<PAGE>
PROSPECTUS SUPPLEMENT TO PROSPECTUS DATED SEPTEMBER 20, 1994
$150,000,000
UNITED DOMINION LOGO
8 1/2% DEBENTURES DUE SEPTEMBER 15, 2024
Interest on the Debentures is payable on March 15 and September 15 of each
year, commencing March 15, 1995. The Debentures are unsecured obligations of the
Trust and will rank equally with all unsecured and unsubordinated indebtedness
of the Trust. The indenture pursuant to which the Debentures will be issued
contains certain restrictions on the Trust's ability to incur additional
indebtedness. See "Description of Debt Securities" in the Prospectus
accompanying this Prospectus Supplement.
The Debentures may not be redeemed at the option of the Trust prior to
maturity. The registered holder of each Debenture may elect to have that
Debenture, or any portion of the principal amount thereof that is a multiple of
$1,000, redeemed on September 15, 2004 at 100% of the principal amount together
with accrued interest to September 15, 2004. Such election, which is irrevocable
when made, must be made within the period commencing on July 15, 2004 and ending
at the close of business on August 15, 2004.
The Debentures will be represented by a single Global Security (as defined
herein) registered in the name of The Depository Trust Company ("DTC") or its
nominee. Interests in the Global Security will be shown on, and transfers
thereof will be effected only through, records maintained by DTC and its
participants. Except as described in "Description of Debentures -- Book-Entry
System," Debentures in definitive form will not be issued. The Debentures will
trade in DTC's Same-Day Funds Settlement System until maturity, and secondary
market trading activity in the Debentures will therefore settle in immediately
available funds. All payments of principal and interest will be made by the
Trust in immediately available funds. See "Description of Debentures -- Same-Day
Settlement and Payment."
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS SUPPLEMENT
OR THE PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
THE ATTORNEY GENERAL OF THE STATE OF NEW YORK HAS NOT PASSED ON OR ENDORSED THE
MERITS OF THIS OFFERING. ANY REPRESENTATION TO THE CONTRARY IS UNLAWFUL.
<TABLE>
<CAPTION>
INITIAL PUBLIC UNDERWRITING PROCEEDS TO
OFFERING PRICE(1) DISCOUNT (2) TRUST (1)(3)
<S> <C> <C> <C>
Per Debenture....................... 99.689% 0.650% 99.039%
Total............................... $149,533,500 $975,000 $148,558,500
</TABLE>
(1) Plus accrued interest, if any, from September 27, 1994.
(2) The Trust has agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act of 1933, as
amended. See "Underwriting."
(3) Before deducting estimated expenses of $262,000 payable by the Trust.
The Debentures are offered by the Underwriters, as specified herein,
subject to receipt and acceptance by them and subject to their right to reject
any order in whole or in part. It is expected that delivery of the Debentures
will be made through the facilities of DTC in New York, New York on or about
September 27, 1994, against payment therefor in immediately available funds.
GOLDMAN, SACHS & CO.
MERRILL LYNCH & CO.
NATIONSBANC CAPITAL MARKETS, INC.
The date of this Prospectus Supplement is September 20, 1994.
<PAGE>
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE DEBENTURES AT A
LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH
STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
THE TRUST
United Dominion Realty Trust, Inc. (the "Trust"), founded in 1972, is a
self-administered equity real estate investment trust that owns and operates
apartments in the Mid-Atlantic and Southeast from Delaware to Florida. It is a
fully integrated real estate company that acquires, improves, operates, manages
and selectively sells properties with the primary goal of maximizing its funds
from operations, while increasing the value of its real estate through capital
improvements and intensive management.
The Trust's 129 properties include 111 apartment communities containing
26,943 units, and 14 shopping centers, two warehouse/industrial properties and
two office properties containing a total of approximately two million square
feet of rentable space. Most of the Trust's properties are located in the
Southeast. Management believes that the Trust has benefitted from the population
and job growth within this region and that this region will continue to provide
attractive demographic and economic patterns conducive to real estate investment
in the 1990's.
