<PAGE>
RULE NO. 424(b)(5)
REGISTRATION NO. 333-15635
PROSPECTUS SUPPLEMENT
(TO PROSPECTUS DATED JUNE 30, 1997)
1,500,000 SHARES
NEW PLAN REALTY TRUST
LOGO DEPOSITARY SHARES
EACH REPRESENTING 1/10 OF A 7.80% SERIES A CUMULATIVE STEP-UP PREMIUM RATE SM
PREFERRED SHARE ("SUPER SM")(PAR VALUE $1.00 PER SHARE)
(LIQUIDATION PREFERENCE EQUIVALENT TO $50.00 PER DEPOSITARY SHARE)
--------------
Each of the 1,500,000 Depositary Shares (the "Depositary Shares") offered
hereby (the "Offering") represents a 1/10 fractional interest in a 7.80% Series
A Cumulative Step-Up Premium Rate SM Preferred Share, par value $1.00 per share
(a "Series A SUPeR Preferred Share"), of New Plan Realty Trust (the "Trust"), a
Massachusetts business trust, deposited with BankBoston N.A., as Depositary,
and entitles the holder to all proportional rights and preferences of the
Series A SUPeR Preferred Shares (including, if any, distribution, voting,
redemption and liquidation rights and preferences). The liquidation preference
of each Series A SUPeR Preferred Share is $500.00 (equivalent to $50.00 per
Depositary Share). See "Description of Series A SUPeR Preferred Shares and
Depositary Shares."
Dividends on the Series A SUPeR Preferred Shares represented by the
Depositary Shares offered hereby will be cumulative from the date of original
issue and will be payable quarterly on or about the fifteenth day of March,
June, September and December of each year, commencing on September 15, 1997, at
the rate of 7.80% of the liquidation preference per annum (equivalent to $3.90
per annum per Depositary Share) through September 15, 2012 and at the rate of
9.80% of the liquidation preference per annum (equivalent to $4.90 per annum
per Depositary Share) thereafter. See "Description of Series A SUPeR Preferred
Shares and Depositary Shares--Dividends."
The Series A SUPeR Preferred Shares and the Depositary Shares representing
such Series A SUPeR Preferred Shares are not redeemable prior to June 15, 2007.
At any time on or after June 15, 2007, the Series A SUPeR Preferred Shares may
be redeemed at the option of the Trust, in whole or in part, at a redemption
price of $500.00 per share (equivalent to $50.00 per Depositary Share), plus
accrued and unpaid dividends, if any, thereon. The redemption price of the
Series A SUPeR Preferred Shares (other than any portion thereof consisting of
accrued and unpaid dividends, if any) shall be paid solely from the sale
proceeds, including proceeds from the Trust's distribution reinvestment plan
(DRIP), of other capital shares of beneficial interest of the Trust, which may
include other classes or series of preferred shares, and from no other source.
The Series A SUPeR Preferred Shares have no stated maturity and will not be
subject to any sinking fund or mandatory redemption provisions and will not be
convertible into any other securities of the Trust. However, the Trust may
redeem Series A SUPeR Preferred Shares in certain circumstances relating to
maintenance of its ability to qualify as a real estate investment trust
("REIT") for federal income tax purposes. See "Description of Series A SUPeR
Preferred Shares and Depositary Shares--Redemption."
Prior to the Offering, there has been no public market for the Series A SUPeR
Preferred Shares, and there can be no assurance that an active trading market
for the Series A SUPeR Preferred Shares will develop following the Offering or,
if developed, that any such market will be sustained. In the absence of a
public trading market, an investor may be unable to liquidate his investment.
The rules of the New York Stock Exchange ("NYSE") provide that in certain
instances all holders of preferred shares should have the right, voting as a
class, to elect an additional two trustees. The Trust's Amended and Restated
Declaration of Trust (the "Declaration of Trust") prohibits the holders of any
series of preferred shares from having the right to elect one or more separate
Trustees. In order to facilitate the listing of the Depositary Shares on the
NYSE, the Trust intends to propose to amend the Declaration of Trust to
eliminate the existing prohibition and to seek the required shareholder
approval of such amendment at the Trust's next annual meeting of shareholders
scheduled for December 10, 1997. There can be no assurance, however, that the
Trust's shareholders will approve the amendment. Application will be made to
list the Depositary Shares on the NYSE, but there can be no assurance that the
NYSE will approve such application. While the Underwriters have advised the
Trust that they intend to make a market in the Depositary Shares prior to
commencement of trading, if any, on the NYSE, they are under no obligation to
do so. See "Underwriting."
In order to maintain the Trust's qualification as a REIT for federal income
tax purposes, ownership by any person of more than 7.5% in number or value of
all of the Trust's outstanding shares of beneficial interest, including
preferred shares, is restricted in the Trust's Declaration of Trust. The
Depositary Shares would be taken into account in determining whether a holder
of the Trust's shares of beneficial interest violated the ownership
limitations. See "Description of Preferred Shares--Restrictions on Ownership"
and "Description of Common Shares--Restrictions on Ownership" in the
accompanying Prospectus.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS SUPPLEMENT OR
THE PROSPECTUS TO WHICH IT RELATES. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRICE TO UNDERWRITING PROCEEDS TO
PUBLIC(1) DISCOUNT(2) COMPANY(3)
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Per Depositary Share...................... $50.00 $1.25 $48.75
- ---------------------------------------------------------------------------------------------------
Total..................................... $75,000,000 $1,875,000 $73,125,000
- ---------------------------------------------------------------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
(1) Plus accrued distributions, if any, from the date of original issue.
(2) The Trust has agreed to indemnify the Underwriter against certain
liabilities, including liabilities under the Securities Act of 1933, as
amended. See "Underwriting."
(3) Before deducting expenses payable by the Trust estimated at $350,000.
The Depositary Shares are offered by the Underwriter, subject to prior sale,
when, as and if delivered to and accepted by the Underwriter, subject to
approval of certain legal matters by counsel for the Underwriter and to certain
other conditions. The Underwriter reserves the right to withdraw, cancel or
modify such offer and to reject orders in whole or in part. It is expected that
delivery of the Depositary Receipts evidencing the Depositary Shares will be
made in New York, New York on or about July 3, 1997.
--------------
MERRILL LYNCH & CO.
--------------
The date of this Prospectus Supplement is June 30, 1997.
- -------
"Step-Up Premium RateSM" and "SUPeRSM" are service marks owned by Merrill Lynch
& Co., Inc.
<PAGE>
Certain persons participating in the Offering may engage in transactions
that stabilize, maintain, or otherwise affect the price of the Depositary
Shares representing a 1/10 fractional interest in the Trust's Series A SUPeR
Preferred Shares, including entering stabilizing bids and effecting syndicate
covering transactions. For a description of these activities, see
"Underwriting."
S-2
<PAGE>
The following information contained in this Prospectus Supplement is
qualified in its entirety by the detailed information appearing elsewhere in
the accompanying Prospectus or incorporated therein by reference. Unless
otherwise specified, the term "Trust" includes New Plan Realty Trust and those
entities owned or controlled by it.
THE TRUST
New Plan Realty Trust, one of the largest publicly traded real estate
investment trusts in the United States based on the aggregate market value of
its outstanding common shares of beneficial interest without par value
("Common Shares"), is a self-administered and self-managed equity real estate
investment trust which primarily owns shopping centers and garden apartment
communities. Substantially all of the Trust's present equity investments
consist of 119 shopping centers, with approximately 16,945,000 gross rentable
square feet, six factory outlet centers with approximately 1,756,000 gross
rentable square feet and 47 garden apartment communities containing 10,964
apartment units. These properties are located in 23 states. See "Business."
The Trust has paid regular and uninterrupted cash distributions on its
Common Shares since it commenced operations as a real estate investment trust
in 1972. These distributions, which are paid quarterly, have increased from
$0.19 per Common Share in fiscal 1973 to $1.395 per Common Share in fiscal
1996 (and $1.44 per Common Share on an annualized basis, based upon the third
quarterly distribution paid in fiscal 1997). Since inception, each
distribution has either been equal to or greater than the distribution
preceding it, and the distributions have been increased in each of the last 71
consecutive quarters. The Trust intends to continue to declare quarterly
distributions on its Common Shares.
The Trust's primary investment strategy is to identify and purchase well-
located income-producing shopping centers and garden apartment communities at
a discount to replacement cost. The Trust also purchases selected factory
outlet centers. The Trust seeks to achieve income growth through a program of
expansion, renovation, leasing, re-leasing and improving the tenant mix. The
Trust minimizes development risks by generally purchasing existing income-
producing properties.
The Trust generally has acquired properties for cash. Management believes
that its ability to purchase available properties for cash enhances its
negotiating position in obtaining attractive purchase prices. In a few
instances properties have been acquired subject to existing long-term
mortgages. Since August 1, 1996, the Trust has acquired 12 shopping centers
aggregating approximately 2,016,000 gross rentable square feet and 12 garden
apartment communities containing 3,670 apartment units for an aggregate
purchase price of approximately $210 million. The Trust has also recently
entered into contracts to purchase three shopping centers, with approximately
497,000 gross rentable square feet and one garden apartment community
consisting of 140 units for an aggregate purchase price of approximately $29
million, including an approximately $1.2 million purchase money mortgage.
Long-term debt of the Trust at June 26, 1997 consisted of approximately $414
million of unsecured senior notes and approximately $65 million of mortgage
loans. At June 26, 1997, the Trust had $12 million outstanding under its $50
million line of credit (the "Line of Credit") with The Bank of New York, Fleet
National Bank and CoreStates Bank N.A. (the "Banks"), which Line of Credit
expires on October 29, 1997. The Trust expects to extend the maturity of the
Line of Credit or enter into a new line of credit.
No single tenant or chain of tenants currently accounts for more than 2% of
the Trust's revenues, other than Kmart, the Trust's largest tenant, which
currently accounts for approximately 4% of revenues. Many of the shopping
centers include supermarket and drug store tenants which historically have
been less susceptible to economic downturns. See "Business."
The Trust, a Massachusetts business trust, maintains its executive offices
at 1120 Avenue of the Americas, New York, New York 10036, and its telephone
number is (212) 869-3000. The Trust employs approximately 550 individuals,
including executive, administrative and field personnel. Trust personnel
lease, manage and maintain or supervise the maintenance of all of the Trust's
properties.
S-3
<PAGE>
THE OFFERING
Securities Offered... 1,500,000 Depositary Shares each representing a 1/10
fractional interest in a Series A SUPeR Preferred
Share.
Dividends............ Dividends on the Series A SUPeR Preferred Shares
represented by the Depositary Shares offered hereby
are cumulative from the date of issue and are payable
quarterly on or about the fifteenth day of March,
June, September and December of each year, commencing
on September 15, 1997, at the rate of 7.80% of the
liquidation preference per annum (equivalent to $3.90
per annum per Depositary Share) through September 15,
2012 and at the rate of 9.80% of the liquidation
preference per annum (equivalent to $4.90 per annum
per Depositary Share) thereafter. The first dividends
on the Series A SUPeR Preferred Shares represented by
the Depositary Shares offered hereby, which will be
paid on September 15, 1997, will be for less than a
full quarter. Dividends on the Series A SUPeR
Preferred Shares will accrue whether or not the Trust
has earnings, whether or not there are funds legally
available for the payment of such distributions and
whether or not such distributions are declared.
Accrued but unpaid dividends on the Series A SUPeR
Preferred Shares will not bear interest and holders of
the Series A SUPeR Preferred Shares will not be
entitled to any dividends in excess of full cumulative
dividends as described above. If, for any taxable
year, the Trust elects to designate as "capital gain
dividends" (as defined in Section 857 of the Internal
Revenue Code of 1986, as amended (the "Code")) any
portion (the "Capital Gains Amount") of the dividends
(within the meaning of the Code) paid or made
available for the year to holders of all classes of
shares of beneficial interest, including preferred
shares (the "Total Dividends"), then the portion of
the Capital Gains Amount that will be allocable to the
holders of Series A SUPeR Preferred Shares will be the
Capital Gains Amount multiplied by a fraction, the
numerator of which will be the total dividends (within
the meaning of the Code) paid or made available to the
holders of the Series A SUPeR Preferred Shares for the
year and the denominator of which shall be the Total
Dividends. See "Description of Series A SUPeR
Preferred Shares and Depositary Shares--Dividends."
Ranking.............. The Series A SUPeR Preferred Shares will rank senior
to the Common Shares with respect to the payment of
distributions and amounts upon liquidation,
dissolution or winding-up. See "Description of
Preferred Shares" included in the accompanying
Prospectus.
Liquidation The Series A SUPeR Preferred Shares will have a
Preference.......... liquidation preference of $500.00 per Series A SUPeR
Preferred Share (equivalent to $50.00 per Depositary
Share), plus an amount equal to accrued and unpaid
distributions. See "Description of Series A SUPeR
Preferred Shares--Liquidation Preference."
Redemption........... Except in certain circumstances relating to the
Trust's maintenance of its ability to qualify as a
REIT, the Series A SUPeR Preferred Shares are not
redeemable prior to June 15, 2007. See "Description of
Preferred Shares-- Restrictions on Ownership" and
"Description of Common Shares--Restrictions on
Ownership" in the accompanying Prospectus. At any time
on or after June 15, 2007, the Series A SUPeR
Preferred Shares will be redeemable for cash at the
option of the Trust, in whole or in part, at $500.00
per share (equivalent to $50.00 per Depositary Share),
plus distributions
S-4
<PAGE>
accrued and unpaid, if any, to the redemption date.
The redemption price (other than the portion thereof
consisting of accrued and unpaid dividends, if any) is
payable solely out of the sale proceeds, including
proceeds from the Trust's distribution reinvestment
plan (DRIP), of other capital shares of beneficial
interest of the Trust, which may include other classes
or series of preferred shares and from no other
source. See "Description of Series A SUPeR Preferred
Shares and Depositary Shares--Redemption."
Voting Rights........ Holders of Series A SUPeR Preferred Shares will not
have any voting rights except as set forth below or in
the accompanying Prospectus or as otherwise from time
to time required by law. In the event that the
Declaration of Trust is amended as described below
under "NYSE Listing", if distributions on the Series A
SUPeR Preferred Shares are in arrears for six or more
quarterly periods, holders of the Depositary Shares
representing the Series A SUPeR Preferred Shares
(voting separately as a class with all other series of
preferred shares upon which like voting rights have
been conferred and are exercisable) will be entitled
to vote for the election of two additional Trustees to
serve on the Board of Trustees of the Trust until all
distribution arrearages are eliminated. See
"Description of Series A SUPeR Preferred Shares and
Depositary Shares--Voting Rights", and "Description of
Preferred Shares--Voting Rights" in the accompanying
Prospectus.
Conversion........... The Series A SUPeR Preferred Shares are not
convertible into or exchangeable for any other
property or securities of the Trust.
NYSE Listing.........
Prior to the Offering, there has been no public market
for the Series A SUPeR Preferred Shares, and there can
be no assurance that an active trading market for the
Series A SUPeR Preferred Shares will develop following
the Offering or, if developed, that any such market
will be sustained. In the absence of a public trading
market, an investor may be unable to liquidate his
investment.
The rules of the NYSE provide that in certain
instances all holders of preferred shares should have
the right, voting as a class, to elect an additional
two trustees. The Trust's Declaration of Trust
prohibits the holders of any series of preferred
shares from having the right to elect one or more
separate Trustees. In order to facilitate the listing
of the Depositary Shares on the NYSE, the Trust
intends to propose to amend the Declaration of Trust
to eliminate the existing prohibition and to seek the
required shareholder approval of such amendment at the
Trust's next annual meeting of shareholders scheduled
for December 10, 1997. There can be no assurance,
however, that the Trust's shareholders will approve
the amendment. Application will be made to list the
Depositary Shares on the NYSE, but there can be no
assurance that the NYSE will approve such application.
See "Description of Series A SUPeR Preferred Shares
and Depositary Shares--General."
Use of Proceeds...... The net proceeds from the Offering will be used
primarily for working capital, general trust purposes
and any property acquisitions, which may include the
acquisition of shopping centers, factory outlet
centers and garden apartment communities as suitable
opportunities arise, the expansion and improvement of
certain properties owned or to be owned by the Trust
and the repayment of certain indebtedness outstanding
at such time.
S-5
<PAGE>
RECENT DEVELOPMENTS
Since January 31, 1997, the Trust has acquired seven shopping centers
containing an aggregate of approximately 1,098,000 gross rentable square feet
and two garden apartment communities containing 992 units for an aggregate
purchase price of approximately $83.3 million.
The seven shopping centers the Trust has acquired since January 31, 1997 are
as follows:
<TABLE>
<CAPTION>
GROSS
RENTABLE YEAR MAJOR
PROPERTY SQUARE FEET BUILT TENANTS
-------- ----------- --------- ------------------------
<S> <C> <C> <C>
New Garden Shopping Center 149,000 1979 Acme Supermarkets
Kennett Square, PA Thrift Drug
Presidential Plaza I & II 88,000 1977/1996* Winn Dixie
North Lauderdale, FL Eckerd Drugs
Creekwood Shopping Center 70,000 1990 Winn Dixie
Rex, GA
Midway Village 73,000 1989 Winn Dixie
Douglas, GA
Bethel Park Plaza 222,000 1965/1997* Giant Eagle Supermarkets
Bethel Park, PA Ames
Cave Spring Shopping Center 167,000 1969/1992* Kroger Supermarkets
Roanoke, VA Revco Drugs
Hills
Regency Park, Shopping Center 330,000 1985 Baby Superstore
Jacksonville, FL Rhodes Furniture
</TABLE>
- --------
* Substantially renovated in the year indicated.
The two garden apartment communities the Trust has acquired since January
31, 1997 are as follows: (i) Knollwood Apartments, built in 1980, consisting
of 704 units and located in Mobile, AL and (ii) Spring Creek Apartments, built
in 1985, consisting of 288 units and located in Columbus, OH.
The Trust has also entered into contracts to purchase three additional
shopping centers containing an aggregate of approximately 497,000 gross
rentable square feet and an apartment complex consisting of 140 units for an
aggregate purchase price of approximately $29 million. The shopping centers
are located in Georgia, Florida and New York, respectively, and the garden
apartment community is located in Alabama.
USE OF PROCEEDS
The net proceeds to the Trust from the sale of the Depositary Shares offered
hereby are estimated at $72,775,000. The Trust presently intends to use the
net proceeds for working capital, general trust purposes and any property
acquisitions, which may include the acquisition of shopping centers, factory
outlet centers and garden apartment communities as suitable opportunities
arise, the expansion and improvement of certain properties owned or to be
owned by the Trust and the repayment of certain indebtedness outstanding at
such time, including amounts outstanding under the Line of Credit which bear
interest at the rate of LIBOR plus .50%. Pending such uses, the net proceeds
may be invested in short-term income producing investments, such as
investments in commercial paper, government securities or money market funds
that invest in government securities.
S-6
<PAGE>
CAPITALIZATION
The following table sets forth the capitalization of the Trust as of April
30, 1997, as adjusted to give effect to (i) the issuance of 150,000 Series A
SUPeR Preferred Shares that are represented by the Depositary Shares offered
hereby and the application of the net proceeds thereof; (ii) a mortgage note
of approximately $6.0 million bearing interest at the rate of 6.75% per annum
relating to a property acquisition incurred since April 30, 1997; and (iii)
the issuance in May 1997 of $30 million of 7.35% unsecured Senior Notes due
June 15, 2007 and $40 million of 5.91% unsecured Senior Floating Rate Notes
due May 15, 2000. The table should be read in conjunction with the Trust's
consolidated financial statements incorporated herein by reference.
<TABLE>
<CAPTION>
HISTORICAL AS ADJUSTED
---------- -----------
(IN THOUSANDS)
<S> <C> <C>
Long-term debt:
Mortgage notes payable(1)............................. $ 58,748 $ 64,775
Senior Notes, net of unamortized discount of approxi-
mately $1.4 million..................................... 342,597 412,597
---------- ----------
$ 401,345 $ 477,372
========== ==========
Shareholders' equity:
Common Shares of Beneficial Interest, without par
value, unlimited
Common Shares authorized; 58,729,995 Common Shares
issued and outstanding(2)............................ $ 733,643 $ 733,643
Preferred Shares, par value $1.00 per share, 1,000,000
authorized, 0 Preferred Shares issued and outstanding
(Historical); 150,000 Preferred Shares issued and
outstanding (as Adjusted), redemption value $75
million.............................................. 72,775
---------- ----------
Total shareholders' equity.............................. 669,068 741,843
---------- ----------
Total capitalization.................................... $1,070,413 $1,219,215
========== ==========
</TABLE>
- --------
(1) Includes current portion of long-term debt. The rates of interest on
outstanding mortgage indebtedness range from 4.29% to 10.75%; the weighted
average interest rate of the mortgages was 7.9% per annum at April 30,
1997.
(2) Does not include approximately 2,581,300 Common Shares reserved for
issuance under the Trust's share option plans and 3,547,216 Common Shares
reserved for issuance under the Trust's Distribution Reinvestment and
Share Purchase Plan.
S-7
<PAGE>
SELECTED FINANCIAL AND OPERATING INFORMATION
The following table sets forth selected financial and operating information
on an historical basis for the Trust. The following information should be read
in conjunction with all of the financial statements and notes thereto included
in the Quarterly Report on Form 10-Q for the quarter ended April 30, 1997, and
the Annual Report on Form 10-K for the year ended July 31, 1996, which
documents are incorporated by reference into the accompanying Prospectus. In
the opinion of management, the operating data for the periods presented
includes all adjustments (consisting only of normal recurring adjustments)
necessary to present fairly the information set forth therein.
