Registration No. 333-18303
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
---------------------------
AMENDMENT No. 2
to
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
---------------------------
CORNERSTONE PROPERTIES INC.
(Exact name of registrant as specified in its charter)
Nevada 74-2170858
(State or other jurisdiction of (I.R.S. employer identification number)
incorporation or organization)
Tower 56, 126 East 56th Street
New York, New York 10022
(212) 605-7100
(Address, including zip code, and telephone number, including area
code, of registrant's principal executive offices)
---------------------------
John S. Moody
President and Chief Executive Officer
Cornerstone Properties Inc.
Tower 56, 126 East 56th Street
New York, New York 10022
(212) 605-7100
(Name, address, including zip code, and telephone number,
including area code, of agent for service for the registrant)
---------------------------
Copies to:
F.H. MOORE, JR., ESQ.
Shearman & Sterling
599 Lexington Avenue
New York, New York 10022
---------------------------
Approximate date of commencement of proposed sale to the public: From time
to time after this Registration Statement becomes effective as determined by
market conditions.
---------------------------
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. |_|
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. |X|
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. |_|
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. |_|
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. |_|
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
===================================================================================================================================
Title of Each Class of Amount to be Proposed Maximum Offering Proposed Maximum Aggregate Amount of Registration
Securities to be Registered Registered(1) Price Per Share Offering Price(2) Fee
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock, without par value $700,000,000 N/A $700,000,000 $151,516(3)
$ 60,605(3)
===================================================================================================================================
</TABLE>
(1) The amount to be registered consists of up to $700,000,000 of an
indeterminate amount of Common Stock, including Common Stock to be issued
pursuant to dividend reinvestment plans.
(2) Estimated solely for the purpose of calculating the registration fee.
(3) The registration fee has been calculated in accordance with Rule 457. Total
registration fee equals $212,121, of which $151,516 was previously paid.
The balance of $60,605 is being paid concurrently herewith.
<PAGE>
---------------------------
The Registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the Registrant shall
file a further amendment which specifically states that the Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
================================================================================
2
<PAGE>
Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor may
offers to buy be accepted prior to the time the registration statement becomes
effective. This prospectus shall not constitute an offer to sell or the
solicitation of an offer to buy nor shall there be any sale of these securities
in any State in which such offer, solicitation or sale would be unlawful prior
to registration or qualification under the securities laws of any such State.
SUBJECT TO COMPLETION
PRELIMINARY PROSPECTUS DATED FEBRUARY 27, 1997
PROSPECTUS
$700,000,000
CORNERSTONE PROPERTIES INC.
Common Stock
--------------------
Cornerstone Properties Inc. ("Cornerstone" or the "Company") may offer
from time to time shares of its Common Stock, with no par value ("Common
Stock"), with an aggregate public offering price of up to $700,000,000 in
amounts, at prices and on terms to be determined at the time of offering and set
forth in one or more supplements to this Prospectus (each a "Prospectus
Supplement").
The number of the shares and specific terms of the Common Stock in
respect of which this Prospectus is being delivered (the "Offered Securities")
will be set forth in an accompanying Prospectus Supplement, including the
initial public offering price and the net proceeds to the Company.
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 Offered Securities
covered by such Prospectus Supplement.
The Common Stock may be offered by the Company directly to one or more
purchasers, through agents designated from time to time by the Company or
through dealers or underwriters. If any agents of the Company or any dealers or
underwriters are involved in the offering of Common Stock in respect of which
this Prospectus is being delivered, the names of such agents, dealers or
underwriters and any applicable purchase price, fee, commission or discount will
be set forth, or will be calculable from the information set forth, in the
accompanying Prospectus Supplement, together with the net proceeds to the
Company. See "Plan of Distribution". This Prospectus may not be used to
consummate sales of Common Stock unless accompanied by a Prospectus Supplement
describing the method and terms of the offering of such Common Stock.
--------------------
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 date of this Prospectus is [ ], 1997.
<PAGE>
No person is authorized to give any information or to make any
representations other than those contained in this Prospectus or any
accompanying Prospectus Supplement in connection with the offer made by this
Prospectus or any Prospectus Supplement and, if given or made, such other
information or representations must not be relied upon as having been authorized
by the Company or by any underwriter, dealer or agent. This Prospectus and any
Prospectus Supplement do not constitute an offer to sell or a solicitation of an
offer to buy any securities other than those to which they relate. Neither the
delivery of this Prospectus and any accompanying Prospectus Supplement nor any
sale of or offer to sell the Offered Securities shall, under any circumstances,
create an implication that there has been no change in the affairs of the
Company or that the information herein is correct as of any time after the date
hereof. This Prospectus and any accompanying Prospectus Supplement do not
constitute an offer to sell or a solicitation of an offer to buy any of the
Offered Securities in any state to any person to whom it is unlawful to make
such offer or solicitation in such state.
--------------------
AVAILABLE INFORMATION
The Company has filed with the Securities and Exchange Commission (the
"Commission") a registration statement (of which this Prospectus is a part) on
Form S-3 (together with all amendments and exhibits thereto, the "Registration
Statement") under the Securities Act of 1933, as amended (the "Securities Act"),
with respect to the Offered Securities. This Prospectus does not contain all the
information set forth in the Registration Statement, certain portions of which
have been omitted as permitted by the rules and regulations of the Commission,
and in the exhibits thereto. Statements contained in this Prospectus as to the
content of any contract or other document are not necessarily complete, and in
each instance reference is made to the copy of such contract or other document
filed as an exhibit to the Registration Statement, each such statement being
qualified in all respects by such reference and the exhibits and schedules
thereto. For further information regarding the Company and the Offered
Securities, reference is hereby made to the Registration Statement and such
exhibits and schedules, which may be examined without charge at, or copies
obtained upon payment of prescribed fees from, the Commission and its regional
offices listed below.
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 Commission. The Registration Statement, as well as such reports, proxy
statements and other information filed with the Commission, can be inspected and
copied at the public reference facilities maintained by the Commission at Room
1024, 450 Fifth Street, N.W., Washington, D.C. 20549, and at the Commission's
Regional Offices at Citicorp Center, 500 West Madison Street, Suite 1400,
Chicago, Illinois 60661, and Seven World Trade Center, 13th Floor, New York, New
York 10048. Copies of such material also can be obtained from the Public
Reference Section of the Commission, Washington, D.C. 20549 at prescribed rates.
The Company files its reports, proxy statements and other information with the
Commission electronically. The Commission maintains a Web site that contains
reports, proxy and information statements and other information regarding
registrants that file electronically with the Commission at http://www.sec.gov.
2
<PAGE>
INCORPORATION OF CERTAIN INFORMATION BY REFERENCE
The following documents have been filed by the Company under the
Exchange Act with the Commission and are incorporated by reference in this
Prospectus:
1. The Company's Annual Report on Form 10-K for the year ended
December 31, 1996, as amended by the Company's Report on Form
10-K/A, dated February 12, 1997, filed with the Commission
pursuant to the Exchange Act.
2. The Company's Current Reports on Form 8-K dated January 29,
1997, filed with the Commission pursuant to the Exchange Act.
3. The Company's Current Reports on Form 8-K/A, dated January 22,
1997, and February 12, 1997 and February 24, 1997, filed with
the Commission pursuant to the Exchange Act.
4. The description of the Company's Common Stock contained in
Item 10 of Form 10 filed with the Commission on April 30,
1982, pursuant to Section 12(g) of the Exchange Act, including
all amendments and reports updating such description.
All documents and reports filed by the Company pursuant to Section
13(a), 13(c), 14 or 15(d) of the Exchange Act after the date of filing hereof
and prior to the date on which the Company ceases offering and selling Common
Stock pursuant to this Prospectus shall be deemed to be incorporated by
reference in this Prospectus and to be a part hereof from the dates of filing of
such documents. 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 contained herein
or in any other subsequently filed document that also is or is 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.
The Company will furnish without charge to each person, including any
beneficial owner, to whom this Prospectus and the accompanying Prospectus
Supplement are delivered, upon the written or oral request of such person, a
copy of any or all of the documents incorporated herein by reference, other than
exhibits to such documents unless such exhibits are specifically incorporated by
reference into the Registration Statement to which this Prospectus relates or
into such other documents. Requests for documents should be directed to
Cornerstone Properties Inc., Tower 56, 126 East 56th Street, New York, New York
10022, Attention: Secretary (telephone number: (212) 605-7100).
--------------------
IN CONNECTION WITH ANY UNDERWRITTEN OFFERING OF COMMON STOCK, THE
UNDERWRITERS MAY OVER-ALLOT OR EFFECT TRANSACTIONS WHICH STABILIZE OR MAINTAIN
THE MARKET PRICE OF THE COMMON STOCK OF THE COMPANY AT A LEVEL ABOVE THAT WHICH
MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH TRANSACTIONS MAY BE EFFECTED ON
THE NEW YORK STOCK EXCHANGE, ON THE LUXEMBOURG STOCK EXCHANGE, ON THE FRANKFURT
STOCK EXCHANGE, ON THE DUSSELDORF STOCK EXCHANGE, IN THE OVER-THE-COUNTER MARKET
OR OTHERWISE. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
3
<PAGE>
THE COMPANY
The Company is a self-advised equity real estate investment trust
("REIT"). Since its formation in 1981, the Company has developed three office
properties in geographically diverse cities of the United States --Denver,
Colorado, Minneapolis, Minnesota and Seattle, Washington. The Company has also
acquired five office buildings in Boston, Massachusetts, New York, New York,
Oakbrook Terrace, Illinois and Pittsburgh, Pennsylvania. Seven of the eight
properties were built in the mid- to late-1980's and the seventh was fully
renovated in the late 1980's.
The Company's business objective is to increase its funds from
operations by generating sustainable current cash flow and providing capital
appreciation through investments in the office real estate markets of the United
States. The general strategy of the Company is to invest in larger, high-quality
office buildings in major metropolitan markets in the United States. The Company
intends to focus on office properties in central business district locations, as
well as in highly developed suburban markets. Highly qualified, local property
managers are hired to manage the Company's properties on a day to day basis.
This allows Cornerstone personnel to remain focused on financing, budgeting,
leasing and other major decisions regarding the properties.
The Company does not intend to undertake any major new business
assignments other than the management of the Company's own portfolio in order to
avoid potential conflicting priorities or the need to serve multiple clients.
The Company continues to have advisory responsibilities to three clients which
were undertaken earlier, but these responsibilities will be terminated by July
1, 1997 and, in any case, are estimated to occupy a minimal amount of management
time.
The principal executive offices of the Company are located at Tower 56,
126 East 56th Street, New York, New York, and its telephone number at that
location is (212) 605-7100. The Company was organized under the laws of the
State of Nevada in May 1981.
USE OF PROCEEDS
Unless otherwise described in the applicable Prospectus Supplement, the
Company intends to use the net cash proceeds from the sale of Offered Securities
for general corporate purposes, including working capital, repayment of
indebtedness, investment in new properties or maintenance or improvement of
currently owned properties. The Prospectus Supplement relating to a particular
sale of Offered Securities will set forth the Company's intended use for the net
proceeds received from the sale of such Offered Securities. Pending application
of the net proceeds of any sale of Offered Securities to such uses, the Company
may invest such net proceeds in short term liquid investments which are
consistent with the Company's intention to qualify for taxation as a REIT. Such
investments may include, for example, government and government agency
securities, certificates of deposit, interest-bearing bank deposits, investment
grade commercial paper and mutual funds investing in similar instruments.
DESCRIPTION OF CAPITAL STOCK OF THE COMPANY
The authorized capital stock of the Company consists of 100,000,000
shares of Common Stock and 15,000,000 shares of Preferred Stock, with no par
value ("Preferred Stock"). Stockholders have no preemptive or other rights to
subscribe for or purchase any proportionate part of any new or additional shares
of stock of any class or of securities convertible into stock of any class. The
following brief description of the capital stock of the Company does not purport
to be complete and is subject in all respects to applicable Nevada law and to
the provisions of the Company's Restated Articles of Incorporation (the
"Articles of Incorporation") and Bylaws, as amended, and to the respective
certificates of designations for each series of Preferred Stock, copies of which
are exhibits to the Registration Statement of which this Prospectus is a part.