The Trust's investment policy has been to acquire primarily apartment
properties presenting the opportunity for higher occupancy, increased rents and
enhanced property values through a program of renovation, refurbishment and
intensive property management. Beginning in 1991, the Trust embarked on a major
expansion of its apartment portfolio involving the acquisition of apartment
properties having high occupancy levels and not requiring substantial renovation
and entry into new geographic markets in contiguous states, most notably
Florida. The properties have been acquired generally at significant discounts
from replacement cost and at attractive current yields. Since the beginning of
1991, the Trust has acquired 74 apartment properties containing 18,331 units at
a total cost of approximately $563 million.
The Trust, a Virginia corporation, has its principal office at 10 South 6th
Street, Suite 203, Richmond, Virginia 23219-3802, and its telephone number is
(804) 780-2691. Unless the context indicates otherwise, the term "Trust," as
used herein, includes the Trust and its subsidiaries, all of which are
wholly-owned.
RECENT DEVELOPMENTS
1994 ACQUISITIONS
Since January 1, 1994, the Trust has acquired 38 apartment communities
containing 9,094 apartment units at a total cost of $313 million, including
closing costs. These acquisitions include 24 properties of a 25-property
portfolio that the Trust acquired subsequent to June 30, 1994 for $162.5
million, including closing costs, from entities affiliated with Clover Financial
Corporation. The remaining portfolio property, located in South Carolina, is
expected to be purchased on or before November 1, 1994.
The Trust also has seven other apartment communities containing 1,995 units
under contract in five separate transactions at an aggregate purchase price of
approximately $83 million, excluding closing costs, which includes tax-exempt
housing bond financing in the aggregate amount of approximately $18 million that
the Trust will assume in the transactions. These properties are located in
Florida (1,300 units) and Tennessee (695 units). There is no assurance that any
of these proposed acquisitions will be consummated.
FINANCINGS
Since January 1, 1994, the Trust has completed (i) a private placement of
$12.4 million of tax-exempt housing bonds, (ii) public offerings of an aggregate
of $11.2 million of tax-exempt housing bonds, (iii) a public offering of $75
million of 7 1/4% Notes due April 1, 1999, and (iv) a public offering of
8,479,400 shares of Common Stock at $14.25 per share.
The Trust anticipates that it will continue to finance its acquisition
program using a combination of debt, equity and convertible securities.
S-2
<PAGE>
USE OF PROCEEDS
The net proceeds to the Trust from the sale of the Debentures are estimated
at $148.3 million. The Trust presently intends to use approximately $95.2
million of the net proceeds to repay notes payable, representing amounts
outstanding under the Trust's bank lines of credit, having a current weighted
average interest rate of 5.43%, which are payable on demand. This debt has been
incurred subsequent to June 30, 1994 primarily for the acquisition of apartment
properties. The remaining net proceeds will be applied to the acquisition of
additional properties as described above in "Recent Developments." Pending such
use, the Trust will invest the net proceeds in short-term money market
instruments.
CAPITALIZATION
The following table sets forth the capitalization of the Trust at June 30,
1994, and as adjusted to give effect to an increase of approximately $43.1
million in mortgage notes payable resulting from mortgage assumptions in
connection with property acquisitions since June 30, 1994, an increase of
approximately $95.2 million in notes payable since June 30, 1994, the issuance
and sale of 479,400 shares of Common Stock since June 30, 1994, and the issuance
and sale of the Debentures offered hereby and the application of a portion of
the proceeds thereof. The table should be read in conjunction with the Trust's
financial statements and related notes incorporated by reference herein.
<TABLE>
<CAPTION>
JUNE 30, 1994
HISTORICAL AS ADJUSTED
<S> <C> <C>
(IN THOUSANDS)
Debt:
Mortgage notes payable.............................. $ 95,834 $ 138,936
8 1/2% Debentures due September 15, 2024............ -- 150,000
7 1/4% Notes due April 1, 1999...................... 75,000 75,000
Other notes payable................................. 127,761 127,761
Total debt....................................... $ 298,595 $ 491,697
Shareholders' Equity:
Preferred Stock, no par value; 25,000,000 shares
authorized, no shares outstanding................ -- --
Common Stock, $1 par value;
100,000,000 shares authorized,
49,723,912 shares issued and outstanding
(50,203,312 as adjusted)......................... 49,724 50,203
Additional paid-in capital.......................... 403,109 409,100
Notes receivable from officer shareholders.......... (4,090) (4,090)
Distributions in excess of net income............... (90,277) (90,277)
Total shareholders' equity....................... $ 358,466 $ 364,936
Total capitalization........................... $ 657,061 $ 856,633
</TABLE>
S-3
<PAGE>
SELECTED FINANCIAL DATA
The following table sets forth selected financial data for the Trust and
should be read in conjunction with the financial statements and pro forma
financial statements of the Trust and related notes incorporated herein by
reference.