<TABLE>
<CAPTION>
NINE MONTHS NINE MONTHS
YEAR ENDED JULY 31, ENDED ENDED
------------------------------------------------------------------ APRIL 30, APRIL 30,
1989 1990 1991 1992 1993 1994 1995 1996 1996 1997
------- ------- ------- ------- ------- -------- -------- -------- ----------- ------------
(IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
OPERATING DATA:
Revenues
Rental income......... $33,763 $38,041 $41,395 $47,595 $65,308 $ 96,384 $126,448 $162,821 $118,662 $147,719
Interest and
dividends............ 9,778 16,082 15,988 17,097 11,001 4,570 4,128 4,785 4,009 3,277
Other revenues........ -- -- -- -- -- -- -- -- -- --
------- ------- ------- ------- ------- -------- -------- -------- -------- --------
43,541 54,123 57,383 64,692 76,309 100,954 130,576 167,606 122,671 150,996
------- ------- ------- ------- ------- -------- -------- -------- -------- --------
Operating expenses
Property operating
costs................ 11,547 14,916 14,133 16,163 22,440 33,283 43,343 57,303 41,780 54,138
Interest on mortgages
& notes(1)........... 1,933 1,901 1,935 1,527 1,386 2,289 7,174 17,561 12,908 19,758
Depreciation and
amortization......... 3,164 3,563 4,205 5,051 7,574 11,342 15,055 20,004 14,556 18,252
------- ------- ------- ------- ------- -------- -------- -------- -------- --------
16,644 20,380 20,273 22,741 31,400 46,914 65,572 94,868 69,244 92,148
------- ------- ------- ------- ------- -------- -------- -------- -------- --------
Operating income........ 26,897 33,743 37,110 41,951 44,909 54,040 65,004 72,738 53,427 58,848
Other income............ 2,153 3,262 4,789 10,064 940 990 228 399 281 (68)
------- ------- ------- ------- ------- -------- -------- -------- -------- --------
29,050 37,005 41,899 52,015 45,849 55,030 65,232 73,137 53,708 58,780
Other deductions(1)..... 1,939 1,958 2,021 2,569 2,620 2,713 2,516 2,616 2,125 1,525
------- ------- ------- ------- ------- -------- -------- -------- -------- --------
Net income.............. $27,111 $35,047 $39,878 $49,446 $43,229 $ 52,317 $ 62,716 $ 70,521 $ 51,583 $ 57,255
======= ======= ======= ======= ======= ======== ======== ======== ======== ========
Net income per Common
Share.................. .95 1.01 1.05 1.08 .89 1.06 1.19 1.25 .92 .98
OTHER DATA:
Funds from
operations(1)(2)........ $28,123 $35,347 $39,294 $44,433 $49,863 $ 62,669 $ 77,543 $ 90,127 $ 65,858 $ 75,575
Distributions paid...... 28,148 36,557 43,640 55,173 61,963 64,693 71,616 78,962 58,554 62,535
Distributions paid per
Common Share........... .97 1.05 1.13 1.21 1.275 1.315 1.355 1.395 1.0425 1.0725
Weighted average number
of Common Shares
outstanding............ 28,620 34,844 38,138 45,971 48,838 49,502 52,894 56,484 55,995 58,353
</TABLE>
<TABLE>
<CAPTION>
NINE MONTHS NINE MONTHS
JULY 31, ENDED ENDED
----------------------------------------------------------------------- APRIL 30, APRIL 30,
1989 1990 1991 1992 1993 1994 1995 1996 1996 1997
-------- -------- -------- -------- -------- -------- -------- -------- ----------- -----------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Real estate (at cost).. $137,081 $168,601 $180,361 $301,136 $388,228 $621,342 $765,080 $977,942 $913,414 $1,130,927
Total assets........... 301,282 307,678 461,913 530,827 534,248 616,993 796,636 945,394 903,844 1,100,631
Long-term debt(3)...... 22,971 22,938 18,868 17,831 23,321 28,060 206,652 238,426 224,305 401,345
Shareholders' equity... 274,199 279,490 437,206 506,339 500,571 565,493 570,529 659,354 657,141 669,068
</TABLE>
- -------
(1) Certain amounts prior to 1993 have been reclassified to conform to the
1993 presentation.
(2) Industry analysts generally consider funds from operations to be an
appropriate measure of the performance of an equity REIT. Funds from
operations does not represent net income or cash generated from operating
activities in accordance with generally accepted accounting principles and
should not be considered as an alternative to net income as an indicator
of the Trust's operating performance or as an alternative to cash flow as
a measure of liquidity. The calculation of funds from operations for the
periods set forth above is based upon the recommended guidelines adopted
by the National Association of Real Estate Investment Trusts.
(3) Includes current installments on mortgage notes payable.
S-8
<PAGE>
BUSINESS
The Trust presently owns or has leasehold interests in 119 shopping centers
containing an aggregate of approximately 16,945,000 gross rentable square
feet. Substantially all of the shopping centers are community and neighborhood
centers. The centers frequently include supermarket chains and drug stores as
major tenants and in some instances the centers include discount department
stores. Twenty-two of the shopping centers are located in New York, 18 in
Georgia, 16 in Ohio, 14 in Pennsylvania, eight in Michigan, six in Virginia,
five in Kentucky, four each in Florida, Indiana, New Jersey and Tennessee,
three in West Virginia, two each in Delaware, Illinois, Iowa, Maryland and
North Carolina and one each in Alabama and Nevada. The Trust also owns six
factory outlet centers aggregating approximately 1,756,000 gross rentable
square feet. Two of the centers are located in Missouri and one center is
located in each of California, Florida, Virginia and New Jersey. As of April
30, 1997, the average occupancy rates for the Trust's shopping centers and
factory outlet centers were 88% and 92%, respectively.
The Trust also owns 47 garden apartment communities with an aggregate of
10,964 apartment units. Eleven of the apartment communities are located in
Tennessee, eight in Alabama, six in Kentucky, five in Ohio, three each in
Louisiana and South Carolina, two each in Delaware, New York, Indiana and
Georgia, and one each in Florida, Missouri and Pennsylvania. Over 70% of the
apartment units have two or more bedrooms. As of April 30, 1997, the average
occupancy rate for the Trust's apartment communities was 95%.
In addition to the real estate properties described above, the Trust holds
five purchase money first mortgages at per annum interest rates of 7.2%,
8.75%, 9.375%, 9.38% and 10%, a second mortgage at a per annum interest rate
of 10.5%, a leasehold mortgage at a per annum interest rate of 12% and a note
receivable at a per annum interest rate of 11.5%. The mortgages and note
receivable, all of which are presently current, totalled approximately $22.4
million at April 30, 1997. The mortgages (other than the leasehold mortgage)
are collateralized by five shopping centers containing an aggregate of
approximately 754,000 gross rentable square feet.
The Trust intends to continue to invest in well-located income-producing
real estate, with a primary emphasis on shopping centers and garden apartment
communities. The Trust may also continue to invest in selected factory outlet
centers. An important part of the Trust's investment strategy is to enhance
the cash flow potential of its properties through a program of expansion,
renovation, leasing, re-leasing and improving the tenant mix.
Currently, none of the Trust's shopping centers are enclosed malls. Many of
the centers feature supermarket and drug store tenants and some of the centers
include discount department stores. Supermarkets and drug stores historically
have been less susceptible to economic downturns. The Trust attempts to
acquire each shopping center and apartment community at a discount to
replacement cost. Properties purchased substantially below replacement cost
generally charge lower rent which may allow for increases upon releasing. By
primarily purchasing completed income-producing properties rather than
building them, the Trust has minimized development risks.
Recently, the Trust has purchased newer or more modern and substantially
renovated shopping centers at below replacement cost. The average size of the
supermarkets in the portfolio now exceeds 47,000 square feet, representing
current food store designs. The Trust believes that such newer high-quality
centers will continue to be available at below replacement cost.
The Trust's revenue base is diversified from an individual tenant and
property perspective, as well as geographically. No single tenant or chain of
tenants currently accounts for more than 2% of the Trust's revenues, other
than Kmart, the Trust's largest tenant, which currently accounts for
approximately 4% of revenues. In addition, no single Trust property accounts
for more than approximately 4.4% of the Trust's total revenues.
S-9
<PAGE>
The Trust generally seeks to acquire properties in those states in which it
already owns property or in an adjacent state to allow for efficient
management. The Trust also attempts to acquire shopping centers which provide
opportunities for expansion or would benefit from renovation.
A substantial portion of the Trust's shopping center income consists of
rents received under long-term leases. Most of these shopping center leases
provide for payment by tenants of an annual minimum rent and additional rent
calculated generally as a percentage of gross sales in excess of a specified
amount ("percentage rent"), and many leases also have cost-of-living
escalation clauses. Upon renewal of a shopping center lease, the Trust seeks
to increase the annual minimum rent of a tenant to an amount which approaches
or exceeds the sum of the former annual minimum rent plus the most recent
annual percentage rent received from the tenant. The Trust's apartments are
generally rented on a one-year basis.
The Trust's shopping center leases usually provide that the Trust, as
landlord, must repair and maintain building exteriors (including roofs and
canopies and external utilities) and common areas, including parking lots.
Most of the shopping center leases also contain provisions for pro rata
contribution by tenants to the cost of maintaining common areas and payment of
real estate taxes. New leases generally provide for full pro rata recovery of
these costs from tenants.
In order to protect and enhance its investments, the Trust incurs
unreimbursed costs for renovation of its properties. The Trust also seeks to
commit tenants to make improvements to their premises, including sign
installation and store modernization. The management of the Trust believes
that because such renovations and improvements enhance the appearance of the
shopping centers, customer traffic may increase. To the extent that additional
customer traffic results in higher sales, percentage rents received by the
Trust with respect to that shopping center may increase. As a result, the
Trust is in a better position to receive higher minimum rents upon the
expiration of leases from existing tenants or new leases.
Under various Federal, state and local laws, ordinances and regulations, an
owner of real estate or interests therein may be liable for the costs of
removal or remediation of certain hazardous substances on or in such property.
Such enactments often impose such liability without regard to whether the
owner knew of, or was responsible for, the presence of such hazardous
substances. The cost of any required remediation and the owner's liability
therefor as to any property is generally not limited under such enactments and
could exceed the value of the property and/or the aggregate assets of the
owner. The presence of such substances, or the failure to properly remediate
such substances, may also adversely affect the owner's ability to sell or rent
such property or to borrow using such property as collateral.
The Trust's management is not aware of any environmental liability that it
believes could have a material adverse effect on the Trust's financial
condition or results of operations. In addition, since 1989, the Trust has
typically conducted Phase I environmental audits (which generally involve
inspection without soil sampling or ground water analysis) in connection with
property acquisitions and none of these audits has revealed the existence of
any environmental conditions that the Trust's management believes could have a
material adverse effect on the Trust's financial condition or results of
operations. No assurance, however, can be given that these audits reveal all
environmental liabilities, that environmental liabilities may not have
developed since such audits were conducted or that no material adverse
environmental condition exists that is not known to the Trust.
The success of the Trust depends upon, among other factors, the trends of
the economy, including interest rates, construction costs, income tax laws and
increases or decreases in operating expenses, governmental regulations and
legislation, including environmental requirements, real estate fluctuations,
retailing trends, population trends, zoning and other local laws, the
financial condition and stability of tenants, the availability of financing
and capital on satisfactory terms and the ability of the Trust to compete with
others for tenants and keep its properties leased at profitable levels. The
Trust competes for properties with an indeterminate number of investors,
including domestic and foreign corporations and financial institutions, real
estate investment trusts, life insurance companies, pension funds and trust
funds. The Trust regularly reviews its portfolio and from time to time
considers the sale of certain of its properties.
S-10
<PAGE>
DESCRIPTION OF SERIES A SUPER PREFERRED SHARES AND DEPOSITARY SHARES
The description of the particular terms of the Series A SUPeR Preferred
Shares and the Depositary Shares set forth in this Prospectus Supplement
supplements, and to the extent inconsistent therewith replaces, the
description of the general terms and provisions of the Preferred Shares and
Depositary Shares set forth in the accompanying Prospectus, to which
description reference is hereby made.
GENERAL
The Trust is authorized to issue up to 1,000,000 preferred shares, $1.00 par
value per share ("preferred shares"), in one or more series, with such
designations, powers, preferences and rights of the shares of such series and
the qualifications, limitations or restrictions thereon, including, but not
limited to, the fixing of the distribution rights, distribution rate or rates,
conversion rights, voting rights and terms of redemption (including sinking
fund provisions), the redemption price or prices, and the liquidation
preferences, in each case, if any, as the Board of Trustees of the Trust may
determine by resolution, without any further vote or action by the
shareholders. See "Description of Preferred Shares" in the accompanying
Prospectus. Unless redeemed by the Trust, the Depositary Shares representing
the Series A SUPeR Preferred Shares have a perpetual term with no stated
maturity date.
On June 30, 1997, the Board of Trustees of the Trust adopted resolutions
establishing the terms of a series of preferred shares consisting of up to
150,000 shares, designated 7.80% Series A Cumulative Step-Up Premium Rate SM
Preferred Shares. As of such date, there were no other series of preferred
shares of the Trust issued or outstanding. The following summary of the terms
and provisions of the Series A SUPeR Preferred Shares does not purport to be
complete and is qualified in its entirety by reference to the pertinent
sections of the Declaration of Trust and the Certificate of Designation
supplementing the Declaration of Trust (the "Certificate of Designation")
designating the Series A SUPeR Preferred Shares, each of which is available
from the Trust.
The registrar, transfer agent and dividends disbursing agent for the Series
A SUPeR Preferred Shares will be BankBoston N.A.
Each Depositary Share represents a 1/10 fractional interest in a Series A
SUPeR Preferred Share. The Series A SUPeR Preferred Shares will be deposited
with BankBoston N.A., as Depositary (the "Preferred Share Depositary"), under
a Deposit Agreement among the Trust, the Preferred Share Depositary and the
holders from time to time of the depositary receipts (the "Depositary
Receipts") issued by the Preferred Share Depositary thereunder. The Depositary
Receipts will evidence the Depositary Shares. Subject to the terms of the
Deposit Agreement, each holder of a Depositary Receipt evidencing a Depositary
Share will be entitled to all the rights and preferences of a 1/10 fractional
interest in a Series A SUPeR Preferred Share (including, if any, distribution,
voting, redemption and liquidation rights and preferences). See "Description
of Depositary Shares" in the accompanying Prospectus.
The rules of the NYSE provide that in certain instances all holders of
preferred shares should have the right, voting as a class, to elect an
additional two trustees. The Trust's Declaration of Trust prohibits the
holders of any series of preferred shares from having the right to elect one
or more separate Trustees. In order to facilitate the listing of the
Depositary Shares on the NYSE, the Trust intends to propose to amend its
Declaration of Trust to eliminate the existing prohibition and to seek the
required shareholder approval of such amendment at the Trust's next annual
meeting of shareholders scheduled for December 10, 1997. The affirmative vote
of the holders of not less than 66 2/3% of the then outstanding Common Shares
is required to approve such amendment. There can be no assurance, however,
that the Trust's shareholders will approve the amendment. Application will be
made to list the Depositary Shares on the NYSE, but there can be no assurance
that the NYSE will approve such application. The Series A SUPeR Preferred
Shares will not be so listed, and the Trust does not expect that there will be
any trading market for the Series A SUPeR Preferred Shares.
S-11
<PAGE>
DIVIDENDS
Holders of the Series A SUPeR Preferred Shares shall be entitled to receive,
when, as and if authorized by the Board of Trustees, out of funds legally
available for the payment of dividends, cumulative cash dividends at the rate
of 7.80% of the liquidation preference per annum (equivalent to $3.90 per
annum per Depositary Share) through September 15, 2012 and at the rate of
9.80% of the liquidation preference per annum (equivalent to $4.90 per annum
per Depositary Share) thereafter. Dividends on the Series A SUPeR Preferred
Shares represented by the Depositary Shares offered hereby shall accrue and be
cumulative from the date of original issue and shall be payable quarterly in
arrears on the fifteenth day of each March, June, September and December or,
if not a business day, the next succeeding business day (each, a "Dividend
Payment Date"). The first dividends on the Series A SUPeR Preferred Shares
represented by the Depositary Shares offered hereby, which will be paid on
September 15, 1997, will be for less than a full quarter. Such dividend and
any dividend payable on the Series A SUPeR Preferred Shares for any partial
dividend period will be computed on the basis of a 360-day year consisting of
twelve 30-day months. Dividends will be payable to holders of record as they
appear in the share records of the Trust at the close of business on the
applicable record date, which shall be the first day of the calendar month in
which the applicable Dividend Payment Date falls or such other date designated
by the Board of Trustees of the Trust for the payment of dividends that is not
more than 30 nor less than 10 days prior to such Dividend Payment Date (each,
a "Dividend Record Date").
No dividends on the Series A SUPeR Preferred Shares shall be authorized by
the Board of Trustees of the Trust or be paid or set apart for payment by the
Trust at such time as the terms and provisions of any agreement of the Trust,
including any agreement relating to its indebtedness, prohibits such
authorization, payment or setting apart for payment or provides that such
authorization, payment or setting apart for payment would constitute a breach
thereof or a default thereunder, or if such authorization or payment shall be
restricted or prohibited by law.
Notwithstanding the foregoing, dividends on the Series A SUPeR Preferred
Shares will accrue whether or not the Trust has earnings, whether or not there
are funds legally available for the payment of such dividends and whether or
not such dividends are authorized. Accrued but unpaid dividends on the Series
A SUPeR Preferred Shares will not bear interest and holders of the Series A
SUPeR Preferred Shares will not be entitled to any dividends in excess of full
cumulative dividends as described above. See "Description of Preferred
Shares--Dividends" in the accompanying Prospectus.
Any dividend payment made on the Series A SUPeR Preferred Shares shall first
be credited against the earliest accrued but unpaid dividend due with respect
to such shares which remains payable.
If, for any taxable year, the Trust elects to designate as "capital gain
dividends" (as defined in Section 857 of the Code) any portion (the "Capital
Gains Amount" of the dividends (within the meaning of the Code) paid or made
available for the year to holders of all classes of shares of beneficial
interest (the "Total Dividends"), then the portion of the Capital Gains Amount
that will be allocable to the holders of Series A SUPeR Preferred Shares will
be the Capital Gains Amount multiplied by a fraction, the numerator of which
will be the total dividends (within the meaning of the Code) paid or made
available to the holders of the Series A SUPeR Preferred Shares for the year
and the denominator of which shall be the Total Dividends.
LIQUIDATION PREFERENCE
In the event of any liquidation, dissolution or winding-up of the affairs of
the Trust, the holders of the Series A SUPeR Preferred Shares are entitled to
be paid out of the assets of the Trust legally available for distribution to
its shareholders liquidating distributions in cash or property at its fair
market value as determined by the Trust's Board of Trustees in the amount of a
liquidation preference of $500.00 per share (equivalent to $50.00 per
Depositary Share), plus an amount equal to any accrued and unpaid dividends to
the date of such liquidation, dissolution or winding-up, before any
distribution of assets is made to holders of Common Shares or any other
S-12
<PAGE>
capital shares of beneficial interest that rank junior to the Series A SUPeR
Preferred Shares as to liquidation preference. After payment of the full
amount of the liquidating distributions to which they are entitled, the
holders of Series A SUPeR Preferred Shares will have no right or claim to any
of the remaining assets of the Trust. The consolidation or merger of the Trust
with or into any other entity or the sale, lease, transfer or conveyance of
all or substantially all of the property or business of the Trust shall not be
deemed to constitute a liquidation, dissolution or winding-up of the Trust.
For further information regarding the rights of the holders of the Series A
SUPeR Preferred Shares and related Depositary Shares upon the liquidation,
dissolution or winding- up of the Trust, see "Description of Preferred
Shares--Liquidation Preference" and "Description of Depositary Shares--
Liquidation Preference" in the accompanying Prospectus.
REDEMPTION
The Series A SUPeR Preferred Shares are not redeemable prior to June 15,
2007. At any time on or after June 15, 2007, the Trust, at its option upon not
less than 30 or more than 60 days' written notice, may redeem the Series A
SUPeR Preferred Shares (and the Preferred Share Depositary will redeem the
number of Depositary Shares representing the Series A SUPeR Preferred Shares
so redeemed upon not less than 30 days' written notice to the holders
thereof), in whole or in part, at any time or from time to time, at a
redemption price of $500.00 per share (equivalent to $50.00 per Depositary
Share), plus all accrued and unpaid dividends thereon, if any, to the date
fixed for redemption, without interest, to the extent the Trust will have
funds legally available therefor. The redemption price of the Series A SUPeR
Preferred Shares (other than any portion thereof consisting of accrued and
unpaid dividends, if any) shall be paid solely from the sale proceeds of other
capital shares of beneficial interest of the Trust, including proceeds from
the Trust's distribution reinvestment plan (DRIP), and not from any other
source. For purposes of the preceding sentence, "capital shares of beneficial
interest" means any equity securities (including common shares of beneficial
interest and preferred shares), shares, interests, participations, or other
ownership interests (however designated) and any rights (other than debt
securities convertible into or exchangeable for equity securities) or options
to purchase any of the foregoing. Holders of Depositary Receipts evidencing
Depositary Shares to be redeemed shall surrender such Depositary Receipts at
the place designated in such notice and shall be entitled to the redemption
price and any accrued and unpaid dividends, if any, payable upon such
redemption following such surrender. If notice of redemption of any Depositary
Shares has been given and if the funds necessary for such redemption have been
set aside by the Trust in trust for the benefit of the holders of any
Depositary Shares so called for redemption, then from and after the redemption
date dividends will cease to accrue on such Depositary Shares, such Depositary
Shares shall no longer be deemed outstanding and all rights of the holders of
such shares will terminate, except the right to receive the redemption price.
If fewer than all of the outstanding Depositary Shares are to be redeemed, the
Depositary Shares to be redeemed shall be selected pro rata (as nearly as may
be practicable without creating fractional Depositary Shares) or by any other
equitable method determined by the Trust. See "Description of Preferred
Shares--Restrictions on Ownership" and "Description of Common Shares--
Restrictions on Ownership" in the accompanying Prospectus.
Notice of redemption will be given by publication in a newspaper of general
circulation in The City of New York, such publication to be made once a week
for two successive weeks commencing not less than 30 nor more than 60 days'
prior to the redemption date. A similar notice furnished by the Trust will be
mailed by the Preferred Share Depositary, postage prepaid, not less than 30
nor more than 60 days' prior to the redemption date, addressed to the
respective holders of record of the Depositary Receipts evidencing the
Depositary Shares to be redeemed at their respective addresses as they appear
on the share transfer records of the Preferred Share Depositary. No failure to
give such notice or any defect thereto or in the mailing thereof shall affect
the validity of the proceedings for the redemption of any Series A SUPeR
Preferred Shares or Depositary Shares except as to the holder to whom notice
was defective or not given. Each notice shall state: (i) the redemption date;
(ii) the redemption price; (iii) the number of Series A SUPeR Preferred Shares
to be redeemed (and the equivalent number of Depositary Shares); (iv) the
place or places where the Depositary Receipts evidencing the Depositary Shares
are to be surrendered for payment of the redemption price; and (v) that
distributions on the shares to be
S-13
<PAGE>
redeemed will cease to accrue on such redemption date. If fewer than all the
Depositary Shares held by any holder are to be redeemed, the notice mailed to
such holder shall also specify the number of Depositary Shares to be redeemed
from such holder.
The holders of Depositary Receipts at the close of business on a Dividend
Record Date will be entitled to receive the distribution payable with respect
to the Depositary Shares evidenced by such Depositary Receipts on the
corresponding Dividend Payment Date notwithstanding the redemption thereof
between such Dividend Record Date and the corresponding Dividend Payment Date
or the Trust's default in the payment of the dividend due.
The Series A SUPeR Preferred Shares have no stated maturity and will not be
subject to any sinking fund or mandatory redemption provisions (except as
provided under "Restrictions on Ownership" below).
VOTING RIGHTS
Holders of Series A SUPeR Preferred Shares will not have any voting rights
except as set forth below or in the accompanying Prospectus or as otherwise
from time to time required by law. In the event that the Declaration of Trust
is amended to eliminate the existing provision that prohibits the holders of
any series of preferred shares from having the right to elect one or more
separate Trustees, whenever dividends on any Series A SUPeR Preferred Shares
shall be in arrears for six or more quarterly periods, holders of Series A
SUPeR Preferred Shares (voting separately as a class with all other series of
preferred shares upon which like voting rights have been confirmed and are
exercisable) will be entitled to vote for the election of two additional
Trustees of the Trust at a special meeting called by the holders of record of
at least ten percent (10%) of the Series A SUPeR Preferred Shares or of any
series of preferred shares (unless such request is received less than 90 days
before the date fixed for the next annual or special meeting of the
shareholders) or at the next annual meeting of shareholders, and at each
subsequent annual meeting until all dividends accumulated on the Series A
SUPeR Preferred Shares for the past dividend periods and the then current
dividend period shall have been fully paid or declared and a sum sufficient
for the payment thereof set aside for payment. In such case, the entire Board
of Trustees of the Trust will be increased by two Trustees.
In any matter in which the Series A SUPeR Preferred Shares are entitled to
vote (as expressly provided herein or as may be required by law), including
any action by written consent, each Series A SUPeR Preferred Share shall be
entitled to 10 votes, each of which 10 votes may be directed separately by the
holder thereof (or by any proxy or proxies of such holder). With respect to
each Series A SUPeR Preferred Share, the holder thereof may designate up to 10
proxies, with each such proxy having the right to vote a whole number of votes
(totaling 10 votes per Series A SUPeR Preferred Share). As a result, each
Depositary Share will be entitled to one vote.