4
<PAGE>
Common Stock
The Company had 20,853,661 shares of Common Stock outstanding at
January 31, 1997. Subject to the provisions of the Articles of Incorporation
regarding preservation of the Company's REIT status, each outstanding share of
Common Stock entitles the holder thereof to one vote on all matters presented to
stockholders for a vote. There are no cumulative voting rights with respect to
the election of directors. Holders of Common Stock have no conversion, sinking
fund or redemption rights. All of the Offered Securities will be, when issued,
fully paid and nonassessable.
The holders of the Common Stock are entitled to receive dividends when,
as and if declared by the Board of Directors of the Company out of funds legally
available therefor, subject to the terms of any Preferred Stock at the time
outstanding and to the provisions of the Articles of Incorporation regarding
preservation of the Company's REIT status. In the event of the liquidation of
the Company, each outstanding share of Common Stock is entitled to participate
pro rata in the assets remaining after payment of, or adequate provision for,
all known debts and liabilities of the Company.
The Transfer Agent and Registrar for the Common Stock is Boston
EquiServe.
Preferred Stock
Under the Articles of Incorporation, the Board of Directors of the
Company is authorized, without further stockholder action, to provide for the
issuance of Preferred Stock in one or more series. The powers, designations,
preferences and relative, participating, optional or other special rights, and
qualifications, limitations or restrictions, including dividend rights, voting
rights, conversion rights, terms of redemption and liquidation preferences, of
the Preferred Stock of each series are fixed or designated by the Board of
Directors pursuant to a certificate of designations (each, a "Certificate of
Designations"). Such Preferred Stock may have voting or other rights which could
adversely affect the rights of holders of the Common Stock.
Holders of Preferred Stock have no voting rights in general corporate
matters except as provided by law or as set forth in the Certificate of
Designations therefor. Under Nevada law, if any proposed amendment to the
Articles of Incorporation would alter or change any preference or any relative
or other right given to the holders of Preferred Stock, then the amendment must
be approved by the affirmative vote of the holders of shares representing a
majority of the voting power of each class or series affected by the amendment
regardless of limitations or restrictions on the voting power thereof.
As of January 31, 1997, the Preferred Stock established by the Company
consisted of (i) 3,030,303 shares of 7% Cumulative Convertible Preferred Stock,
with no par value (the "7% Preferred Stock"), all of which were issued and
outstanding and held by Deutsche Bank; (ii) 458,621 shares of 8% Cumulative
Convertible Preferred Stock, Series A, with no par value (the "8% Preferred
Stock, Series A"), all of which were issued and outstanding and held indirectly
by Rodamco, N.V. ("Rodamco"); and (iii) 1,035,483 shares of its 8% Cumulative
Convertible Preferred Stock, with no par value (the "8% Preferred Stock"),
689,655 of which were issued and outstanding and held by the New York State
Teachers' Retirement System. Set forth below is a brief description of the terms
of each series of Preferred Stock.
7% Preferred Stock
Priority. The 7% Preferred Stock, with respect to dividends and
distributions and upon the liquidation, dissolution or winding-up of the
Company, ranks (i) senior to all classes of Common Stock, to the 8% Preferred
Stock, Series A, and to each other class of capital stock or series of Preferred
Stock established by the Board of Directors (except as set forth below) which
does not expressly provide that it ranks senior to the 7% Preferred Stock as to
dividends and distributions and upon the liquidation, winding-up and dissolution
of the Company and (ii) on a parity with the 8% Preferred Stock and any other
class of capital stock or series of Preferred Stock issued by the Company, the
terms of which expressly provide that such class or series will rank on a parity
with the 7% Preferred Stock as to dividends and distributions or upon the
liquidation, dissolution or winding-up of the Company.
Dividends. Holders of 7% Preferred Stock are entitled to receive
cumulative cash dividends payable annually at the rate of 7% per annum when, as
and if declared by the Board of Directors out of funds legally
5
<PAGE>
available therefor and in preference to any dividend payable on the Common Stock
and the 8% Preferred Stock, Series A. Such dividends accrue from day to day and
are cumulative, whether or not declared.
Liquidation. Upon the liquidation, dissolution or winding-up of the
Company (either voluntary or involuntary), holders of 7% Preferred Stock are
entitled to receive out of the assets of the Company available for distribution
after payment of all liabilities, before any distribution is made to the holders
of the 8% Preferred Stock, Series A, or the Common Stock, an amount equal to
$16.50 per share plus an amount equal to all dividends (whether or not earned or
declared) accrued and accumulated and unpaid on the shares of 7% Preferred Stock
to the date of final distribution.
Conversion. Each share of the 7% Preferred Stock is convertible, at the
option of the holder thereof, at any time after August 4, 2000, into that number
of shares of Common Stock as is determined by dividing the stated value of such
share by the conversion price in effect for the 7% Preferred Stock at the time
of conversion. The conversion price currently in effect is $16.50 per share of
Common Stock, subject to adjustment.
Redemption. The 7% Preferred Stock is not redeemable.
Voting. The Certificate of Designations for the 7% Preferred Stock
provides that if dividends payable on the 7% Preferred Stock shall be in arrears
for six calendar quarters or more, whether or not consecutive, the holders of
the outstanding shares of the 7% Preferred Stock shall have the right to elect
two of the authorized number of members of the Board of Directors at the
Company's next annual meeting of stockholders until such arrearages have been
paid or set apart for payment. In addition, the Certificate of Designations for
the 7% Preferred Stock provides that the issuance of any shares of Preferred
Stock ranking prior to the 7% Preferred Stock shall require the consent of the
holders of the 7% Preferred Stock. The Company has agreed that so long as
Deutsche Bank holds at least 1,000,000 shares of the 7% Preferred Stock, the
Company will not issue any shares of Preferred Stock ranking on a parity with
the 7% Preferred Stock without the prior written consent of Deutsche Bank.
Deutsche Bank consented to the issuance of the 8% Preferred Stock.
Registration Rights. If at any time after one year following a
registered initial public offering in the United States by the Company, Deutsche
Bank notifies the Company in writing that it intends to offer or to cause to be
offered for sale its shares of the 7% Preferred Stock and/or shares of Common
Stock issued upon conversion of the 7% Preferred Stock and requests the Company
to cause such securities to be registered under the Securities Act, the Company
will use its best efforts to cause such securities to be so registered if
counsel for the Company shall deem such registration necessary or advisable.
Deutsche Bank is required to hold and to intend to offer for public sale not
less than a total of 1,500,000 shares of the 7% Preferred Stock and/or shares of
Common Stock issued upon conversion thereof at the time of any such request. The
Company is not obligated to make more than one registration pursuant to these
provisions.
8% Preferred Stock
Priority. The 8% Preferred Stock, with respect to dividends and
distributions and upon the liquidation, dissolution or winding-up of the
Company, ranks (i) senior to all classes of Common Stock, to the 8% Preferred
Stock, Series A, and to each other class of capital stock or series of Preferred
Stock established by the Board of Directors which does not expressly provide
that it ranks senior to the 8% Preferred Stock as to dividends and distributions
or upon the liquidation, winding-up and dissolution of the Company and (ii) on
parity with the 7% Preferred Stock and any other class of capital stock or
series of Preferred Stock issued by the Company, the terms of which expressly
provide that such class or series will rank on a parity with the 8% Preferred
Stock as to dividends and distributions or upon the liquidation, dissolution or
winding-up of the Company.
Dividends. Holders of 8% Preferred Stock are entitled to receive
cumulative cash dividends payable quarterly at the rate of 8% per annum when, as
and if declared by the Board of Directors out of funds legally available
therefor and in preference to any dividend payable on the Common Stock and the
8% Preferred Stock, Series A. Such dividends accrue from day to day and are
cumulative, whether or not declared.
Liquidation. Upon the liquidation, dissolution or winding-up of the
Company (either voluntary or involuntary), holders of 8% Preferred Stock are
entitled to receive out of the assets of the Company available for distribution
after payment of all liabilities, before any distribution is made to the holders
of the 8%
6
<PAGE>
Preferred Stock, Series A, or the Common Stock, an amount equal to $145.00 per
share plus an amount equal to all dividends (whether or not earned or declared)
accrued and accumulated and unpaid on the shares of 8% Preferred Stock to the
date of final distribution.
Conversion. Each share of 8% Preferred Stock is convertible, at the
option of the holder thereof, at any time and from time to time, into that
number of shares of Common Stock as is determined by dividing the stated value
of such share by the conversion price in effect for the 8% Preferred Stock at
the time of conversion. The conversion price currently in effect is $14.50 per
share of Common Stock, subject to adjustment.
Conversion by the Company. The Company has the right, at its option, to
convert all shares of 8% Preferred Stock then outstanding into shares of Common
Stock upon the consummation of a public offering meeting the following
conditions (an "8% Preferred Stock Qualified Public Offering"). An "8% Preferred
Stock Qualified Public Offering" means an underwritten public offering of Common
Stock to be listed on the New York Stock Exchange in which (i) the aggregate net
proceeds to the Company (after payment of all fees and expenses of the offering
and pay-down of any then remaining debt under the Term Loan Agreement, dated as
of August 8, 1995, between the Company and Deutsche Bank AG (London)) together
with the net proceeds of any prior public offerings of Common Stock listed on
the New York Stock Exchange equal or exceed US$200 million, (ii) the expected
distributions on shares of Common Stock of the Company for the 12 months
following the 8% Preferred Stock Qualified Public Offering (as certified by the
treasurer or chief financial officer of the Company) divided by the public
offering price is equal to or less than 7.75% and (iii) (A) if the 8% Preferred
Stock Qualified Public Offering is completed in calendar year 1997, the initial
public offering price is at least $16.00 per share, (B) if the 8% Preferred
Stock Qualified Public Offering is completed in calendar year 1998, the initial
public offering price is at least $16.50 per share and (C) if the 8% Preferred
Stock Qualified Public Offering is completed in calendar year 1999, the initial
public offering price is at least $17.00 per share; provided, however, that an
8% Preferred Stock Qualified Public Offering shall be deemed to occur on the
first business day following any day the condition set forth in clause (i) above
and each of the following conditions is satisfied: (x) the day is prior to
January 1, 2000, (y) the average of the closing prices for shares of Common
Stock as reported on the New York Stock Exchange composite tape for the 20
consecutive trading days immediately preceding such day (the "Composite
Average") equals or exceeds the applicable minimum initial public offering price
for a public offering to be considered an 8% Preferred Stock Qualified Public
Offering at such time and (z) the expected distributions on shares of Common
Stock for the 12 months following such day (as certified by the treasurer or
chief financial officer of the Company) divided by the Composite Average is
equal to or less than 7.75%.
Redemption. The Company may redeem the 8% Preferred Stock at any time
on or after November 22, 2001, as a whole in cash at a redemption price equal to
$145.00 per share plus an amount equal to all dividends accrued and unpaid
thereon to the redemption date, plus a redemption premium calculated to cause
the holders of the 8% Preferred Stock to have received an internal rate of
return of 12% per annum.
Change in Control Put. Each holder of 8% Preferred Stock has the right
to require the redemption of its 8% Preferred Stock by the Company in cash at a
redemption price equal to $146.45 per share plus an amount equal to all
dividends accrued and unpaid thereon to the redemption date upon the occurrence
of a "Change in Control". A "Change in Control" means (i) a merger,
consolidation or reorganization of the Company, if, after giving effect thereto,
the holders of the Common Stock prior to such transaction shall fail to own at
least 51% of the capital stock entitled to vote for the election of directors in
the successor entity, (ii) the sale of a majority or more of the assets of the
Company in any single transaction or in any series of related transactions or
(iii) a change in the composition of the Board of Directors of the Company such
that during any period of two consecutive years the individuals who at the
beginning of such period were directors of the Company shall cease for any
reason to constitute a majority of the directors then in office (and not
designated to the Board by any holder of Preferred Stock) unless the individuals
replacing such directors were elected or nominated by the Board of Directors of
the Company.
Restriction on Debt. The Company may not incur debt exceeding 60% of
the appraised value of the assets of the Company other than debt in an amount
which does not exceed the principal amount of outstanding debt of the Company
extended, refinanced, renewed or replaced with the proceeds thereof, plus any
costs associated with the extension, refinancing, renewal or replacement.
