and regulations, an
owner or operator of real estate is liable for the costs of removal or
remediation of certain hazardous or toxic substances on or in such property.
Such laws often impose such liability without regard to whether the owner or
operator knew of, or was responsible for, the presence of such hazardous or
toxic substances. The presence of such substances, or the failure to properly
remediate such substances, may adversely affect the owner's or operator's
ability to sell or rent such property or to use such property as collateral in
its borrowings.
Phase I environmental site assessments (which generally did not include
environmental sampling, monitoring or laboratory analysis) were obtained by the
Company with respect to properties acquired by the Company from 1989 to the
present. 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 Company's properties.
However, other than as described in this Prospectus Supplement, the attached
Prospectus or the documents incorporated by reference in this Prospectus
Supplement, the Company has no knowledge that any environmental contamination
has occurred nor that 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 (the "Annual Report"), particularly "Item
1 -- Regulation" and Note 16 to the consolidated financial statements.
Since the date of the Annual Report, the Company has discovered that its
Charlotte, North Carolina industrial facility was the site of additional
releases of petroleum-related substances into the soil and groundwater at the
premises of a former trucking company tenant. The former trucking company tenant
may be responsible for some or all of these releases. The Company has not
completed its investigation of these releases, but Company management currently
believes that the cost of addressing the releases discovered to date would not
have a material adverse effect on the Company's results of operations, financial
position or liquidity.
The State of Florida has established a program covering part of the cost of
addressing releases of dry cleaning-related solvents from certain dry cleaning
facilities in the state. Since the date of its Annual Report, the Company has
encouraged its dry cleaning tenants at its Florida properties to enter this
program and to investigate whether their operations have resulted in the release
of dry cleaning-related solvents. These investigations are ongoing and have
resulted in the discovery of releases from dry cleaning tenants to the soil and
groundwater at certain Company properties. Based on the information provided to
the Company to date, the Company believes that the cost of addressing the
releases discovered to date would not have a material adverse effect on the
Company's results of operations, financial position or liquidity.
UNCERTAINTY OF MEETING ACQUISITION OBJECTIVES AND NEW BUSINESS INITIATIVES
The Company continually seeks prospective acquisitions of additional
shopping centers and portfolios of shopping centers which the Company believes
can be purchased at attractive initial yields and/or which demonstrate the
potential for revenue and cash flow growth through renovation, expansion,
re-tenanting and re-leasing programs similar to those that the Company has
undertaken historically. The Company also evaluates from time to time mergers
and acquisitions with companies engaged in similar business. There can be no
assurance that the Company will complete any potential acquisition or merger
that it may evaluate. The evaluation process involves certain costs which are
non-recoverable in the event the transactions are not consummated. In addition,
notwithstanding the Company's criteria for evaluating and conducting due
diligence with respect to potential acquisitions, there can be no assurance that
any acquisition that is consummated will meet the Company's expectations. The
Company also has initiated several new strategies, including potential
co-investments, joint developments, and management of shopping center properties
for
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third-party owners, and no assurance can be given that these will be successful.
See "Prospectus Supplement Summary -- The Company" and "Recent Developments."
COMPETITION
The Company and its properties compete with numerous other real estate
companies and retail properties, respectively. Other retail properties within
the market areas of each of the Company's properties compete with the Company
for tenants, and the number of such competitive retail properties could have a
material effect on both the Company's ability to rent space at its properties
and the amount of rents chargeable. Other real estate companies compete for
development, redevelopment and acquisition opportunities, may be willing and
able to pay more for such opportunities than the Company, and may increase the
prices sought by sellers of such properties. Some of the Company's competitors
have substantially greater resources than the Company.
OWNERSHIP LIMITS AND CERTAIN EFFECTS OF FAILING TO QUALIFY AS A REIT
In order to maintain its qualification as a REIT, the Company must satisfy
various tests, including tests related to the source and amount of its income,
the nature of its assets, and its stock ownership. For example, not more than
50% in value of the outstanding shares of the Company may be owned, directly or
indirectly, by five or fewer individuals (as defined in the Internal Revenue
Code of 1986, as amended (the "Code")). To minimize the possibility that the
Company will fail to qualify as a REIT under this test, the Company's Articles
of Incorporation (the "Articles") authorize the directors to take such action as
may be required to preserve its qualification as a REIT and generally limits the
ownership of Common Stock by any particular shareholder. The ownership limits in
the Articles may delay, defer or prevent a change in control of the Company. In
addition, the ownership of the Company's assets must comply with certain asset
tests that both limit the type of assets it may hold to certain types of real
estate and other investment assets and limit the concentration of those assets
in otherwise permitted investments. See "Taxation."
If the Company fails to qualify as a REIT, it will be subject to federal
income tax (including any applicable alternative minimum tax) on its taxable
income at corporate rates. In addition, unless entitled to relief under certain
statutory provisions, the Company will also be disqualified from treatment as a
REIT for the four taxable years following the year during which qualification is
lost. This treatment would reduce the net earnings of the Company available for
investment or distribution to shareholders because of the additional tax
liability for the year or years involved. In addition, distributions would no
longer be required to be made. See "Taxation."
S-6
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THE COMPANY
The 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,
with acquisition, redevelopment, financing, property management and leasing
capabilities. As of September 30, 1996, on a cost basis, approximately 97% of
the Company's investment portfolio consisted of shopping centers located
primarily in the Southeastern United States. As of December 1, 1996, the Company
owned 83 shopping centers, including four freestanding Wal-Marts (two of which
were subsequently sold in December 1996) and certain other small commercial
properties. As of December 1, 1996, the Company's properties contained in excess
of 8.4 million square feet of leasable space, which was approximately 94%
leased. See "-- Properties."
The Company's focus on neighborhood and community shopping centers in the
Southeastern United States provides it with a high degree of market familiarity
and promotes greater efficiencies in the Company's acquisition, property
management and leasing activities. Such focus facilitates the Company in
establishing and maintaining strong working relationships with major national
and regional retailers which serve the Southeastern market. The Company's
leading tenants include supermarkets such as Publix, Kroger, Winn-Dixie,
Delchamps, Harris Teeter and Food Lion, drug stores such as Revco, Eckerd and
K&B, and national retailers such as Wal-Mart and Kmart.