For further information regarding the voting rights of the holders of the
Series A SUPeR Preferred Shares and related Depositary Receipts, see
"Description of Preferred Shares--Voting Rights" and "Description of
Depositary Shares--Voting of the Preferred Shares" in the accompanying
Prospectus.
CONVERSION RIGHTS
The Series A SUPeR Preferred Shares are not convertible into or exchangeable
for any other property or securities of the Trust.
RESTRICTIONS ON OWNERSHIP
For information regarding restrictions on ownership of the Series A SUPeR
Preferred Shares and related Depositary Shares, see "Description of Preferred
Shares--Restrictions on Ownership" and "Description of Common Shares--
Restrictions on Ownership" in the accompanying Prospectus.
S-14
<PAGE>
CERTAIN FEDERAL INCOME TAX CONSIDERATIONS
The following description relates to all material federal income tax
considerations applicable to distributions with respect to, and redemptions
of, Depositary Shares and Series A SUPeR Preferred Shares. For a discussion of
all other material federal income tax considerations to the Trust of its REIT
election, see "Certain Federal Income Tax Considerations to the Trust of its
REIT Election," in the accompanying Prospectus. Altheimer & Gray, which has
acted as special tax counsel to the Trust, is of the opinion that the
following discussion, together with the discussion in the Prospectus under the
heading "Certain Federal Income Tax Considerations to the Trust of its REIT
Election," to the extent they constitute matters of law or legal conclusions,
are correct in all material respects, based on current law.
EACH PROSPECTIVE HOLDER OF DEPOSITARY SHARES IS URGED TO REFER TO THE
ACCOMPANYING PROSPECTUS FOR A SUMMARY OF THE FEDERAL INCOME TAX CONSEQUENCES
NOT DISCUSSED HEREIN. MOREOVER, AS THE RELEVANT CODE PROVISIONS ARE HIGHLY
COMPLEX, EACH PROSPECTIVE HOLDER OF DEPOSITARY SHARES IS URGED TO CONSULT WITH
HIS OR ITS OWN TAX ADVISOR WITH RESPECT TO THE FEDERAL, STATE, LOCAL AND
FOREIGN INCOME AND OTHER TAX CONSEQUENCES IN LIGHT OF HIS SPECIFIC OR UNIQUE
CIRCUMSTANCES, OF THE PURCHASE AND DISPOSITION OF DEPOSITARY SHARES.
TAXATION OF TAXABLE DOMESTIC SHAREHOLDERS
General. As long as the Trust qualifies as a REIT, distributions made to the
Trust's taxable domestic shareholders with respect to their Common Shares and
preferred shares including Depositary Shares (collectively, the "Securities")
out of current or accumulated earnings and profits (and not designated as
capital gain dividends) will be taken into account by them as ordinary income
and will not be eligible for the dividends received deduction for shareholders
that are corporations. For purposes of determining whether distributions on
the Securities are out of current or accumulated earnings and profits, the
earnings and profits of the Trust will be allocated first to distributions
with respect to preferred shares and second to distributions with respect to
Common Shares. Dividends that are designated as capital gain dividends will be
taxed as long-term capital gains (to the extent that they do not exceed the
Trust's actual net capital gain for the taxable year) without regard to the
period for which the shareholder has held its Securities. However, corporate
shareholders may be required to treat up to 20% of certain capital gain
dividends as ordinary income. For a discussion on the manner in which that
portion of any dividends designated by the Trust as capital gain dividends
will be allocated among the holders of preferred shares and Common Shares, see
"Description of Series A SUPeR Preferred Shares and Depositary Shares--
Dividends." To the extent that the Trust makes distributions in excess of
current and accumulated earnings and profits, these distributions are treated
first as a tax-free return of capital to the shareholder, reducing the tax
basis of a shareholder's Securities by the amount of such distribution (but
not below zero), with distributions in excess of the shareholder's tax basis
taxable as capital gains (if the Securities are held as a capital asset). In
addition, any dividend declared by the Trust in October, November or December
of any year and payable to a shareholder of record on a specific date in any
such month shall be treated as both paid by the Trust and received by the
shareholder on December 31 of such year, provided that the dividend is
actually paid by the Trust during January of the following calendar year.
Shareholders may not include in their individual income tax returns any net
operating losses or capital losses of the Trust.
In general, any loss upon a sale or exchange of Securities by a shareholder
who has held such Securities for six months or less (after applying certain
holding period rules) will be treated as a long-term capital loss, to the
extent of distributions from the Trust received by such shareholder which are
required to be treated by such shareholder as long-term capital gains.
Additional Tax Consequences for Holders of Preferred Shares and Depositary
Shares. Section 305(c) of the Code and the regulations thereunder provide in
certain cases for the continuing economic accrual of a "redemption premium" on
preferred stock on a constant yield-to-maturity basis, and for the treatment
of such
S-15
<PAGE>
accrual as a distribution with respect to such preferred stock. The term
"redemption premium" is not defined in the Code or regulations. A "redemption
premium" may include dividends payable at other than a constant rate, although
the law is not clear. If such dividends are treated as "redemption premium,"
the annual taxable dividends to Holders of an increasing rate preferred stock
may in the early years be greater than the dividends actually received, due to
the accrual on a constant-yield basis of amounts payable in later years. For
such treatment to apply, there would be required a determination of a
"maturity date," i.e., a date (occurring on or after June 15, 2012) at which
it is considered, as of the issuance of the Depositary Shares, to be more
likely than not that the Trust will exercise its redemption option. Based upon
certain representations of the Trust it cannot be determined at this time that
any such date exists. Further, there appears to be an indication in the
regulations that, all other things being equal, a redemption would more likely
occur before an increase in the dividend rate than after. Based on the
foregoing, the above-described treatment of stepped up rate dividends as being
taxable before received on an economic accrual basis should not apply to
distributions made on the Depositary Shares. In addition, since the amount
payable for a Depositary Share on redemption is equal to the amount for which
such share will be issued, no "redemption premium" should arise by reason of
the amount of the redemption price.
A redemption of Depositary Shares will be treated under Section 302 of the
Code as a distribution taxable as a dividend (to the extent of the Trust's
current and accumulated earnings and profits) at ordinary income rates unless
the redemption satisfies one of the tests set forth in Section 302(b) of the
Code and is therefore treated as a sale or exchange of the redeemed shares.
The redemption will be treated as a sale or exchange if it (i) is
"substantially disproportionate" with respect to the holder, (ii) results in a
"complete termination" of the holder's share interest in the Trust, or (iii)
is "not essentially equivalent to a dividend" with respect to the holder, all
within the meaning of Section 302(b) of the Code. In determining whether any
of these tests have been met, shares of beneficial interest considered to be
owned by the holder by reason of certain constructive ownership rules set
forth in the Code, as well as shares of beneficial interest actually owned by
the holder, must generally be taken into account. If a particular holder of
Depositary Shares owns (actually or constructively) no Common Shares, or an
insubstantial percentage of the outstanding Common Shares, a redemption of
Depositary Shares of that holder is likely to qualify for sale or exchange
treatment because the redemption would not be "essentially equivalent to a
dividend." However, because the determination as to whether any of the
alternative tests of Section 302(b) of the Code will be satisfied with respect
to any particular holder of Depositary Shares depends upon the facts and
circumstances at the time that the determination must be made, prospective
holders of Depositary Shares are advised to consult their own tax advisors to
determine such tax treatment.
If a redemption of Depositary Shares is not treated as a distribution
taxable as a dividend to a particular holder, it will be treated as to that
holder as a taxable sale or exchange. As a result, such holder will recognize
gain or loss for federal income tax purposes in an amount equal to the
difference between (i) the amount of cash and the fair market value of any
property received (less any portion thereof attributable to accumulated and
declared but unpaid dividends, which will be taxable as a dividend to the
extent of the Trust's current and accumulated earnings and profits), and (ii)
the holder's adjusted basis in the Depositary Shares for tax purposes. Such
gain or loss will be capital gain or loss if the Depositary Shares have been
held as a capital asset, and will be long-term gain or loss if such shares
have been held for more than one year.
If a redemption of Depositary Shares is treated as a distribution taxable as
a dividend, the amount of the distribution will be measured by the amount of
cash and the fair market value of any property received by the holder. The
holder's adjusted basis in the redeemed Depositary Shares for tax purposes
will be transferred to the holder's remaining shares of beneficial interest if
any. If the holder owns no other shares of beneficial interest, such basis
may, under certain circumstances, be transferred to a related person or it may
be lost entirely.
TAXATION OF TAX-EXEMPT SHAREHOLDERS
Most tax-exempt employees' pension trusts are not subject to Federal income
tax except to the extent of their receipt of "unrelated business taxable
income" as defined in Section 512(a) of the Code ("UBTI").
S-16
<PAGE>
Distributions by the Trust to a shareholder that is a tax-exempt entity should
not constitute UBTI, provided that the tax-exempt entity has not financed the
acquisition of its Securities with "acquisition indebtedness" within the
meaning of the Code and the Securities are not otherwise used in an unrelated
trade or business of the tax-exempt entity. In addition, for taxable years
beginning on or after January 1, 1994, certain pension trusts that own more
than 10% of a "pension-held REIT" must report a portion of the distribution
that they receive from such a REIT as UBTI. The Trust has not been and does
not expect to be treated as a pension-held REIT for purposes of this rule.
TAXATION OF FOREIGN SHAREHOLDERS
The following is a discussion of certain anticipated U.S. Federal income tax
consequences of the ownership and disposition of Securities applicable to Non-
U.S. Holders of such Securities. A "Non-U.S. Holder" is any person other than
(i) a citizen or resident of the United States, (ii) a corporation or
partnership created or organized in the United States or under the laws of the
United States or of any state thereof, or (iii) an estate or trust whose
income is includable in gross income for U.S. Federal income tax purposes
regardless of its source. The discussion is based on current law and is for
general information only.
DISTRIBUTIONS FROM THE TRUST.
1. Ordinary Dividends. The portion of dividends received by Non-U.S. Holders
payable out of the Trust's earnings and profits which are not attributable to
capital gains of the Trust and which are not effectively connected with a U.S.
trade or business of the Non-U.S. Holder will be subject to U.S. withholding
tax at the rate of 30% (unless reduced by an applicable treaty). In general,
Non-U.S. Holders will not be considered engaged in a U.S. trade or business
solely as a result of their ownership of Securities. In cases where the
dividend income from a Non-U.S. Holder's investment in Securities is (or is
treated as) effectively connected with the Non-U.S. Holder's conduct of a U.S.
trade or business, the Non-U.S. Holder generally will be subject to U.S. tax
at graduated rates, in the same manner as U.S. shareholders are taxed with
respect to such dividends (and may also be subject to the 30% branch profits
tax in the case of a Non-U.S. Holder that is a foreign corporation).
2. Non-Dividend Distributions. Distributions by the Trust which are not
dividends out of the earnings and profits of the Trust will not be subject to
U.S. income or withholding tax. If it cannot be determined at the time a
distribution is made whether or not such distribution will be in excess of the
Trust's current and accumulated earnings and profits, the entire distribution
will be subject to withholding at the rate applicable to dividends. However,
the Non-U.S. Holder may seek a refund of such amounts from the Internal
Revenue Service if it is subsequently determined that such distribution was,
in fact, in excess of current and accumulated earnings and profits of the
Trust.
3. Capital Gain Dividends. Under the Foreign Investment in Real Property Tax
Act of 1980 ("FIRPTA"), a distribution made by the Trust to a Non-U.S. Holder,
to the extent attributable to gains from dispositions of United States Real
Property Interests ("USRPIs") such as the Properties beneficially owned by the
Trust ("USRPI Capital Gains"), will be considered effectively connected with a
U.S. trade or business of the Non-U.S. Holder and subject to U.S. income tax
at the rate applicable to U.S. individuals or corporations, without regard to
whether such distribution is designated as a capital gain dividend. In
addition, the Trust will be required to withhold tax equal to 35% of the
amount of dividends to the extent such dividends constitute USRPI Capital
Gains or otherwise could be designated as capital gain dividends.
Distributions subject to FIRPTA may also be subject to a 30% branch profits
tax in the hands of a foreign corporate shareholder that is not entitled to
treaty exemption.
Dispositions of Securities. Unless Securities constitute a USRPI, a sale of
Securities by a Non-U.S. Holder generally will not be subject to U.S. taxation
under FIRPTA. The Securities will not constitute a USRPI if the Trust 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 stock is held directly or indirectly by Non-U.S. Holders. The Trust
believes that it has been and anticipates that it will continue to be a
domestically controlled
S-17
<PAGE>
REIT, and therefore that the sale of Securities will not be subject to
taxation under FIRPTA. Because the Securities will be publicly traded,
however, no assurance can be given the Trust will continue to be a
domestically controlled REIT. If the Trust does not constitute a domestically
controlled REIT, a Non-U.S. Holder's sale of Securities generally will still
not be subject to tax under FIRPTA as a sale of a USRPI provided that (i) the
Securities are "regularly traded" (as defined by applicable Treasury
regulations) on an established securities market and (ii) the selling Non-U.S.
Holder held 5% or less of the Trust's outstanding Securities at all times
during a specified testing period.
If gain on the sale of Securities were subject to taxation under FIRPTA, the
Non-U.S. Holder would be subject to the same treatment as a U.S. shareholder
with respect to such gain (subject to applicable alternative minimum tax and a
special alternative minimum tax in the case of nonresident alien individuals)
and the purchaser of Securities could be required to withhold 10% of the
purchase price and remit such amount to the Internal Revenue Service. Capital
gains not subject to FIRPTA will nonetheless be taxable in the United States
to a Non-U.S. Holder in two cases: (i) if the Non-U.S. Holder's investment in
Securities is effectively connected with a U.S. trade or business conducted by
such Non-U.S. Holder, the Non-U.S. Holder will be subject to the same
treatment as a U.S. shareholder with respect to such gain, or (ii) if the Non-
U.S. Holder is a nonresident alien individual who was present in the United
States for 183 days or more during the taxable year and has a "tax home" in
the United States, the nonresident alien individual will be subject to a 30%
tax on the individual's capital gain.
OTHER TAX CONSIDERATIONS
State and Local Taxes. The Trust and its shareholders may be subject to
state or local taxation in various jurisdictions, including those in which it
or they transact business or reside. The state and local tax treatment of the
Trust and its shareholders may not conform to the Federal income tax
consequences discussed above. Consequently, prospective shareholders should
consult their own tax advisors regarding the effect of state and local tax
laws on an investment in the shares of beneficial interest of the Trust.
UNDERWRITING
Subject to the terms and conditions contained in the terms agreement and the
related underwriting agreement (collectively, the "Underwriting Agreement"),
the Trust has agreed to sell to Merrill Lynch, Pierce, Fenner & Smith
Incorporated (the "Underwriter"), and the Underwriter has agreed to purchase
from the Trust, the Depositary Shares. The Underwriting Agreement provides
that the obligations of the Underwriter is subject to certain conditions
precedent, and that the Underwriter will be obligated to purchase all of the
Depositary Shares if any are purchased.
The Underwriter has advised the Trust that it proposes initially to offer
the Depositary Shares to the public at the public offering price set forth on
the cover page of the Prospectus Supplement, and to certain dealers at such
price less a concession not in excess of $.75 per share. The Underwriter may
allow, and such dealers may reallow, a discount not in excess of $.50 per
share to certain other dealers. After the public offering, the public offering
price, concession and discount may be changed.
The Trust has agreed to indemnify the Underwriter against certain
liabilities, including liabilities under the Securities Act of 1933, as
amended, or to contribute to payments the Underwriter may be required to make
in respect thereof.
In connection with the Offering, the rules of the Securities and Exchange
Commission permit the Underwriter to engage in certain transactions that
stabilize the price of the Depositary Shares. Such transactions may consist of
bids or purchases for the purpose of pegging, fixing or maintaining the price
of the Depositary Shares.
If the Underwriter creates a short position in the Depositary Shares in
connection with the Offering (i.e., if it sells more Depositary Shares than
are set forth on the cover page of this Prospectus Supplement), the
S-18
<PAGE>
Underwriter may reduce that short position by purchasing Depositary Shares in
the open market. In general, purchases of a security for the purpose of
stabilization or to reduce a short position could cause the price of the
security to be higher than it might otherwise be in the absence of such
purchases.
Neither the Company nor the Underwriter makes any representation or
prediction as to the direction or magnitude of any effect that the
transactions described above may have on the price of the Depositary Shares.
In addition, neither the Company nor the Underwriter makes any representations
that the Underwriter will engage in such transactions or that such
transactions, once commenced, will not be discontinued without notice.
The rules of the NYSE provide that in certain instances all holders of
preferred shares should have the right, voting as a class, to elect an
additional two trustees. The Trust's Declaration of Trust prohibits the
holders of any series of preferred shares from having the right to elect one
or more separate Trustees. In order to facilitate listing of the Depositary
Shares on the NYSE, the Trust intends to propose to amend the Declaration of
Trust to eliminate the existing prohibition and to seek shareholder approval
of such amendment at the Trust's next annual meeting of shareholders scheduled
for December 10, 1997. There can be no assurance, however, that the
shareholders will approve the amendment. Application will be made to list the
Depositary Shares on the NYSE, but there can be no assurance that the NYSE
will approve such application. The Underwriter has advised the Trust that it
intends to make a market in the Depositary Shares prior to any commencement of
trading on the NYSE. The Underwriter will have no obligation to make a market
in the Depositary Shares, however, and may cease market making activities if
commenced at any time.
S-19
<PAGE>
PROSPECTUS
$280,000,000
NEW PLAN REALTY TRUST
DEBT SECURITIES, PREFERRED SHARES,
DEPOSITARY SHARES, COMMON SHARES, WARRANTS AND RIGHTS
New Plan Realty Trust ("New Plan" or the "Trust") may from time to time
offer in one or more series its (i) unsecured debt securities, which may be
either senior debt securities ("Senior Securities") or subordinated debt
securities ("Subordinated Securities," and together with Senior Securities,
the "Debt Securities"), (ii) preferred shares, par value $1.00 per share
("Preferred Shares"), (iii) Preferred Shares represented by depositary shares
("Depositary Shares"), (iv) common shares of beneficial interest without par
value ("Common Shares"), (v) warrants to purchase Debt Securities, Preferred
Shares or Common Shares (collectively, "Warrants"), or (vi) rights to purchase
Common Shares ("Rights"), with an aggregate initial public offering price of
up to $280,000,000 on terms to be determined at the time of offering. Debt
Securities, Preferred Shares, Depositary Shares, Common Shares, Warrants and
Rights (collectively, the "Offered Securities") may be offered, separately or
together, in separate series in amounts, at prices and on terms to be set
forth in a supplement to this Prospectus (a "Prospectus Supplement").
The specific terms of the Offered Securities in respect of which this
Prospectus is being delivered will be set forth in the applicable Prospectus
Supplement and will include, where applicable: (i) in the case of Debt
Securities, the specific title, aggregate principal amount, ranking, currency,
form (which may be registered or bearer, or certificated or global),
authorized denominations, maturity, rate (or manner of calculation thereof)
and time of payment of interest, terms for redemption at the option of the
Trust or repayment at the option of the Holder, terms for sinking fund
payments, terms for conversion into Preferred Shares or Common Shares, certain
covenants, other terms and conditions, and the initial public offering price;
(ii) in the case of Preferred Shares, the number, specific title and stated
value, any dividend, liquidation, redemption, conversion, voting and other
terms and conditions, and the initial public offering price; (iii) in the case
of Depositary Shares, the fractional share of a Preferred Share represented by
each such Depositary Share; (iv) in the case of Common Shares, any initial
public offering price; (v) in the case of Warrants, the number and terms
thereof, the designation and the number of securities issuable upon their
exercise, the exercise price, the terms of the offering and sale thereof and,
where applicable, the duration and detachability thereof; and (vi) in the case
of Rights, the duration, exercise price and transferability thereof. In
addition, such specific terms may include limitations on direct or beneficial
ownership and restrictions on transfer of certain types of Offered Securities,
in each case as may be appropriate to preserve the status of the Trust as a
real estate investment trust ("REIT") for federal income tax purposes.
The applicable Prospectus Supplement will also contain information, where
applicable, about certain United States federal income tax considerations
relating to, and any listing on a securities exchange of, the Offered
Securities covered by such Prospectus Supplement.
The Offered Securities may be offered directly, through agents designated
from time to time by the Trust, or to or through underwriters or dealers. If
any agents or underwriters are involved in the sale of any of the Offered
Securities, their names, and any applicable purchase price, fee, commission or
discount arrangement between or among them, will be set forth, or will be
calculable from the information set forth, in the applicable Prospectus
Supplement. See "Plan of Distribution." No Offered Securities may be sold
without delivery of the applicable Prospectus Supplement describing the method
and terms of the offering of such series of Offered Securities.
-----------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
-----------------
The date of this Prospectus is June 30, 1997.
<PAGE>
AVAILABLE INFORMATION
The Trust is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith files reports, proxy statements and other information with the
Securities and Exchange Commission (the "Commission"). The reports, proxy
statements and other information filed by the Trust with the Commission in
accordance with the Exchange Act can be inspected and copied at the
Commission's Public Reference Section, 450 Fifth Street, N.W., Washington,
D.C. 20549, and at the following regional offices of the Commission: Seven
World Trade Center, 13th Floor, New York, New York 10048 and 500 West Madison
Street, Suite 1400, Chicago, Illinois 60661. Copies of such material can be
obtained from the Public Reference Section of the Commission, 450 Fifth
Street, N.W., Washington, D.C. 20549, at prescribed rates. In addition, the
Common Shares are listed on the New York Stock Exchange and similar
information concerning the Trust can be inspected and copied at the offices of
the New York Stock Exchange, Inc., 20 Broad Street, New York, New York 10005.
The Trust has filed with the Commission a registration statement (the
"Registration Statement") (of which this Prospectus is a part) under the
Securities Act of 1933, as amended (the "Securities Act"), with respect to the
Offered Securities. This Prospectus does not contain all of 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.
Statements contained in this Prospectus as to the contents 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 or to previous filings made by the Trust with the
Commission, each such statement being qualified in all respects by such
reference. For further information regarding the Trust and the Offered
Securities, reference is hereby made to the Registration Statement and the
previous filings made by the Company with the Commission, which may be
obtained from the Commission (i) at its principal office in Washington, D.C.,
upon payment of the fees prescribed by the Commission or (ii) by consulting
the Commission's Web site at the address of http://www.sec.gov.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The documents listed below have been filed by the Trust under the Exchange
Act with the Commission and are incorporated herein by reference:
1. The Trust's Annual Report on Form 10-K for the year ended July 31, 1996
filed October 16, 1996, pursuant to the Exchange Act.
2. The Trust's Quarterly Reports on Form 10-Q for the three months ended
October 31, 1996, filed December 12, 1996, for the six months ended January
31, 1997, filed March 10, 1997, and for the nine months ended April 30, 1997,
filed June 11, 1997, pursuant to the Exchange Act.
3. The Trust's Current Reports on Form 8-K dated and filed August 19, 1996,
November 4, 1996, December 12, 1996, January 6, 1997, June 18, 1997 and June
30, 1997, pursuant to the Exchange Act.
4. Item 1 of the Trust's registration statement on Form 8-A, as amended,
filed May 19, 1986 pursuant to Section 12 of the Exchange Act.