7
<PAGE>
Voting. The Certificate of Designations for the 8% Preferred Stock
provides that the holders of shares of 8% Preferred Stock are entitled to elect
one member of the Board of Directors of the Company. The Certificate of
Designations for the 8% Preferred Stock also provides that if (i) on or prior to
December 31, 1999, the Company has not completed an 8% Preferred Stock Qualified
Public Offering, (ii) dividends on the 8% Preferred Stock are in arrears for two
consecutive calendar quarters or more or (iii) the Company has violated the
restriction on debt described above, the holders of the outstanding shares of 8%
Preferred Stock shall have the right to elect one additional member of the Board
of Directors. The Certificate of Designations for the 8% Preferred Stock further
provides that prior to the completion of an 8% Preferred Stock Qualified Public
Offering, the consent of the holders of at least a majority of the shares of 8%
Preferred Stock outstanding at the time shall be necessary to effect certain
material changes to the Articles of Incorporation or to increase the size of the
Board of Directors to greater than nine members. The consent of the holders of
8% Preferred Stock is not required for increases in the size of the Board of
Directors to allow for directors elected by holders of 8% Preferred Stock or 8%
Preferred Stock, Series A, to be seated.
Registration Rights. The holders of at least 25% of the shares of
Common Stock or other securities issuable upon conversion of the 8% Preferred
Stock (the "8% Conversion Stock") may require the Company to use its best
efforts to register the 8% Conversion Stock on the earlier of (i) the date which
is six months after the date the registration statement filed by the Company
covering an 8% Preferred Stock Qualified Public Offering became effective or
(ii) December 31, 1999 if an 8% Preferred Stock Qualified Public Offering shall
not have been completed on or prior to such date. In addition, holders of the 8%
Preferred Stock have been granted certain incidental rights to register 8%
Conversion Stock upon the filing of registration statements by the Company,
subject to certain limitations.
8% Preferred Stock, Series A
Priority. The 8% Preferred Stock, Series A, with respect to dividends
and distributions and upon the liquidation, dissolution or winding-up of the
Company, ranks (i) senior to all classes of Common Stock and each other class of
capital stock or series of preferred stock established by the Board of Directors
(except as set forth below) which does not expressly provide that it ranks
senior to the 8% Preferred Stock as to dividends and distributions or upon the
liquidation, winding-up and dissolution of the Company; (ii) on a parity with
any other class of capital stock or series of Preferred Stock issued by the
Company the terms of which expressly provide that such class or series will rank
on a parity with the 8% Preferred Stock, Series A, with respect to dividends and
distributions or upon the liquidation, dissolution or winding-up of the Company;
and (iii) junior to the 7% Preferred Stock and the 8% Preferred Stock.
Dividends. Holders of 8% Preferred Stock, Series A, are entitled to
receive cumulative cash dividends payable quarterly at the rate of 8% per annum
when, as and if declared by the Board of Directors out of funds legally
available therefor and in preference to any dividend payable on the Common
Stock. Such dividends accrue from day to day and are cumulative, whether or not
declared.
Liquidation. Upon the liquidation, dissolution or winding-up of the
Company (either voluntary of involuntary), holders of 8% Preferred Stock, Series
A, are entitled to receive out of the assets of the Company available for
distribution after payment of all liabilities, before any distribution is made
to the holders of the Common Stock, an amount equal to $145.00 per share plus an
amount equal to all dividends (whether or not earned or declared) accrued and
accumulated and unpaid on the shares of 8% Preferred Stock, Series A, to the
date of final distribution.
Conversion. Each share of 8% Preferred Stock, Series A, is convertible,
at the option of the holder thereof, at any time and from time to time, into
that number of shares of Common Stock as is determined by dividing the stated
value of such share by the conversion price in effect for the 8% Preferred
Stock, Series A, at the time of conversion. The conversion price currently in
effect is $14.50 per share of Common Stock, subject to adjustment.
Conversion by the Company. The Company has the right, at its option, to
convert all shares of 8% Preferred Stock, Series A, then outstanding into shares
of Common Stock upon the consummation of a "Series A Qualified Public Offering".
A "Series A Qualified Public Offering" means: a "Public Offering" (as defined
below) prior to January 1, 2000 in which (i) the aggregate net proceeds to the
Company (after payment of all fees and expenses of the offering) together with
the net proceeds of any prior Public Offerings of Common
8
<PAGE>
Stock listed on the New York Stock Exchange equal or exceed the Minimum Amount
(as defined below) and (ii) (a) if the Public Offering is completed in calendar
year 1997, the initial public offering price is at least $16.00 per share, (b)
if the Public Offering is completed in calendar year 1998, the initial public
offering price is at least $16.50 per share or (c) if the Public Offering is
completed in calendar year 1999, the initial public offering price is at least
$17.00 per share; provided, however, that a Qualified Public Offering shall be
deemed to occur on the first business day which follows any period of 20 trading
days after a Public Offering and prior to January 1, 2000 in which the Composite
Average equals or exceeds the applicable minimum initial price for a Public
Offering to be considered a Series A Qualified Public Offering at such time.
"Public Offering" means an underwritten public offering of Common Stock pursuant
to an effective registration statement under the 1933 Act and listed on the New
York Stock Exchange. "Minimum Amount" means, at any time, the sum of (i) $75
million plus (ii) the product of .5618 multiplied by the stated value of all
shares of 8% Preferred Stock issued by the Company prior to such time and after
November 1, 1996. As of December 1, 1996, the Minimum Amount was $131,180,000.
Redemption. The Company may redeem the 8% Preferred Stock, Series A, at
any time on or after December 31, 2001, as a whole in cash at a redemption price
equal to $145.00 per share plus an amount equal to all dividends accrued and
unpaid thereon through the redemption date, plus a redemption premium calculated
to cause the holders of the 8% Preferred Stock, Series A, to have received an
internal rate of return equal to 12% per annum.
Put if No Public Offering. Each holder of the 8% Preferred Stock,
Series A, has the right to require redemption of its 8% Preferred Stock, Series
A, in cash at a price equal to $145.00 per share plus a sum equal to all
dividends accrued and unpaid thereon (if any) if the Company has not completed,
prior to January 1, 2001, a Public Offering in which the aggregate net proceeds
to the Company (after payment of fees and expenses of the offering) equal or
exceed $75,000,000.
Change in Control Put. Each holder of shares of 8% Preferred Stock,
Series A, has the right to require the redemption of its 8% Preferred Stock,
Series A, by the Company in cash at a redemption price equal to $146.45 per
share plus an amount equal to all dividends accrued and unpaid thereon to the
redemption date upon the occurrence of a Change in Control (as defined above).
Voting. The Certificate of Designations for the 8% Preferred Stock,
Series A, provides that the holders of shares of 8% Preferred Stock, Series A,
are entitled to elect one member of the Board of Directors of the Company. The
Certificate of Designations for the 8% Preferred Stock, Series A, also provides
that if dividends on the 8% Preferred Stock, Series A, are in arrears for two
consecutive calendar quarters or more, the holders of the outstanding shares of
8% Preferred Stock, Series A, shall have the right to elect one additional
member of the Board of Directors of the Company. The Certificate of Designations
for the 8% Preferred Stock, Series A, further provides that prior to the
completion of a Series A Qualified Public Offering, the consent of the holders
of at least a majority of the shares of 8% Preferred Stock, Series A,
outstanding at the time shall be necessary to effect certain material changes to
the Restated Articles of Incorporation or to increase the size of the Board of
Directors to greater than nine members. Such consent is not required for
increases in the size of the Board of Directors to allow for directors elected
by holders of 8% Preferred Stock or 8% Preferred Stock, Series A, to be seated.
Designation of Director. The Company has agreed that, as long as
Rodamco maintains an investment in the Company of at least $50 million,
management of the Company will continue to nominate a representative of Rodamco
for election to the Board of Directors and the Investment Committee of the Board
of Directors.
Registration Rights. The holders of all the shares of Common Stock or
other securities issuable upon conversion of the 8% Preferred Stock, Series A
("Series A Conversion Stock"), may require the Company to use its best efforts
to register the Series A Conversion Stock on the earlier of (i) the date which
is six months after the date the registration statement filed by the Company
covering a Public Offering shall have become effective and (ii) December 31,
2000 if a Series A Qualified Public Offering shall not have been completed on or
prior to such date. In addition, holders of the 8% Preferred Stock, Series A,
have been granted certain incidental rights to register the Series A Conversion
Stock upon the filing of registration statements by the Company, subject to
certain limitations.
9
<PAGE>
Conversion Price Adjustments
Subject to certain exceptions, the conversion prices per share
applicable to the 7% Preferred Stock, the 8% Preferred Stock and the 8%
Preferred Stock, Series A, are subject to adjustment upon the occurrence of
certain events, including (i) dividends (and other distributions) payable in
Common Stock on the Company's outstanding shares of Common Stock, (ii) the
issuance to all holders of Common Stock of certain rights or warrants entitling
them to subscribe for or purchase Common Stock, (iii) subdivisions, combinations
and reclassifications of Common Stock and (iv) distributions to all holders of
Common Stock of evidences of indebtedness of the Company or assets (including
securities, but excluding those dividends, rights, warrants and distributions
referred to above and dividends and distributions paid in cash out of the
profits or surplus of the Company).
In case the Company shall be a party to any transaction (including,
without limitation, a merger, consolidation or sale of all or substantially all
of the Company's assets), in each case as a result of which shares of Common
Stock will be converted into the right to receive stock, securities or other
property (including cash or any combination thereof), each outstanding share of
7% Preferred Stock, 8% Preferred Stock and 8% Preferred Stock, Series A, if
convertible after the consummation of the transaction, will thereafter be
convertible into the kind and amount of shares of stock and other securities and
property receivable (including cash or any combination thereof) upon the
consummation of such transaction by a holder of that number of shares or
fraction thereof of Common Stock into which one share of the applicable series
of Preferred Stock is convertible immediately prior to such transaction.
10
<PAGE>
CERTAIN PROVISIONS OF NEVADA LAW
AND OF THE COMPANY'S ARTICLES OF INCORPORATION
The terms of Chapter 78 of the Nevada Revised Statutes, entitled the
Nevada General Corporation Law (the "NGCL"), apply to the Company. Under certain
circumstances, the following selected provisions of the NGCL may delay or make
more difficult acquisitions or changes of control of the Company. The Articles
of Incorporation and Bylaws of the Company do not exclude the Company from such
provisions of the NGCL. Such provisions may make it more difficult to accomplish
transactions which stockholders may otherwise deem to be in their best
interests. Such provisions may also have the effect of preventing changes in the
management of the Company.
Control Share Acquisitions
Pursuant to Sections 78.378 to 78.3793 of the NGCL, an "acquiring
person," who acquires a "controlling interest" in an "issuing corporation," may
not exercise voting rights on any "control shares" unless such voting rights are
conferred by a majority vote of the disinterested stockholders of the issuing
corporation at a special meeting of such stockholders held upon the request and
at the expense of the acquiring person. In the event that the control shares are
accorded full voting rights and the acquiring person acquires control shares
with a majority or more of all the voting powers, any stockholder, other than
the acquiring person, who does not vote in favor of authorizing voting rights
for the control shares is entitled to demand payment for the fair value of his
or her shares, and the corporation must comply with the demand. For purposes of
the above provisions, "acquiring person" means (subject to certain exceptions)
any person who, individually or in association with others, acquires or offers
to acquire, directly or indirectly, a controlling interest in an issuing
corporation. "Controlling interest" means the ownership of outstanding voting
shares of an issuing corporation sufficient to enable the acquiring person,
individually or in association with others, directly or indirectly, to exercise
(i) one-fifth or more but less than one-third, (ii) one-third or more but less
than a majority and/or (iii) a majority or more of the voting power of the
issuing corporation in the election of directors. Voting rights must be
conferred by a majority of the disinterested stockholders as each threshold is
reached and/or exceeded. "Control Shares" means those outstanding voting shares
of an issuing corporation which an acquiring person acquires or offers to
acquire in an acquisition or within 90 days immediately preceding the date when
the acquiring person became an acquiring person. "Issuing corporation" means a
corporation that is organized in Nevada, has 200 or more stockholders (at least
100 of whom are stockholders of record and residents of Nevada) and does
business in Nevada directly or through an affiliated corporation. The above
provisions do not apply if the articles of incorporation or bylaws of the
corporation in effect on the 10th day following the acquisition of a controlling
interest by an acquiring person provide that said provisions do not apply. As
noted above, the Company's Articles of Incorporation and Bylaws do not exclude
the Company from the restrictions imposed by such provisions.