RECENT DEVELOPMENTS
In 1996, the Company determined its management succession, took various
actions to implement its acquisition and disposition strategy, and began new
initiatives in the co-investment, joint development and property management
areas.
Underwritten Public Offering
On January 14, 1997, the Company completed the Underwritten Public Offering
of 4,000,000 shares of Common Stock under an existing shelf registration
statement at a price of $11.25 per share. In connection with the Underwritten
Public Offering, the Company also granted PaineWebber, the sole underwriter, an
option to purchase up to an additional 653,747 shares of Common Stock, solely to
cover over-allotments in connection with the Underwritten Public Offering. As of
the date hereof, PaineWebber has not exercised such option in whole or in part.
Approximately $38,224,000 of the estimated $42,625,000 of the net proceeds from
the Underwritten Public Offering will be applied to the repurchase of the
$54,799,000 aggregate principal amount of Debentures owned by HBK.
Chief Executive Officer Succession
Effective January 1, 1997, Thomas H. McAuley, President and Chief Operating
Officer of the Company since October 1, 1995, assumed the additional role of
Chief Executive Officer, a position formerly held by Donald W. MacLeod. Mr.
McAuley has been a Director of the Company since 1987 and has 19 years of real
estate experience at the Company, Faison Associates, Ewing Southeast Realty and
Johnstown Mortgage Company. Mr. MacLeod continues to serve as Chairman of the
Board of Directors.
Strategic Initiatives
The Company has initiated new plans to complement its strategy of acquiring
and operating high-quality, well-located shopping centers which are anchored by
supermarkets, drug stores and other consumer necessity or value-oriented
retailers. This strategy includes developing neighborhood and community shopping
centers, whether for the Company's own account or in strategic alliances with
prominent Southeastern shopping center developers, and greater emphasis on
redeveloping and expanding existing centers. In 1996, the Company began taking a
more active approach to the disposition of certain investment properties. In
addition, the
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Company intends to pursue co-investment opportunities with respect to
Southeastern shopping centers where IRT Capital Corporation ("IRT Capital"), a
taxable affiliate of the Company, would manage the center after its acquisition
or development, thereby providing management fee income in addition to its
investment return.
Acquisitions
The Company constantly evaluates possible property acquisitions. In 1996,
the Company acquired two additional shopping centers for a total cash
consideration of approximately $14.8 million.
On August 30, 1996, the Company purchased Salisbury Marketplace in
Salisbury, North Carolina for $4.6 million cash. This property, which was built
in 1987, contains approximately 77,000 square feet of retail space, is anchored
by Food Lion and Revco and, as of December 1, 1996, was 100% leased.
On November 25, 1996, the Company purchased Alafaya Commons in Orlando,
Florida for $10.2 million cash, funded from the Company's Line of Credit.
Alafaya, which was built in 1987, contains approximately 121,000 square feet of
retail space, and was 100% leased as of December 1, 1996. The anchor tenants are
a 54,000 square foot Publix and an 11,000 square foot JoAnn Fabrics.
In addition, the Company has one pending contract to purchase a shopping
center for $7.1 million, subject to completion of environmental and other
diligence.
Dispositions
The Company continually assesses its portfolio for possible dispositions,
and in 1996, it sold three investments for cash and purchase-money financing
totaling approximately $10.8 million. On March 31, 1996, the Company sold its
only regional mall, Valley West Mall in Glendale, Arizona, for a total sales
price of $5.45 million, consisting of $1.65 million in cash and a purchase-money
mortgage of $3.80 million bearing interest at 9% per annum. On December 24,
1996, the Company sold its vacant Wal-Mart stores in Fremont and Kearney,
Nebraska for a total consideration of $5.35 million, consisting of $4.35 million
in cash and a $1.00 million, 7.00% purchase-money second mortgage due in 1998.
These sales of non-Southeastern properties which, in the opinion of Company
management, had little or no further growth potential, were made in accordance
with the Company's objective to focus on Southeastern properties.
PROPERTIES
The Company's properties are typically anchored by prominent consumer
necessity-oriented tenants, such as supermarkets and drug stores, which tend to
attract shoppers for basic household goods. In addition, the Company's tenants
include national value retailing chains. Company management believes that the
generally high quality of its shopping center locations is attractive to new
tenants and aids in the retention of existing tenants. The Company seeks to
diversify the credit risk within its portfolio and among the retailers that
occupy shopping centers. The Company's 1995 annual revenue was derived from over
1,050 leases with 750 different tenants, with no single tenant or corporate
entity accounting for more than 7.9% of revenues. Nine different supermarket
chains and two national value chains comprise 11 of the 15 tenants which
accounted for 1% or more of the Company's revenues during 1995. Together,
supermarkets accounted for approximately 29% of such revenues, while national
value retailers and drugstores accounted for approximately 15% and 4%,
respectively. The Company's leading tenants include supermarkets such as Publix,
Kroger, Winn-Dixie, Delchamps, Harris Teeter and Food Lion, drug stores such as
Revco, Eckerd, and K&B, and national retailers such as Wal-Mart and Kmart.
The Company's Southeastern shopping centers are spread among 62 counties in
10 states. Based on data provided by McGraw Hill/DRI, for the period from 1997
to 2001, the weighted average population growth rate in the Company's
Southeastern counties is estimated to be 5.1% compared to an estimated growth
rate of 3.7% for the United States as a whole. In addition, based on data
provided by McGraw Hill/DRI, these Southeastern counties are projected to have a
weighted average growth rate in nonfarm employment of 7.6% over the same period,
compared to an estimated national average of 5.6%.