All other documents filed by the Trust pursuant to Sections 13(a), 13(c), 14
and 15(d) of the Exchange Act subsequent to the date of this Prospectus and
prior to the termination of the offering of the Offered Securities shall be
deemed to be incorporated by reference in this Prospectus and to be a part
hereof from the date of filing such documents.
Any statement contained herein or 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 the applicable Prospectus Supplement) or in any other
subsequently filed document which also is or is deemed to be incorporated by
reference herein modifies or supersedes such statement. Any such
2
<PAGE>
statement so modified or superseded shall not be deemed, except as so modified
or superseded, to constitute a part of this Prospectus.
Copies of all documents which are incorporated herein by reference (not
including the exhibits to such information, unless such exhibits are
specifically incorporated by reference in such information) will be provided
without charge to each person, including any beneficial owner, to whom this
Prospectus is delivered, upon written or oral request. Requests should be
directed to New Plan Realty Trust, Attention: Ronald Frankel, 1120 Avenue of
the Americas, New York, New York 10036; (212) 869-3000.
THE TRUST
New Plan Realty Trust, one of the largest publicly traded real estate
investment trusts in the United States based on the aggregate market value of
its outstanding Common Shares, is a self-administered and self-managed equity
real estate investment trust which primarily owns shopping centers and
apartment complexes. Substantially all of the Trust's present equity
investments consist of 119 shopping centers, with approximately 16,945,000
gross rentable square feet, six factory outlet centers with approximately
1,756,000 gross rentable square feet and 47 apartment complexes containing
10,964 apartment units. These properties are located in 23 states. Since the
organization of the corporate predecessor of the Trust in 1962, the Trust and
its predecessor have been directed by members of the Newman family. The Newman
family has been active in real estate ownership and management since 1926.
The Trust has paid regular and uninterrupted cash distributions on its
Common Shares since it commenced operations as a real estate investment trust
in 1972. These distributions, which are paid quarterly, have increased from
$0.19 per Common Share in fiscal 1973 to $1.395 per Common Share in fiscal
1996. Since inception, each distribution has either been equal to or greater
than the distribution preceding it, and the distributions have been increased
in each of the last 71 consecutive quarters. The Trust intends to continue to
declare quarterly distributions on its Common Shares.
The Trust invests its assets in income-producing real estate, with a primary
emphasis on shopping centers, including factory outlet centers, and apartment
complexes. The Trust's primary investment strategy is to identify and purchase
well-located shopping centers, including factory outlet centers, and apartment
complexes usually at a significant discount to replacement cost. The Trust
seeks to achieve income growth through a program of expansion, renovation,
leasing, re-leasing and improving the tenant mix of its shopping centers and
factory outlets. The Trust minimizes development risks by generally purchasing
existing income-producing properties.
The Trust, a Massachusetts business trust, maintains its executive offices
at 1120 Avenue of the Americas, New York, New York 10036, and its telephone
number is (212) 869-3000.
RATIOS OF EARNINGS TO FIXED CHARGES
The following table sets forth the historical ratios of earnings to fixed
charges of the Trust for the periods indicated:
<TABLE>
<CAPTION>
NINE
MONTHS
ENDED
APRIL 30,
1992 1993 1994 1995 1996 1997
---- ---- ---- ---- ---- ---------
<S> <C> <C> <C> <C> <C>
28.5 23.6 17.0 8.1 4.9 3.7
</TABLE>
To date, the Trust has not issued any preferred shares; therefore, the
ratios of earnings to combined fixed charges and preferred share dividends are
unchanged from the ratios presented in this section. For purposes of computing
these ratios, earnings have been calculated by adding fixed charges (excluding
capitalized interest) to income (loss) before income taxes and extraordinary
items. Fixed charges consist of interest costs, whether expensed or
capitalized, the interest component of rental expense, if any, and
amortization of debt discounts and issue costs, whether expensed or
capitalized.
3
<PAGE>
USE OF PROCEEDS
Unless otherwise described in the applicable Prospectus Supplement, the
Trust intends to use the net proceeds from the sale of the Offered Securities
for working capital and general trust purposes, which may include the
acquisition of shopping centers, factory outlet centers and apartment
complexes as suitable opportunities arise, the expansion and improvement of
certain properties owned or to be owned by the Trust, and the repayment of
certain indebtedness outstanding at such time.
DESCRIPTION OF DEBT SECURITIES
The following description sets forth certain general terms and provisions of
the Debt Securities to which any Prospectus Supplement may relate. The
particular terms of the Debt Securities being offered and the extent to which
such general provisions may apply will be described in a Prospectus Supplement
relating to such Debt Securities.
The Senior Securities are to be issued under an Indenture, dated as of March
29, 1995, as amended or supplemented from time to time (the "Senior Securities
Indenture"), between the Trust and State Street Bank and Trust Company (as
successor to The First National Bank of Boston), as trustee (the "Senior
Securities Trustee") and the Subordinated Securities are to be issued under an
Indenture, as amended or supplemented from time to time (the "Subordinated
Securities Indenture"), between the Trust and a trustee to be selected by the
Trust (the "Subordinated Securities Trustee"). The Senior Securities Indenture
and the Subordinated Securities Indenture are referred to herein individually
as the "Indenture" and collectively as the "Indentures," and the Senior
Securities Trustee and the Subordinated Securities Trustee are referred to
herein individually as the "Trustee" and collectively as the "Trustees." The
Senior Securities Indenture and a form of the Subordinated Securities
Indenture have been filed as exhibits to the Registration Statement of which
this Prospectus is a part and will be available for inspection, respectively,
at the corporate trust office of the Senior Securities Trustee and at the
corporate trust office of the Subordinated Securities Trustee or as described
above under "Available Information." The Senior Securities Indenture is, and
the Subordinated Securities Indenture will be, subject to and governed by the
Trust Indenture Act of 1939, as amended (the "TIA"). The description of the
Subordinated Securities Indenture set forth below assumes that the Trust has
entered into the Subordinated Securities Indenture. The Trust will execute the
Subordinated Securities Indenture when and if the Trust issues Subordinated
Securities. The statements made hereunder relating to the Indentures and the
Debt Securities to be issued thereunder are summaries of certain provisions
thereof and do not purport to be complete and are subject to, and are
qualified in their entirety by reference to, all provisions of the Indentures
and such Debt Securities. Unless otherwise specified, all section references
appearing herein are to sections of the Indentures, and capitalized terms used
but not defined herein shall have the meanings set forth in the Indentures.
GENERAL
The Debt Securities will be direct, unsecured obligations of the Trust.
Senior Securities will rank pari passu with certain other senior debt of the
Company that may be outstanding from time to time and will rank senior to all
Subordinated Securities that may be outstanding from time to time.
Subordinated Securities will be subordinated in right of payment to the prior
payment in full of the Senior Debt of the Company, as described under
"Subordination."
Each Indenture provides that the Debt Securities may be issued without limit
as to aggregate principal amount, in one or more series, in each case as
established from time to time in or pursuant to authority granted by a
resolution of the Board of Trustees of the Trust or as established in one or
more indentures supplemental to the Indenture. All Debt Securities of one
series need not be issued at the same time and, unless otherwise provided, a
series may be reopened, without the consent of the Holders of the Debt
Securities of such series, for issuances of additional Debt Securities of such
series (Section 301 of each Indenture).
4
<PAGE>
Each Indenture provides that there may be more than one Trustee thereunder,
each with respect to one or more series of Debt Securities. Any Trustee under
either Indenture may resign or be removed with respect to one or more series
of Debt Securities, and a successor Trustee shall be appointed by the Trust,
by or pursuant to a resolution adopted by the Board of Trustees, to act with
respect to such series (Section 608 of each Indenture). In the event that two
or more persons are acting as Trustee with respect to different series of Debt
Securities, each such Trustee shall be a Trustee of a trust under the
applicable Indenture separate and apart from the trust administered by any
other Trustee thereunder, and, except as otherwise indicated therein, any
action described therein to be taken by the Trustee may be taken by each such
Trustee with respect to, and only with respect to, the one or more series of
Debt Securities for which it is Trustee under the applicable Indenture
(Section 609 of each Indenture).
Reference is made to the Prospectus Supplement relating to the series of
Debt Securities being offered for the specific terms thereof, including:
(1) the title of such Debt Securities;
(2) the classification of such Debt Securities as Senior Securities or
Subordinated Securities;
(3) the aggregate principal amount of such Debt Securities and any limit on
such aggregate principal amount;
(4) the percentage of the principal amount at which such Debt Securities
will be issued and, if other than the principal amount thereof, the portion of
the principal amount thereof payable upon declaration of acceleration of the
maturity thereof, or (if applicable) the portion of the principal amount of
such Debt Securities which is convertible into Common Shares or Preferred
Shares, or the method by which any such portion shall be determined;
(5) if convertible, in connection with the preservation of the Trust's
status as a REIT, any applicable limitations on the ownership or
transferability of the Common Shares or Preferred Shares into which such Debt
Securities are convertible;
(6) the date or dates, or the method for determining such date or dates, on
which the principal of such Debt Securities will be payable;
(7) the rate or rates (which may be fixed or variable), or the method by
which such rate or rates shall be determined, at which such Debt Securities
will bear interest, if any;
(8) the date or dates, or the method for determining such date or dates,
from which any such interest will accrue, the Interest Payment Dates on which
any such interest will be payable, the Regular Record Dates for such Interest
Payment Dates, or the method by which such dates shall be determined, the
Person to whom such interest shall be payable, and the basis upon which
interest shall be calculated if other than that of a 360-day year of twelve
30-day months;
(9) the place or places where the principal of (and premium, if any) and
interest and Additional Amounts, if any, on such Debt Securities will be
payable, such Debt Securities may be surrendered for conversion or
registration of transfer or exchange and notices or demands to or upon the
Trust in respect of such Debt Securities and the applicable Indenture may be
served;
(10) the period or periods within which, the price or prices at which and
the terms and conditions upon which such Debt Securities may be redeemed, in
whole or in part, at the option of the Trust, if the Trust is to have such an
option;
(11) the obligation, if any, of the Trust to redeem, repay or purchase such
Debt Securities pursuant to any sinking fund or analogous provision or at the
option of a Holder thereof, and the period or periods within which, the price
or prices at which and the terms and conditions upon which such Debt
Securities will be redeemed, repaid or purchased, in whole or in part,
pursuant to such obligation;
5
<PAGE>
(12) if other than U.S. dollars, the currency or currencies in which such
Debt Securities are denominated and payable, which may be a foreign currency
or units of two or more foreign currencies or a composite currency or
currencies, and the terms and conditions relating thereto;
(13) whether the amount of payments of principal of (and premium, if any) or
interest, if any, on such Debt Securities may be determined with reference to
an index, formula or other method (which index, formula or other method may,
but need not be, based on a currency, currencies, currency unit or units or
composite currency or currencies) and the manner in which such amounts shall
be determined;
(14) whether such Debt Securities will be issued in the form of one or more
global securities and whether such global securities are to be issuable in a
temporary global form or permanent global form;
(15) any additions to, modifications of or deletions from the terms of such
Debt Securities with respect to the Events of Default or covenants set forth
in the applicable Indenture;
(16) whether the principal of (and premium, if any) or interest or
Additional Amounts, if any, on such Debt Securities are to be payable, at the
election of the Trust or a Holder, in one or more currencies other than that
in which such Debt Securities are denominated or stated to be payable, the
period or periods within which, and the terms and conditions upon which, such
election may be made, and the time and manner of, and identity of the exchange
rate agent with responsibility for, determining the exchange rate between the
currency or currencies in which such Debt Securities are denominated or stated
to be payable and the currency or currencies in which such Debt Securities are
to be so paid;
(17) whether such Debt Securities will be issued in certificated or book-
entry form;
(18) whether such Debt Securities will be in registered or bearer form and,
if in registered form, the denominations thereof if other than $1,000 and any
integral multiple thereof and, if in bearer form, the denominations thereof
and the terms and conditions relating thereto;
(19) the applicability, if any, of the defeasance and covenant defeasance
provisions of Article Fourteen of the applicable Indenture;
(20) if such Debt Securities are to be issued upon the exercise of Warrants,
the time, manner and place for such Debt Securities to be authenticated and
delivered;
(21) the terms, if any, upon which such Debt Securities may be convertible
into Common Shares or Preferred Shares of the Trust and the terms and
conditions upon which such conversion will be effected, including, without
limitation, the initial conversion price or rate and the conversion period;
(22) whether and under what circumstances the Trust will pay Additional
Amounts as contemplated in the applicable Indenture on such Debt Securities in
respect of any tax, assessment or governmental charge and, if so, whether the
Trust will have the option to redeem such Debt Securities in lieu of making
such payment;
(23) the name of the applicable Trustee and the address of its corporate
trust office; and
(24) any other terms of such Debt Securities not inconsistent with the
provisions of the applicable Indenture (Section 301 of each Indenture).
The Debt Securities may provide for less than the entire principal amount
thereof to be payable upon declaration of acceleration of the maturity thereof
("Original Issue Discount Securities"). Special U.S. federal income tax,
accounting and other considerations applicable to Original Issue Discount
Securities will be described in the applicable Prospectus Supplement.
Except as set forth below under "Certain Covenants-Senior Securities
Indenture Limitations on Incurrence of Debt," neither Indenture contains any
other provisions that would limit the ability of the Trust to incur
indebtedness or that would afford Holders of Debt Securities protection in the
event of a highly leveraged or similar transaction involving the Trust or in
the event of a change of control. However, restrictions on ownership and
transfers of the Trust's Common Shares and Preferred Shares are designed to
preserve its status as a REIT
6
<PAGE>
and, therefore, may act to prevent or hinder a change of control. See
"Description of Preferred Shares" and "Description of Common Shares."
Reference is made to the applicable Prospectus Supplement for information with
respect to any deletions from, modifications of or additions to the Events of
Default or covenants of the Trust that are described below, including any
addition of a covenant or other provision providing event risk or similar
protection.
DENOMINATIONS, INTEREST, REGISTRATION AND TRANSFER
Unless otherwise described in the applicable Prospectus Supplement, the Debt
Securities of any series will be issuable in denominations of $1,000 and
integral multiples thereof and those in bearer form will be issuable in
denominations of $5,000 (Section 302 of each Indenture).
Unless otherwise specified in the applicable Prospectus Supplement, the
principal of (and premium, if any) and interest or any Additional Amounts on
any series of Debt Securities will be payable at the corporate trust office of
the applicable Trustee or an office or agency established by the Company in
accordance with the Indenture, provided that, at the option of the Trust,
payment of interest may be made by check mailed to the address of the Person
entitled thereto as it appears in the Security Register or by wire transfer of
funds to such Person at an account maintained within the United States
(Sections 301, 305, 306, 307 and 1002 of each Indenture).
Any interest not punctually paid or duly provided for on any Interest
Payment Date with respect to a Debt Security ("Defaulted Interest") will
forthwith cease to be payable to the Holder on the applicable Regular Record
Date and may either be paid to the person in whose name such Debt Security is
registered at the close of business on a special record date (the "Special
Record Date") for the payment of such Defaulted Interest to be fixed by the
applicable Trustee, notice whereof shall be given to the Holder of such Debt
Security not less than 10 days prior to such Special Record Date, or may be
paid at any time in any other lawful manner, all as more completely described
in the applicable Indenture (Section 307 of each Indenture).
Subject to certain limitations imposed upon Debt Securities issued in book-
entry form, the Debt Securities of any series will be exchangeable for other
Debt Securities of the same series and of a like aggregate principal amount
and tenor of different authorized denominations upon surrender of such Debt
Securities at the corporate trust office of the applicable Trustee or at an
office or agency established by the Company in accordance with the Indenture.
In addition, subject to certain limitations imposed upon Debt Securities
issued in book-entry form, the Debt Securities of any series may be
surrendered for conversion or registration of transfer thereof at the
corporate trust office of the applicable Trustee or at an office or agency
established by the Company in accordance with the Indenture. Every Debt
Security surrendered for conversion, registration of transfer or exchange
shall be duly endorsed or accompanied by a written instrument of transfer. No
service charge will be made for any registration of transfer or exchange of
any Debt Securities, but the Trust may require payment of a sum sufficient to
cover any tax or other governmental charge payable in connection therewith
(Section 305 of each Indenture). If the applicable Prospectus Supplement
refers to any transfer agent (in addition to the Trustee) initially designated
by the Trust with respect to any series of Debt Securities, the Trust may at
any time rescind the designation of any such transfer agent or approve a
change in the location through which any such transfer agent acts, except that
the Trust will be required to maintain a transfer agent in each Place of
Payment for such series. The Trust may at any time designate additional
transfer agents with respect to any series of Debt Securities (Section 1002 of
each Indenture).
Neither the Trust nor any Trustee shall be required to (i) issue, register
the transfer of or exchange Debt Securities of any series during a period
beginning at the opening of business 15 days before any selection of Debt
Securities of that series to be redeemed and ending at the close of business
on the day of mailing of the relevant notice of redemption; (ii) register the
transfer of or exchange any Debt Security, or portion thereof, called for
redemption, except the unredeemed portion of any Debt Security being redeemed
in part; or (iii) issue, register the transfer of or exchange any Debt
Security which has been surrendered for repayment at the option of the Holder,
except the portion, if any, of such Debt Security not to be so repaid (Section
305 of each Indenture).
7
<PAGE>
CERTAIN COVENANTS
Senior Securities Indenture Limitations on Incurrence of Debt. The Trust
will not, and will not permit any Subsidiary to, incur any Debt (as defined
below) if, immediately after giving effect to the incurrence of such
additional Debt and the application of the proceeds thereof, the aggregate
principal amount of all outstanding Debt of the Trust and its Subsidiaries on
a consolidated basis determined in accordance with generally accepted
accounting principles is greater than 65% of the sum of (i) the Trust's Total
Assets (as defined below) as of the end of the fiscal quarter covered in the
Trust's Annual Report on Form 10-K or Quarterly Report on Form 10-Q, as the
case may be, most recently filed with the Commission (or, if such filing is
not permitted under the Exchange Act, with the Trustee) prior to the
incurrence of such additional Debt, (ii) the purchase price of any real estate
assets or mortgages receivable acquired by the Trust or any Subsidiary since
the end of such fiscal quarter, including those obtained in connection with
the incurrence of such additional Debt, and (iii) the amount of any securities
offering proceeds received by the Trust or any Subsidiary since the end of
such fiscal quarter (to the extent that such proceeds were not used to acquire
such real estate assets or mortgages receivable or used to reduce Debt)
(Section 1004 of Senior Securities Indenture).
In addition to the foregoing limitation on the incurrence of Debt, the Trust
will not, and will not permit any Subsidiary to, incur any Debt secured by any
mortgage, lien, charge, pledge, encumbrance or security interest of any kind
upon any of the property of the Trust or any Subsidiary if, immediately after
giving effect to the incurrence of such additional Debt and the application of
the proceeds thereof, the aggregate principal amount of all outstanding Debt
of the Trust and its Subsidiaries on a consolidated basis which is secured by
any mortgage, lien, charge, pledge, encumbrance or security interest on
property of the Trust or any Subsidiary is greater than 40% of the sum of (i)
the Trust's Total Assets as of the end of the fiscal quarter covered in the
Trust's Annual Report on Form 10-K or Quarterly Report on Form 10-Q, as the
case may be, most recently filed with the Commission (or, if such filing is
not permitted under the Exchange Act, with the Trustee) prior to the
incurrence of such additional Debt, (ii) the purchase price of any real estate
assets or mortgages receivable acquired by the Trust or any Subsidiary since
the end of such fiscal quarter, including those obtained in connection with
the incurrence of such additional Debt and (iii) the amount of any securities
offering proceeds received by the Trust or any Subsidiary since the end of
such fiscal quarter (to the extent that such proceeds were not used to acquire
such real estate assets or mortgages receivable or used to reduce Debt)
(Section 1004 of Senior Securities Indenture).
In addition to the foregoing limitations on the incurrence of Debt, the
Trust will not, and will not permit any Subsidiary to, incur any Debt if
Consolidated Income Available for Debt Service (as defined below) for any 12
consecutive calendar months within the 15 calendar months immediately
preceding the date on which such additional Debt is to be incurred shall have
been less than 1.5 times the Maximum Annual Service Charge (as defined below)
on the Debt of the Trust and all Subsidiaries to be outstanding immediately
after the incurring of such additional Debt (Section 1004 of Senior Securities
Indenture).
The Trust will at all times maintain an Unencumbered Total Asset Value in an
amount not less than 100% of the aggregate principal amount of all outstanding
Debt of the Trust and its Subsidiaries that is unsecured (Section 1004 of
Senior Securities Indenture).
As used herein,
"Consolidated Income Available for Debt Service" for any period means
Consolidated Net Income (as defined below) of the Trust and its Subsidiaries
plus amounts which have been deducted for (a) interest on Debt of the Trust
and its Subsidiaries, (b) provision for taxes of the Trust and its
Subsidiaries based on income, (c) amortization of debt discount, (d) property
depreciation and amortization and (e) the effect of any noncash charge
resulting from a change in accounting principles in determining Consolidated
Net Income for such period.
"Consolidated Net Income" for any period means the amount of consolidated
net income (or loss) of the Trust and its Subsidiaries for such period
determined on a consolidated basis in accordance with generally accepted
accounting principles.
8
<PAGE>
"Debt" of the Trust or any Subsidiary means any indebtedness of the Trust or
any Subsidiary, whether or not contingent, in respect of (i) borrowed money or
evidenced by bonds, notes, debentures or similar instruments, (ii)
indebtedness secured by any mortgage, pledge, lien, charge, encumbrance or any
security interest existing on property owned by the Trust or any Subsidiary,
(iii) letters of credit or amounts representing the balance deferred and
unpaid of the purchase price of any property except any such balance that
constitutes an accrued expense or trade payable or (iv) any lease of property
by the Trust or any Subsidiary as lessee which is reflected on the Trust's
Consolidated Balance Sheet as a capitalized lease in accordance with generally
accepted accounting principles, in the case of items of indebtedness under (i)
through (iii) above to the extent that any such items (other than letters of
credit) would appear as a liability on the Trust's Consolidated Balance Sheet
in accordance with generally accepted accounting principles, and also
includes, to the extent not otherwise included, any obligation by the Trust or
any Subsidiary to be liable for, or to pay, as obligor, guarantor or otherwise
(other than for purposes of collection in the ordinary course of business),
indebtedness of another person (other than the Trust or any Subsidiary) (it
being understood that Debt shall be deemed to be incurred by the Trust or any
Subsidiary whenever the Trust or such Subsidiary shall create, assume,
guarantee or otherwise become liable in respect thereof).
"Maximum Annual Service Charge" as of any date means the maximum amount
which may become payable in any period of 12 consecutive calendar months from
such date for interest on, and required amortization of, Debt. The amount
payable for amortization shall include the amount of any sinking fund or other
analogous fund for the retirement of Debt and the amount payable on account of
principal on any such Debt which matures serially other than at the final
maturity date of such Debt.
"Total Assets" as of any date means the sum of (i) Undepreciated Real Estate
Assets and (ii) all other assets of the Trust and its Subsidiaries determined
in accordance with generally accepted accounting principles (but excluding
accounts receivable and intangibles).
"Undepreciated Real Estate Assets" as of any date means the amount of real
estate assets of the Trust and its Subsidiaries on such date, before
depreciation and amortization determined on a consolidated basis in accordance
with generally accepted accounting principles.
"Unencumbered Total Asset Value" as of any date means the sum of the Trust's
Total Assets which are unencumbered by any mortgage, lien, charge, pledge or
security interest.