Certain Business Combinations
Sections 78.411 to 78.444 of the NGCL restrict the ability of a
"resident domestic corporation" to engage in any combination with an "interested
stockholder" for three years following the interested stockholder's date of
acquiring the shares that cause such stockholder to become an interested
stockholder, unless the combination or the purchase of shares by the interested
stockholder on the interested stockholder's date of acquiring the shares that
cause such stockholder to become an interested stockholder is approved by the
board of directors of the resident domestic corporation before that date. If the
combination was not previously approved, the interested stockholder may effect a
combination after the three-year period only if such stockholder receives
approval from a majority of the disinterested shares or the offer meets certain
fair price criteria. For purposes of the above provisions, "resident domestic
corporation" means a Nevada corporation that has 200 or more stockholders.
"Interested stockholder" means any person, other than the resident domestic
corporation or its subsidiaries, who is (i) the beneficial owner, directly or
indirectly, of 10% or more of the voting power of the outstanding voting shares
of the resident domestic corporation or (ii) an affiliate or associate of the
resident domestic corporation and, at any time within three years immediately
before the date in question, was the beneficial owner, directly or indirectly,
of 10% or more of the voting power of the then outstanding shares of the
resident domestic corporation. The above provisions do not apply to corporations
that so elect in a charter amendment approved by a majority of the disinterested
shares. Such a charter amendment, however, would not become effective for 19
months after its passage and would apply only to stock acquisitions occurring
after its
11
<PAGE>
effective date. As noted above, the Company's Articles of Incorporation and
Bylaws do not exclude the Company from the restrictions imposed by such
provisions.
Directors' Duties
Section 78.138 of the NGCL allows directors and officers, in exercising
their respective powers with a view to the interests of the corporation, to
consider the interests of the corporation's employees, suppliers, creditors and
customers, the economy of the state and the nation, the interests of the
community and of society and the long and short-term interests of the
corporation and its stockholders, including the possibility that these interests
may be best served by the continued independence of the corporation. Directors
may resist a change or potential change in control if the directors, by a
majority vote of a quorum, determine that the change or potential change is
opposed to or not in the best interest of the corporation. In so determining,
the board of directors must consider the interests set forth above or have
reasonable grounds to believe that, within a reasonable time, the debt created
as a result of the change in control would cause the assets of the corporation
or any successor to be less than the liabilities or would render the corporation
or any successor insolvent or lead to bankruptcy proceedings.
Put Provisions
The terms of the 8% Preferred Stock and the 8% Preferred Stock, Series
A, allow the holders to require the Company to redeem their shares in certain
circumstances, including upon the occurrence of events constituting a "Change in
Control." See "Description of Capital Stock of the Company--Preferred Stock."
Ownership Restrictions
For the Company to qualify as a REIT under the Internal Revenue Code of
1986, as amended (the "Code"), not more than 50% in value of its outstanding
capital stock may be owned, directly or indirectly, by five or fewer individuals
(as defined by the Code to include certain entities) during the last half of a
taxable year. To help ensure that the Company continues to qualify as a REIT,
Article 8 of the Company's Articles of Incorporation provides that shares of the
Company's stock shall not be transferred to any person if such transfer would
cause such person to become the direct or indirect owner of more than 6% of the
value of the outstanding shares of capital stock of the Company (the "6%
Limit"). Shares of stock acquired in excess of the 6% Limit shall be deemed to
be transferred to the Company as trustee for the benefit of the person to whom
the person who acquired the excess shares later transfers such shares. In
addition, excess shares shall be deemed to have been offered for sale to the
Company or its designee at their "fair market value" for a 90-day period.
Article 8 further provides that a person who knowingly violates the 6% Limit
must indemnify the Company and its stockholders for losses if such violation
causes the Company either to fail to qualify as a REIT or to be subject to
personal holding company taxes. The affirmative vote of the holders of at least
80% of the outstanding shares of Common Stock is required to alter, amend,
repeal or adopt any provision inconsistent with such restrictions.
12
<PAGE>
FEDERAL INCOME TAX CONSIDERATIONS
The following is a general summary of the material federal income tax
considerations associated with an investment in the Common Stock offered hereby.
Shearman & Sterling, counsel to the Company, has reviewed the following
discussion and is of the opinion that it fairly summarizes the federal income
tax considerations that are likely to be material to a holder of Common Stock.
The following discussion is not exhaustive of all possible tax considerations
and is not tax advice. Moreover, this summary does not deal with all tax aspects
that might be relevant to a particular prospective stockholder in light of his
or her personal circumstances; nor does it deal with particular types of
stockholders that are subject to special treatment under the Code, such as
insurance companies, financial institutions and broker-dealers. The Code
provisions governing the federal income tax treatment of REITs are highly
technical and complex, and this summary is qualified in its entirety by the
applicable Code provisions, rules and Treasury Regulations promulgated
thereunder, and administrative and judicial interpretations thereof. The
following discussion and the opinions of Shearman & Sterling are based on
current law.
EACH PROSPECTIVE PURCHASER IS URGED TO CONSULT HIM, HER OR ITS OWN TAX
ADVISOR WITH RESPECT TO SUCH PURCHASER'S SPECIFIC FEDERAL, STATE, LOCAL, FOREIGN
AND OTHER TAX CONSEQUENCES OF THE PURCHASE, HOLDING AND SALE OF COMMON STOCK OF
THE COMPANY.
Federal Income Taxation of the Company
The Company believes that, commencing with its taxable year ended
December 31, 1983, it was organized and has operated in such a manner so as to
qualify for taxation as a REIT under the Code, and the Company intends to
continue to operate in such a manner, but no assurance can be given that it has
qualified or will remain qualified as a REIT. The Company has not requested and
does not intend to request a ruling from the Internal Revenue Service (the
"IRS") as to its status as a REIT. Based on various assumptions and factual
representations made by the Company, in the opinion of Shearman & Sterling,
counsel to the Company, the Company was organized and has operated in conformity
with the requirements for qualification as a REIT, the Company has operated so
as to qualify as a REIT since its taxable year ended December 31, 1992 (which
such counsel believes is the Company's earliest taxable year which is within the
normal period for federal tax audit), and the Company's proposed method of
operation will enable it to meet the requirements for qualification and taxation
as a REIT under the Code for each of its subsequent taxable years. Such
qualification depends upon the Company's ability to meet the various
requirements imposed under the Code through actual operations, as discussed
below, and no assurance can be given that actual operations will meet these
requirements. The opinion of Shearman & Sterling is not binding on the IRS. The
opinion of Shearman & Sterling also is based upon existing law, the regulations
issued by the United States Treasury Department (the "Treasury Regulations"),
currently published administrative positions of the IRS and judicial decisions,
which are subject to change either prospectively or retroactively.
If the Company qualifies for taxation as a REIT, it generally will not
be subject to federal corporate income taxes on that portion of its ordinary
income or capital gain that is currently distributed to stockholders. The REIT
provisions of the Code generally allow a REIT to deduct dividends paid to its
stockholders. This deduction for dividends paid to stockholders substantially
eliminates the federal "double taxation" on earnings (once at the corporate
level and once again at the stockholder level) that usually results from
investments in a corporation.
The Company, however, will be subject to federal income tax, as
follows: first, the Company will be taxed at regular corporate rates on its
undistributed REIT taxable income, including undistributed net capital gains.
Second, under certain circumstances, the Company may be subject to the corporate
"alternative minimum tax." Third, if the Company has net income from the sale or
other disposition of "foreclosure property" that is held primarily for sale to
customers in the ordinary course of business or other non-qualifying income from
foreclosure property, it will be subject to tax at the highest corporate rate on
such income. Fourth, if the Company has net income from prohibited transactions
(which are, in general, certain sales or other dispositions of property other
than foreclosure property held primarily for sale to customers in the ordinary
course of business), such income will be subject to a 100% tax. Fifth, if the
Company should fail to satisfy either the 75% or 95% gross income test
(discussed below) but has nonetheless maintained its qualification as a REIT
because certain other requirements have been met, it will be subject to a 100%
tax on
13
<PAGE>
the net income attributable to the greater of the amount by which the Company
fails the 75% or 95% test, multiplied by a fraction intended to reflect the
Company's profitability. Sixth, if the Company fails to distribute during each
year at least the sum of (i) 85% of its REIT ordinary income for such year, (ii)
95% of its REIT capital gain net income for such year and (iii) any
undistributed taxable income from prior periods, the Company will be subject to
a 4% excise tax on the excess of such required distribution over the amounts
actually distributed. Seventh, if the Company should acquire or be treated as
acquiring any asset from a C corporation (i.e., a corporation generally subject
to full corporate-level tax) in a carryover-basis transaction and the Company
subsequently recognizes gain on the disposition of such asset during the
ten-year period (the "Recognition Period") beginning on the date on which such
asset was acquired by the Company, then, to the extent of the excess of (a) the
fair market value of the asset as of the beginning of the applicable Recognition
Period over (b) the Company's adjusted basis in such asset as of the beginning
of such Recognition Period (the "Built-In Gain"), such gain will be subject to
tax at the highest regular corporate rate, pursuant to guidelines issued by the
IRS (the "Built-In Gain Rules").
Requirements for Qualification
To qualify as a REIT, the Company must elect to be so treated and must
meet the requirements, discussed below, relating to the Company's organization,
sources of income, nature of assets and distributions of income to stockholders.
Organizational Requirements
The Code defines a REIT as a corporation, trust or association: (i)
that is managed by one or more directors or trustees, (ii) the beneficial
ownership of which is evidenced by transferable shares or by transferable
certificates of beneficial interest, (iii) that would be taxable as a domestic
corporation but for Sections 856 through 859 of the Code, (iv) that is neither a
financial institution nor an insurance company subject to certain provisions of
the Code, (v) the beneficial ownership of which is held by 100 or more persons
(the "100 Stockholder Requirement"), and (vi) during the last half of each
taxable year not more than 50% in value of the outstanding stock of which is
owned, directly or indirectly, through the application of certain attribution
rules, by five or fewer individuals (as defined in the Code to include certain
entities) (the "Five or Fewer Requirement"). In addition, certain other tests,
described below, regarding the nature of its income and assets also must be
satisfied. The Code provides that conditions (i) through (iv), inclusive, must
be met during the entire taxable year and that condition (v) must be met during
at least 335 days of a taxable year of 12 months or during a proportionate part
of a taxable year of less than 12 months. For purposes of conditions (v) and
(vi), pension funds and certain other tax-exempt entities are treated as
individuals, subject to a "look-through" exception in the case of condition
(vi).
In order to protect the Company from a concentration of ownership of
its stock that would cause the Company to fail the Five or Fewer Requirement or
the 100 Stockholder Requirement, the Articles of Incorporation of the Company
provides that no holder is permitted to own, either actually or constructively
under the applicable attribution rules of the Code, more than 6% (in value) of
the aggregate outstanding shares of all classes of stock of the Company with
certain exceptions. In addition, no holder is permitted to own, either actually
or constructively under the applicable attribution rules of the Code, any shares
of any class of the Company's stock if such ownership would cause more than 50%
in value of the Company's outstanding stock to be owned by five or fewer
individuals or would result in the Company's stock being beneficially owned by
less than 100 persons (determined without reference to any rule of attribution).
In rendering its opinion that the Company has operated in a manner so as to
qualify, and its proposed method of operation will continue to enable it to
qualify, as a REIT, Shearman & Sterling is relying on the representation of the
Company that the ownership of its stock has satisfied and will satisfy the Five
or Fewer Requirement and the 100 Stockholder Requirement, without regard to
whether, as a matter of law, the provisions contained in the Articles of
Incorporation will preclude the Company from failing the Five or Fewer
Requirement or the 100 Stockholder Requirement.
Pursuant to applicable Treasury Regulations, a REIT must maintain
certain records and request on an annual basis certain information designed to
disclose the actual owners of its outstanding shares. The Company believes it
has satisfied and intends to continue to satisfy such requirements.
14
<PAGE>
In addition, a corporation may not elect to become a REIT unless its
taxable year is the calendar year. The Company has a calendar year taxable year.
The Company owns and operates a number of properties through
wholly-owned subsidiaries. Under the Code, a corporation which is a "qualified
REIT subsidiary" is not treated as a separate corporation; rather, all assets,
liabilities and items of income, deduction, and credit of a "qualified REIT
subsidiary" are treated as assets, liabilities and such items (as the case may
be) of the REIT. Thus, in applying the requirements described herein, the
Company's "qualified REIT subsidiaries" will be ignored, and all assets,
liabilities and items of income, deduction and credit of such subsidiaries will
be treated as assets, liabilities and items of the Company.