<TABLE>
<CAPTION>
SIX
MONTHS
ENDED
YEAR ENDED DECEMBER 31, JUNE 30,
PRO
HISTORICAL FORMA HISTORICAL
1989 1990 1991 1992 1993 1993(1) 1993
<S> <C> <C> <C> <C> <C> <C> <C>
(IN THOUSANDS, EXCEPT RATIO INFORMATION AND PER SHARE DATA)
OPERATING DATA
Income:
Income from property
operations:
Rental income............. $ 37,173 $ 44,042 $ 51,250 $ 63,202 $ 89,084 $137,312 $ 41,918
Property operating
expenses................ 14,214 17,969 20,956 26,503 37,859 60,759 17,213
Depreciation of real
estate owned............ 8,762 10,464 12,845 15,732 19,764 27,610 9,516
14,197 15,609 17,449 20,967 31,461 48,943 15,189
Interest and other income... 1,552 273 79 1,402 708 270 112
15,749 15,882 17,528 22,369 32,169 49,213 15,301
Expenses:
Interest.................... 9,934 9,435 11,859 11,697 16,938 26,923 8,387
General and
administrative............ 1,475 1,718 1,872 2,231 3,349 3,349 1,728
Other depreciation and
amortization.............. 201 173 219 300 596 596 258
11,610 11,326 13,950 14,228 20,883 30,868 10,373
Income before gains (losses)
on investments and
extraordinary item.......... 4,139 4,556 3,578 8,141 11,286 18,345 4,928
Gains (losses) on sales of
investments................. 1,433 417 26 -- (89) (89) (89)
Provision for possible
investment losses........... -- -- -- (1,564) -- -- --
Income before extraordinary
item........................ 5,572 4,973 3,604 6,577 11,197 18,256 4,839
Extraordinary item -- early
extinguishment of debt...... (98) (103) (35) (242) -- -- --
Net income.................... $ 5,474 $ 4,870 $ 3,569 $ 6,335 $ 11,197 $ 18,256 $ 4,839
Net income per share:
Before extraordinary item... $ .29 $ .21 $ .14 $ .19 $ .29 $ .39 $ .14
Extraordinary item.......... (.01) -- -- (.01) -- -- --
$ .28 $ .21 $ .14 $ .18 $ .29 $ .39 $ .14
Weighted average number of
shares outstanding.......... 19,329 23,238 24,642 34,604 38,202 46,681 35,328
Distributions declared........ $ 12,156 $ 14,402 $ 15,872 $ 23,271 $ 27,988 $ 33,924 $ 13,437
Distributions declared per
share....................... .61 .62 .63 .66 .70 .70 .35
OTHER DATA
Funds from operations(2)...... $ 12,865 $ 15,231 $ 17,158 $ 24,185 $ 31,658 $ 46,563 $ 14,705
Ratio of earnings to fixed
charges(3)(4)............... 1.45x 1.43x 1.27x 1.54x 1.64x 1.67x 1.56x
Ratio of funds from operations
to fixed charges(2)(4)...... 2.08x 2.43x 2.32x 3.00x 2.80x 2.69x 2.68x
<CAPTION>
SIX MONTHS
ENDED
JUNE 30,
PRO
HISTORICAL FORMA
1994 1994(1)
<S> <C> <C>
OPERATING DATA
Income:
Income from property
operations:
Rental income............. $ 56,379 $ 73,210
Property operating
expenses................ 23,823 32,046
Depreciation of real
estate owned............ 12,020 14,529
20,536 26,635
Interest and other income... 386 297
20,922 26,932
Expenses:
Interest.................... 10,474 13,998
General and
administrative............ 2,595 2,595
Other depreciation and
amortization.............. 371 371
13,440 16,964
Income before gains (losses)
on investments and
extraordinary item.......... 7,482 9,968
Gains (losses) on sales of
investments................. -- --
Provision for possible
investment losses........... -- --
Income before extraordinary
item........................ 7,482 9,968
Extraordinary item -- early
extinguishment of debt...... (89) (89)
Net income.................... $ 7,393 $ 9,879
Net income per share:
Before extraordinary item... $ .18 $ .20
Extraordinary item.......... -- --
$ .18 $ .20
Weighted average number of
shares outstanding.......... 42,100 49,717
Distributions declared........ $ 17,878 $ 19,532
Distributions declared per
share....................... .39 .39