Existence. Except as permitted under "Merger, Consolidation or Sale," the
Trust will do or cause to be done all things necessary to preserve and keep in
full force and effect its corporate existence, rights (charter and statutory)
and franchises; provided, however, that the Trust will not be required to
preserve any right or franchise if it determines that the preservation thereof
is no longer desirable in the conduct of its business and that the loss
thereof is not disadvantageous in any material respect to the Holders of the
Debt Securities (Section 1005 of each Indenture).
Maintenance of Properties. The Trust will cause all of its properties used
or useful in the conduct of its business or the business of any Subsidiary to
be maintained and kept in good condition, repair and working order and
supplied with all necessary equipment and will cause to be made all necessary
repairs, renewals, replacements, betterments and improvements thereof, all as
in the judgment of the Trust may be necessary so that the business carried on
in connection therewith may be properly and advantageously conducted at all
times; provided, however, that the Trust and its Subsidiaries shall not be
prevented from selling or otherwise disposing for value its properties in the
ordinary course of business (Section 1006 of each Indenture).
Insurance. The Trust will, and will cause each of its Subsidiaries to, keep
all of its insurable properties adequately insured against loss or damage with
insurers of recognized responsibility and having an A.M. Best policy holder's
rating of not less than A-:V (Section 1007 of each Indenture).
Payment of Taxes and Other Claims. The Trust will pay or discharge or cause
to be paid or discharged, before the same shall become delinquent, (i) all
future taxes, assessments and governmental charges levied or
9
<PAGE>
imposed upon it or any Subsidiary or upon the income, profits or property of
the Trust or any Subsidiary, and (ii) all lawful claims for labor, materials
and supplies which, if unpaid, might by law become a lien upon the property of
the Trust or any Subsidiary, unless such lien would not have a material
adverse effect upon such property; provided, however, that the Trust shall not
be required to pay or discharge or cause to be paid or discharged any such
tax, assessment, charge or claim (i) whose amount, applicability or validity
is being contested in good faith by appropriate proceedings or (ii) for which
the Trust has set apart and maintains an adequate reserve (Section 1008 of
each Indenture).
Provision of Financial Information. Whether or not the Trust is subject to
Section 13 or 15(d) of the Exchange Act, the Trust will, to the extent
permitted under the Exchange Act, file with the Commission the annual reports,
quarterly reports and other documents which the Trust would have been required
to file with the Commission pursuant to such Section 13 or 15(d) if the Trust
were so subject, such documents to be filed with the Commission on or prior to
the respective dates (the "Required Filing Dates") by which the Trust would
have been required so to file such documents if the Trust were so subject. The
Trust will also in any event (x) within 15 days of each Required Filing Date
(i) transmit by mail to all Holders of Debt Securities, as their names and
addresses appear in the Security Register, without cost to such Holders,
copies of the annual reports and quarterly reports which the Trust would have
been required to file with the Commission pursuant to Section 13 or 15(d) of
the Exchange Act if the Trust were subject to such Sections and (ii) file with
the Trustees copies of the annual reports, quarterly reports and other
documents which the Trust would have been required to file with the Commission
pursuant to Section 13 or 15(d) of the Exchange Act if the Trust were subject
to such Sections and (y) if filing such documents by the Trust with the
Commission is not permitted under the Exchange Act, promptly upon written
request and payment of the reasonable cost of duplication and delivery, supply
copies of such documents to any prospective Holder (Section 1009 of each
Indenture).
MERGER, CONSOLIDATION OR SALE
The Trust may merge with or into, consolidate with, or sell, lease or convey
all or substantially all of its assets to, any other trust or corporation,
provided that (a) either the Trust shall be the continuing trust or
corporation, or the successor trust or corporation (if other than the Trust)
formed by or resulting from any such merger or consolidation or which shall
have received the transfer of such assets shall expressly assume payment of
the principal of (and premium, if any) and interest on all of the Debt
Securities and the due and punctual performance and observance of all of the
covenants and conditions contained in the Indentures; (b) immediately after
giving effect to such transaction and treating any indebtedness which becomes
an obligation of the Trust or any Subsidiary as a result thereof as having
been incurred by the Trust or such Subsidiary at the time of such transaction,
no Event of Default under the Indentures, and no event which, after notice or
the lapse of time, or both, would become such an Event of Default, shall have
occurred and be continuing; and (c) an officer's certificate and legal opinion
covering such conditions shall be delivered to the Trustees (Sections 801 and
803 of each Indenture).
EVENTS OF DEFAULT, NOTICE AND WAIVER
Each Indenture provides that the following events are "Events of Default"
with respect to any series of Debt Securities issued thereunder (a) default
for 30 days in the payment of any installment of interest or Additional
Amounts on any Debt Security of such series; (b) default in the payment of the
principal of (or premium, if any, on) any Debt Security of such series when
due; (c) default in making any sinking fund payment as required for any Debt
Security of such series; (d) default in the performance of any other covenant
of the Trust contained in the applicable Indenture (other than a covenant
added to such Indenture solely for the benefit of a series of Debt Securities
issued thereunder other than such series), continued for 60 days after written
notice as provided in such Indenture; (e) an event of default under any
evidence of indebtedness of the Trust or any mortgage, indenture or other
instrument under which such indebtedness is issued or by which such
indebtedness is secured or evidenced, such default having resulted in the
acceleration of the maturity of an aggregate principal amount exceeding
$10,000,000 of such indebtedness, but only if such indebtedness is not
discharged or such
10
<PAGE>
acceleration is not rescinded or annulled within a specified period of time;
(f) certain events of bankruptcy, insolvency or reorganization, or court
appointment of a receiver, liquidator or trustee of the Trust, any Significant
Subsidiary or the property of the Trust or any Significant Subsidiary; and (g)
any other Event of Default provided with respect to a particular series of
Debt Securities (Section 501 of each Indenture). The term "Significant
Subsidiary" means each significant subsidiary (as defined in Regulation S-X
promulgated under the Securities Act) of the Trust.
If an Event of Default under either Indenture with respect to Debt
Securities of any series at the time Outstanding occurs and is continuing,
then in every such case the Trustee or the Holders of not less than 25% in
principal amount of the Outstanding Debt Securities of that series may declare
the principal amount (or, if the Debt Securities of that series are Original
Issue Discount Securities or Indexed Securities, such portion of the principal
amount as may be specified in the terms thereof) of all of the Outstanding
Debt Securities of that series to be due and payable immediately by written
notice thereof to the Trust (and to the applicable Trustee if given by the
Holders). However, at any time after such a declaration of acceleration with
respect to Debt Securities of such series (or of all Debt Securities then
Outstanding under the applicable Indenture, as the case may be) has been made,
but before a judgment or decree for payment of the money due has been obtained
by the applicable Trustee, the Holders of not less than a majority in
principal amount of Outstanding Debt Securities of such series (or of all Debt
Securities then Outstanding under the applicable Indenture, as the case may
be) may rescind and annul such declaration and its consequences if (a) the
Trust shall have deposited with the applicable Trustee all required payments
of the principal of (and premium, if any) and interest, and any Additional
Amounts, on the Debt Securities of such series (or of all Debt Securities then
Outstanding under the applicable Indenture, as the case may be), plus certain
fees, expenses, disbursements and advances of the Trustee and (b) all Events
of Default, other than the non-payment of accelerated principal (or specified
portion thereof), with respect to Debt Securities of such series (or of all
Debt Securities then Outstanding under the applicable Indenture, as the case
may be) have been cured or waived as provided in the applicable Indenture
(Section 502 of each Indenture). Each Indenture also provides that the Holders
of not less than a majority in principal amount of the Outstanding Debt
Securities of any series (or of all Debt Securities then Outstanding under the
applicable Indenture, as the case may be) may waive any past default with
respect to such series and its consequences, except a default (x) in the
payment of the principal of (or premium, if any) or interest or Additional
Amounts on any Debt Security of such series or (y) in respect of a covenant or
provision contained in the applicable Indenture that cannot be modified or
amended without the consent of the Holders of all Outstanding Debt Securities
affected thereby (Section 513 of each Indenture).
Each Trustee is required to give notice to the Holder of Debt Securities
within 90 days of a default under the applicable Indenture; provided, however,
that the Trustee may withhold notice to the Holders of any series of Debt
Securities of any default with respect to such series (except a default in the
payment of the principal of (or premium, if any) or interest payable on any
Debt Security of such series or in the payment of any sinking fund installment
in respect of any Debt Security of such series) if the Responsible Officers of
the Trustee consider such withholding to be in the interest of such Holders
(Section 601 of each Indenture).
Each Indenture provides that no Holders of Debt Securities of any series may
institute any proceedings, judicial or otherwise, with respect to the
applicable Indenture or for any remedy thereunder, except in the case of
failure of the Trustee thereunder for 60 days, to act after it has received a
written request to institute proceedings in respect of an Event of Default
from the Holders of not less than 25% in principal amount of the Outstanding
Debt Securities of such series, as well as an offer of indemnity reasonably
satisfactory to it (Section 507 of each Indenture). This provision will not
prevent, however, any Holder of Debt Securities from instituting suit for the
enforcement of payment of the principal of (and premium, if any) and interest
on, and Additional Amounts payable with respect to, such Debt Securities at
the respective due dates thereof (Section 508 of each Indenture).
Subject to provisions in each Indenture relating to its duties in case of
default, each Trustee is under no obligation to exercise any of its rights or
powers under the applicable Indenture at the request or direction of any
Holders of any series of Debt Securities then Outstanding under such
Indenture, unless such Holders shall have
11
<PAGE>
offered to the Trustee reasonable security or indemnity (Section 602 of each
Indenture). The Holders of not less than a majority in principal amount of the
applicable Outstanding Debt Securities of any series (or of all Debt
Securities then Outstanding under the applicable Indenture, as the case may
be) shall have the right to direct the time, method and place of conducting
any proceeding for any remedy available to the Trustee, or of exercising any
trust or power conferred upon the Trustee. However, the Trustee may refuse to
follow any direction which is in conflict with any law or the applicable
Indenture, which may involve the Trustee in personal liability or which may be
unduly prejudicial to the Holders of Debt Securities of such series not
joining therein (Section 512 of each Indenture).
Within 120 days after the close of each fiscal year, the Trust must deliver
to each Trustee a certificate, signed by one of several specified officers,
stating whether or not such officer has knowledge of any default under the
applicable Indenture and, if so, specifying each such default and the nature
and status thereof (Section 1010 of each Indenture).
MODIFICATION OF THE INDENTURES
Modifications and amendments of each Indenture may be made only with the
consent of the Holders of not less than a majority in principal amount of all
Outstanding Debt Securities issued under such Indenture which are affected by
such modification or amendment; provided, however, that no such modification
or amendment may, without the consent of the Holder of each such Debt Security
affected thereby, (a) change the Stated Maturity of the principal of (or
premium, if any), or any installment of principal of or interest on, any such
Debt Security; (b) reduce the principal amount of, or the rate or amount of
interest on, or any Additional Amounts payable in respect of, or any premium
payable on redemption of, or change any obligation of the Company to pay any
Additional Amounts set forth in the Indenture relating to, any such Debt
Security, or reduce the amount of principal of an Original Issue Discount
Security that would be due and payable upon declaration of acceleration of the
maturity thereof or would be provable in bankruptcy, or adversely affect any
right of repayment of the Holder of any such Debt Security; (c) change the
Place of Payment, or the coin or currency, for payment of principal of,
premium, if any, or interest on, or any Additional Amounts payable with
respect to, any such Debt Security; (d) impair the right to institute suit for
the enforcement of any payment on or with respect to any such Debt Security;
(e) reduce the above-stated percentage of Outstanding Debt Securities of any
series necessary to modify or amend the applicable Indenture, to waive
compliance with certain provisions thereof or certain defaults and
consequences thereunder or to reduce the quorum or voting requirements set
forth in such Indenture; or (f) modify any of the foregoing provisions or any
of the provisions relating to the waiver of certain past defaults or certain
covenants, except to increase the required percentage to effect such action or
to provide that certain other provisions may not be modified or waived without
the consent of the Holder of each such Debt Security affected thereby (Section
902 of each Indenture).
The Holders of not less than a majority in principal amount of Outstanding
Debt Securities issued under either Indenture have the right to waive
compliance by the Trust with certain covenants in the applicable Indenture
(Section 1012 of each Indenture).
Modifications and amendments of each Indenture may be made by the Trust and
the applicable Trustee without the consent of any Holder of Debt Securities
issued thereunder for any of the following purposes: (i) to evidence the
succession of another Person to the Trust as obligor under the applicable
Indenture; (ii) to add to the covenants of the Trust for the benefit of the
Holders of all or any series of Debt Securities or to surrender any right or
power conferred upon the Trust in the applicable Indenture; (iii) to add
Events of Default for the benefit of the Holders of all or any series of Debt
Securities; (iv) to add or change any provisions of the applicable Indenture
to facilitate the issuance of, or to liberalize certain terms of, Debt
Securities in bearer form, or to permit or facilitate the issuance of Debt
Securities in uncertificated form, provided that such action shall not
adversely affect the interests of the Holders of the Debt Securities of any
series in any material respect; (v) to change or eliminate any provisions of
the applicable Indenture, provided that any such change or elimination shall
become effective only when there are no Debt Securities Outstanding of any
series issued thereunder created prior thereto which are entitled to the
benefit of such provision; (vi) to secure the Debt Securities; (vii)
12
<PAGE>
to establish the form or terms of Debt Securities of any series, including the
provisions and procedures, if applicable, for the conversion of such Debt
Securities into Preferred Shares or Common Shares of the Trust; (viii) to
provide for the acceptance of appointment by a successor Trustee or facilitate
the administration of the trusts under the applicable Indenture by more than
one Trustee; (ix) to cure any ambiguity, defect or inconsistency in the
applicable Indenture, provided that such action will not adversely affect the
interests of Holders of Debt Securities of any series in any material respect;
or (x) to supplement any of the provisions of the applicable Indenture to the
extent necessary to permit or facilitate defeasance and discharge of any
series of such Debt Securities, provided that such action will not adversely
affect the interests of the Holders of the Debt Securities of any series in
any material respect (Section 901 of each Indenture).
Each Indenture provides that in determining whether the Holders of the
requisite principal amount of Outstanding Debt Securities of a series have
given any request, demand, authorization, direction, notice, consent or waiver
thereunder or whether a quorum is present at a meeting of Holders of Debt
Securities, (i) the principal amount of an Original Issue Discount Security
that will be deemed to be outstanding shall be the amount of the principal
thereof that would be due and payable as of the date of such determination
upon declaration of acceleration of the maturity thereof, (ii) the principal
amount of a Debt Security denominated in a Foreign Currency that shall be
deemed outstanding will be the U.S. dollar equivalent, determined on the issue
date for such Debt Security, of the principal amount (or, in the case of an
Original Issue Discount Security, the U.S. dollar equivalent on the issue date
of such Debt Security of the amount determined as provided in (i) above),
(iii) the principal amount of an Indexed Security that will be deemed
outstanding will be the principal face amount of such Indexed Security at
original issuance, unless otherwise provided with respect to such Indexed
Security pursuant to Section 301 of the applicable Indenture, and (iv) Debt
Securities owned by the Trust or any other obligor upon the Debt Securities or
any Affiliate of the Trust or of such other obligor will be disregarded
(Section 101 of each Indenture).
Each Indenture contains provisions for convening meetings of the Holders of
Debt Securities of a series (Section 1501 of each Indenture). A meeting may be
called at any time by the applicable Trustee, and also, upon request, by the
Trust, pursuant to a resolution adopted by the Board of Trustees, or the
Holders of at least 10% in principal amount of the Outstanding Debt Securities
of such series, in any such case upon notice given as provided in the
applicable Indenture (Section 1502 of each Indenture). Except for any consent
that must be given by the Holder of each Debt Security affected by certain
modifications and amendments of the applicable Indenture, any resolution
presented at a meeting or adjourned meeting duly reconvened at which a quorum
is present may be adopted by the affirmative vote of the Holders of a majority
in principal amount of the Outstanding Debt Securities of that series;
provided, however, that, except as referred to above, any resolution with
respect to any request, demand, authorization, direction, notice, consent,
waiver or other action that may be made, given or taken by the Holders of a
specified percentage, which is less than a majority, in principal amount of
the Outstanding Debt Securities of a series may be adopted at a meeting or
adjourned meeting duly reconvened at which a quorum is present by the
affirmative vote of the Holders of such specified percentage in principal
amount of the Outstanding Debt Securities of that series. Any resolution
passed or decision taken at any meeting of Holders of Debt Securities of any
series duly held in accordance with the applicable Indenture will be binding
on all Holders of Debt Securities of that series. The quorum at any meeting
called to adopt a resolution, and at any reconvened meeting, will be Persons
holding or representing a majority in principal amount of the Outstanding Debt
Securities of a series; provided, however, that if any action is to be taken
at such meeting with respect to a consent or waiver which may be given by the
Holders of not less than a specified percentage in principal amount of the
Outstanding Debt Securities of a series, the Persons holding or representing
such specified percentage in principal amount of the Outstanding Debt
Securities of such series will constitute a quorum (Section 1504 of each
Indenture).
Notwithstanding the foregoing provisions, if any action is to be taken at a
meeting of Holders of Debt Securities of any series with respect to any
request, demand, authorization, direction, notice, consent, waiver or other
action that the applicable Indenture expressly provides may be made, given or
taken by the Holders of a specified percentage in principal amount of all
Outstanding Debt Securities affected thereby, or of the Holders of
13
<PAGE>
such series and one or more additional series: (i) there shall be no minimum
quorum requirement for such meeting and (ii) the principal amount of the
Outstanding Debt Securities of such series that vote in favor of such request,
demand, authorization, direction, notice, consent, waiver or other action
shall be taken into account in determining whether such request, demand,
authorization, direction, notice, consent, waiver or other action has been
made, given or taken under the applicable Indenture (Section 1504 of each
Indenture).
DISCHARGE, DEFEASANCE AND COVENANT DEFEASANCE
The Trust may discharge certain obligations to Holders of any series of Debt
Securities that have not already been delivered to the Trustee for
cancellation and that either have become due and payable or will become due
and payable within one year (or scheduled for redemption within one year) by
irrevocably depositing with the applicable Trustee, in trust, funds in such
currency or currencies, currency unit or units or composite currency or
currencies in which such Debt Securities are payable in an amount sufficient
to pay the entire indebtedness on such Debt Securities in respect of principal
(and premium, if any) and interest and Additional Amounts payable to the date
of such deposit (if such Debt Securities have become due and payable) or to
the Stated Maturity or Redemption Date, as the case may be (Section 401 of
each Indenture).
Each Indenture provides that, if the provisions of Article XIV are made
applicable to the Debt Securities of or within any series pursuant to Section
301 of such Indenture, the Trust may elect either (a) to defease and be
discharged from any and all obligations with respect to such Debt Securities
(except for the obligation to pay Additional Amounts, if any, upon the
occurrence of certain events of tax, assessment or governmental charge with
respect to payments on such Debt Securities and the obligations to register
the transfer or exchange of such Debt Securities, to replace temporary or
mutilated, destroyed, lost or stolen Debt Securities, to maintain an office or
agency in respect of such Debt Securities and to hold moneys for payment in
trust) ("defeasance") (Section 1402 of each Indenture) or (b) to be released
from its obligations with respect to such Debt Securities under Sections 1004
to 1009, inclusive, of the applicable Indenture (being the restrictions
described under "Certain Covenants") or, if provided pursuant to Section 301
of such Indenture, its obligations with respect to any other covenant, and any
omission to comply with such obligations will not constitute a default or an
Event of Default with respect to such Debt Securities ("covenant defeasance")
(Section 1403 of each Indenture), in either case upon the irrevocable deposit
by the Trust with the applicable Trustee, in trust, of an amount, in such
currency or currencies, currency unit or units or composite currency or
currencies in which such Debt Securities are payable at Stated Maturity, or
Government Obligations (as defined below), or both, applicable to such Debt
Securities which through the scheduled payment of principal and interest in
accordance with their terms will provide money in an amount sufficient to pay
the principal of (and premium, if any) and interest on such Debt Securities,
and any mandatory sinking fund or analogous payments thereon, on the scheduled
due dates therefor (Section 1404 of each Indenture).
Such a trust may only be established if, among other things, the Trust has
delivered to the applicable Trustee an Opinion of Counsel (as specified in the
applicable Indenture) to the effect that the Holders of such Debt Securities
will not recognize income, gain or loss for U.S. federal income tax purposes
as a result of such defeasance or covenant defeasance and will be subject to
U.S. federal income tax on the same amounts, in the same manner and at the
same times as would have been the case if such defeasance or covenant
defeasance had not occurred (Section 1404 of each Indenture).
"Government Obligations" means securities which are (i) direct obligations
of the United States of America or the government which issued the Foreign
Currency in which the Debt Securities of a particular series are payable, for
the payment of which its full faith and credit is pledged or (ii) obligations
of a Person controlled or supervised by and acting as an agency or
instrumentality of the United States of America or such government which
issued the Foreign Currency in which the Debt Securities of such series are
payable, the payment of which is unconditionally guaranteed as a full faith
and credit obligation by the United States of America or such other
government, which, in either case, are not callable or redeemable at the
option of the issuer thereof, and will also include a depository receipt
issued by a bank or trust company as custodian with respect to any such
Government Obligation or a specific payment of interest on or principal of any
such Government Obligation
14
<PAGE>
held by such custodian for the account of the holder of a depository receipt,
provided that (except as required by law) such custodian is not authorized to
make any deduction from the amount payable to the holder of such depository
receipt from any amount received by the custodian in respect of the Government
Obligation or the specific payment of interest on or principal of the
Government Obligation evidenced by such depository receipt (Section 101 of
each Indenture).
Unless otherwise provided in the applicable Prospectus Supplement, if after
the Trust has deposited funds and/or Government Obligations to effect
defeasance or covenant defeasance with respect to Debt Securities of any
series, (a) the Holder of a Debt Security of such series is entitled to, and
does, elect pursuant to Section 301 of the applicable Indenture or the terms
of such Debt Security to receive payment in a currency, currency unit or
composite currency other than that in which such deposit has been made in
respect of such Debt Security, or (b) a Conversion Event (as defined below)
occurs in respect of the currency, currency unit or composite currency in
which such deposit has been made, the indebtedness represented by such Debt
Security shall be deemed to have been, and will be, fully discharged and
satisfied through the payment of the principal of (and premium, if any) and
interest on such Debt Security as they become due out of the proceeds yielded
by converting the amount so deposited in respect of such Debt Security into
the currency, currency unit or composite currency in which such Debt Security
becomes payable as a result of such election or such cessation of usage based
on the applicable market exchange rate (Section 1405 of each Indenture).
"Conversion Event" means the cessation of use of (i) a Foreign Currency, both
by the government of the country which issued such currency and for the
settlement of transactions by a central bank or other public institutions of
or within the international banking community, (ii) the ECU both within the
European Monetary System and for the settlement of transactions by public
institutions of or within the European Communities or (iii) any currency unit
or composite currency other than the ECU for the purposes for which it was
established (Section 101 of each Indenture). Unless otherwise provided in the
applicable Prospectus Supplement, all payments of principal of (and premium,
if any) and interest on any Debt Security that is payable in a Foreign
Currency that ceases to be used by its government of issuance shall be made in
U.S. dollars.