Income Tests
To maintain qualification as a REIT, the Company must satisfy three
gross income requirements annually. First, at least 75% of the Company's gross
income, excluding gross income from certain dispositions of property held
primarily for sale to customers in the ordinary course of a trade or business
("prohibited transactions") for each taxable year must be derived directly or
indirectly from investments relating to real property or mortgages on real
property (including "rents from real property" and, in certain circumstances,
interest) or from certain types of temporary investments. Second, at least 95%
of the Company's gross income (excluding gross income from "prohibited
transactions") for each taxable year must be derived from such real property
investments and from dividends, interest and gain from the sale or disposition
of stock or securities or from any combination of the foregoing. Third,
short-term gain from the sale or other disposition of stock or securities, gain
from "prohibited transactions" and gain from the sale or other disposition of
real property held for less than four years (apart from involuntary conversions
and sales of foreclosure property) must represent less than 30% of the Company's
gross income (including gross income from prohibited transactions) for each
taxable year.
Rents received or deemed to be received by the Company will qualify as
"rents from real property" in satisfying the gross income requirements for a
REIT described above only if several conditions are met. First, the amount of
rent generally must not be based in whole or in part on the income or profits of
any person. However, an amount received or accrued generally will not be
excluded from the term "rents from real property," solely by reason of being
based on a fixed percentage or percentages of receipts or sales. Second, the
Code provides that rents received from a tenant will not qualify as "rents from
real property" in satisfying the gross income tests if the REIT, or a direct or
constructive owner of 10% or more of the REIT, directly or constructively owns
10% or more of such tenant (a "Related Party Tenant"). Third, if rent
attributable to personal property, leased in connection with a lease of real
property, is greater than 15% of the total rent received under the lease, then
the portion of rent attributable to the personal property will not qualify as
"rents from real property." Fourth, for rents to qualify as "rents from real
property" the REIT must not operate or manage the property or furnish or render
services to tenants, other than through an "independent contractor" who is
adequately compensated and from whom the REIT does not derive any income;
provided, however, that a REIT may provide services with respect to its
properties and the income will qualify as "rents from real property" if the
services are "usually or customarily rendered" in connection with the rental of
room or other space for occupancy only and are not otherwise considered
"rendered to the occupant."
The Company has not and does not anticipate that it will in the future
(i) charge rent that is based in whole or in part on the income or profits of
any person (except by reason of being based on a fixed percentage or percentages
of receipts or sales consistent with the rule described above), (ii) derive rent
attributable to personal property leased in connection with real property that
exceeds 15% of the total rents or (iii) derive rent attributable to a Related
Party Tenant. The Company believes it has met and will continue to meet the
three gross income requirements outlined above.
The term "interest" generally does not include any amount received or
accrued (directly or indirectly) if the determination of such amount depends in
whole or in part on the income or profits of any person. An amount received or
accrued generally will not be excluded from the term "interest," however, solely
by reason of being based on a fixed percentage or percentages of receipts or
sales.
If the Company fails to satisfy one or both of the 75% or 95% gross
income tests for any taxable year, it may nevertheless qualify as a REIT for
that year if it is eligible for relief under certain provisions of the
15
<PAGE>
Code. These relief provisions will be generally available if (i) the Company's
failure to meet these tests was due to reasonable cause and not due to willful
neglect, (ii) the Company attaches a schedule of the sources of its income to
its federal income tax return and (iii) any incorrect information on the
schedule is not due to fraud with intent to evade tax. It is not possible,
however, to state whether, in all circumstances, the Company would be entitled
to the benefit of these relief provisions. For example, if the Company fails to
satisfy the gross income tests because nonqualifying income that the Company
intentionally incurs exceeds the limits on such income, the IRS could conclude
that the Company's failure to satisfy the tests was not due to reasonable cause.
As discussed above in "-- Federal Income Taxation of the Company," even if these
relief provisions apply, a tax would be imposed with respect to the excess net
income. No similar mitigation provision provides relief if the Company fails the
30% income test; and in such case, the Company will cease to qualify as a REIT.
Asset Tests
At the close of each quarter of its taxable year, the Company also must
satisfy three tests relating to the nature and diversification of its assets.
First, at least 75% of the value of the Company's total assets must be
represented by real estate assets, cash, cash items and government securities.
Second, no more than 25% of the Company's total assets may be represented by
securities other than those in the 75% asset class. Third, of the investments
included in the 25% asset class, 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 (excluding securities of a qualified REIT Subsidiary or another
REIT).
After initially meeting the asset tests at the close of any quarter,
the Company will not lose its status as a REIT for failure to satisfy the asset
tests at the end of a later quarter solely by reason of changes in asset values.
If the failure to satisfy the asset tests results from an acquisition of
securities or other property during a quarter, the failure can be cured by
disposition of sufficient nonqualifying assets within 30 days after the close of
that quarter. The Company has maintained and intends in the future to maintain
adequate records of the value of its assets to ensure compliance with the asset
tests and to take such other actions within 30 days after the close of any
quarter as may be required to cure any noncompliance.
Annual Distribution Requirements
In order to be taxed as a REIT, the Company is required to distribute
dividends (other than capital gain dividends) to its stockholders in an amount
at least equal to (a) the sum of (i) 95% of the Company's "REIT taxable income"
(computed without regard to the dividends-paid deduction and the Company's net
capital gain) and (ii) 95% of the net income, if any, from foreclosure property
in excess of the special tax on income from foreclosure property, minus (b) the
sum of certain items of non-cash income. Such distributions must be paid in the
taxable year to which they relate or in the following taxable year if declared
before the Company timely files its federal income tax return for such year and
if paid on or before the first regular dividend payment after such declaration.
Even if the Company satisfies the foregoing distribution requirements, to the
extent that the Company does not distribute all of its net capital gain or "REIT
taxable income," as adjusted, it will be subject to tax thereon at regular
capital gains or ordinary corporate tax rates. Furthermore, if the Company
should fail to distribute during each calendar year at least the sum of (a) 85%
of its REIT ordinary income for that year, (b) 95% of its capital gain net
income for that year and (c) any undistributed taxable income from prior
periods, the Company would be subject to a 4% excise tax on the excess of such
required distribution over the amounts actually distributed. In addition, during
its Recognition Period, if the Company disposes of any asset subject to the
Built-In Gain Rules, the Company will be required, pursuant to guidance issued
by the IRS, to distribute at least 95% of the Built-In Gain (after tax), if any,
recognized on the disposition of the asset.
It is expected that the Company's REIT taxable income will continue to
be less than its cash flow due to the allowance of depreciation and other
non-cash charges in computing REIT taxable income. Accordingly, the Company
anticipates that it generally will have sufficient cash or liquid assets to
enable it to satisfy the 95% distribution requirement. It is possible, however,
that the Company, from time to time, may not have sufficient cash or other
liquid assets to meet the 95% distribution requirement or to distribute such
greater amount as may be necessary to avoid income and excise taxation, as a
result of timing differences between (i) the actual receipt of income and actual
payment of deductible expenses and (ii) the inclusion of such income and
deduction of such expenses in arriving at taxable income of the Company, or as a
result of nondeductible expenses such as principal amortization or repayments,
or capital expenditures in excess of non-cash deductions. In the event that
16
<PAGE>
such timing differences occur, the Company may find it necessary to seek funds
through borrowings or the issuance of equity securities (there being no
assurance that it will be able to do so) or, if possible to pay taxable stock
dividends in order to meet the dividend requirement.
Under certain circumstances, the Company may be able to rectify a
failure to meet the distribution requirement for a year by paying "deficiency
dividends" to stockholders in a later year, which may be included in the
Company's deduction for dividends paid for the earlier year. Thus, the Company
may be able to avoid being taxed on amounts distributed as deficiency dividends.
The Company will, however, be required to pay interest based upon the amount of
any deduction taken for deficiency dividends.
Failure to Qualify
If the Company fails to qualify for taxation as a REIT in any taxable
year and the relief provisions do not apply, the Company will be subject to tax
(including any applicable corporate alternative minimum tax) on its taxable
income at regular corporate rates. Distributions to stockholders in any year in
which the Company fails to qualify will not be deductible by the Company nor
will they be required to be made. In such event, to the extent of current or
accumulated earnings and profits, all distributions to stockholders will be
dividends, taxable as ordinary income; and subject to certain limitations of the
Code, corporate distributees may be eligible for the dividends-received
deduction. Unless the Company is entitled to relief under specific statutory
provisions, the Company also will be disqualified from taxation as a REIT for
the four taxable years following the year during which qualification was lost.
It is not possible to state whether in all circumstances the Company would be
entitled to such statutory relief. For example, if the Company fails to satisfy
the gross income tests because nonqualifying income that the Company
intentionally incurs exceeds the limit on such income, the IRS could conclude
that the Company's failure to satisfy the tests was not due to reasonable cause.
Taxation of U.S. Stockholders
As used herein, the term "U.S. Stockholder" means a holder of Common
Stock that for United States federal income tax purposes is (a) a citizen or
resident of the United States, (b) a corporation, partnership or other entity
created or organized in or under the laws of the United States or of any
political subdivision thereof or (c) an estate or trust, the income of which is
subject to United States federal income taxation regardless of its source. For
any taxable year for which the Company qualifies for taxation as a REIT, amounts
distributed to taxable U.S. Stockholders will be taxed as follows.
Distributions Generally
Distributions to U.S. Stockholders, other than capital gain dividends
discussed below, will constitute dividends up to the amount of the Company's
current or accumulated earnings and profits and will be taxable to the
stockholders as ordinary income. For purposes of determining whether
distributions are out of earnings and profits, the earnings and profits of the
Company will be allocated first to the Company's Preferred Stock (to the extent
of distributions made in respect thereof), and then to the Common Stock.
Distributions are not eligible for the dividends-received deduction for
corporations. To the extent that the Company makes a distribution in excess of
its current or accumulated earnings and profits, the distribution will be
treated first as a tax-free return of capital, reducing the tax basis in the
U.S. Stockholder's Common Stock, and the distribution in excess of a U.S.
Stockholder's tax basis in its Common Stock will be taxable as gain realized
from the sale of its Common Stock. Dividends declared by the Company in October,
November or December of any year payable to a stockholder of record on a
specified date in any such month shall be treated as both paid by the Company
and received by the stockholder on December 31 of the year, provided that the
dividend is actually paid by the Company during January of the following
calendar year. Stockholders may not include on their own federal income tax
returns any losses of the Company.
The Company will be treated as having sufficient earnings and profits
to treat as a dividend any distribution by the Company up to the amount required
to be distributed in order to avoid imposition of the 4% excise tax discussed in
"-- Federal Income Taxation of the Company" above. Moreover, any "deficiency
dividend" will be treated as an ordinary or capital gain dividend, as the case
may be, regardless of the Company's earnings and profits. As a result,
stockholders may be required to treat certain distributions that would otherwise
result in a tax-free return of capital as taxable dividends.
17
<PAGE>
Capital Gain Dividends
Dividends to U.S. Stockholders that are properly designated by the
Company as capital gain dividends will be treated 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 stockholder has held
his stock. However, corporate stockholders may be required to treat up to 20% of
certain capital gain dividends as ordinary income. Capital gain dividends are
not eligible for the dividends-received deduction for corporations.
Passive Activity Loss and Investment Interest Limitations
Distributions from the Company and gain from the disposition of Common
Stock will not be treated as passive activity income, and therefore stockholders
may not be able to apply any "passive activity losses" against such income.
Dividends from the Company (to the extent they do not constitute a return of
capital) will generally be treated as investment income for purposes of the
investment income limitation on the deduction of investment interest. Under
recently enacted legislation, net capital gain from the disposition of Common
Stock and capital gain dividends generally will be excluded from investment
income.
Certain Dispositions of Shares
In general, a U.S. Stockholder will realize capital gain or loss on the
disposition of shares of Common Stock equal to the difference between the sales
price for such shares and the adjusted tax basis for such shares. Gain or loss
realized upon a sale or exchange of Common Stock by a U.S. Stockholder who has
held such Common Stock for more than one year will be treated as long-term
capital gain or loss, respectively, and otherwise will be treated as short-term
capital gain or loss. However, losses incurred on the sale or exchange of Common
Stock held for less than six months (after applying certain holding period
rules) will be deemed long-term capital loss to the extent of any capital gain
dividends received by the selling stockholder from those shares.