OTHER DATA
Funds from operations(2)...... $ 20,330 $ 25,324
Ratio of earnings to fixed
charges(3)(4)............... 1.70x 1.70x
Ratio of funds from operations
to fixed charges(2)(4)...... 2.88x 2.77x
</TABLE>
<TABLE>
<CAPTION>
JUNE 30,
DECEMBER 31, 1994
1989 1990 1991 1992 1993 HISTORICAL
<S> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA
Real estate owned, at cost.... $251,051 $294,205 $361,503 $454,115 $582,213 $683,645
Total assets.................. 231,537 259,532 314,473 390,365 505,840 682,427
Mortgage and other notes
payable..................... 80,896 117,703 168,346 181,121 229,420 298,595
Convertible subordinated
debentures.................. 15,808 14,987 -- -- -- --
Shareholders' equity.......... 127,764 118,154 136,152 197,677 259,963 358,466
<CAPTION>
JUNE 30, 1994
PRO
FORMA(1)
<S> <C>
BALANCE SHEET DATA
Real estate owned, at cost.... $848,452
Total assets.................. 760,976
Mortgage and other notes
payable..................... 369,735
Convertible subordinated
debentures.................. --
Shareholders' equity.......... 364,936
</TABLE>
S-4
<PAGE>
(1) Pro forma operating data give effect to (i) the sale of 8,479,400 shares of
Common Stock at $14.25 per share, (ii) the acquisition of 30 apartment
communities purchased in 1994 previously reported on Forms 8-K dated April
15, May 17 and May 26, 1994, and (iii) the acquisition of 11 apartment
communities purchased in 1993 previously reported on Form 8-K dated December
31, 1993, as if the transactions had occurred at the beginning of each pro
forma period presented. Pro forma balance sheet data give effect as of June
30, 1994, to (i) the July 1994 sale of 479,400 shares of Common Stock at
$14.25 per share, and (ii) the acquisition of 25 apartment properties
subsequent to June 30, 1994.
(2) Funds from operations is defined as income before gains (losses) on
investments and extraordinary items adjusted for certain non-cash items,
primarily real estate depreciation. The Trust considers funds from
operations in evaluating property acquisitions and its operating
performance, and believes that funds from operations should be considered
along with, but not as an alternative to, net income and cash flows as a
measure of the Trust's operating performance and liquidity. Funds from
operations does not represent cash generated from operating activities in
accordance with generally accepted accounting principles and is not
necessarily indicative of cash available to fund cash needs.
(3) For purposes of computing this ratio, earnings consist of income before
extraordinary item plus fixed charges other than capitalized interest.
(4) Fixed charges consist of interest on borrowed funds (including capitalized
interest) and amortization of debt discount and expense.
S-5
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND OPERATIONS
RESULTS OF OPERATIONS
Funds from operations is defined as income before gains (losses) on
investments and extraordinary items adjusted for certain non-cash items,
primarily real estate depreciation. The Trust considers funds from operations in
evaluating property acquisitions and its operating performance, and believes
that funds from operations should be considered along with, but not as an
alternative to, net income and cash flows as a measure of the Trust's operating
performance and liquidity. Funds from operations does not represent cash
generated from operating activities in accordance with generally accepted
accounting principles and is not necessarily indicative of cash available to
fund cash needs.