In the event the Trust effects covenant defeasance with respect to any Debt
Securities and such Debt Securities are declared due and payable because of
the occurrence of any Event of Default other than the Event of Default
described in clause (d) under "Events of Default, Notice and Waiver" with
respect to Sections 1004 to 1009, inclusive, of the applicable Indenture
(which Sections would no longer be applicable to such Debt Securities) or
described in clause (g) under "Events of Default, Notice and Waiver" with
respect to any other covenant as to which there has been covenant defeasance,
the amount in such currency, currency unit or composite currency in which such
Debt Securities are payable, and Government Obligations on deposit with the
applicable Trustee, will be sufficient to pay amounts due on such Debt
Securities at the time of their Stated Maturity but may not be sufficient to
pay amounts due on such Debt Securities at the time of the acceleration
resulting from such Event of Default. However, the Trust would remain liable
to make payment of such amounts due at the time of acceleration.
The applicable Prospectus Supplement may further describe the provisions, if
any, permitting such defeasance or covenant defeasance, including any
modifications to the provisions described above, with respect to the Debt
Securities of or within a particular series.
CONVERSION RIGHTS
The terms and conditions, if any, upon which the Debt Securities are
convertible into Preferred Shares or Common Shares will be set forth in the
applicable Prospectus Supplement relating thereto. Such terms will include
whether such Debt Securities are convertible into Preferred Shares or Common
Shares, the conversion price (or manner of calculation thereof), the
conversion period, provisions as to whether conversion will be at the option
of the Holders or the Trust, the events requiring an adjustment of the
conversion price and provisions affecting conversion in the event of the
redemption of such Debt Securities.
15
<PAGE>
GLOBAL SECURITIES
The Debt Securities of a series may be issued in whole or in part in the
form of one or more fully registered global securities (the "Global
Securities") that will be deposited with, or on behalf of, a depository (the
"Depository") identified in the applicable Prospectus Supplement relating to
such series. Global Securities are expected to be deposited with The
Depository Trust Company, as Depository. Global Securities may be issued in
either registered or bearer form and in either temporary or permanent form.
Unless and until it is exchanged in whole or in part for the individual Debt
Securities represented thereby, a Global Security may not be transferred
except as a whole by the Depository for such Global Security to a nominee of
such Depository or by a nominee of such Depository to such Depository or
another nominee of such Depository or by the Depository or any nominee of such
Depository to a successor Depository or any nominee of such successor.
The specific terms of the depository arrangement with respect to a series of
Debt Securities will be described in the applicable Prospectus Supplement
relating to such series. Unless otherwise indicated in the applicable
Prospectus Supplement, the Trust anticipates that the following provisions
will apply to depository arrangements.
Upon the issuance of a Global Security, the Depository for such Global
Security or its nominee will credit on its book-entry registration and
transfer system the respective principal amounts of the individual Debt
Securities represented by such Global Security to the accounts of persons that
have accounts with such Depository ("Participants"). Such accounts shall be
designated by the underwriters, dealers or agents with respect to such Debt
Securities or by the Trust if such Debt Securities are offered and sold
directly by the Trust. Ownership of beneficial interests in a Global Security
will be limited to Participants or persons that may hold interests through
Participants. Ownership of beneficial interests in such Global Security will
be shown on, and the transfer of that ownership will be effected only through,
records maintained by the applicable Depository or its nominee (with respect
to beneficial interests of Participants) and records of Participants (with
respect to beneficial interests of persons who hold through Participants). The
laws of some states require that certain purchasers of securities take
physical delivery of such securities in definitive form. Such limits and laws
may impair the ability to own, pledge or transfer beneficial interest in a
Global Security.
So long as the Depository for a Global Security or its nominee is the
registered owner of such Global Security, such Depository or such nominee, as
the case may be, will be considered the sole owner or holder of the Debt
Securities represented by such Global Security for all purposes under the
applicable Indenture. Except as provided below or in the applicable Prospectus
Supplement, owners of beneficial interest in a Global Security will not be
entitled to have any of the individual Debt Securities of the series
represented by such Global Security registered in their names, will not
receive or be entitled to receive physical delivery of any such Debt
Securities of such series in definitive form and will not be considered the
owners or holders thereof under the applicable Indenture.
Payments of principal of, any premium and any interest on, or any Additional
Amounts payable with respect to, individual Debt Securities represented by a
Global Security registered in the name of a Depository or its nominee will be
made to the Depository or its nominee, as the case may be, as the registered
owner of the Global Security representing such Debt Securities. None of the
Trust, the Trustees, any Paying Agent or the Security Registrar for such Debt
Securities will have any responsibility or liability for any aspect of the
records relating to or payments made on account of beneficial ownership
interests in the Global Security for such Debt Securities or for maintaining,
supervising or reviewing any records relating to such beneficial ownership
interests.
The Trust expects that the Depository for a series of Debt Securities or its
nominee, upon receipt of any payment of principal, premium or interest in
respect of a permanent Global Security representing any of such Debt
Securities, will immediately credit Participants' accounts with payments in
amounts proportionate to their respective beneficial interests in the
principal amount of such Global Security for such Debt Securities as shown on
the records of such Depository or its nominee. The Trust also expects that
payments by Participants to owners
16
<PAGE>
of beneficial interests in such Global Security held through such Participants
will be governed by standing instructions and customary practices, as is the
case with securities held for the account of customers in bearer form or
registered in "street name." Such payments will be the responsibility of such
Participants.
If a Depository for a series of Debt Securities is at any time unwilling,
unable or ineligible to continue as depository and a successor depository is
not appointed by the Trust within 90 days, the Trust will issue individual
Debt Securities of such series in exchange for the Global Security
representing such series of Debt Securities. In addition, the Trust may, at
any time and in its sole discretion, subject to any limitations described in
the applicable Prospectus Supplement relating to such Debt Securities,
determine not to have any Debt Securities of such series represented by one or
more Global Securities and, in such event, will issue individual Debt
Securities of such series in exchange for the Global Security or Securities
representing such series of Debt Securities. Individual Debt Securities of
such series so issued will be issued in denominations, unless otherwise
specified by the Trust, of $1,000 and integral multiples thereof.
SUBORDINATION
Upon any distribution to creditors of the Trust in a liquidation,
dissolution or reorganization, the payment of the principal of and interest on
the Subordinated Securities will be subordinated to the extent provided in the
Subordinated Securities Indenture in right of payment to the prior payment in
full of all Senior Debt (Sections 1601 and 1602 of the Subordinated Securities
Indenture), but the obligation of the Trust to make payment of the principal
and interest on the Subordinated Securities will not otherwise be affected
(Section 1608 of the Subordinated Securities Indenture). No payment of
principal or interest may be made on the Subordinated Securities at any time
if a default on Senior Debt exists that permits the holders of such Senior
Debt to accelerate its maturity and the default is the subject of judicial
proceedings or the Trust receives notice of the default (Section 1603 of the
Subordinated Securities Indenture). After all Senior Debt is paid in full and
until the Subordinated Securities are paid in full, holders will be subrogated
to the rights of holders of Senior Debt to the extent that distributions
otherwise payable to holders have been applied to the payment of Senior Debt
(Section 1607 of the Subordinated Securities Indenture). By reason of such
subordination, in the event of a distribution of assets upon insolvency,
certain general creditors of the Trust may recover more, ratably, than holders
of the Subordinated Securities.
Senior Debt is defined in the Subordinated Securities Indenture as the
principal of and interest on, or substantially similar payments to be made by
the Trust in respect of, the following, whether outstanding at the date of
execution of the Subordinated Securities Indenture or thereafter incurred,
created or assumed: (a) indebtedness of the Trust for money borrowed or
represented by purchase-money obligations, (b) indebtedness of the Trust
evidenced by notes, debentures, or bonds, or other securities issued under the
provisions of an indenture, fiscal agency agreement or other instrument, (c)
obligations of the Trust as lessee under leases of property either made as
part of any sale and leaseback transaction to which the Trust is a party or
otherwise, (d) indebtedness of partnerships and joint ventures that is
included in the consolidated financial statements of the Trust, (e)
indebtedness, obligations and liabilities of others in respect of which the
Trust is liable contingently or otherwise to pay or advance money or property
or as guarantor, endorser or otherwise or which the Trust has agreed to
purchase or otherwise acquire, and (f) any binding commitment of the Trust to
fund any real estate investment or to fund any investment in any entity making
such real estate investment, in each case other than (1) any such
indebtedness, obligation or liability referred to in clauses (a) through (f)
above as to which, in the instrument creating or evidencing the same pursuant
to which the same is outstanding, it is provided that such indebtedness,
obligation or liability is not superior in right of payment to the
Subordinated Securities or ranks pari passu with the Subordinated Securities,
(2) any such indebtedness, obligation or liability which is subordinated to
indebtedness of the Trust to substantially the same extent as or to a greater
extent than the Subordinated Securities are subordinated, (3) any trade
accounts payable and (4) the Subordinated Securities (Section 101 of the
Subordinated Securities Indenture). There are no restrictions in the
Subordinated Securities Indenture upon the creation of additional Senior Debt.
However, the Senior Securities Indenture contains limitations on incurrence of
indebtedness by the Trust. See "--Certain Covenants--Senior Securities
Indenture Limitations on Incurrence of Debt."
17
<PAGE>
DESCRIPTION OF PREFERRED SHARES
The Trust is authorized to issue 1,000,000 preferred shares, par value $1.00
per share, and no Preferred Shares were outstanding as of the date of this
Prospectus.
The following description of the Preferred Shares sets forth certain general
terms and provisions of the Preferred Shares to which any Prospectus
Supplement may relate. The particular terms of the Preferred Shares being
offered will be described in a Prospectus Supplement relating to such
Preferred Shares. The statements below describing the Preferred Shares are in
all respects subject to and qualified in their entirety by reference to the
applicable provisions of the Trust's Amended and Restated Declaration of Trust
(the "Declaration of Trust").
GENERAL
The Declaration of Trust authorizes the Board of Trustees to issue Preferred
Shares in series, and to establish the number of shares to be included in each
series and to fix the designation and relative rights, preferences and
limitations of the shares of each series, including, but not limited to, the
determination of the following: any dividend and distribution rights; any
terms on which Preferred Shares may be redeemed; any voting rights; any rights
in the event of the dissolution, liquidation or winding up of the Trust; any
conversion rights; and any other rights, preferences and limitations. The
Preferred Shares will, when issued, be fully paid and nonassessable and will
have no preemptive rights.
Reference is made to the Prospectus Supplement relating to the Preferred
Shares offered thereby for specific terms, including:
(1)The title and stated value of such Preferred Shares;
(2) The number of shares of such Preferred Shares being offered, the
liquidation preference per share and the offering price of such
Preferred Shares;
(3) The dividend rate(s), period(s) and/or payment date(s) or method(s) of
calculation thereof applicable to such Preferred Shares;
(4) The date from which dividends on such Preferred Shares shall
accumulate, if applicable;
(5) The procedures for any auction and remarketing, if any, for such
Preferred Shares;
(6) The provision for a sinking fund, if any, for such Preferred Shares;
(7) The provisions for redemption, if applicable, of such Preferred
Shares;
(8) Any listing of such Preferred Shares on any securities exchange;
(9) The terms and conditions, if applicable, upon which such Preferred
Shares will be convertible into Common Shares of the Trust, including
the conversion price (or manner of calculation thereof);
(10) Whether interests in such Preferred Shares will be represented by
Depositary Shares;
(11) A discussion of federal income tax considerations applicable to such
Preferred Shares;
(12) The relative ranking and preferences of such Preferred Shares as to
dividend rights and rights upon liquidation, dissolution or winding up
of the affairs of the Trust;
(13) Any limitations on issuance of any series of preferred shares ranking
senior to or on a parity with such series of Preferred Shares as to
dividend rights and rights upon liquidation, dissolution or winding up
of the affairs of the Trust;
(14) Any limitations on direct or beneficial ownership and restrictions on
transfer of such Preferred Shares, in each case as may be appropriate
to preserve the status of the Trust as a REIT; and
(15) Any other specific terms, preferences, rights, limitations or
restrictions of such Preferred Shares.
18
<PAGE>
RANK
Unless otherwise specified in the applicable Prospectus Supplement, the
Preferred Shares will, with respect to dividend rights and/or rights upon
liquidation, dissolution or winding up of the Trust, rank (i) senior to all
classes or series of Common Shares of the Trust, and to all equity securities
ranking junior to such Preferred Shares with respect to dividend rights and/or
rights upon liquidation, dissolution or winding up of the Trust, as the case
may be; (ii) on a parity with all equity securities issued by the Trust the
terms of which specifically provide that such equity securities rank on a
parity with the Preferred Shares with respect to dividend rights and/or rights
upon liquidation, dissolution or winding up of the Trust, as the case may be;
and (iii) junior to all equity securities issued by the Trust the terms of
which specifically provide that such equity securities rank senior to the
Preferred Shares with respect to dividend rights and/or rights upon
liquidation, dissolution or winding up of the Trust, as the case may be. As
used in the Declaration of Trust for these purposes, the term "equity
securities" does not include convertible debt securities.
DIVIDENDS
Holders of Preferred Shares shall be entitled to receive, when, as and if
declared by the Board of Trustees of the Trust, out of assets of the Trust
legally available for payment, cash dividends at such rates (or method of
calculation thereof) and on such dates as will be set forth in the applicable
Prospectus Supplement. Each such dividend shall be payable to holders of
record as they appear on the stock transfer books of the Trust on such record
dates as shall be fixed by the Board of Trustees of the Trust.
Dividends on any series of the Preferred Shares may be cumulative or non-
cumulative, as provided in the applicable Prospectus Supplement. Dividends, if
cumulative, will be cumulative from and after the date set forth in the
applicable Prospectus Supplement. If the Board of Trustees of the Trust fails
to declare a dividend payable on a dividend payment date on any series of the
Preferred Shares for which dividends are noncumulative, then the holders of
such series of the Preferred Shares will have no right to receive a dividend
in respect of the dividend period ending on such dividend payment date, and
the Trust will have no obligation to pay the dividend accrued for such period,
whether or not dividends on such series are declared payable on any future
dividend payment date.
If any Preferred Shares of any series are outstanding, no full dividends
shall be declared or paid or set apart for payment on the preferred shares of
the Trust of any other series ranking, as to dividends, on a parity with or
junior to the Preferred Shares of such series for any period unless (i) if
such series of Preferred Shares has a cumulative dividend, full cumulative
dividends have been or contemporaneously are declared and paid or declared and
a sum sufficient for the payment thereof set apart for such payment on the
Preferred Shares of such series for all past dividend periods and the then
current dividend period or (ii) if such series of Preferred Shares does not
have a cumulative dividend, full dividends for the then current dividend
period have been or contemporaneously are declared and paid or declared and a
sum sufficient for the payment thereof set apart for such payment on the
Preferred Shares of such series. When dividends are not paid in full (or a sum
sufficient for such full payment is not so set apart) upon the Preferred
Shares of any series and the shares of any other series of preferred shares
ranking on a parity as to dividends with the Preferred Shares of such series,
all dividends declared upon the Preferred Shares of such series and any other
series of preferred shares ranking on a parity as to dividends with such
Preferred Shares shall be declared pro rata so that the amount of dividends
declared per share on the Preferred Shares of such series and such other
series of preferred shares shall in all cases bear to each other the same
ratio that accrued dividends per share on the Preferred Shares of such series
(which shall not include any accumulation in respect of unpaid dividends for
prior dividend periods if such Preferred Shares do not have a cumulative
dividend) and such other series of preferred shares bear to each other. No
interest, or sum of money in lieu of interest, shall be payable in respect of
any dividend payment or payments on Preferred Shares of such series which may
be in arrears.
Except as provided in the immediately preceding paragraph, unless (i) if
such series of Preferred Shares has a cumulative dividend, full cumulative
dividends on the Preferred Shares of such series have been or
19
<PAGE>
contemporaneously are declared and paid or declared and a sum sufficient for
the payment thereof set apart for payment for all past dividend periods and
the then current dividend period and (ii) if such series of Preferred Shares
does not have a cumulative dividend, full dividends on the Preferred Shares of
such series have been or contemporaneously are declared and paid or declared
and a sum sufficient for the payment thereof set apart for payment for the
then current dividend period, no dividends (other than in common shares or
other shares of beneficial interest of the Trust ranking junior to the
Preferred Shares of such series as to dividends and upon liquidation) shall be
declared or paid or set aside for payment or other distribution upon the
Common Shares or any other shares of beneficial interest of the Trust ranking
junior to or on a parity with the Preferred Shares of such series as to
dividends or upon liquidation, nor shall any Common Shares or any other shares
of beneficial interest of the Trust ranking junior to or on a parity with the
Preferred Shares of such series as to dividends or upon liquidation be
redeemed, purchased or otherwise acquired for any consideration (or any moneys
be paid to or made available for a sinking fund for the redemption of any
shares of any such stock) by the Trust (except by conversion into or exchange
for other shares of beneficial interest of the Trust ranking junior to the
Preferred Shares of such series as to dividends and upon liquidation).
Any dividend payment made on a series of Preferred Shares shall first be
credited against the earliest accrued but unpaid dividend due with respect to
shares of such series which remains payable.
REDEMPTION
If so provided in the applicable Prospectus Supplement, the Preferred Shares
of any series will be subject to mandatory redemption or redemption at the
option of the Trust, as a whole or in part, in each case upon the terms, at
the times and at the redemption prices set forth in such Prospectus
Supplement.
The Prospectus Supplement relating to a series of Preferred Shares that is
subject to mandatory redemption will specify the number of such Preferred
Shares that shall be redeemed by the Trust in each year commencing after a
date to be specified, at a redemption price per share to be specified,
together with an amount equal to all accrued and unpaid dividends thereon
(which shall not, if such Preferred Shares do not have a cumulative dividend,
include any accumulation in respect of unpaid dividends for prior dividend
periods) to the date of redemption. The redemption price may be payable in
cash or other property, as specified in the applicable Prospectus Supplement.
If the redemption price for Preferred Shares of any series is payable only
from the net proceeds of the issuance of shares of beneficial interest of the
Trust, the terms of such Preferred Shares may provide that, if no such shares
of beneficial interest shall have been issued or to the extent the net
proceeds from any issuance are insufficient to pay in full the aggregate
redemption price then due, such Preferred Shares shall automatically and
mandatorily be converted into shares of the applicable shares of beneficial
interest of the Trust pursuant to conversion provisions specified in the
applicable Prospectus Supplement.
Notwithstanding the foregoing, unless (i) if such series of Preferred Shares
has a cumulative dividend, full cumulative dividends on all shares of such
series have been or contemporaneously are declared and paid or declared and a
sum sufficient for the payment thereof set apart for payment for all past
dividend periods and the then current dividend period and (ii) if such series
of Preferred Shares does not have a cumulative dividend, full dividends on all
shares of such series have been or contemporaneously are declared and paid or
declared and a sum sufficient for the payment thereof set apart for payment
for the then current dividend period, no shares of such series of Preferred
Shares shall be redeemed unless all outstanding Preferred Shares of such
series are simultaneously redeemed; provided, however, that the foregoing
shall not prevent the redemption, purchase or acquisition of Preferred Shares
of such series to preserve the REIT status of the Trust or pursuant to a
purchase or exchange offer made on the same terms to holders of all
outstanding Preferred Shares of such series. In addition, unless (i) if such
series of Preferred Shares has a cumulative dividend, full cumulative
dividends on all outstanding shares of such series have been or
contemporaneously are declared and paid or declared and a sum sufficient for
the payment thereof set apart for payment for all past dividend periods and
the then current dividend period and (ii) if such series of Preferred Shares
does not have a cumulative dividend, full dividends on all shares of such
series have been or contemporaneously are declared and paid or declared and a
sum sufficient for the payment thereof set apart for payment for the then
current dividend period, the Trust shall not purchase or
20
<PAGE>
otherwise acquire directly or indirectly any Preferred Shares of such series
(except by conversion into or exchange for shares of beneficial interest of
the Trust ranking junior to the Preferred Shares of such series as to
dividends and upon liquidation); provided, however, that the foregoing shall
not prevent the redemption, purchase or acquisition of Preferred Shares of
such series to assist in maintaining the REIT status of the Trust or pursuant
to a purchase or exchange offer made on the same terms to holders of all
outstanding Preferred Shares of such series.
If fewer than all of the outstanding Preferred Shares of any series are to
be redeemed, the number of shares to be redeemed will be determined by the
Trust and such shares may be redeemed pro rata from the holders of record of
such shares in proportion to the number of such shares held by such holders
(with adjustments to avoid redemption of fractional shares) or any other
equitable method determined by the Trust.
Notice of redemption will be mailed at least 30 days but not more than 60
days before the redemption date to each holder of record of Preferred Shares
of any series to be redeemed at the address shown on the stock transfer books
of the Trust. Each notice shall state: (i) the redemption date; (ii) the
number of shares and series of the Preferred Shares to be redeemed; (iii) the
redemption price; (iv) the place or places where certificates for such
Preferred Shares are to be surrendered for payment of the redemption price;
(v) that dividends on the shares to be redeemed will cease to accrue on such
redemption date; and (vi) the date upon which the holder's conversion rights,
if any, as to such shares shall terminate. If fewer than all the Preferred
Shares of any series are to be redeemed, the notice mailed to each such holder
thereof shall also specify the number of Preferred Shares to be redeemed from
each such holder. If notice of redemption of any Preferred Shares has been
properly given and if the funds necessary for such redemption have been
irrevocably set aside by the Trust in trust for the benefit of the holders of
any Preferred Shares so called for redemption, then from and after the
redemption date dividends will cease to accrue on such Preferred Shares, such
Preferred Shares shall no longer be deemed outstanding and all rights of the
holders of such shares will terminate, except the right to receive the
redemption price. Any moneys so deposited which remain unclaimed by the
holders of such Preferred Shares at the end of two years after the redemption
date will be returned by the applicable bank or trust company to the Trust.
LIQUIDATION PREFERENCE
Upon any voluntary or involuntary liquidation, dissolution or winding up of
the affairs of the Trust, then, before any distribution or payment shall be
made to the holders of any Common Shares or any other class or series of
shares of beneficial interest of the Trust ranking junior to any series of
Preferred Shares in the distribution of assets upon any liquidation,
dissolution or winding up of the Trust, the holders of such series of
Preferred Shares shall be entitled to receive, after payment or provision for
payment of the Trust's debts and other liabilities, out of assets of the Trust
legally available for distribution to shareholders, liquidating distributions
in the amount of the liquidation preference per share (set forth in the
applicable Prospectus Supplement), plus an amount equal to all dividends
accrued and unpaid thereon (which shall not include any accumulation in
respect of unpaid dividends for prior dividend periods if such Preferred
Shares do not have a cumulative dividend). After payment of the full amount of
the liquidating distributions to which they are entitled, the holders of such
series of Preferred Shares will have no right or claim to any of the remaining
assets of the Trust. In the event that, upon any such voluntary or involuntary
liquidation, dissolution or winding up, the legally available assets of the
Trust are insufficient to pay the amount of the liquidating distributions on
all such outstanding Preferred Shares and the corresponding amounts payable on
all shares of other classes or series of shares of beneficial interest of the
Trust ranking on a parity with such series of Preferred Shares in the
distribution of assets upon liquidation, dissolution or winding up, then the
holders of such series of Preferred Shares and all other such classes or
series of shares of beneficial interest shall share ratably in any such
distribution of assets in proportion to the full liquidating distributions to
which they would otherwise be respectively entitled.
If the liquidating distributions shall have been made in full to all holders
of a series of Preferred Shares, the remaining assets of the Trust shall be
distributed among the holders of any other classes or series of shares of
beneficial interest ranking junior to such series of Preferred Shares upon
liquidation, dissolution or winding up, according to their respective rights
and preferences and in each case according to their respective number of
21
<PAGE>
shares. For purposes of this section, a distribution of assets in any
dissolution, winding up or liquidation will not include (i) any consolidation
or merger of the Trust with or into any other entity, (ii) any dissolution,
liquidation, winding up, or reorganization of the Trust immediately followed
by organization of another entity to which such assets are distributed or
(iii) a sale or other disposition of all or substantially all of the Trust's
assets to another entity; provided that, in each case, effective provision is
made in the charter of the resulting and surviving entity or otherwise for the
recognition, preservation and protection of the rights of the holders of
Preferred Shares.