Treatment of Tax-Exempt Stockholders
A tax-exempt investor that is exempt from tax on its investment income,
such as an individual retirement account ("IRA") or a 401(k) plan, that holds
the Common Stock as an investment generally will not be subject to tax on
dividends paid by the Company. However, if such tax-exempt investor is treated
as having purchased its Common Stock with borrowed funds, some or all of its
dividends will be subject to tax. In addition, a portion of the dividends paid
to certain pension plans (including 401(k) plans but not including IRAs and
government pension plans) that own more than 10% (by value) of the Company's
outstanding capital stock will be taxed as unrelated business taxable income if
the Company is a "pension held REIT." The Company does not expect to be a
pension held REIT.
Special Tax Considerations for Foreign Stockholders
The rules governing United States federal income taxation of
non-resident alien individuals, foreign corporations, foreign partnerships and
foreign trusts and estates (collectively, "Non-U.S. Stockholders") are complex,
and the following discussion is intended only as a summary of these rules.
Prospective Non-U.S. Stockholders should consult with their own tax advisors to
determine the impact of federal, state and local income tax laws on an
investment in the Company, including any reporting requirements.
In general, Non-U.S Stockholders will be subject to regular United
States federal income tax with respect to their investment in the Company if the
investment is "effectively connected" with the Non-U.S. Stockholder's conduct of
a trade or business in the United States. A corporate Non-U.S. Stockholder that
receives income that is (or is treated as) effectively connected with a U.S.
trade or business also may be subject to the branch profits tax under Section
884 of the Code, which is imposed in addition to regular United States federal
corporate income tax generally at the rate of 30%, subject to reduction under a
tax treaty, if applicable. Certain certification requirements must be met in
order for effectively connected income to be exempt from withholding. The
following discussion will apply to Non-U.S. Stockholders whose investment in the
Company is not so effectively connected.
18
<PAGE>
A distribution by the Company that is not attributable to gain from the
sale or exchange by the Company of a United States real property interest and
that is not designated by the Company as a capital gain dividend will be treated
as an ordinary income dividend to the extent that it is made out of current or
accumulated earnings and profits. Generally, any ordinary income dividend will
be subject to a United States federal income tax equal to 30% of the gross
amount of the dividend unless this tax is reduced by an applicable tax treaty.
To the extent that the Company makes a distribution in excess of its current or
accumulated earnings and profits, the distribution will be treated first as a
tax-free return of capital, reducing a Non-U.S. Stockholder's basis in its
Common Stock (but not below zero), and the distribution in excess of a Non-U.S.
Stockholder's tax basis in its Common Stock will be treated as gain realized
from the sale of its Common Stock.
Distributions by the Company that are attributable to gain from the
sale or exchange of a United States real property interest will be taxed to a
Non-U.S. Stockholder under the Foreign Investment in Real Property Tax Act of
1980 ("FIRPTA"). Under FIRPTA, such distributions are taxed to a Non-U.S.
Stockholder as if the distributions were gains "effectively connected" with a
United States trade or business. Accordingly, a Non-U.S. Stockholder will be
taxed at the normal capital gain rates applicable to a U.S. Stockholder (subject
to any applicable alternative minimum tax and a special alternative minimum tax
in the case of non-resident alien individuals). Distributions subject to FIRPTA
also may be subject to the branch profits tax generally at the rate of 30%,
subject to reduction under a tax treaty, if applicable.
All dividends payable in respect of the 8% Preferred Stock, Series A,
will, to the extent permitted under the Code, be paid first out of earnings and
profits other than earnings and profits attributable to gain from the sale or
exchange of United States real property interests. Consequently, a
proportionately greater amount of distributions in respect of the Common Stock,
the 7% Preferred Stock and the 8% Preferred Stock may be out of earnings and
profits attributable to gain from the sale or exchange of United States real
property interests.
Although tax treaties may reduce the Company's withholding obligations,
the Company generally will withhold from distributions to Non-U.S. Stockholders,
and remit to the IRS, (i) 35% of designated capital gain dividends (or, if
greater, 35% of the amount of any distributions that could be designated as
capital gain dividends) and (ii) 30% of all other distributions out of current
or accumulated earnings and profits, unless reduced by an applicable tax treaty.
In addition, as a result of recently enacted legislation, the Company generally
will withhold 10% of any distribution in excess of the Company's current and
accumulated earnings and profits. In addition, if the Company designates prior
distributions as capital gain dividends, subsequent distributions, up to the
amount of such prior distributions, will be treated as capital gain dividends
for purposes of withholding. A Non-U.S. Stockholder generally will be entitled
to a refund from the IRS to the extent an amount is withheld from a distribution
that exceeds the amount of U.S. tax owed by such Non-U.S. Stockholder.
Pursuant to current Treasury Regulations, dividends paid to an address
in a country outside the United States are generally presumed to be paid to a
resident of such country for purposes of determining the applicability of
withholding discussed above and the applicability of a tax treaty rate. Under
proposed Treasury Regulations, not currently in effect, however, a Non-U.S.
Stockholder who wished to claim the benefit of an applicable treaty rate would
be required to satisfy certain certification and other requirements. Under
certain treaties, lower withholding rates generally applicable to dividends do
not apply to dividends from a REIT, such as the Company.
If the Common Stock constitutes a "United States real property
interest" within the meaning of FIRPTA, a sale of Common Stock by a Non-U.S.
Stockholder generally will be subject to United States federal income taxation.
The Common Stock will constitute a United States real property interest unless
the Company is a "domestically controlled REIT." A domestically controlled REIT
is a REIT in which at all times during a specified testing period less than 50%
in value of its shares is held directly or indirectly by Non-U.S. Stockholders.
Currently, the Company does not qualify as a domestically controlled REIT, and
will not qualify as a domestically controlled REIT for at least five years
following completion of this Offering. It is currently anticipated that,
following the expiration of such five-year period, the Company will be a
domestically controlled REIT and therefore that the sale of Common Stock
thereafter will not be subject to taxation under FIRPTA. However, in part
because the Common Stock is publicly traded in the United States, Luxembourg and
Germany, no assurance can be given that the Company will qualify as a
domestically controlled REIT even following such five-year period. So long as
the Company is not a domestically controlled REIT, gain on the sale of Common
Stock will be subject to taxation under FIRPTA, and a Non-U.S. Stockholder will
be subject to
19
<PAGE>
the same treatment as a U.S. Stockholder with respect to the gain (subject to
applicable alternative minimum tax and a special alternative minimum tax in the
case of non-resident alien individuals). Even at such time as the Company may
become a domestically controlled REIT, capital gains will be taxable to a
Non-U.S. Stockholder if the Non-U.S. Stockholder is a non-resident alien
individual who is present in the United States for 183 days or more during the
taxable year and certain other conditions apply, in which case the non-resident
alien individual will be subject to a 30% tax on his or her U.S. source capital
gains.
Upon the death of a foreign individual stockholder, the stockholder's
shares will be treated as part of the stockholder's U.S. estate for purposes of
the U.S. estate tax, except as may be otherwise provided in an applicable estate
tax treaty.
Information Reporting Requirements and Backup Withholding Tax
The Company will report to its U.S. Stockholders and the IRS the amount
of dividends paid during each calendar year, and the amount of tax withheld, if
any. Under certain circumstances, U.S. Stockholders may be subject to backup
withholding at a rate of 31% on payments made with respect to, or cash proceeds
of a sale or exchange of, Common Stock. Backup withholding will apply only if
the holder (i) fails to furnish his or her taxpayer identification number
("TIN") (which, for an individual, would be his or her Social Security number),
(ii) furnishes an incorrect TIN, (iii) is notified by the IRS that he or she has
failed properly to report payments of interest and dividends or is otherwise
subject to backup withholding or (iv) under certain circumstances, fails to
certify, under penalties of perjury, that he or she has furnished a correct TIN
and (a) that he or she has not been notified by the IRS that he or she is
subject to backup withholding for failure to report interest and dividend
payments or (b) that he or she has been notified by the IRS that he or she is no
longer subject to backup withholding. Backup withholding will not apply with
respect to payments made to certain exempt recipients, such as corporations and
tax-exempt organizations.
U.S. Stockholders should consult their own tax advisors regarding their
qualifications for exemption from backup withholding and the procedure for
obtaining such an exemption. Backup withholding is not an additional tax.
Rather, the amount of any backup withholding with respect to a payment to a U.S.
Stockholder will be allowed as a credit against the U.S. Stockholder's United
States federal income tax liability and may entitle the U.S. Stockholder to a
refund, provided that the required information is furnished to the IRS.
Backup withholding tax and information reporting will generally not
apply to distributions paid to Non-U.S. Stockholders outside the United States
that are treated as (i) dividends subject to the 30% (or lower treaty rate)
withholding tax discussed above, (ii) capital gains dividends or (iii)
distributions attributable to gain from the sale or exchange by the Company of
United States real property interests. As a general matter, backup withholding
and information reporting will not apply to a payment of the proceeds of a sale
of Common Stock by or through a foreign office of a foreign broker. Information
reporting (but not backup withholding) will apply, however, to a payment of the
proceeds of a sale of Common Stock by a foreign office of a broker that (a) is a
United States person, (b) derives 50% or more of its gross income for certain
periods from the conduct of a trade or business in the United States or (c) is a
"controlled foreign corporation" (generally, a foreign corporation controlled by
United States stockholders) for United States tax purposes, unless the broker
has documentary evidence in its records that the holder is a Non-U.S.
Stockholder and certain other conditions are met, or the stockholder otherwise
establishes an exemption. Payment to or through a United States office of a
broker of the proceeds of a sale of Common Stock is subject to both backup
withholding and information reporting unless the stockholder certifies under
penalty of perjury that the stockholder is a Non-U.S. Stockholder, or otherwise
establishes an exemption. A Non-U.S. Stockholder may obtain a refund of any
amounts withheld under the backup withholding rules by filing the appropriate
claim for refund with the IRS.
State and Local Tax
The Company and its stockholders may be subject to state and local tax
in states and localities in which it does business or owns property. The tax
treatment of the Company and the stockholders in such jurisdictions may differ
from the federal income tax treatment described above. Consequently, prospective
stockholders should consult their own tax advisors regarding the effect of state
and local tax laws on an investment in the Company.
20
<PAGE>
PLAN OF DISTRIBUTION
The Company may sell Common Stock to one or more underwriters or
dealers for public offering and sale by them or may sell Common Stock to
investors directly or through agents. The Prospectus Supplement with respect to
the Common Stock offered thereby describes the terms of the offering of such
Common Stock and the method of distribution of the Common Stock offered thereby
and identifies any firms acting as underwriters, dealers or agents in connection
therewith.
The Common Stock may be distributed from time to time in one or more
transactions at a fixed price or prices (which may be changed), at market prices
prevailing at the time of sale, at prices related to such prevailing market
prices, at negotiated prices or at prices determined as specified in the
Prospectus Supplement. In connection with the sale of the Common Stock,
underwriters, dealers or agents may be deemed to have received compensation from
the Company in the form of underwriting discounts, concessions or commissions
and may also receive commissions from purchasers of the Common Stock for whom
they may act as agent. Underwriters may sell the Common Stock 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 agent. Certain of the underwriters, dealers
or agents who participate in the distribution of Common Stock may engage in
other transactions with, or perform other services for, the Company in the
ordinary course of business.
Any underwriting compensation paid by the Company to underwriters or
agents in connection with the offering of Common Stock, and any discounts,
concessions or commissions allowed by underwriters to dealers, are set forth in
the Prospectus Supplement. Underwriters, dealers and agents participating in the
distribution of Common Stock may be deemed to be underwriters, and any discounts
or commissions received by them and any profit realized by them on the resale of
the Common Stock 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.
Underwriters and their controlling persons, dealers and agents may be
entitled, under agreements entered into with the Company, to indemnification
against and contribution toward certain civil liabilities, including liabilities
under the Securities Act.
In order to comply with the securities laws of certain states, if
applicable, Common Stock will be sold in such jurisdictions only through
registered or licensed brokers and dealers. In addition, in certain states
Common Stock may not be sold unless it has been registered or qualified for sale
in the applicable state or an exemption from the registration or qualification
requirement is available and is complied with.