S-8
<PAGE> 11
The following table lists all of the Company's real estate investments, as
of December 1, 1996, with shopping centers grouped by state and metropolitan
markets:
<TABLE>
<CAPTION>
YEAR
COMPANY PERCENT COMPLETED, PRINCIPAL TENANTS
DATE OWNED GROSS LEASED RENOVATED OR -------------------------------
DESCRIPTION ACQUIRED LEASABLE AREA 12/1/96 EXPANDED TENANT SQUARE FEET
- -------------------------------- --------- ------------------ -------- ------------ ----------------- -----------
<S> <C> <C> <C> <C> <C> <C>
SHOPPING CENTERS
ALABAMA
COLUMBUS, (GA)
Stadium Plaza 8/92 70,475 sq. ft. 94% 1988 Piggly Wiggly 30,625
Phenix City, AL Big B Drugs 10,950
MOBILE
West Gate Plaza 6/74 & 64,378 sq. ft. 98% 1974 & Winn-Dixie 44,000
Mobile, AL 1/85 1995 K&B Drugs 12,000
FLORIDA
DAYTONA BEACH
Masonova Plaza(1) 6/79 157,955 sq. ft. 40% 1969
Daytona Beach, FL
New Smyrna Beach Regional 8/92 118,451 sq. ft. 99% 1987 Publix 42,112
New Smyrna Beach, FL Walgreens 13,070
Beall's Outlet 8,000
Old Kings Commons 5/88 84,759 sq. ft. 99% 1988 Wal-Mart(2) 54,233
Palm Coast, FL
FT. LAUDERDALE
Countryside Shops 6/94 173,161 sq. ft. 100% 1986, 1988 Eckerd Drugs 10,356
Cooper City, FL & 1991 Publix 39,795
J. Byrons 44,000
Westgate Square 6/94 104,893 sq. ft. 95% 1984 & Winn-Dixie 36,320
Sunrise, FL 1988 Walgreens 13,000
FT. WALTON BEACH
Ft. Walton Beach Plaza 7/86 48,248 sq. ft. 100% 1986 Food World 42,848
Ft. Walton Beach, FL
JACKSONVILLE
South Beach Regional 8/92 289,319 sq. ft. 99% 1990 & Kmart 86,479
Jacksonville Beach, FL 1991 Stein Mart 35,077
Beall's 35,500
Food Lion 29,000
NAPLES
Gulf Gate Plaza 6/79 173,216 sq. ft. 81% 1969 & Publix 29,120
Naples, FL 1974 Beall's Outlet 17,500
JoAnn Fabrics 15,138
ORLANDO
Alafaya Commons 11/96 120,586 sq. ft. 100% 1987 Publix 54,230
Orlando, FL JoAnn Fabrics 11,000
Hoffner Plaza(1) 6/79 39,370 sq. ft. 20% 1972
Orlando, FL
PENSACOLA
Parkmore Plaza 12/92 159,067 sq. ft. 99% 1986 & Wal-Mart 90,399
Milton, FL 1992 Delchamps 49,968
Pensacola Plaza 7/86 56,098 sq. ft. 100% 1985 Food World 42,848
Pensacola, FL
SARASOTA-BRADENTON
North River Village Center 12/92 & 177,128 sq. ft. 100% 1988 & Kmart 94,841
Ellenton, FL 12/93 1993 Publix 42,112
Walgreens 13,500
Beall's 9,000
Venice Plaza(3) 6/79 144,850 sq. ft. 94% 1971 & TJX 77,117
Venice, FL 1979 Kash & Karry 22,200
Rite Aid(2) 7,500
</TABLE>
S-9
<PAGE> 12
<TABLE>
<CAPTION>
YEAR
COMPANY PERCENT COMPLETED, PRINCIPAL TENANTS
DATE OWNED GROSS LEASED RENOVATED OR -------------------------------
DESCRIPTION ACQUIRED LEASABLE AREA 12/1/96 EXPANDED TENANT SQUARE FEET
- -------------------------------- --------- ------------------ -------- ------------ ----------------- -----------
<S> <C> <C> <C> <C> <C> <C>
TAMPA-ST. PETERSBURG-CLEARWATER
Chelsea Place 7/93 81,144 sq. ft. 100% 1992 Publix 48,890
New Port Richey, FL Eckerd Drugs 9,504
Palm Gardens 6/79 52,670 sq. ft. 100% 1970 Food Lion 34,050
Largo, FL
Seven Hills 7/93 64,890 sq. ft. 100% 1991 Publix 48,890
Spring Hill, FL
GEORGIA
ATLANTA
Douglas Commons 8/92 97,027 sq. ft. 93% 1988 Kroger 59,431
Douglasville, GA
Macland Pointe 1/93 79,699 sq. ft. 98% 1992 & Publix 55,999
Marietta, GA 1993
Paulding Commons 8/92 192,391 sq. ft. 98% 1991 Kmart 86,479
Dallas, GA Kroger 49,700
Spalding Village 8/92 235,318 sq. ft. 100% 1989 Kmart 86,479
Griffin, GA Kroger 59,431
J.C. Penney's 33,796
Wesley Chapel Crossing 12/92 170,792 sq. ft. 98% 1989 Wal-Mart 91,124
Decatur, GA Ingles 32,000
Big B Drugs 8,468
MACON
Watson Central 12/92 & 227,747 sq. ft. 95% 1989 & Wal-Mart 122,382
Warner Robins, GA 10/93 1993 Winn-Dixie 45,000
VARIOUS
Colony Square 2/88 50,000 sq. ft. 100% 1987 Food Lion 25,000
Fitzgerald, GA
Commerce Crossing 12/92 100,668 sq. ft. 100% 1988 Wal-Mart 50,968
Commerce, GA Ingles 32,000
Heritage Walk 6/93 159,362 sq. ft. 100% 1991 & Kmart 86,479
Milledgeville, GA 1992 Bi-Lo 30,623
Goody's 25,000
West Towne Square 3/90 89,596 sq. ft. 94% 1988 Bruno's Foodmax 44,512
Rome, GA
KENTUCKY
Scottsville Square 8/92 38,450 sq. ft. 25% 1986