VOTING RIGHTS
Holders of any series of Preferred Shares will not have any voting rights,
except as set forth below or as otherwise from time to time required by law or
as indicated in the applicable Prospectus Supplement. The Declaration of Trust
provides that no holders of Preferred Shares shall have the right to elect one
or more separate trustees. However, if the Trust elects to issue a series of
Preferred Shares, it may amend the Declaration of Trust to provide for certain
additional voting rights to holders of Preferred Shares.
So long as any Preferred Shares remain outstanding, the Trust will not,
without the affirmative vote or consent of the holders of two-thirds (2/3) of
the shares of each series of Preferred Shares outstanding at the time, given
in person or by proxy, either in writing or at a meeting (such series voting
separately as a class), (i) authorize or create, or increase the authorized or
issued amount of, any class or series of shares of beneficial interest ranking
prior to such series of Preferred Shares with respect to payment of dividends
or the distribution of assets upon liquidation, dissolution or winding up, or
reclassify any authorized shares of beneficial interest of the Trust into any
such shares, or create, authorize or issue any obligation or security
convertible into or evidencing the right to purchase any such shares; or (ii)
amend, alter or repeal the provisions of the Trust's Declaration of Trust or
the Certificate of Designation for such series of Preferred Shares, whether by
merger, consolidation or otherwise, so as to materially and adversely affect
any right, preference, privilege or voting power of such series of Preferred
Shares or the holders thereof; provided, however, that any increase in the
amount of the authorized preferred shares or the creation or issuance of any
other series of preferred shares, or any increase in the amount of authorized
shares of such series or any other series of Preferred Shares, in each case
ranking on a parity with or junior to the Preferred Shares of such series with
respect to payment of dividends or the distribution of assets upon
liquidation, dissolution or winding up, shall not be deemed to materially and
adversely affect such rights, preferences, privileges or voting powers.
The foregoing voting provisions will not apply if, at or prior to the time
when the act with respect to which such vote would otherwise be required shall
be affected, all outstanding shares of such series of Preferred Shares shall
have been redeemed or called for redemption upon proper notice and sufficient
funds shall have been irrevocably deposited in trust to effect such
redemption.
CONVERSION RIGHTS
The terms and conditions, if any, upon which any series of Preferred Shares
are convertible into Common Shares will be set forth in the applicable
Prospectus Supplement relating thereto. Such terms will include the number of
Common Shares into which the Preferred Shares are convertible, the conversion
price (or manner of calculation thereof), the conversion period, provisions as
to whether conversion will be at the option of the holders of the Preferred
Shares or the Trust, the events requiring an adjustment of the conversion
price and provisions affecting conversion in the event of the redemption of
such Preferred Shares.
RESTRICTIONS ON OWNERSHIP
For the Trust to qualify as a REIT under the Code, not more than 50% in
value of its outstanding shares of beneficial interest may be owned, directly
or constructively, by five or fewer individuals (as defined in the Code)
during the last half of a taxable year, and the shares of beneficial interest
must be beneficially owned by 100 or more persons during at least 335 days of
a taxable year of 12 months (or during a proportionate part of a shorter
taxable year). Therefore, the Declaration of Trust imposes certain
restrictions on the ownership and transferability of Preferred Shares. All
certificates representing Preferred Shares will bear a legend referring to
these restrictions. For a general description of such restrictions, see
"Description of Common Shares-- Restrictions on Ownership."
22
<PAGE>
DESCRIPTION OF DEPOSITARY SHARES
GENERAL
The Trust may issue receipts ("Depositary Receipts") for Depositary Shares,
each of which will represent a fractional interest of a share of a particular
series of Preferred Shares, as specified in the applicable Prospectus
Supplement. Preferred Shares of each series represented by Depositary Shares
will be deposited under a separate Deposit Agreement (each, a "Deposit
Agreement") among the Trust, the depositary named therein (the "Preferred
Shares Depositary") and the holders from time to time of the Depositary
Receipts. Subject to the terms of the Deposit Agreement, each owner of a
Depositary Receipt will be entitled, in proportion to the fractional interest
of a share of a particular series of Preferred Shares represented by the
Depositary Shares evidenced by such Depositary Receipt, to all rights and
preferences of the Preferred Shares represented by such Depositary Shares
(including dividend, voting, conversion, redemption and liquidation rights).
The Depositary Shares will be evidenced by Depositary Receipts issued
pursuant to the applicable Deposit Agreement. Immediately following the
issuance and delivery of the Preferred Shares by the Trust to the Preferred
Shares Depositary, the Trust will cause the Preferred Shares Depositary to
issue, on behalf of the Trust, the Depositary Receipts. Copies of the
applicable form of Deposit Agreement and Depositary Receipt may be obtained
from the Trust upon request.
DIVIDENDS AND OTHER DISTRIBUTIONS
The Preferred Shares Depositary will distribute all cash dividends or other
cash distributions received in respect of the Preferred Shares to the record
holders of Depositary Receipts evidencing the related Depositary Shares in
proportion to the number of such Depositary Receipts owned by such holders,
subject to certain obligations of holders to file proofs, certificates and
other information and to pay certain charges and expenses to the Preferred
Shares Depositary.
In the event of a distribution other than in cash, the Preferred Shares
Depositary will distribute property received by it to the record holders of
Depositary Receipts entitled thereto, subject to certain obligations of
holders to file proofs, certificates and other information and to pay certain
charges and expenses to the Preferred Shares Depositary, unless the Preferred
Shares Depositary determines that it is not feasible to make such
distribution, in which case the Preferred Shares Depositary may, with the
approval of the Trust, sell such property and distribute the net proceeds from
such sale to such holders.
WITHDRAWAL OF SHARES
Upon surrender of the Depositary Receipts at the corporate trust office of
the Preferred Shares Depositary (unless the related Depositary Shares have
previously been called for redemption), the holders thereof will be entitled
to delivery at such office, to or upon such holder's order, of the number of
whole or fractional Preferred Shares and any money or other property
represented by the Depositary Shares evidenced by such Depositary Receipts.
Holders of Depositary Receipts will be entitled to receive whole or fractional
shares of the related Preferred Shares on the basis of the proportion of
Preferred Shares represented by each Depositary Share as specified in the
applicable Prospectus Supplement, but holders of such Preferred Shares will
not thereafter be entitled to receive Depositary Shares therefor. If the
Depositary Receipts delivered by the holder evidence a number of Depositary
Shares in excess of the number of Depositary Shares representing the number of
shares of Preferred Shares to be withdrawn, the Preferred Shares Depositary
will deliver to such holder at the same time a new Depositary Receipt
evidencing such excess number of Depositary Shares. The Trust does not expect
that there will be any public market for Preferred Shares that are withdrawn
as described in this paragraph.
REDEMPTION OF DEPOSITARY SHARES
Whenever the Trust redeems Preferred Shares held by the Preferred Shares
Depositary, the Preferred Shares Depositary will redeem as of the same
redemption date the number of Depositary Shares representing the
23
<PAGE>
Preferred Shares so redeemed, provided the Trust shall have paid in full to
the Preferred Shares Depositary the redemption price of the Preferred Shares
to be redeemed plus an amount equal to any accrued and unpaid dividends
thereon to the date fixed for redemption. The redemption price per Depositary
Share will be equal to the redemption price and any other amounts per share
payable with respect to the Preferred Shares. If fewer than all the Depositary
Shares are to be redeemed, the Depositary Shares to be redeemed will be
selected pro rata (as nearly as may be practicable without creating fractional
Depositary Shares) or by any other equitable method determined by the Trust.
From and after the date fixed for redemption, all dividends in respect of
the Preferred Shares so called for redemption will cease to accrue, the
Depositary Shares so called for redemption will no longer be deemed to be
outstanding and all rights of the holders of the Depositary Receipts
evidencing the Depositary Shares so called for redemption will cease, except
the right to receive any moneys payable upon such redemption and any money or
other property to which the holders of such Depositary Receipts were entitled
upon such redemption upon surrender thereof to the Preferred Shares
Depositary.
VOTING OF THE PREFERRED SHARES
Upon receipt of notice of any meeting at which the holders of the Preferred
Shares are entitled to vote, the Preferred Shares Depositary will mail the
information contained in such notice of meeting to the record holders of the
Depositary Receipts evidencing the Depositary Shares which represent such
Preferred Shares. Each record holder of Depositary Receipts evidencing
Depositary Shares on the record date (which will be the same date as the
record date for the Preferred Shares) will be entitled to instruct the
Preferred Shares Depositary as to the exercise of the voting rights pertaining
to the amount of Preferred Shares represented by such holder's Depositary
Shares. The Preferred Shares Depositary will vote the amount of Preferred
Shares represented by such Depositary Shares in accordance with such
instructions, and the Trust will agree to take all reasonable action which may
be deemed necessary by the Preferred Shares Depositary in order to enable the
Preferred Shares Depositary to do so. The Preferred Shares Depositary will
abstain from voting the amount of Preferred Shares represented by such
Depositary Shares to the extent it does not receive specific instructions from
the holders of Depositary Receipts evidencing such Depositary Shares. The
Preferred Shares Depositary shall not be responsible for any failure to carry
out any instruction to vote, or for the manner or effect of any such vote
made, as long as any such action or non-action is in good faith and does not
result from negligence or willful misconduct of the Preferred Shares
Depositary.
LIQUIDATION PREFERENCE
In the event of the liquidation, dissolution or winding up of the Trust,
whether voluntary or involuntary, the holders of each Depositary Receipt will
be entitled to the fraction of the liquidation preference accorded each
Preferred Share represented by the Depositary Share evidenced by such
Depositary Receipt, as set forth in the applicable Prospectus Supplement.
CONVERSION OF PREFERRED SHARES
The Depositary Shares, as such, are not convertible into Common Shares or
any other securities or property of the Trust. Nevertheless, if so specified
in the applicable Prospectus Supplement relating to an offering of the
Depositary Shares, the Depositary Receipts may be surrendered by holders
thereof to the Preferred Shares Depositary with written instructions to the
Preferred Shares Depositary to instruct the Trust to cause conversion of the
Preferred Shares represented by the Depositary Shares evidenced by such
Depositary Receipts into whole shares of Common Shares, other shares of
Preferred Shares of the Trust or other shares of beneficial interest, and the
Trust has agreed that upon receipt of such instructions and any amounts
payable in respect thereof, it will cause the conversion thereof utilizing the
same procedures as those provided for delivery of Preferred Shares to effect
such conversion. If the Depositary Shares evidenced by a Depositary Receipt
are to be converted in part only, a new Depositary Receipt will be issued for
any Depositary Shares not to be converted. No fractional shares of Common
Shares will be issued upon conversion, and if such conversion will result in a
fractional share being
24
<PAGE>
issued, an amount will be paid in cash by the Trust equal to the value of the
fractional interest based upon the closing price of the Common Shares on the
last business day prior to the conversion.
AMENDMENT AND TERMINATION OF THE DEPOSIT AGREEMENT
The form of Depositary Receipt evidencing the Depositary Shares which
represent the Preferred Shares and any provision of the Deposit Agreement may
at any time be amended by agreement between the Trust and the Preferred Shares
Depositary. However, any amendment that materially and adversely alters the
rights of the holders of Depositary Receipts or that would be materially and
adversely inconsistent with the rights granted to the holders of the related
Preferred Shares will not be effective unless such amendment has been approved
by the existing holders of at least a majority of the Depositary Shares
evidenced by the Depositary Receipts then outstanding. No amendment shall
impair the right, subject to certain exceptions in the Deposit Agreement, of
any holder of Depositary Receipts to surrender any Depositary Receipt with
instructions to deliver to the holder the related Preferred Shares and all
money and other property, if any, represented thereby, except in order to
comply with law. Every holder of an outstanding Depositary Receipt at the time
any such amendment becomes effective shall be deemed, by continuing to hold
such Depositary Receipt, to consent and agree to such amendment and to be
bound by the Deposit Agreement as amended thereby.
The Deposit Agreement may be terminated by the Trust upon not less than 30
days' prior written notice to the Preferred Shares Depositary if (i) such
termination is necessary to preserve the Trust's status as a REIT or (ii) at
least two-thirds of each series of Preferred Shares affected by such
termination consents to such termination, whereupon the Preferred Shares
Depositary shall deliver or make available to each holder of Depositary
Receipts, upon surrender of the Depositary Receipts held by such holder, such
number of whole or fractional shares of Preferred Shares as are represented by
the Depositary Shares evidenced by such Depositary Receipts together with any
other property held by the Preferred Shares Depositary with respect to such
Depositary Receipt. The Trust has agreed that if the Deposit Agreement is
terminated to preserve the Trust's status as a REIT, then the Trust will use
its best efforts to list the Preferred Shares issued upon surrender of the
related Depositary Shares on a national securities exchange. In addition, the
Deposit Agreement will automatically terminate if (i) all outstanding
Depositary Shares shall have been redeemed or converted, or (ii) there shall
have been a final distribution in respect of the related Preferred Shares in
connection with any liquidation, dissolution or winding up of the Trust and
such distribution shall have been distributed to the holders of Depositary
Receipts evidencing the Depositary Shares representing such Preferred Shares.
CHARGES OF PREFERRED SHARES DEPOSITARY
The Trust will pay all transfer and other taxes and governmental charges
arising solely from the existence of the Deposit Agreement. In addition, the
Trust will pay the fees and expenses of the Preferred Shares Depositary in
connection with the performance of its duties under the Deposit Agreement.
However, holders of Depositary Receipts will pay certain other transfer and
other taxes and governmental charges as well as the fees and expenses of the
Preferred Shares Depositary for any duties requested by such holders to be
performed which are outside of those expressly provided for in the Deposit
Agreement.
RESIGNATION AND REMOVAL OF DEPOSITARY
The Preferred Shares Depositary may resign at any time by delivering to the
Trust notice of its election to do so, and the Trust may at any time remove
the Preferred Shares Depositary, any such resignation or removal to take
effect upon the appointment of a successor Preferred Shares Depositary. A
successor Preferred Shares Depositary must be appointed within 60 days after
delivery of the notice of resignation or removal and must be a bank or trust
company having its principal office in the United States and having a combined
capital and surplus of at least $50,000,000.
25
<PAGE>
MISCELLANEOUS
The Preferred Shares Depositary will forward to holders of Depositary
Receipts any reports and communications from the Trust which are received by
the Preferred Shares Depositary with respect to the related Preferred Shares.
Neither the Preferred Shares Depositary nor the Trust will be liable if it
is prevented from or delayed in, by law or any circumstances beyond its
control, performing its obligations under the Deposit Agreement. The
obligations of the Trust and the Preferred Shares Depositary under the Deposit
Agreement will be limited to performing their duties thereunder in good faith
and without negligence or willful misconduct, and the Trust and the Preferred
Shares Depositary will not be obligated to prosecute or defend any legal
proceeding in respect of any Depositary Receipts, Depositary Shares or
Preferred Shares represented thereby unless satisfactory indemnity is
furnished. The Trust and the Preferred Shares Depositary may rely on written
advice of counsel or accountants, or information provided by persons
presenting Preferred Shares represented thereby for deposit, holders of
Depositary Receipts or other persons believed in good faith to be competent to
give such information, and on documents believed in good faith to be genuine
and signed by a proper party.
In the event the Preferred Shares Depositary shall receive conflicting
claims, requests or instructions from any holders of Depositary Receipts, on
the one hand, and the Trust, on the other hand, the Preferred Shares
Depositary shall be entitled to act on such claims, requests or instructions
received from the Trust.
DESCRIPTION OF COMMON SHARES
The Trust has the authority to issue an unlimited number of common shares of
beneficial interest without par value. At June 26, 1997, the Trust had
outstanding 58,729,995 common shares of beneficial interest without par value.
The following description of the Common Shares sets forth certain general
terms and provisions of the Common Shares to which any Prospectus Supplement
may relate, including a Prospectus Supplement providing that Common Shares
will be issuable upon conversion of Debt Securities or Preferred Shares or
upon the exercise of Warrants. The statements below describing the Common
Shares are in all respects subject to and qualified in their entirety by
reference to the applicable provisions of the Trust's Declaration of Trust.
Holders of the Trust's Common Shares will be entitled to receive dividends
when, as and if declared by the Board of Trustees of the Trust, out of funds
legally available therefor. Payment and declaration of dividends on the Common
Shares and purchases of Common Shares by the Trust will be subject to certain
restrictions if the Trust fails to pay dividends on the Preferred Shares. See
"Description of Preferred Shares". Upon any liquidation, dissolution or
winding up of the Trust, holders of Common Shares will be entitled to share
equally and ratably in any assets available for distribution to them, after
payment or provision for payment of the debts and other liabilities of the
Trust and the preferential amounts owing with respect to any outstanding
Preferred Shares. The Common Shares will possess ordinary voting rights for
the election of trustees and in respect of other trust matters, each share
entitling the holder thereof to one vote. Trustees are elected in classes for
terms expiring at the third succeeding annual meeting. Holders of Common
Shares do not have cumulative voting rights in the election of trustees, which
means that holders of more than 50% of all of the Trust's Common Shares voting
for the election of trustees at any annual meeting can elect all of the
trustees to be elected at such meeting if they choose to do so and the holders
of the remaining shares cannot elect any trustees at such meeting. Approval of
the following matters requires the affirmative vote of the holders of at least
66 2/3% of all outstanding Common Shares: amendments to the Trust's
Declaration of Trust, termination of the Trust, certain mergers,
reorganizations or consolidations of the Trust or the sale, conveyance,
exchange or other disposition of more than 50% of the Trust's property, and
the removal of any trustee by the shareholders. Holders of Common Shares will
not have preemptive rights, which means they have no right to acquire any
additional Common Shares that may be issued by the Trust at a subsequent date.
The Common Shares will, when issued, be fully paid and nonassessable.
26
<PAGE>
RESTRICTIONS ON OWNERSHIP
For the Trust to qualify as a REIT under the Code, not more than 50% in
value of its outstanding shares of beneficial interest may be owned, directly
or indirectly, by five or fewer individuals (as defined in the Code) during
the last half of a taxable year, and its shares of beneficial interest must be
beneficially owned by 100 or more persons during at least 335 days of a
taxable year of 12 months (or during a proportionate part of a shorter taxable
year). The Declaration of Trust imposes certain restrictions on the ownership
and transferability of Common Shares and Preferred Shares (collectively,
"Shares"). If two-thirds (2/3) of the Trustees determine that ownership of
Shares has become, or that there is a substantial possibility it may become,
concentrated to an extent which would prevent the Trust from continuing to be
qualified as a REIT, then the Trustees may redeem (by lot or other manner
deemed equitable by the Trustees) a sufficient number of Shares to bring the
ownership of the Shares into conformity with the requirements of the Code, or
prohibit the transfer of Shares to prevent the ownership of Shares from being
concentrated to an extent which may not allow the Trust to qualify as a REIT
under the Code. The redemption price to be paid will be (i) the last reported
sale price of the applicable Shares on the last business day prior to the
redemption date on the principal national securities exchange on which such
Shares are listed, or (ii) if the applicable Shares are not so listed, the
average of the highest bid and lowest asked prices on such last business day
as reported by the National Quotation Bureau Incorporated or a similar
organization selected from time to time by the Trustees for the purpose, or
(iii) if not determinable as aforesaid, as determined in good faith by the
Trustees. From and after the date fixed for redemption by the Trustees, the
holder of any Shares so called for redemption shall cease to be entitled to
any distributions, voting rights and other benefits with respect to the Shares
called for redemption, except the right to payment of the applicable
redemption price. Under certain circumstances the proceeds of redemption might
be taxed as a dividend to the recipient.
In order to insure that the Trust remains qualified as a REIT for federal
income tax purposes, the Declaration of Trust also provides that any transfer
of Shares that would prevent the Trust from continuing to be so qualified
shall be void ab initio, and the intended transferee of such Shares shall be
deemed never to have had an interest therein. If the foregoing provision is
determined to be void or invalid by virtue of any legal decision, statute,
rule or regulation, then the transferee of such Shares shall be deemed to have
acted as agent on behalf of the Trustees in acquiring such Shares, and to hold
such Shares on behalf of the Trustees.
In addition, except as set forth below, any issuance or transfer of Shares
that would create a direct or indirect owner of more than 7.5% of the lesser
of the number or the value of the total Shares outstanding ("Excess Shares")
shall be void ab initio and the would-be transferee of such Shares shall be
deemed never to have had any interest in the Shares purportedly transferred.
The Trustees may waive such restriction unless the ownership of Excess Shares
would result in the termination of the status of the Trust as a REIT under the
Code.
Any person who could, as a result of any transfer and/or registration of
transfer on the books of the Trust of any Shares, or securities convertible
into Shares, become a direct or indirect owner of Excess Shares shall give
written notice to the Trust of the proposed transfer and any information as
may be required by the Trustees no later than the 15th day prior to any
transfer which, if consummated, would result in such ownership.
If a shareholder has knowledge that he owns, directly or indirectly,
together with certain related persons, 500,000 or more Shares (including
Shares into which convertible securities, options and warrants may be
converted or purchased pursuant thereto), within 10 days of becoming aware of
such ownership, whether or not connected with any acquisition of Shares, he
must notify the Trust in writing of such fact and must similarly notify the
Trust of any subsequent acquisition of Shares (or convertible securities,
options or warrants) by himself or related persons of which he has knowledge
within 10 days of becoming aware of such acquisition. In addition, each
shareholder shall upon demand be required to disclose to the Trust in writing
such information with respect to the direct, indirect and constructive
ownership of Shares as the Board of Trustees deems necessary to comply with
the provisions of the Code applicable to a REIT or to comply with the
requirements of any taxing authority or governmental agency.
The Registrar and Transfer Agent for the Trust's Common Shares is Bank
Boston N.A.
27
<PAGE>
DESCRIPTION OF WARRANTS
The Trust may issue Warrants for the purchase of Debt Securities, Preferred
Shares, Depositary Shares or Common Shares. Warrants may be issued
independently or together with any Offered Securities and may be attached to
or separate from such securities. Each series of Warrants will be issued under
a separate warrant agreement (each, a "Warrant Agreement") to be entered into
between the Trust and a warrant agent ("Warrant Agent"). The Warrant Agent
will act solely as an agent of the Trust in connection with the Warrants of
such series and will not assume any obligation or relationship of agency or
trust for or with any holders or beneficial owners of Warrants. The following
sets forth certain general terms and provisions of the Warrants offered
hereby. Further terms of the Warrants and the applicable Warrant Agreement
will be set forth in the applicable Prospectus Supplement.
The applicable Prospectus Supplement will describe the following terms,
where applicable, of the Warrants in respect of which this Prospectus is being
delivered: (1) the title of such Warrants; (2) the aggregate number of such
Warrants; (3) the price or prices at which such Warrants will be issued; (4)
the currencies in which the price of such Warrants may be payable; (5) the
designation, aggregate principal amount and terms of the securities
purchasable upon exercise of such Warrants; (6) the designation and terms of
the Offered Securities with which such Warrants are issued and the number of
such Warrants issued with each such security; (7) the currency or currencies,
including composite currencies, in which the principal of or any premium or
interest on the securities purchasable upon exercise of such Warrants will be
payable; (8) if applicable, the date on and after which such Warrants and the
related securities will be separately transferable; (9) the price at which and
currency or currencies, including composite currencies, in which the
securities purchasable upon exercise of such Warrants may be purchased; (10)
the date on which the right to exercise such Warrants shall commence and the
date on which such right shall expire; (11) the minimum or maximum amount of
such Warrants which may be exercised at any one time; (12) information with
respect to book-entry procedures, if any; (13) a discussion of certain Federal
income tax considerations; and (14) any other terms of such Warrants,
including terms, procedures and limitations relating to the exchange and
exercise of such Warrants.