EXPERTS
The consolidated financial statements as of December 31, 1996 and 1995,
and for the years ended December 31, 1996, 1995 and 1994 incorporated by
reference in this Prospectus or elsewhere in the Registration Statement of which
this Prospectus is a part, have been incorporated herein in reliance upon the
reports of Coopers & Lybrand L.L.P., independent accountants, given on the
authority of said firm as experts in accounting and auditing.
LEGAL MATTERS
Certain legal matters will be passed upon for the Company by Shearman &
Sterling, New York, New York and Lionel, Sawyer & Collins, Las Vegas, Nevada.
21
<PAGE>
================================================================================
No person has been authorized to give any
information or to make any representation not
contained or incorporated by reference in this
Prospectus and, if given or made, such
information or representation must not be relied
upon as having been authorized by the Company
or any other person. This Prospectus does not
constitute an offer to sell or a solicitation of any
offer to buy any of the securities by anyone in
any jurisdiction in which such offer or
solicitation is not authorized or in which the
person making such offer or solicitation is not
qualified to do so to any person to whom it is
unlawful to make such offer or solicitation in
such jurisdiction. Neither the delivery of this
Prospectus nor any sale made hereunder shall,
under any circumstances, create any implication
that the information herein is correct as of any
time subsequent to the date hereof or that there
has been no change in the affairs of the
Company since such date or, in the case of
information incorporated herein by reference,
the date of filing with the Securities and
Exchange Commission.
---------------
TABLE OF CONTENTS
Page
Available Information...............................2
Incorporation of Certain Information by Reference...3
The Company.........................................4
Use of Proceeds.....................................4
Description of Capital Stock of the Company.........4
Certain Provisions of Nevada Law and
of the Company's Articles of Incorporation......11
Federal Income Tax Considerations..................13
Plan of Distribution...............................21
Experts............................................21
Legal Matters......................................21
================================================================================
================================================================================
$700,000,000
CORNERSTONE PROPERTIES INC.
Common Stock
-------------
PROSPECTUS
-------------
[ ], 1997
================================================================================
<PAGE>
Part II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 14. Other Expenses of Issuance and Distribution
The following table is an itemized listing of expenses to be
incurred by the Company in connection with the issuance and distribution of the
shares of Common Stock being registered hereby, other than underwriting
discounts and commissions. All amounts shown are estimates, except the SEC
Registration fee:
SEC Registration Fees................................. $151,516
NYSE Listing Fee...................................... 179,100
Printing and Engraving Expenses....................... 280,000
Accounting Fees and Expenses.......................... 50,000
Legal Fees and Expenses (other than Blue Sky)......... 500,000
Transfer Agent and Registrar Fees..................... 2,500
Blue Sky Fees and Expenses............................ 15,000
Miscellaneous......................................... 30,000
---------
Total................................................. 1,208,116
=========
Item 15. Indemnification of Officers and Directors
Subsection 1 of Section 78.751 of Chapter 78 of the Nevada
Revised Statutes (the "NRS") empowers a corporation to indemnify any person who
was or is a party or is threatened to be made a party to any threatened, pending
or completed action, suit or proceeding, whether civil, criminal, administrative
or investigative (other than an action by or in the right of the corporation) by
reason of the fact that he is or was a director, officer, employee or agent of
the corporation or is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation or other enterprise,
against expenses (including attorneys' fees), judgments, fines and amounts paid
in settlement actually and reasonably incurred by him in connection with such
action, suit or proceeding if he acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best interests of the
corporation, and with respect to any criminal action or proceeding, had no
reasonable cause to believe his conduct was unlawful. The termination of any
action, suit or proceeding by judgment, order, settlement or conviction or upon
a plea of nolo contendre or its equivalent does not, of itself, create a
presumption that the person did not act in good faith or in a manner which he
reasonably believed to be in or not opposed to the best interests of the
corporation or that, with respect to any criminal action or proceeding, he had
reasonable cause to believe his actions were unlawful.
Subsection 2 of Section 78.751 of the NRS empowers a
corporation to indemnify any person who was or is a party or is threatened to be
made a party to any threatened, pending or completed action or suit by or in the
right of the corporation to procure a judgment in its favor by reason of the
fact that such person acted in any of the capacities set forth above against
expenses, including attorneys' fees, actually and reasonably incurred by him in
connection with the defense or settlement of such action or suit if he acted
under similar standards to those described above except that no indemnification
may be made in respect of any claim, issue or matter as to which such person
shall have been adjudged to be liable to the corporation or for amounts paid in
settlement to the corporation unless and only to the extent that the court in
which such action or suit was brought determines that, despite the adjudication
of liability, such person is fairly and reasonably entitled to indemnity for
such expenses as the court deems proper.
II-2
<PAGE>
Section 78.751 of the NRS further provides that to the extent
a director or officer of a corporation has been successful in the defense of any
action, suit or proceeding referred to in subsections (1) and (2) or in the
defense of any claim, issue or matter therein, he shall be indemnified against
expenses (including attorneys' fees) actually and reasonably incurred by him in
connection therewith; that any indemnification provided for by Section 78.751 of
the NRS (by court order or otherwise) shall not be deemed exclusive of any other
rights to which the indemnified party may be entitled; and that the scope of
indemnification shall continue as to directors, officers, employees or agents
who have ceased to hold such positions, and to their heirs, executors and
administrators. Section 78.752 empowers the corporation to purchase and maintain
insurance on behalf of a director, officer, employee or agent of the corporation
against any liability asserted against him or incurred by him in any such
capacity or arising out of his status as such whether or not the corporation
would have the power to indemnify him against such liabilities under Section
78.751.
Article IX of the Bylaws of the Company provides for
indemnification of its officers and Directors, substantially identical in scope
to that permitted under Section 78.751 of the NRS. The Bylaws provide, pursuant
to Subsection 5 of Section 78.751 of the NRS, that the expenses of officers and
Directors incurred in defending any action, suit or proceeding, whether civil,
criminal, administrative or investigative, must be paid by the Company as they
are incurred and in advance of the final disposition of the action, suit or
proceeding, upon receipt of any undertaking by or on behalf of the Director or
officer to repay such amounts unless it shall ultimately be determined that he
is entitled to be indemnified by the Company pursuant to Article IX of the
Bylaws.
Item 16. Exhibits
Exhibit
Number Description of Exhibit
------ ----------------------
1.1* Form of Underwriting Agreement
4.1** Specimen of Common Stock Certificate (filed as Exhibit 4.1 to the
Company's Form 10-Q filed April 30, 1982 (Commission File No.
0-10421) and incorporated by reference herein)
4.2** Restated Articles of Incorporation of the Company (filed as
Exhibit 3.1 to the Company's Form 10-K for the year ended December
31, 1995 (Commission File No. 0-10421) and incorporated by
reference herein)
4.3** Bylaws of the Company (filed as Exhibit 3.5 to the Company's Form
10-K for the year ended December 31, 1995 (Commission File No.
0-10421) and incorporated by reference herein)
4.4** Certificate of Designations of 3,030,303 Shares of the 7%
Cumulative Convertible Preferred Stock, without par value, of the
Company (filed as Exhibit 3.1(a) to the Company's Form 10-K for
the year ended December 31, 1995 (Commission File No. 0-10421) and
incorporated by reference herein)
4.5** Certificate of Designations of 1,034,483 Shares of 8% Cumulative
Convertible Preferred Stock, without par value, of the Company
(filed as Exhibit 4.1 to the Company's Form 8-K filed December 12,
1996 (Commission File No. 0-10421) and incorporated by reference
herein)
4.6** Certificate of Designations of 458,621 Shares of 8% Cumulative
Convertible Preferred Stock, Series A, without par value, of the
Company (filed as Exhibit 4.2 to the Company's Form 8-K filed
December 12, 1996 (Commission File No. 0-10421) and incorporated
by reference herein)
5.1 Opinion of Lionel Sawyer & Collins
8.1 Opinion of Shearman & Sterling as to certain tax matters
23.1 Consent of Lionel Sawyer & Collins (contained in the opinion filed
as Exhibit 5.1)
23.2 Consent of Shearman & Sterling (contained in the opinion filed as
Exhibit 8.1)
23.3 Consent of Coopers & Lybrand L.L.P.
23.4 Consent of Ernst & Young L.L.P.
23.5 Consent of Ernst & Young L.L.P.
24.1 Powers of Attorney
- ----------------
* To be incorporated by reference with the offering of Securities.
** Previously filed.
II-3
<PAGE>
Item 17. Undertakings
The undersigned Registrant hereby undertakes:
(1) to file, during any period in which offers or sales are
being made, a post-effective amendment to this registration statement:
(i) to include any prospectus required by
Section 10(a)(3) of the Securities Act of 1933 (the
"Securities Act");
(ii) to reflect in the prospectus any facts or events
arising after the effective date of the registration statement
(or the most recent post-effective amendment thereof) which,
individually or in the aggregate, represent a fundamental
change in the information set forth in the registration
statement. Notwithstanding the foregoing, any increase or
decrease in volume of securities offered (if the total dollar
value of securities offered would not exceed that which was
registered) and any deviation from the low or high end of the
estimated maximum offering range may be reflected in the form
of prospectus filed with the Securities and Exchange
Commission (the "Commission") pursuant to Rule 424(b) if, in
the aggregate, the changes in volume and price represent no
more than a 20% change in the maximum aggregate offering price
set forth in the "Calculation of Registration Fee" table in
the effective registration statement; and
(iii) to include any material information with
respect to the plan of distribution not previously disclosed
in the registration statement or any material change to such
information in the registration statement.
provided, however, that paragraphs (1)(i) and (1)(ii) of this section
do not apply if the registration statement is on Form S-3, Form S-8 or
Form F-3, and the information required to be included in a
post-effective amendment by those paragraphs is contained in periodic
reports filed with or furnished to the Commission by the registrant
pursuant to Section 13 or Section 15(d) of the Securities Exchange Act
of 1934 (the "Exchange Act") that are incorporated by reference in the
registration statement;
(2) that, for the purpose of determining any liability under
the Securities Act, each such post-effective amendment shall be deemed
to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof; and
(3) to remove from registration by means of a post-effective
amendment any of the securities being registered which remain unsold at
the termination of the offering.
The undersigned registrant hereby further undertakes that, for
purposes of determining any liability under the Securities Act, each filing of
the registrant's annual report pursuant to Section 13(a) or Section 15(d) of the
Exchange Act (and, where applicable, each filing of an employee benefit plan's
annual report pursuant to Section 15(d) of the Exchange Act) that is
incorporated by reference in the registration statement shall be deemed to be a
new registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to directors, officers and controlling persons
of the registrant pursuant to the foregoing provisions, or otherwise, the
registrant has been advised that in the opinion of the Commission such
indemnification is against public policy as expressed in the Securities Act and
is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the registrant of expenses
incurred or paid by a director, officer or controlling person of the registrant
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Securities Act and will be governed by the final
adjudication of such issue.
II-4
<PAGE>
The undersigned Registrant hereby further undertakes that:
(1) for purposes of determining any liability under the
Securities Act, the information omitted from the form of prospectus
filed as part of this registration statement in reliance upon Rule 430A
and contained in a form of prospectus filed by the registrant pursuant
to Rule 424(b)(1) or (4) or 497(h) under the Securities Act shall be
deemed to be part of this registration statement as of the time it was
declared effective; and
(2) For the purpose of determining any liability under the
Securities Act, each post-effective amendment that contains a form of
prospectus shall be deemed to be a new registration statement relating
to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering
thereof.
II-5
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933,
the registrant certifies that it has reasonable grounds to believe that it meets
all of the requirements for filing on Form S-3 and has duly caused this
amendment to the Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of New York, New York, on
this 27th day of February, 1997.
CORNERSTONE PROPERTIES INC.
By: /s/ John S. Moody
---------------------------------------------
Name: John S. Moody
Title: President and Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933,
this amendment to the Registration Statement has been signed below by the
following persons in the capacities indicated on the dates indicated.