Bowling Green, KY
LOUISIANA
BATON ROUGE
Bluebonnet Village 12/94 89,879 sq. ft. 98% 1983 Delchamps 33,387
Baton Rouge, LA K&B Drugs 15,000
Millervillage Shopping Center 12/94 94,559 sq. ft. 92% 1983 & Delchamps 56,052
Baton Rouge, LA 1992 K&B Drugs 15,000
Sherwood South 12/94 75,607 sq. ft. 100% 1972, 1988 Sav-A-Center 22,500
Baton Rouge, LA & 1992 Eckerd Drugs 12,000
Cloth World 9,750
Siegen Village 12/94 115,762 sq. ft. 100% 1988 & Kmart 92,079
Baton Rouge, LA 1996 Office Depot 31,200
HOUMA
Tarpon Heights 1/95 56,605 sq. ft. 100% 1982 Delchamps 28,092
Galliano, LA Eckerd Drugs 8,905
</TABLE>
S-10
<PAGE> 13
<TABLE>
<CAPTION>
YEAR
COMPANY PERCENT COMPLETED, PRINCIPAL TENANTS
DATE OWNED GROSS LEASED RENOVATED OR -------------------------------
DESCRIPTION ACQUIRED LEASABLE AREA 12/1/96 EXPANDED TENANT SQUARE FEET
- -------------------------------- ------- --------- ---- ---------- ---------------- ---------
<S> <C> <C> <C> <C> <C> <C>
LAFAYETTE
Ambassador Row 12/94 193,982 sq. ft. 99% 1980 & Kmart 83,067
Lafayette, LA 1991 K&B Drugs 18,580
Big Lots 32,109
Ambassador Row Courtyards 12/94 155,483 sq. ft. 82% 1986 & Delchamps 54,084
Lafayette, LA 1991 Marshalls 22,500
Pinhook Plaza 12/94 190,319 sq. ft. 98% 1979 & Kmart 72,897
Lafayette, LA 1992 Delchamps 42,599
Plaza Acadienne(4) 12/94 105,419 sq. ft. 100% 1980 Delchamps 28,092
Eunice, LA K&B Drugs 15,000
The Boulevard 12/94 68,012 sq. ft. 100% 1976 & Campo Concept 30,975
Lafayette, LA 1994 Piccadilly 10,440
NEW ORLEANS
Country Club Plaza 1/95 64,686 sq. ft. 92% 1982 Delchamps 33,387
Slidell, LA K&B Drugs 8,450
The Crossing 12/94 113,989 sq. ft. 100% 1988 & Albertson's 58,432
Slidell, LA 1993 Campo Concept 20,000
Piccadilly 11,250
Elmwood Oaks 1/92 130,284 sq. ft. 100% 1989 Wal-Mart 95,079
Harahan, LA Blockbuster Music 12,045
Western Auto 10,560
Village at Northshore 12/94 144,373 sq. ft. 100% 1988 & Delchamps 51,348
Slidell, LA 1993 Service
Merchandise 50,000
MISSISSIPPI
Delchamps Plaza 4/88 66,857 sq. ft. 100% 1987 Delchamps 42,057
Pascagoula, MS K&B Drugs 15,000
NORTH CAROLINA
ASHEVILLE
Asheville Plaza(5) 4/86 49,800 sq. ft. 100% 1967 The Paty Company 49,800
Asheville, NC
CHARLOTTE-GASTONIA-ROCK HILL
Providence Square 12/71 85,690 sq. ft. 90% 1973 Harris Teeter 35,702
Charlotte, NC Eckerd Drugs 9,600
Stanley Market Place 1/92 40,364 sq. ft. 100% 1980 & Winn-Dixie 28,400
Stanley, NC 1991 Revco 6,000
GREENSBORO-WINSTON SALEM-HIGH
POINT
Thomasville Commons 8/92 148,754 sq. ft. 98% 1991 Kmart 86,479
Thomasville, NC Ingles 32,000
Revco 8,450
Salisbury Marketplace 8/96 76,970 sq. ft. 100% 1987 Food Lion 29,000
Salisbury, NC Revco 8,470
GREENVILLE
University Center 12/89 56,180 sq. ft. 93% 1989 Harris Teeter 32,960
Greenville, NC Kerr Drugs 9,720
HICKORY-MORGANTON-LENOIR
Taylorsville Shopping Center 8/86 & 48,537 sq. ft. 100% 1982 & Harris Teeter 31,137
Taylorsville, NC 12/88 1988
RALEIGH-DURHAM-CHAPEL HILL
Centre Pointe Plaza 12/92 & 163,642 sq. ft. 100% 1989 & Wal-Mart 91,155
Smithfield, NC 12/93 1993 Winn-Dixie 38,547
Riverview Shopping Center 3/72 130,058 sq. ft. 84% 1973 & Kroger 53,538
Durham, NC 1994 Upchurch Drugs 10,000
Willowdaile Shopping Center 8/86 & 120,815 sq. ft. 95% 1986 Harris Teeter 27,985
Durham, NC 12/87 Carmike Cinemas 25,383
Kerr Drugs 9,600
WILMINGTON
The Galleria 8/86 & 92,344 sq. ft. 90% 1986, 1990 & Harris Teeter 28,000
Wrightsville Beach, NC 12/87 1996 Kerr Drugs 9,600
</TABLE>
S-11
<PAGE> 14
<TABLE>
<CAPTION>
YEAR
COMPANY PERCENT COMPLETED, PRINCIPAL TENANTS
DATE OWNED GROSS LEASED RENOVATED OR -------------------------------
DESCRIPTION ACQUIRED LEASABLE AREA 12/1/96 EXPANDED TENANT SQUARE FEET
- -------------------------------- ------- --------- ---- ---------- ---------------- ----------
<S> <C> <C> <C> <C> <C> <C>
VARIOUS
Chadwick Square 1/92 31,700 sq. ft. 95% 1985 Food Lion 25,000
Hendersonville, NC
Chestnut Square 1/92 39,640 sq. ft. 100% 1985 Food Lion 21,000
Brevard, NC Eckerd Drugs(2) 8,640