SIX MONTHS ENDED JUNE 30, 1994
For the first six months of 1994, the Trust reported increases over the
comparable 1993 period in rental income, income from property operations, net
income and funds from operations. The majority of the reported increases were
attributable to the Trust's apartment acquisitions since the beginning of 1993
and, to a lesser extent, stronger rental demand throughout the Trust's market
region. The performance of the Trust's mature group of apartments (13,832 units
comprising 57 communities) contributed to the increases with economic occupancy
at 93.4% for the first six months of 1994 compared to 91.5% for the first six
months last year. The Trust considers an apartment community to be mature after
it has been owned for a full calendar (fiscal) year. Average rents at these
properties grew by 3.0% and operating expenses increased approximately 5.4%,
increasing the operating expense ratio (the ratio of rental operating expenses
to rental income) 0.1% to 44.4% for the first six months of 1994. Operating
expenses were abnormally high during the first quarter of 1994 primarily as a
result of the unusually harsh winter. Net operating income (rental income minus
rental operating expenses) from these apartment units was up $958,000, or 5.0%
for the first six months of 1994. For the remaining 6,678 apartment units
acquired by the Trust since the beginning of 1993, economic occupancy averaged
92.4% during the first six months of 1994 and operating expenses averaged 43.8%
of revenues.
For the first six months of 1994, net operating income from commercial
properties increased 4.0%, or $151,000, from the first six months of 1993,
reflecting primarily additional small tenant leases.
Interest expense for the first six months of 1994 increased by
approximately $2.1 million, reflecting the financing of approximately $94
million of apartment acquisitions since January, 1994 with bank lines of credit,
tax-exempt bonds and $75 million of senior unsecured notes that were publicly
sold in early April, 1994. On a per share basis, interest expense increased
$0.01 in the first half of 1994 versus the first half of 1993.
For the first half of 1994, depreciation expense totaled $12.0 million
versus $9.5 million for the first half of 1993. The increase of $2.5 million
reflects the portfolio expansion that has occurred during the past year.
Management expects that the Trust's operating results for the remainder of
1994 will show continued improvement when compared to the comparable period of
1993 as a result of the continued positive impact of the 1993 and 1994
acquisitions and anticipated occupancy gains and rent growth.
YEAR ENDED DECEMBER 31, 1993
For 1993, the Trust reported significant increases over 1992 in rental
income, income from property operations, income before gains (losses) on
investments and extraordinary item, net income, and funds from operations. These
increases are attributable primarily to the significant portfolio expansion that
has occurred since the beginning of 1992. The performance of the Trust's mature
group of 10,924 apartment units (46 apartment communities) contributed to the
increases.
For 1993, the Trust's mature apartment properties provided 60% of the
Trust's rental income. These units had average economic occupancy of 91.2%
during 1993 compared to 90.6% for 1992, an increase of 0.6%. In 1993, average
rents at these properties grew 2.6% (to $440 per month) and rental expenses
increased 5.3%, resulting in an increase in the operating expense ratio of 0.8%
to 47.9%. Net operating income from these apartment units was up approximately
$500,000, or 1.8%. For the remaining 6,990 apartment units acquired by the Trust
since the beginning of 1992, economic occupancy averaged 92.1% and the operating
expense ratio was 43.3% for 1993. For the 17,914 apartments in the 74
communities owned on December 31, 1993, economic occupancy averaged
S-6
<PAGE>
91.5% and the expense ratio was 46.4% for the full year. In 1992, the 13,832
units then owned had economic occupancy of 90.7% and an expense ratio of 46.5%.
For 1993, net operating income from commercial properties increased
$288,000, or 4.0%, primarily reflecting additional small tenant leases.
For 1993, depreciation expense increased $4.0 million with substantially
all of the increase attributable to the portfolio expansion that has occurred
during 1993.
For 1993, interest income was $708,000 compared to $1.4 million in 1992.
During both 1992 and 1993, the Trust completed public offerings of Common Stock
and invested the proceeds temporarily in short-term money market investments.
During 1992, however, the Trust had such temporary investments throughout much
of the year at higher rates than in 1993 when the average amount invested in the
money markets was significantly lower. Consequently, interest income declined in
1993.
Interest expense increased approximately $5.2 million reflecting the fact
that the Trust used less equity relative to debt to finance acquisitions in 1993
than it did in 1992. While interest expense increased $0.105 per share in 1993,
as a percent of rental income it was virtually unchanged from 1992.