DESCRIPTION OF RIGHTS
The Trust may issue Rights to its shareholders for the purchase of Common
Shares. Each series of Rights will be issued under a separate rights agreement
(a "Rights Agreement") to be entered into between the Trust and a bank or
trust company, as Rights agent, all as set forth in the Prospectus Supplement
relating to the particular issue of Rights. The Rights agent will act solely
as an agent of the Trust in connection with the certificates relating to the
Rights and will not assume any obligation or relationship of agency or trust
for or with any holders of Rights certificates or beneficial owners of Rights.
The Rights Agreement and the Rights certificates relating to each series of
Rights will be filed with the Commission and incorporated by reference as an
exhibit to the Registration Statement of which this Prospectus is a part at or
prior to the time of the issuance of such series of Rights.
The applicable Prospectus Supplement will describe the terms of the Rights
to be issued, including the following where applicable: (i) the date for
determining the shareholders entitled to the Rights distribution; (ii) the
aggregate number of Common Shares purchasable upon exercise of such Rights and
the exercise price; (iii) the aggregate number of Rights being issued; (iv)
the date, if any, on and after which such Rights may be transferable
separately; (v) the date on which the right to exercise such Rights shall
commence and the date on which such right shall expire; (vi) any special
United States federal income tax consequences; and (vii) any other terms of
such Rights, including terms, procedures and limitations relating to the
distribution, exchange and exercise of such Rights.
28
<PAGE>
CERTAIN FEDERAL INCOME TAX CONSIDERATIONS
TO THE TRUST OF ITS REIT ELECTION
The following summary of certain federal income tax considerations to the
Trust is based on current law, is for general information only, and is not tax
advice. The tax treatment of a holder of any of the Offered Securities will
vary depending upon the terms of the specific securities acquired by such
holder, as well as his particular situation, and this discussion does not
attempt to address any aspects of federal income taxation relating to holders
of Offered Securities. Certain federal income tax considerations relevant to
holders of the Offered Securities will be provided in the applicable
Prospectus Supplement relating thereto.
EACH INVESTOR IS ADVISED TO CONSULT THE APPLICABLE PROSPECTUS SUPPLEMENT, AS
WELL AS HIS OWN TAX ADVISOR, REGARDING THE TAX CONSEQUENCES TO HIM OF THE
ACQUISITION, OWNERSHIP AND SALE OF THE OFFERED SECURITIES, INCLUDING THE
FEDERAL, STATE, LOCAL, FOREIGN AND OTHER TAX CONSEQUENCES OF SUCH ACQUISITION,
OWNERSHIP AND SALE AND OF POTENTIAL CHANGES IN APPLICABLE TAX LAWS.
TAXATION OF THE TRUST AS A REIT
General. The Trust has elected to be taxed as a real estate investment trust
under Sections 856 through 860 of the Code, commencing with its taxable year
ended July 31, 1972. The Trust believes that, commencing with its taxable year
ended July 31, 1972, it was organized and has been operating in such a manner
as to qualify for taxation as a REIT under the Code and the Trust intends to
continue to operate in such a manner, but no assurance can be given that it
will operate in a manner so as to qualify or remain qualified.
These sections of the Code are highly technical and complex. The following
sets forth the material aspects of the sections that govern the federal income
tax treatment of a REIT. This summary is qualified in its entirety by the
applicable Code provisions, rules and regulations promulgated thereunder, and
administrative and judicial interpretations thereof.
In the opinion of Altheimer & Gray, commencing with the Trust's taxable year
which ended July 31, 1972, the Trust has been organized in conformity with the
requirements for qualification as a REIT, and its method of operation enabled
it to meet the requirements for qualification and taxation as a REIT under the
Code. It must be emphasized that this opinion is based on various assumptions
and is conditioned upon certain representations made by the Trust as to
factual matters. In addition, this opinion is based upon the factual
representations of the Trust concerning its business and properties as set
forth in this Prospectus. Moreover, such qualification and taxation as a REIT
depends upon the Trust's ability to meet, through actual annual operating
results, distribution levels, diversity of stock ownership, and the various
qualification tests imposed under the Code discussed below, the results of
which have not been and will not be reviewed by Altheimer & Gray. Accordingly,
no assurance can be given that the actual results of the Trust's operation in
any particular taxable year will satisfy such requirements. See "--Failure to
Qualify."
If the Trust qualifies for taxation as a REIT, it generally will not be
subject to federal corporate income taxes on its net income that is currently
distributed to shareholders. This treatment substantially eliminates the
"double taxation" (at both the corporate and shareholder levels) that
generally results from investment in a regular corporation. However, the Trust
will be subject to federal income tax as follows: First, the Trust will be
taxed at regular corporate rates on any undistributed real estate investment
trust taxable income, including undistributed net capital gains. Second, under
certain circumstances, the Trust may be subject to the "alternative minimum
tax" on its items of tax preference. Third, if the Trust has (i) net income
from the sale or other disposition of "foreclosure property" which is held
primarily for sale to customers in the ordinary course of business or (ii)
other non-qualifying income from foreclosure property, it will be subject to
tax at the highest corporate rate on such income. Fourth, if the Trust has net
income from prohibited transactions (which are, in general, certain sales or
other dispositions of property held primarily for sale to customers in the
ordinary course of business other than foreclosure property), such income will
be subject to a 100% tax. Fifth, if the Trust should
29
<PAGE>
fail to satisfy the 75% gross income test or the 95% gross income test (as
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 an amount equal to (a) the gross income attributable to the greater of
the amount by which the Trust fails the 75% or 95% test, multiplied by (b) a
fraction intended to reflect the Trust's profitability. Sixth, if the Trust
should fail to distribute during each calendar 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 Trust would be subject to a 4% excise tax on the excess of
such required distribution over the amounts actually distributed. Seventh, if
the Trust acquires any asset from a C corporation (i.e., generally a
corporation subject to full corporate-level tax) in certain transactions in
which the basis of the asset in the hands of the Trust is determined by
reference to the basis of the asset (or any other property) in the hands of
the C corporation, and the Trust recognizes gain on the disposition of such
asset during the 10-year period (the "Recognition Period") beginning on the
date on which such asset was acquired by the Trust, then, to the extent of the
excess, if any, of the fair market value over the adjusted basis of any such
asset as of the beginning of the Recognition Period (the "Built-in Gain"),
such gain will be subject to tax at the highest corporate rate on ordinary
income.
Requirements for Qualification. The Code defines a REIT as a corporation,
trust or association (1) which is managed by one or more trustees or
directors, (2) the beneficial ownership of which is evidenced by transferable
shares, or by transferable certificates of beneficial interest, (3) which
would be taxable as a domestic corporation, but for Sections 856 through 859
of the Code, (4) which is neither a financial institution nor an insurance
company subject to certain provisions of the Code, (5) the beneficial
ownership of which is held by 100 or more persons, (6) during the last half of
each taxable year, not more than 50% in value of the outstanding stock of
which is owned, directly or constructively, by five or fewer individuals (as
defined in the Code) and (7) which meets certain other tests, described below,
regarding the nature of its income and assets. The Code provides that
conditions (1) to (4) must be met during the entire taxable year and that
condition (5) must be met during at least 335 days of a taxable year of 12
months, or during a proportionate part of a taxable year of less than 12
months. Conditions (5) and (6) will not apply until after the first taxable
year for which an election is made to be taxed as a REIT.
The Trust has satisfied condition (5) and believes that it has issued
sufficient shares to allow it to satisfy condition (6). In addition, the
Trust's Declaration of Trust provides for restrictions regarding ownership and
transfer of the Trust's shares of beneficial interest, which restrictions are
intended to assist the Trust in continuing to satisfy the share ownership
requirements described in (5) and (6) above. The ownership and transfer
restrictions pertaining to a particular series of Preferred Shares are
described in "Description of Preferred Shares--Restrictions on Ownership."
The Trust owns and operates a number of properties through subsidiaries.
Code Section 856(i) provides that a corporation which is a "qualified REIT
subsidiary" shall not be treated as a separate corporation, and all assets,
liabilities, and items of income, deduction, and credit of a "qualified REIT
subsidiary" shall be treated as assets, liabilities and such items (as the
case may be) of the REIT. Thus, in applying the requirements described herein,
the Trust'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 Trust.
Income Tests. In order to maintain qualification as a REIT, the Trust
annually must satisfy three gross income requirements. First, at least 75% of
the Trust's gross income (excluding gross income from prohibited transactions)
for each taxable year must be derived directly or indirectly from investments
relating to real property or mortgages on real property (including "rents from
real property" and, in certain circumstances, interest) or from certain types
of temporary investments. Second, at least 95% of the Trust's gross income
(excluding gross income from prohibited transactions) for each taxable year
must be derived from such real property investments, 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
on the sale or other disposition of real property held for less than four
30
<PAGE>
years (apart from involuntary conversions and sales of foreclosure property)
must represent less than 30% of the Trust's gross income (including gross
income from prohibited transactions) for each taxable year.
Rents received by the Trust 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 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 real estate investment trust, or an
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 such personal property will not qualify as "rents from
real property." Finally, for rents received to qualify as "rents from real
property," the REIT generally must not operate or manage the property or
furnish or render services to the tenants of such property, other than through
an independent contractor from whom the REIT derives no revenue; provided,
however, the Trust may directly perform certain services that are "usually or
customarily rendered" in connection with the rental of space for occupancy
only and are not otherwise considered "rendered to the occupant" of the
property. The Trust does not and will not charge rent for any property that is
based in whole or in part on the income or profits of any person (except by
reason of being based on a percentage of receipts of sales, as described
above), the Trust does not and will not rent any property to a Related Party
Tenant, and the Trust does not and will not derive rental income attributable
to personal property (other than personal property leased in connection with
the lease of real property, the amount of which is less than 15% of the total
rent received under the lease). The Trust directly performs services under
certain of its leases.
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. However, an amount
received or accrued generally will not be excluded from the term "interest"
solely by reason of being based on a fixed percentage or percentages of
receipts or sales.
If the Trust 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 such
year if it is entitled to relief under certain provisions of the Code. These
relief provisions will generally be available if the Trust's failure to meet
such tests was due to reasonable cause and not due to willful neglect, the
Trust attaches a schedule of the sources of its income to its federal income
tax return, and any incorrect information on the schedule was not due to fraud
with intent to evade tax. It is not possible, however, to state whether in all
circumstances the Trust would be entitled to the benefit of these relief
provisions. As discussed above under "--General," even if these relief
provisions apply, a tax would be imposed with respect to the excess net
income.
Asset Tests. The Trust, at the close of each quarter of its taxable year,
must also satisfy three tests relating to the nature of its assets. First, at
least 75% of the value of the Trust's total assets must be represented by real
estate assets (including (i) assets held by the Trust's qualified REIT
subsidiaries and the Trust's allocable share of real estate assets held by
partnerships in which the Trust owns an interest and (ii) stock or debt
instruments held for not more than one year purchased with the proceeds of a
stock offering or long-term (at least five years) debt offering of the Trust),
cash, cash items and government securities. Second, not more than 25% of the
value of the Trust'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 Trust may
not exceed 5% of the value of the Trust's total assets and the Trust may not
own more than 10% of any one issuer's outstanding voting securities.
The Trust currently has numerous wholly-owned subsidiaries. As set forth
above, the ownership of more than 10% of the voting securities of any one
issuer by a REIT is prohibited by the asset tests. However, if the Trust's
subsidiaries are "qualified REIT subsidiaries" as defined in the Code, such
subsidiaries will not be
31
<PAGE>
treated as separate corporations for federal income tax purposes. Thus, the
Trust's ownership of stock of a "qualified REIT subsidiary" will not cause the
Trust to fail the asset tests.
Annual Distribution Requirements. The Trust, in order to qualify as a REIT,
is required to distribute dividends (other than capital gain dividends) to its
shareholders in an amount at least equal to (A) the sum of (i) 95% of the
Trust's "REIT taxable income" (computed without regard to the dividends paid
deduction and the Trust's net capital gain) and (ii) 95% of the net income
(after tax), if any, from foreclosure property, minus (B) the sum of certain
items of non-cash income. In addition, if the Trust disposes of any asset
during a Recognition Period, the Trust will be required, pursuant to IRS
regulations which have not yet been promulgated, to distribute at least 95% of
the Built-in Gain (after tax), if any, recognized on the disposition of such
asset. Such distributions must be paid in the taxable year to which they
relate, or in the following taxable year if declared before the Trust timely
files its tax return for such year and if paid on or before the first regular
dividend payment after such declaration. To the extent that the Trust does not
distribute all of its net capital gain or distributes at least 95%, but less
than 100%, of its "real estate investment trust taxable income," as adjusted,
it will be subject to tax thereon at regular ordinary and capital gain
corporate tax rates. Furthermore, if the Trust should fail to distribute
during each calendar year at least the sum of (i) 85% of its REIT ordinary
income for such year, (ii) 95% of its REIT capital gain income for such year,
and (iii) any undistributed taxable income from prior periods, the Trust would
be subject to a 4% excise tax on the excess of such required distribution over
the amounts actually distributed. The Trust intends to make timely
distributions sufficient to satisfy this annual distribution requirement.
It is possible that the Trust, from time to time, may not have sufficient
cash or other liquid assets to meet the above distribution requirements due to
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 Trust. In the event that
such timing differences occur, in order to meet the 95% distribution
requirement, the Trust may find it necessary to arrange for short-term, or
possibly long-term borrowings or to pay dividends in the form of taxable stock
dividends.
Under certain circumstances, the Trust 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 Trust's
deduction for dividends paid for the earlier year. Thus, the Trust may be able
to avoid being taxed on amounts distributed as deficiency dividends; however,
the Trust will be required to pay interest based upon the amount of any
deduction taken for deficiency dividends.
FAILURE TO QUALIFY
If the Trust fails to qualify for taxation as a REIT in any taxable year,
and the relief provisions do not apply, the Trust will be subject to tax
(including any applicable alternative minimum tax) on its taxable income at
regular corporate rates. Distributions to shareholders in any year in which
the Trust fails to qualify will not be deductible by the Trust nor will they
be required to be made. In such event, to the extent of current and
accumulated earnings and profits, all distributions to shareholders will be
taxable as ordinary income and, subject to certain limitations of the Code,
corporate distributees may be eligible for the dividends received deduction.
Unless entitled to relief under specific statutory provisions, the Trust will
also be disqualified from taxation as a REIT for the four taxable years
following the year during which qualification was lost. It is not possible to
state whether in all circumstances the Trust would be entitled to such
statutory relief.
32
<PAGE>
PLAN OF DISTRIBUTION
The Trust may sell the Offered Securities to one or more underwriters for
public offering and sale by them or may sell the Offered Securities to
investors directly or through agents. Any such underwriter or agent involved
in the offer and sale of the Offered Securities will be named in the
applicable Prospectus Supplement.
Underwriters may offer and sell the Offered Securities at a fixed price or
prices, which may be changed, at prices related to the prevailing market
prices at the time of sale or at negotiated prices. The Trust also may, from
time to time, authorize underwriters acting as the Trust's agents to offer and
sell the Offered Securities upon the terms and conditions as are set forth in
the applicable Prospectus Supplement. In connection with the sale of Offered
Securities, underwriters may be deemed to have received compensation from the
Trust in the form of underwriting discounts or commissions and may also
receive commissions from purchasers of Offered Securities for whom they may
act as agent. Underwriters may sell Offered Securities to or through dealers,
and such dealers may receive compensation in the form of discounts,
concessions or commissions from the underwriters and/or commissions from the
purchasers for whom they may act as agent.
Any underwriting compensation paid by the Trust to underwriters or agents in
connection with the offering of Offered Securities, and any discounts,
concessions or commissions allowed by underwriters to participating dealers,
will be set forth in the applicable Prospectus Supplement. Underwriters,
dealers and agents participating in the distribution of the Offered Securities
may be deemed to be underwriters, and any discounts and commissions received
by them and any profit realized by them on resale of the Offered Securities
may be deemed to be underwriting discounts and commissions, under the
Securities Act. Underwriters, dealers and agents may be entitled, under
agreements entered into with the Trust, to indemnification against and
contribution toward certain civil liabilities, including liabilities under the
Securities Act.
If so indicated in a Prospectus Supplement, the Trust will authorize agents,
underwriters or dealers to solicit offers by certain institutional investors
to purchase Offered Securities of the series to which such Prospectus
Supplement relates providing for payment and delivery on a future date
specified in such Prospectus Supplement. There may be limitations on the
minimum amount which may be purchased by any such institutional investor or on
the portion of the aggregate principal amount of the particular Offered
Securities which may be sold pursuant to such arrangements. Institutional
investors to which such offers may be made, when authorized, include
commercial and savings banks, insurance companies, pension funds, investment
companies, educational and charitable institutions and such other institutions
as may be approved by the Trust. The obligations of any such purchasers
pursuant to such delayed delivery and payment arrangements will not be subject
to any conditions except that (i) the purchase by an institution of the
particular Offered Securities shall not at the time of delivery be prohibited
under the laws of any jurisdiction in the United States to which such
institution is subject, and (ii) if the particular Offered Securities are
being sold to underwriters, the Trust shall have sold to such underwriters the
total principal amount of such Offered Securities or number of Warrants less
the principal amount or number thereof, as the case may be, covered by such
arrangements. Underwriters will not have any responsibility in respect of the
validity of such arrangements or the performance of the Trust or such
institutional investors thereunder.
Certain of the underwriters and their affiliates may be customers of, engage
in transactions with and perform services for the Trust and its subsidiaries
in the ordinary course of business.
33
<PAGE>
ERISA MATTERS
The Trust may be considered a "party in interest" within the meaning of the
Employee Retirement Income Security Act of 1974, as amended ("ERISA"), and a
"disqualified person" under corresponding provisions of the Code with respect
to certain employee benefit plans. Certain transactions between an employee
benefit plan and a party in interest or disqualified person may result in
"prohibited transactions" within the meaning of ERISA and the Code, unless
such transactions are effected pursuant to an applicable exemption. Any
employee benefit plan or other entity subject to such provisions of ERISA or
the Code proposing to invest in the Offered Securities should consult with its
legal counsel.
LEGAL OPINIONS
Certain legal matters will be passed upon for the Trust by Steven F. Siegel,
General Counsel and Secretary of the Trust, and by Robinson Silverman Pearce
Aronsohn & Berman LLP, New York, New York. The legal authorization and
issuance of the Offered Securities, as well as certain other legal matters
concerning Massachusetts law, will be passed upon for the Trust by Goodwin,
Procter & Hoar LLP, Boston, Massachusetts. Altheimer & Gray, Chicago,
Illinois, has acted as counsel to the Trust on tax and certain other matters.
Norman Gold, a member of Altheimer & Gray, is a Trustee. Mr. Gold beneficially
owns 10,899 Common Shares.
Certain legal matters will be passed upon for the underwriters, dealers or
agents by Brown & Wood LLP, New York, New York.
EXPERTS
The consolidated balance sheets as of July 31, 1996 and 1995 and the
consolidated statements of income, changes in shareholders' equity and cash
flows and the consolidated financial statement schedules of the Trust for each
of the three years in the period ended July 31, 1996, which appear in the
Annual Report on the Form 10-K incorporated by reference in this Prospectus,
have been incorporated herein in reliance on the report of Coopers & Lybrand
L.L.P., independent accountants, given on the authority of that firm as
experts in accounting and auditing.
The historical summary of combined revenues and certain operating expenses
of certain properties acquired by the Trust for the year ended October 31,
1995 appearing in the Trust's Current Report on Form 8-K dated August 19,
1996, the historical summary of combined revenues and certain operating
expenses of certain properties acquired by the Trust for the year ended July
31, 1996 appearing in the Trust's Current Reports on Form 8-K dated November
4, 1996 and January 6, 1997, and the historical summary of combined revenues
and certain operating expenses of certain properties acquired by the Trust for
the year ended October 31, 1996 appearing in the Trust's Current Reports on
Form 8-K dated June 18, 1997 and June 30, 1997 have been audited by Eichler
Bergsman & Co., LLP, independent accountants, as set forth in their reports
thereon, included therein, respectively, and incorporated herein by reference.
Such historical summary of combined revenues and certain operating expenses
are incorporated herein by reference in reliance upon such reports given on
the authority of that firm as experts in accounting and auditing.
34
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
NO DEALER, SALESMAN OR OTHER INDIVIDUAL HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR MAKE ANY REPRESENTATION OTHER THAN THOSE CONTAINED OR
INCORPORATED BY REFERENCE IN THIS PROSPECTUS SUPPLEMENT AND THE PROSPECTUS IN
CONNECTION WITH THE OFFERING MADE BY THIS PROSPECTUS SUPPLEMENT AND THE
PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT
BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE TRUST OR THE UNDERWRITER.
NEITHER THE DELIVERY OF THIS PROSPECTUS SUPPLEMENT OR THE PROSPECTUS NOR ANY
SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCE, CREATE AN IMPLICATION THAT
THERE HAS BEEN NO CHANGE IN THE FACTS SET FORTH IN THIS PROSPECTUS SUPPLEMENT
OR IN THE PROSPECTUS OR IN THE AFFAIRS OF THE TRUST SINCE THE DATE HEREOF. THIS
PROSPECTUS SUPPLEMENT AND THE PROSPECTUS DO NOT CONSTITUTE AN OFFER OR
SOLICITATION BY ANYONE IN ANY STATE 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 OR TO ANYONE TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER OR
SOLICITATION.
----------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
PROSPECTUS SUPPLEMENT
The Trust................................................................. S-3
The Offering.............................................................. S-4
Recent Developments....................................................... S-6
Use of Proceeds........................................................... S-6
Capitalization............................................................ S-7
Selected Financial and Operating Information.............................. S-8
Business.................................................................. S-9
Description of Series A SUPeR Preferred Shares and Depositary Shares...... S-11
Certain Federal Income Tax Considerations................................. S-15
Underwriting.............................................................. S-18
PROSPECTUS
Available Information..................................................... 2
Incorporation of Certain Documents by Reference........................... 2
The Trust................................................................. 3
Ratios of Earnings to Fixed Charges....................................... 3
Use of Proceeds........................................................... 4
Description of Debt Securities............................................ 4
Description of Preferred Shares........................................... 18
Description of Depositary Shares.......................................... 23
Description of Common Shares.............................................. 26
Description of Warrants................................................... 28
Description of Rights..................................................... 28
Certain Federal Income Tax Considerations to the Trust of its REIT
Election................................................................. 29
Plan of Distribution...................................................... 33
ERISA Matters............................................................. 34
Legal Opinions............................................................ 34
Experts................................................................... 34
</TABLE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
1,500,000 SHARES
NEW PLAN
REALTY TRUST
DEPOSITARY SHARES
EACH
REPRESENTING 1/10 OF A 7.80% SERIES A CUMULATIVE STEP-UP PREMIUM RATE SM
PREFERRED SHARE ("SUPER SM")
(PAR VALUE $1.00 PER SHARE) (LIQUIDATION PREFERENCE EQUIVALENT TO $50.00 PER
DEPOSITARY SHARE)
-----------------
PROSPECTUS SUPPLEMENT
-----------------
MERRILL LYNCH & CO.
JUNE 30, 1997
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