Eden Centre 11/94 56,355 sq. ft. 100% 1991 Food Lion 29,000
Eden, NC Revco 8,450
First Street Station 8/94 52,230 sq. ft. 98% 1989 Harris Teeter 32,960
Albemarle, NC Eckerd Drugs 8,640
Forest Hills Centre 8/90 74,180 sq. ft. 100% 1990 Harris Teeter 32,960
Wilson, NC Eckerd Drugs 8,640
Plaza North 8/92 47,240 sq. ft. 92% 1986 Bi-Lo 25,590
Hendersonville, NC Revco 8,450
Shelby Plaza(4) 4/86 103,000 sq. ft. 67% 1972 Big Lots 30,000
Shelby, NC Heilig-Meyers 25,000
SOUTH CAROLINA
VARIOUS
Abbeville Plaza(1) 4/86 59,525 sq. ft. 50% 1970
Abbeville, SC
Carolina Place 5/89 36,560 sq. ft. 97% 1989 Bi-Lo 32,960
Hartsville, SC
Chester Plaza 4/86 & 71,443 sq. ft. 66% 1967 & Bi-Lo 30,623
Chester, SC 2/92 1992 Revco 5,500
Lancaster Plaza 4/86 77,400 sq. ft. 100% 1971 Bi-Lo 19,200
Lancaster, SC Revco 6,600
Lancaster Shopping Center 8/86 & 29,047 sq. ft. 100% 1963 & Harris Teeter 24,045
Lancaster, SC 12/87 1987
Litchfield Landing 8/86 42,201 sq. ft. 98% 1984 Harris Teeter 24,806
North Litchfield, SC Eckerd Drugs 8,640
North Village Center(3) 8/86 60,356 sq. ft. 100% 1984 Harris Teeter 24,806
North Myrtle Beach, SC Revco 10,500
TENNESSEE
NASHVILLE
Smyrna Village 8/92 83,334 sq. ft. 100% 1992 Kroger 59,214
Smyrna, TN
VARIOUS
Lawrence Commons 8/92 52,295 sq. ft. 100% 1987 Kroger 37,245
Lawrenceburg, TN
Forrest Gallery 12/92 214,450 sq. ft. 93% 1987 Wal-Mart(2) 65,930
Tullahoma, TN Kroger 48,780
Ira A. Watson 32,680
VIRGINIA
LYNCHBURG
Waterlick Plaza 10/89 98,694 sq. ft. 97% 1973 & Harris Teeter 30,780
Lynchburg, VA 1988 Piece Goods 22,260
Revco 10,500
VARIOUS
Smyth Valley Crossing 12/92 126,841 sq. ft. 100% 1989 Wal-Mart(6) 65,930
Marion, VA Ingles 32,000
Harris Teeter(5) 6/88 & 36,535 sq. ft. 100% 1981 & Harris Teeter 36,535
Lexington, VA 6/89 1989
------------- ---------
TOTAL FOR 76 SHOPPING CENTERS 7,693,704 sq. ft. 5,027,349
============= =========
</TABLE>
S-12
<PAGE> 15
<TABLE>
<CAPTION>
YEAR
COMPANY PERCENT COMPLETED, PRINCIPAL TENANTS
DATE OWNED GROSS LEASED RENOVATED OR -------------------------------
DESCRIPTION ACQUIRED LEASABLE AREA 12/1/96 EXPANDED TENANT SQUARE FEET
- -------------------------------- --------- ------------------ -------- ------------ ----------------- -----------
<S> <C> <C> <C> <C> <C> <C>
NET LEASED WAL-MARTS
Wal-Mart Stores, Inc. 6/85 54,223 sq. ft. 100% 1985 Wal-Mart 54,223
Mathews, LA
Wal-Mart Stores, Inc.(7) 6/85 64,890 sq. ft. 100% 1985 Wal-Mart(2) 64,890
Fremont, NE
Wal-Mart Stores, Inc.(7) 6/85 & 83,249 sq. ft. 100% 1985 Wal-Mart(2) 83,249
Kearney, NE 1/91
Wal-Mart Stores, Inc. 7/85 53,571 sq. ft. 100% 1985 Wal-Mart(2) 53,571
Marble Falls, TX
LAND PURCHASE LEASEBACKS
Lawrence County Shopping
Center 5/71 135,605 sq. ft. 100% 1971 N/A N/A
Sybene, OH
Grand Marche Shopping Center 9/72 200,585 sq. ft. 100% 1969 N/A N/A
Lafayette, LA
Manatee County Shopping
Center 5/71 120,500 sq. ft. 100% 1971 N/A N/A
Bradenton, FL ---------
TOTAL FOR 83 SHOPPING CENTERS 8,406,327 sq. ft.
APARTMENT =========
Whitehall Kent Apartments 6/79 188 units 79% 1968 N/A N/A
Kent, OH =========
INDUSTRIAL PROPERTIES
Industrial Buildings 6/79 188,513 sq. ft. 78% 1956 & ABF Freight
Charlotte, NC 1963 System 82,400
Plasti-Kote 6/79 41,000 sq. ft. 100% 1961 & Plasti-Kote 41,000
Medina, OH --------- 1966
229,513 sq. ft.
BANKS =========
The Old Phoenix National
Bank(8) 12/84 73,074 sq. ft. 100% Various Old Phoenix
Medina County, OH ========= National Bank 73,074
</TABLE>
- ---------------
(1)Masonova Plaza, Hoffner Plaza and Abbeville Plaza represent candidates for
sale or redevelopment.
(2)The named tenants have vacated but are still paying minimum rental under
their leases.
(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 with 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.
(6)Tenant expanded its space by 32,980 sq. ft. to a total of 98,910 sq. ft. at
its expense and at no additional rental on the increased square footage.
(7)Sold December 24, 1996.
(8)This investment represents ten branch bank properties leased to one tenant.