LIQUIDITY AND CAPITAL RESOURCES
As a qualified REIT, the Trust distributes a substantial portion of its
cash flow to its shareholders. Consequently, new acquisitions, property
renovations and expansions, major capital improvements and balloon debt payments
are funded by a variety of primarily external sources including bank borrowings,
the issuance of equity and debt in public and private transactions and, to a
much lesser extent, property sales and mortgage financings.
At the beginning of 1994, the Trust had approximately $5.8 million of cash
and cash equivalents and $32.4 million of available and unused bank lines of
credit. Since the beginning of 1994, the Trust has expanded its bank lines of
credit to $103.5 million, an increase of $42.5 million. On April 7, 1994, the
Trust completed a $75 million public offering of 7 1/4% senior unsecured notes
due April 1, 1999. The notes were priced at 99.833% to yield 7.29% to maturity.
Net proceeds of the debt offering of $74.3 million were utilized to repay, in
full, outstanding bank debt and to fund subsequent apartment acquisitions.
During the second quarter of 1994, the Trust completed four tax-exempt housing
bond placements totaling $26.6 million (with a weighted average interest rate of
5.70%). In mid-June, 1994, the Trust completed a public offering of 8,000,000
shares of Common Stock at $14.25 per share. In July, 1994, pursuant to an
over-allotment option, the underwriters of that offering purchased an additional
479,400 shares of Common Stock, also at $14.25 per share. Net proceeds of the
Common Stock offering, after deducting underwriting commissions and direct
offering costs, aggregated approximately $114 million, of which approximately
$17.9 million was used to decrease then existing bank debt. The remaining net
proceeds were temporarily invested in short-term money market investments and
were subsequently used to purchase additional apartment properties. On July 1,
1994, in connection with a portfolio purchase discussed below, the Trust
utilized $80 million of cash from the Common Stock offering and $47 million of
bank borrowings to acquire 21 apartment properties.
On July 1, 1994, the Trust purchased from entities affiliated with Clover
Financial Corporation 21 of 25 apartment communities included in a portfolio
which had been under contract since April 1, 1994. The 21 communities, which
contain 4,390 units and were purchased for $143.7 million, including closing
costs, are located in Alabama (2), Delaware (2), Florida (1), Georgia (1),
Maryland (2), North Carolina (4), South Carolina (7) and Virginia (2). On August
16, 1994, three other apartment communities included in the portfolio, located
in Maryland (2) and South Carolina (1) and containing 628 units, were purchased
for $18.8 million, including closing costs. The remaining community, located in
South Carolina, is expected to be purchased on or before November 1, 1994.
In April, 1993, the Trust engaged outside property management for most of
its shopping center properties, following the decision to exit the commercial
property business. Management recently began to offer the Trust's Richmond,
Virginia shopping centers for sale and anticipates that some or all of these
centers will be sold during the remainder of 1994. The Trust will dispose of
most of its commercial properties over the next few years.
The Trust's liquidity and capital resources are believed to be more than
adequate to meet its cash requirements for the foreseeable future.
INFLATION
Management believes that the direct effects of inflation on the Trust's
operations have been inconsequential.
S-7
<PAGE>
BUSINESS
GENERAL
The Trust acquires, improves, operates, manages and selectively sells
properties with the principal objective of maximizing its funds from operations.
To meet this objective, the Trust has emphasized the acquisition of properties
that can be acquired at attractive initial yields and immediately increase funds
from operations. Historically, the Trust's primary investment policy has been to
acquire apartment properties presenting the opportunity for higher occupancy,
increased rents and enhanced property values through a program of renovation,
refurbishment and intensive property management. In 1991, the Trust expanded its
investment policy with the acquisition of apartment properties having higher
occupancies and requiring substantially less renovation. Generally, these
properties have been acquired at significant discounts from replacement cost and
at attractive initial yields. The Trust has also expanded into new geographic
markets in contiguous states, most notably Florida. Since the beginning of 1991,
the Trust has acquired 74 apartment properties containing 18,331 units at a
total cost of approximately $563 million.