Signature Title Date
- --------- ----- ----
/s/ Rolf E. Breuer* Chairman of the Board and February 27, 1997
- --------------------------- Director
Dr. Rolf-E. Breuer
/s/ John S. Moody President and Chief Executive February 27, 1997
- --------------------------- Officer, and Director
John S. Moody (Principal Executive Officer)
/s/ Thomas P. Loftus Vice President and Controller February 27, 1997
- --------------------------- (Principal Accounting Officer)
Thomas P. Loftus
/s/ Kevin P. Mahoney Vice President and Treasurer February 27, 1997
- --------------------------- (Principal Financial Officer)
Kevin P. Mahoney
/s/ Cecil D. Conlee* Director February 27, 1997
- ---------------------------
Cecil D. Conlee
/s/ George A. Davis* Director February 27, 1997
- ---------------------------
George A. Davis
/s/ Blake Eagle* Director February 27, 1997
- ---------------------------
Blake Eagle
/s/ Karl-Ludwig Hermann* Director February 27, 1997
- ---------------------------
Dr. Karl-Ludwig Hermann
/s/ Hans C. Mautner* Director February 27, 1997
- ---------------------------
Hans C. Mautner
/s/ Gerald Rauenhorst* Director February 27, 1997
- ---------------------------
Gerald Rauenhorst
/s/ Michael J.G. Topham* Director February 27, 1997
- ---------------------------
Michael J.G. Topham
/s/ Berthold T. Wetteskind* Director February 27, 1997
- ---------------------------
Berthold T. Wetteskind
II-6
<PAGE>
- ----------
* By John S. Moody as Attorney-In-Fact.
II-7
LIONEL SAWYER & COLLINS
Attorneys At Law
1700 BANK OF AMERICA PLAZA
300 SOUTH FOURTH STREET
LAS VEGAS, NEVADA 69101
February 26, 1997
(702) 383-8888
Cornerstone Properties, Inc.
126 East 56th Street
New York, New York 10022
Re: Cornerstone Properties, Inc.
Registration Statement on Form S-3
----------------------------------
Dear Sirs:
We have acted as special Nevada counsel for Cornerstone Properties, Inc., a
Nevada corporation (the "Company"), in connection with the preparation of a
Registration Statement on Form S-3 ("Registration Statement"), being filed by
the Company with the Securities and Exchange Commission (the "Commission") under
the Securities Act of 1933, as amended (the "Act"), with respect to the
registration by the Company of up to seven hundred million ($700,000,000.00)
dollars of shares ("Shares") of Common Stock, no par value per share, of the
Company (the "Common Stock"), such Shares to be issued and offered in amounts
and prices per share to be determined at the time of such issuance and offering,
and set forth in one or more prospectus supplements to the Registration
Statement (each a "Prospectus Supplement"). The Company has provided us with a
draft prospectus ("Prospectus"), which is a part of the Registration Statement.
Capitalized terms used in this Opinion Letter and not defined herein shall have
the meaning given to them in the Registration Statement.
We have examined originals or copies of such corporate records and
certificates of public officials and we have deemed necessary or advisable for
the purposes of this Opinion Letter. We have assumed the authenticity of all
documents submitted to us as originals, the genuineness of all signatures, the
legal capacity of natural persons and the conformity to originals of all copies
of all documents submitted to us. We have relied upon the certificates of all
public officials and corporate officers with respect to the accuracy of all
matters contained therein.
<PAGE>
Based upon and subject to the foregoing, and subject to the qualifications,
limitations, restrictions and assumptions set forth below, we are of the opinion
that:
1. The Company is a corporation duly incorporated, validly existing, and in
good standing under the laws of the State of Nevada.
2. The Company has the authority to issue up to One Hundred Million
(100,000,000) shares of Common Stock.
3. Upon adoption by the Board of Directors of the Company of a resolution
in form and content as required by applicable law with respect to the issuance
of the Shares ("Resolution"), and assuming: (i) the conformity of the
certificates representing the Shares to the form of the specimen thereof
examined by us, (ii) the due execution and delivery of such certificates, (iii)
the receipt of the consideration called for in the Registration Statement and/or
the Prospectus Supplement and the Resolution, and (iv) the issuance of the
Shares does not exceed the authorized but unissued Common Stock at the time of
such issuance (excluding Common Stock unissued but committed to issuance), then
upon issuance and delivery of the Shares pursuant to the Registration Statement
and/or the Prospectus Supplement and the Resolution, the Shares will be validly
issued, fully paid and nonassessable.
Nothing herein shall be deemed an opinion as to the laws of any other
jurisdiction other than the State of Nevada.
This Opinion Letter is intended solely for the use of the Company in
connection with the Registration Statement. It may not be relied upon by any
other person or for any other purpose, or reproduced or filed publicly by any
person without the written consent of this firm; provided, we hereby consent to
the filing of this Opinion Letter as an exhibit to the Registration Statement
and to the reference to our firm under the caption "Legal Matters" in the
Prospectus included therein. In giving this consent, we do not hereby admit that
we are in a category of persons whose consent is required pursuant to Section 7
of the Act or the rules and regulations of the Commission promulgated
thereunder, and we disclaim liability as an expert under the securities laws of
the United States or any other jurisdiction.
/s/ Lionel Sawyer & Collins
SHEARMAN & STERLING
Citicorp Center
153 East 53rd Street
New York, N.Y. 10022-4676
(212) 848-4000
February 26, 1997
Cornerstone Properties Inc.
126 East 56th Street
New York, NY 10022
Certain Federal Income Tax Matters
----------------------------------
Ladies and Gentlemen:
This opinion is delivered to you in our capacity as counsel to
Cornerstone Properties Inc. (the "Company") in connection with the Company's
registration statement on Form S-3 (the "Registration Statement") filed by the
Company with the Securities and Exchange Commission (the "Commission") under the
Securities Act of 1933, as amended, relating to an offering of the Company's
Common Stock, without par value with an aggregate public offering price of
$700,000,000. This opinion relates to the Company's qualification for federal
income tax purposes as a real estate investment trust (a "REIT") as defined in
section 856 of the Internal Revenue Code of 1986, as amended (the "Code").
In rendering the following opinions, we have examined the
Articles of Incorporation and Bylaws of the Company, and such other records,
certificates and documents as we have deemed necessary or appropriate for
purposes of rendering the opinions set forth herein. We have reviewed the
Registration Statement and the documents incorporated by reference therein (the
"Incorporated Documents") that describe the Company and its investments and
activities. We have relied upon the representations of the Company and its
affiliates and certain officers thereof (including, without limitation,
representations contained in a representation letter dated as of this date)
regarding the manner in which the Company has been and will continue to be owned
and operated. We assume that the Company has been and will be operated in
accordance with applicable laws and the terms and conditions of applicable
documents, and that the descriptions of the Company and its investments, and the
proposed investments, activities, operations and governance of the Company set
forth in the Incorporated Documents continue to be true.
<PAGE>
Based upon and subject to the foregoing and based upon the
Code, the Regulations issued by the United States Treasury Department
thereunder, court decisions, and rulings and other pronouncements of the
Internal Revenue Service, all as in effect on the date hereof, we are of the
opinion that:
(i) For the taxable years 1993, 1994 and 1995, the Company's
organization and operations have conformed with the
requirements for qualification and taxation as a REIT, and the
Company's proposed method of operation will enable it to
continue to meet the requirements for qualification and
taxation as a REIT, and
(ii) The statements in the Incorporated Documents set forth
under the caption "Federal Income Tax Considerations," to the
extent constituting matters of law, summaries of legal
matters, or legal conclusions, are accurate in all material
respects.
Qualification of the Company as a REIT, however, will depend
upon the Company's satisfaction annually of the various qualification tests
imposed by the Code, and no assurance can be made that the Company will be able
to satisfy or will actually satisfy these various qualification tests. We do not
undertake to monitor whether the Company will, in fact, satisfy the various
qualification tests, and we express no opinion whether the Company actually will
satisfy these various qualification tests in the future.
This opinion is based on current federal income tax law, and
we do not undertake to advise you as to any future changes in federal income tax
law that may affect this opinion unless we are specifically engaged to do so.
This opinion relates solely to federal income tax law, and we
do not undertake to render any opinion as to the qualification of the Company as
a REIT under any state or local corporate franchise or income tax laws.
We hereby consent to the use of our name and opinions under
"Certain Federal Income Tax Considerations" in the Registration Statement and
the reference to our name under the heading "Legal Matters" in the Registration
Statement.
Very truly yours,
/s/ Shearman & Sterling
COOPERS & LYBRAND, L.L.P.
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in this Registration Statement on
Form S-3 of our report dated March 5, 1996, on our audits of the consolidated
financial statements of Cornerstone Properties Inc. as of December 31, 1996 and
1995, and for the years ended December 31, 1996, 1995 and 1994, which report is
included in Cornerstone Properties Inc.'s 1996 Annual Report on Form 10-K. We
also consent to the reference to our Firm under the caption "Experts" in the
Prospectus which is part of this Registration Statement.
/s/ Cooper & Lybrand L.L.P.
New York, New York
February 27, 1997
ERNST & YOUNG
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in this Registration Statement on
(Form S-3/A No. 333-18303) of our report dated February 23, 1996, with respect
to the Statement of Revenues and Certain Expenses of Tower 56 (the Property)
included in the Current Report on Form 8-K Amendment No. 1 dated January 22,
1997, both filed with the Securities and Exchange Commission.
/s/ Ernst & Young L.L.P.
New York, New York
February 27, 1997
ERNST & YOUNG
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in the Registration Statement (Form
S-3/A No. 333-18303) of our report dated December 13, 1996, with respect to the
Statement of Revenue and Certain Expenses of One Lincoln Centre for the year
ended December 31, 1995, included in the Current Report on Form 8-K/A Amendment
No. 1 dated January 22, 1997, both filed with the Securities and Exchange
Commission.
/s/ Ernst & Young LLP
Chicago, Illinois
February 27, 1997
ERNST & YOUNG
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in the Registration Statement
(Form S-3/A No. 333-18303) of our report dated December 13, 1996, with respect
to the Statement of Revenue and Certain Expenses of No. 527 Madison Avenue for
the year ended December 31, 1995, included in the Current Report on Form 8-K/A
Amendment No. 1 dated February 24, 1997, both filed with the Securities and
Exchange Commission.
/s/ Ernst & Young LLP
Stanford, Connecticut
February 27, 1997
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned
constitutes and appoints John S. Moody, Rodney C. Dimock, Thomas P. Loftus,
Kevin P. Mahoney, and each of them, as his true and lawful attorney-in-fact and
agent with full power of substitution and resubstitution, for him and in his
name, place and stead, in any and all capacities, to sign (1) a Registration
Statement on Form S-3 or other appropriate form covering up to $700,000,000 of
Common Stock of the Company and any and all amendments (post-effective or
otherwise) to, and supplements to any prospectus contained in, such registration
statement and any and all instruments and documents filed as a part of or in
connection with such amendments or supplements; (2) the Company's Annual Report
on Form 10-K for the year ended December 31, 1996; and (3) any other reports or
registration statements to be filed by the Company with the Securities and
Exchange Commission and/or any national securities exchange under the Securities
Exchange Act of 1934, as amended, and any and all amendments thereto, and any
and all instruments and documents filed as part of or in connection with such
reports or registration statements or amendments thereto; and in connection with
the foregoing, to do any and all acts and things and execute any and all
instruments which such attorneys-in-fact and agents may deem necessary or
advisable to enable the Company to comply with the securities laws of the United
States and any State or other political subdivision thereof; granting unto said
attorneys-in-fact and agents, full power and authority to do and perform each
and every act and thing requisite and necessary to be done in and about the
foregoing, as fully to all intents and purposes as he might or could do in
person, hereby ratifying and confirming all that said attorneys-in-fact and
agents or their substitute or substitutes, may lawfully do or cause to be done
by virtue hereof.
February 27, 1997
/s/ Rolf E. Breuer
--------------------------
Dr. Rolf E. Breuer
/s/ Cecil D. Conlee
--------------------------
Cecil D. Conlee
/s/ George Abbott Davis
--------------------------
George Abbott Davis
/s/ Blake Eagle
--------------------------
Blake Eagle
/s/ Karl-Ludwig Hermann
--------------------------
Dr. Karl-Ludwig Hermann
/s/ Hans C. Mautner
--------------------------
Hans C. Mautner
/s/ Gerald Rauenhorst
--------------------------
Gerald Rauenhorst
/s/ Michael J.G. Topham
--------------------------
Michael J.G. Topham
/s/ Berthold T. Wetteskind
--------------------------
Berthold T. Wetteskind