S-13
<PAGE> 16
Shopping Center Lease Expirations
The following tables show, as of September 30, 1996, anchor tenant and shop
tenant lease expirations, respectively, for the next 10 calendar years, assuming
that no tenants exercise renewal options:
ANCHOR TENANTS(1)
LEASE EXPIRATION SCHEDULE
<TABLE>
<CAPTION>
APPROXIMATE PERCENT OF ANNUALIZED AVERAGE
NUMBER OF LEASED TOTAL LEASED BASE RENT BASE RENT PER
LEASE YEAR LEASES AREA IN SQUARE FOOTAGE UNDER EXPIRING SQUARE FOOT
EXPIRATION EXPIRING SQUARE FEET EXPIRING LEASES EXPIRING
------------------------- --------- ------------ -------------- -------------- -------------
<S> <C> <C> <C> <C> <C>
1997..................... 10 157,438 2% $ 496,749 $3.16
1998..................... 6 209,134 3 963,804 4.61
1999..................... 5 65,955 1 407,422 6.18
2000..................... 4 53,500 1 172,200 3.22
2001..................... 7 74,850 1 482,027 6.44
2002..................... 6 96,825 1 474,859 4.90
2003..................... 5 79,543 1 504,422 6.34
2004..................... 7 206,651 3 1,274,102 6.17
2005..................... 12 360,288 5 1,772,388 4.92
2006..................... 9 376,108 5 2,194,726 5.84
-- --------- -- ---------- -----
71 1,680,292 23% $8,742,699 $5.20
== ========= == ========== =====
</TABLE>
- ---------------
(1) Anchor tenants include all supermarkets, drug stores, national value
retailers and department stores and other tenants leasing in excess of
10,000 square feet which, in management's opinion, have the traffic-
generating qualities necessary to be considered an anchor.
SHOP TENANTS(1)
LEASE EXPIRATION SCHEDULE
<TABLE>
<CAPTION>
APPROXIMATE PERCENT OF ANNUALIZED AVERAGE
NUMBER OF LEASED TOTAL LEASED BASE RENT BASE RENT PER
LEASE YEAR LEASES AREA IN SQUARE FOOTAGE UNDER EXPIRING SQUARE FOOT
EXPIRATION EXPIRING SQUARE FEET EXPIRING LEASES EXPIRING
------------------------- --------- ------------ -------------- -------------- -------------
<S> <C> <C> <C> <C> <C>
1997..................... 233 498,608 7% $ 4,436,148 $ 8.90
1998..................... 190 340,178 5 3,383,268 9.95
1999..................... 173 340,364 5 3,480,129 10.22
2000..................... 100 290,730 4 2,829,642 9.73
2001..................... 71 246,365 3 1,902,622 7.72
2002..................... 11 36,512 0 368,263 10.09
2003..................... 9 20,608 0 231,586 11.24
2004..................... 5 11,530 0 83,284 7.22
2005..................... 8 25,764 0 394,372 15.31
2006..................... 6 7,991 0 178,816 22.38
--- --------- -- ----------- ------
806 1,818,650 24% $ 17,288,130 $ 9.51
=== ========= == =========== ======
</TABLE>
- ---------------
(1) Shop tenants include all tenants except anchor tenants.
MORTGAGE LOAN INVESTMENTS
The Company held fixed rate mortgage loan investments with respect to five
properties aggregating $12,219,270 as of September 30, 1996. Each of these loans
are secured by first mortgage liens, except as described below. Interest rates
on such investments ranged from 8.63% to 12.38%, with maturity dates from August
1998 to May 2009. One of the Company's mortgage loan investments is a $5,115,451
purchase-money
S-14
<PAGE> 17
second lien mortgage taken back on the sale of a former equity investment,
Spanish Quarter Apartments. The Spanish Quarter Apartments mortgage loan
investment is part of a wrap-around mortgage financing and is subordinate to
$742,760 of mortgage debt owed by the Company with respect to such property. All
of the Company's mortgage loan investments are current, and the Company
considers all such loans to be well-secured. See "Recent
Developments -- Dispositions" for a description of purchase-money financing
taken back on the December 1996 sale of two Wal-Mart stores.
USE OF PROCEEDS
The Company and HBK have agreed in the Purchase and Standstill Agreement to
purchase and sell, respectively, $16,575,000 aggregate principal amount of
Debentures held by HBK for the 1,500,000 shares of Common Stock offered hereby.
The Company will repurchase the balance of such Debentures from HBK for
$38,224,000 in cash from the net proceeds of the Underwritten Public Offering.
See "Plan of Offering."
S-15
<PAGE> 18
CAPITALIZATION
The following table sets forth the unaudited capitalization of the Company
as of September 30, 1996, pro forma adjustments to give effect to certain
transactions consummated after September 30, 1996, including the issuance and
sale of the Common Stock offered hereby and in the Underwritten Public Offering
and the purchase and cancellation of $54,799,000 aggregate principal amount of
Debentures from the proceeds thereof and the pro forma capitalization after such
adjustments. This table should be read in conjunction with the consolidated
financial information of the Company incorporated herein by reference.
<TABLE>
<CAPTION>
SEPTEMBER 30, 1996
----------------------------------------
PRO FORMA
ACTUAL ADJUSTMENTS PRO FORMA
-------- ----------- ---------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Debt:
Mortgage notes payable................................. $ 88,146 $ (3,850)(1) $ 84,296
7.3% Debentures........................................ 84,905 (54,799)(3) 30,106
7.45% senior notes..................................... 49,925 49,925
Indebtedness to banks.................................. 1,100 13,900(2) 10,617
(4,383)(3)
-------- -------- --------
Total debt..................................... 224,076 (49,132) 174,944
-------- -------- --------
Shareholders' equity:
Common Stock, $1 par value, 75,000,000 shares
authorized; 25,783,911 shares issued and outstanding
(actual); 31,283,911 shares issued and outstanding
(pro forma)......................................... 25,784 5,500(3) 31,284
Additional paid-in-capital............................. 201,057 53,094(3) 254,151
Cumulative distributions in excess of net earnings..... (32,579) (965)(4) (33,544)
Total shareholders' equity..................... 194,262 57,629 251,891
-------- -------- --------
Total capitalization........................... $418,338 $ 8,497 $ 426,835
======== ======== ========
</TABLE>
- ---------------
(1) Repayment of a $3,850 mortgage note payable at maturity November 1, 1996.