The Trust seeks to employ leverage conservatively using primarily corporate
debt, which is considered to be more flexible and less costly than mortgage debt
on individual properties. At August 24, 1994, approximately $667 million, or
75%, of the Trust's real estate owned at cost was unencumbered by mortgage debt.
The Trust also uses tax-exempt housing bonds to finance eligible properties.
The Trust considers apartments to be its principal business and plans to
commit substantially all of its investment portfolio and all of its new
acquisitions to apartments. Over the long term, management believes that
investment in apartments in the Southeast will benefit from the following
factors:
(Bullet) Rental vacancy rates in the South Region (defined by the
Census Bureau as the 17-state region from Delaware to Texas)
have declined to their lowest level since 1984.
(Bullet) There has been a significant decline in apartment
construction in the Trust's target markets particularly from
1990 through 1993. While apartment construction permits
increased slightly in the first six months of 1994 over the
1993 period, they remain well below levels in the mid and
late 1980s.
(Bullet) Approximately 12 million new households are expected to be
formed in the 1990s, and a majority of this growth is
projected in the South Region.
(Bullet) Approximately 36% of all households were renters at the start
of the decade. Despite historically low mortgage interest
rates, the proportion of renter households has remained
relatively constant.
(Bullet) There are estimates that a significant majority of today's
renter households cannot afford to buy a moderately priced
home in their region because of credit problems, the lack of
a down payment or a monthly payment that is too high.
(Bullet) Other demographic characteristics favor apartment demand
including an increase in single person and single parent
households, higher growth rates among minorities, additional
immigrant households and a decline in younger household
income.
(Bullet) Job growth in the South Region has been very strong,
averaging 2.8% in 1993, the highest of the four Census Bureau
regions.
APARTMENTS
The Trust's apartments consist of a mix of lower to upper income
properties with a majority being middle to moderate income. A majority of
the tenants are family households. The apartments are typically suburban,
garden or townhouse style units with one, two and three bedrooms. The units
are generally individually heated and cooled, with all appliances and
wall-to-wall carpet. Amenities normally include swimming pools, tennis
courts, clubhouses and playgrounds. Some of the apartment communities also
have fitness centers, volleyball courts, jacuzzis and racquet ball courts.
The average cost for the Trust's apartments, including all renovations and
refurbishment costs, was approximately $29,500 per unit at June 30, 1994.
During the second quarter of 1994, apartment occupancy averaged 93.9%
overall and 94.2% for the mature 13,832 units which were acquired prior to
1993.
S-8
<PAGE>
The following chart shows the geographic distribution of the Trust's
apartment properties.
<TABLE>
<CAPTION>
NUMBER OF PERCENTAGE OF
APARTMENT PROPERTIES NUMBER OF UNITS APARTMENT UNITS
<S> <C> <C> <C>
Columbia, South Carolina....................... 11 3,218 12%
Richmond, Virginia............................. 12 3,170 12
Baltimore/Washington........................... 11 2,621 10
Raleigh, North Carolina........................ 8 2,440 9
Charlotte, North Carolina...................... 12 2,334 9
Tampa/Clearwater, Florida...................... 7 1,999 8
Greenville/Spartanburg, South Carolina......... 6 1,178 4
Tidewater, Virginia(1)......................... 5 1,140 4
Atlanta, Georgia............................... 4 1,123 4
Orlando, Florida............................... 4 1,077 4
Wilmington, North Carolina..................... 4 889 3
Nashville, Tennessee........................... 3 842 3
Other North Carolina........................... 6 1,288 5
Other Florida.................................. 5 1,200 4
Other Georgia.................................. 3 740 3
Other Virginia................................. 4 570 2
Other South Carolina........................... 2 408 2
Alabama........................................ 2 382 1
Delaware....................................... 2 324 1
Total..................................... 111 26,943 100%
</TABLE>
(1) The Norfolk/Virginia Beach/Newport News/Hampton area.