(2) The repayment on November 1, 1996 of a mortgage note payable and the
acquisition of Alafaya Commons shopping center for $10,200 on November 24,
1996 were funded from $13,900 of borrowings under the Line of Credit and
$150 of cash on hand.
(3) Issuance of 4,000,000 shares pursuant to the Underwritten Public Offering
and 1,500,000 shares offered hereby.
<TABLE>
<S> <C>
Net proceeds are estimated as follows:
Underwritten Public Offering.................................. $42,652
Common Stock offered hereby................................... 16,530
-------
$59,182
=======
Use of Proceeds:
Principal portion of Debentures purchased..................... $54,799
Repayment of indebtedness to banks............................ 4,383
-------
$59,182
=======
</TABLE>
(4) Recognition of loss on early extinguishment of debt as a result of the
purchase of the Debentures based on the closing price of the Company's
Common Stock on January 15, 1997 of $11.875 per share.
S-16
<PAGE> 19
DISTRIBUTIONS
The Company has paid 76 consecutive quarterly distributions to its
shareholders. The Company's current quarterly dividend is $0.225 per share, or
$0.90 per share annually, which represents a current annual yield of
approximately 7.58% (based on the January 15, 1997 closing price of the Common
Stock on the NYSE of $11.875).
In January of each year, the Company provides its shareholders with
information concerning the amount of distributions paid during the preceding
year which constitute ordinary income, net capital gain or return of capital.
For federal income tax purposes, the Company has determined that approximately
10% and 28% of the distributions paid in 1994 and 1995, respectively, were
non-taxable returns of capital to shareholders.
TAXATION
The provisions of the Code pertaining to REITs are highly technical and
complex. The following is a very general summary of certain provisions which
currently govern the federal income tax treatment of the Company and its
shareholders. For the particular provisions which govern the federal income tax
treatment of the Company and its shareholders, 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. This
discussion does not address any state tax considerations or issues that arise as
a result of an investor's special circumstances or special status under the
Code.
Investors are urged to consult their own tax advisors with respect to the
tax consequences arising under federal law and the laws of any state,
municipality or other taxing jurisdiction. Foreign investors should consult
their own tax advisors concerning the tax consequences of an investment in the
Company including the possibility of U.S. income tax withholding on Company
distributions.
The Company believes that at all times it has been organized and has
operated and the Company intends to continue to operate, in such a manner as to
qualify as a REIT under the Code. Although management of the Company believes it
was organized, has operated and is operating in such a manner, no assurance can
be given that the Company has so qualified or it will at all times so qualify.
The Company's continued qualification and taxation as a REIT during future
taxable years is dependent, among other things, upon its meeting the
requirements of Code Section 856 throughout the year and for the year as a
whole. Accordingly, because IRT's satisfaction of such requirements will depend
on future events, it is not possible to assure that IRT will satisfy the
requirements to be a real estate investment trust during those years. In
addition qualification as a REIT involves the application of highly technical
and complex Code provisions for which there are only limited judicial or
administrative interpretations and the determination of various factual matters
and circumstances not entirely within the Company's control. No assurance can be
given that new legislation, new regulations, administrative interpretations or
court decisions will not change the tax laws with respect to qualification as a
REIT or the federal income tax consequences of such qualification. The Company,
however, is not aware of any currently pending tax legislation that would
adversely affect its ability to continue to operate as a REIT.
To qualify as a REIT under the Code for a taxable year, the Company must
meet certain organizational and operational requirements, which generally
require it to be a passive investor in operating real estate and to avoid
excessive concentration of its ownership of capital stock. Generally, for each
taxable year, at least 75% of a REIT's gross income must be derived from
specified real estate sources and 95% must be derived from such real estate
sources plus certain other permitted sources. In addition, gross income from the
sale or other disposition of stock or securities held for less than one year and
real property held for less than four years must constitute less than 30% of the
gross income of the REIT for each taxable year. At least 75% of the value of the
total assets of the Company at the end of each calendar quarter must consist of
real estate assets, cash or governmental securities. In addition, the value of
any one issuer's securities owned by the Company may not exceed 5% of the value
of the Company's total assets, and the Company may not own more than 10% of any
one issuer's outstanding voting securities. The Company owns 1% of the voting
stock and approximately 96% of the nonvoting stock, representing approximately
95% of the equity, of IRT Capital with the remaining
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<PAGE> 20
equity interests currently owned by certain officers of the Company. In
addition, based upon its analysis of the estimated value of the debt and equity
securities of IRT Capital to be owned by the Company relative to the estimated
value of the other assets to be owned by the Company, the Company believes that
the debt and equity securities of IRT Capital held by the Company will not
exceed, at the closing of the Offering, 5% of the total value of the Company's
assets. No independent appraisals will be obtained to support this conclusion.
Although the Company plans to take steps to ensure that it satisfies the 5%
value test, there can be no assurance that such steps will always be successful
or will not require a reduction in the Company's overall interest in IRT Capital
at some future time.
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
gain or the dividends paid deduction) for its taxable year to its shareholders,
it will generally not be subject to federal income tax with respect to income
which it distributes to its shareholders. However, the Company may be subject to
federal income tax under certain circumstances, including taxes at regular
corporate rates on any undistributed REIT taxable income, the "alternative
minimum tax" on its items of tax preference, and taxes imposed on income and
gain generated by certain extraordinary transactions. If the Company fails to
qualify as a REIT, it will be subject to federal income tax (including any
applicable alternative minimum tax) on its taxable income at corporate rates. In
addition, unless entitled to relief under certain statutory provisions, the
Company will also be disqualified from treatment as a REIT for the four taxable
years following the year during which qualification is lost. This treatment
would reduce the net earnings of the Company available for investment or
distribution to shareholders because of the additional tax liability for the
year or years involved. In addition, distributions would no longer be required
to be made. To the extent that distributions to shareholders would have been
made in anticipation of the Company's qualifying as a REIT, the Company might be
required to borrow funds or to liquidate certain of its investments to pay the
applicable tax. The failure to qualify as a REIT also would constitute a default
under certain debt obligations of the Company.
The failure to qualify as a REIT would have a material adverse effect on an
investment in the Company as the taxable income of the Company would be subject
to federal income taxation at corporate rates, and, therefore, the amount of
cash available for distribution to its shareholders would be reduced or
eliminated.
As long as the Company qualifies as a REIT, distributions made to the
Company's taxable U.S. shareholders out of current or accumulated earnings and
profits (and not designated as capital gain dividends) will be taken into
account by such U.S. shareholders as ordinary income and will not be eligible
for the dividends received deduction generally available to corporations.
Distributions that are designated as capital gain dividends will be taxed as
long-term capital gains (to the extent they do not exceed the Company's actual
net capital gain for the taxable year) without regard to the period for which
the shareholder has held his Common Stock. However, corporate shareholders may
be required to treat up to 20% of certain capital gain dividends as ordinary
income. Distributions in excess of current and accumulated earnings and profits
will not be taxable to a shareholder to the extent that they do not exceed the
adjusted basis of the shareholder's Common Stock, but rather will reduce the
adjusted basis of such stock. To the extent that distributions in excess of
current and accumulated earnings and profits exceed the adjusted basis of a
shareholder's Common Stock, the distributions will be included in income as
long-term capital gain (or short-term capital gain if the Common Stock has been
held for one year or less) assuming the Common Stock is a capital asset in the
hands of the shareholder. In addition, any dividend declared by the Company in
October, November or December of any year and payable to a shareholder of record
on a specified date in any such month shall be treated as both paid by the
Company and received by the shareholder on December 31 of such year, provided
that the distribution is actually paid by the Company during January of the
following calendar year.
PLAN OF OFFERING
HBK is a Delaware limited partnership with its principal office located at
777 Main Street, Suite 2750, Fort Worth, Texas 76102. As of the date of this
Prospectus Supplement, HBK has informed the Company that it owns $54,799,000
principal amount of Debentures and that the HBK Short Position relates to
1,500,000 shares of Company Common Stock. Pursuant to the Purchase and
Standstill Agreement between the Company and HBK, the Company has agreed to
repurchase such Debentures owned by HBK at their
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<PAGE> 21
aggregate par value plus accrued interest calculated in accordance with the
terms of such Debentures, in exchange for the 1,500,000 shares of Common Stock
offered directly to HBK by the Company hereby at an agreed value of $16,575,000
and a cash payment of $39,913,027 (including accrued interest). Pursuant to the
Purchase and Standstill Agreement, HBK has also agreed to use such shares of
Common Stock solely to cover the HBK Short Position. Upon completion of the
Offering, the repurchase of the Debentures owned by HBK, and the elimination of
the HBK Short Position, HBK will not own any Common Stock, Debentures or other
securities of the Company, and has agreed not to take any position with respect
to Company securities or to attempt to influence Company policies and management
in the future. All information contained herein regarding HBK has been supplied
by HBK, which is solely responsible therefor.
In connection with this Offering, HBK is acting for its own account, and is
not acting as an agent for, or otherwise for or on behalf of the Company.
LEGAL MATTERS
Certain legal matters, including the legality of the Common Stock, will be
passed upon for the Company by Alston & Bird, Atlanta, Georgia.
S-19
<PAGE> 22
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> 23
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. In addition, the Commission maintains a
site on the World Wide Web at http://www.sec.gov that contains reports,
information statements and other information regarding the Company and other
registrants that file electronically with the Commission.
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.
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.
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<PAGE> 24
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.
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
3
<PAGE> 25
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.
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;
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<PAGE> 26
(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, 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;
5
<PAGE> 27
(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 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
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<PAGE> 28
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).
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).
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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 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
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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 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
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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 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
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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 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;
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(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
(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
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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.
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.
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
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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.
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
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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.
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).
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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.
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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NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS IN CONNECTION WITH THIS OFFERING OTHER THAN THOSE CONTAINED IN
THIS PROSPECTUS SUPPLEMENT AND THE PROSPECTUS AND, IF GIVEN OR MADE, SUCH OTHER
INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED
BY THE COMPANY. NEITHER THE DELIVERY OF THIS PROSPECTUS SUPPLEMENT OR THE
PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE
ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY
SINCE THE DATE HEREOF OR THAT THE INFORMATION CONTAINED HEREIN IS CORRECT AS OF
ANY TIME SUBSEQUENT TO ITS DATE. THIS PROSPECTUS SUPPLEMENT AND THE PROSPECTUS
DO NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY ANY
SECURITIES OTHER THAN THE REGISTERED SECURITIES TO WHICH THEY RELATE. THIS
PROSPECTUS SUPPLEMENT AND THE PROSPECTUS DO NOT CONSTITUTE AN OFFER TO SELL OR A
SOLICITATION OF AN OFFER TO BUY SUCH SECURITIES IN ANY CIRCUMSTANCES IN WHICH
SUCH OFFER OR SOLICITATION IS UNLAWFUL.
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TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
PROSPECTUS SUPPLEMENT
Prospectus Supplement Summary......... S-1
Risk Factors.......................... S-3
The Company........................... S-7
Use of Proceeds....................... S-15
Capitalization........................ S-16
Distributions......................... S-17
Taxation.............................. S-17
Plan of Offering...................... S-18
Legal Matters......................... S-19
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........ 3
Description of Common Stock........... 14
Plan of Distribution.................. 16
Experts............................... 16
Legal Opinions........................ 16
</TABLE>
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1,500,000 SHARES
IRT PROPERTY COMPANY
(IRT LOGO)
COMMON STOCK
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PROSPECTUS SUPPLEMENT
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JANUARY 16, 1997
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