DESCRIPTION OF DEBENTURES
THE FOLLOWING DESCRIPTION OF THE PARTICULAR TERMS OF THE DEBENTURES
OFFERED HEREBY (REFERRED TO IN THE ACCOMPANYING PROSPECTUS AS THE "DEBT
SECURITIES") SUPPLEMENTS, AND TO THE EXTENT INCONSISTENT THEREWITH
REPLACES, THE DESCRIPTION OF THE GENERAL TERMS AND PROVISIONS OF DEBT
SECURITIES SET FORTH IN THE PROSPECTUS, TO WHICH DESCRIPTION REFERENCE IS
HEREBY MADE. THE FOLLOWING STATEMENTS RELATING TO THE DEBENTURES AND THE
SENIOR INDENTURE ARE SUMMARIES OF PROVISIONS CONTAINED THEREIN AND DO NOT
PURPORT TO BE COMPLETE. SUCH STATEMENTS ARE QUALIFIED BY REFERENCE TO THE
PROVISIONS OF THE SENIOR INDENTURE, INCLUDING THE DEFINITIONS THEREIN OF
CERTAIN TERMS. THE SENIOR INDENTURE IS AN EXHIBIT TO THE REGISTRATION
STATEMENT OF WHICH THE PROSPECTUS ACCOMPANYING THIS PROSPECTUS SUPPLEMENT
IS A PART. CAPITALIZED TERMS NOT OTHERWISE DEFINED HEREIN SHALL HAVE THE
MEANINGS GIVEN TO THEM IN THE PROSPECTUS.
GENERAL
The 8 1/2% Debentures due September 15, 2024 (the "Debentures") will
be limited to $150,000,000 aggregate principal amount and will mature on
September 15, 2024. The Debentures will be unsecured and unsubordinated
obligations of the Trust and will rank equally with other unsecured and
unsubordinated indebtedness of the Trust.
The Debentures will only be issued in fully registered book-entry form
without coupons in denominations of $1,000 and integral multiples thereof,
except under the limited circumstances described below under
" -- Book-Entry System."
INTEREST
The Debentures will bear interest at the rate set forth on the cover
page of this Prospectus Supplement from September 27, 1994, or the most
recent Interest Payment Date (as defined below) to which interest has been
paid or provided for, payable semi-annually on March 15 and September 15 of
each year, beginning March 15, 1995 (each, an "Interest Payment Date") to
the person in whose name a Debenture (or any predecessor Debenture) is
registered at the close of business on the March 1 or September 1, as the
case may be, next preceding such Interest Payment Date.
S-9
<PAGE>
REDEMPTION AT OPTION OF TRUST
The Debentures may not be redeemed at the option of the Trust prior to
maturity and do not provide for any sinking fund.
REDEMPTION AT OPTION OF HOLDER
The Debentures may be redeemed on September 15, 2004, at the option of
the registered holders of the Debentures, at 100% of their principal amount
together with accrued interest to September 15, 2004. In order for a holder
to exercise this option, the Trust must receive at its office or agency in
New York, New York, during the period beginning on July 15, 2004 and ending
at 5:00 PM (New York City time) on August 15, 2004 (or, if August 15, 2004
is not a Business Day, the next succeeding Business Day), the Debenture
with the form entitled "Option to Require Redemption on September 15, 2004"
on the reverse of the Debenture duly completed. Any such notice received by
the Trust during the period beginning on July 15, 2004 and ending at 5:00
PM (New York City time) on August 15, 2004 shall be irrevocable. The
redemption option may be exercised by the holder of a Debenture for less
than the entire principal amount of the Debentures held by such holder, so
long as the principal amount that is to be redeemed is equal to $1,000 or
an integral multiple of $1,000. All questions as to the validity, form,
eligibility (including time of receipt) and acceptance of any Debenture for
redemption will be determined by the Trust, whose determination will be
final and binding.
Failure by the Trust to repurchase the Debentures when required as
described in the preceding paragraph will result in an Event of Default
under the Senior Indenture.
As described below under " -- Book-Entry System," the Debentures will
be registered in the name of The Depository Trust Company ("DTC ") or its
nominee, which will be the holder thereof entitled to exercise the
redemption option. In order to ensure that DTC or its nominee will exercise
such option in a timely manner with respect to a particular Debenture, the
beneficial owner of an interest in such Debenture must instruct the broker
or other Participant (as defined below) through which it holds an interest
in such Debenture to notify DTC or its nominee of its desire to exercise
such option. Different Participants have different cut-off times for
accepting instructions from their customers and, accordingly, each such
beneficial owner should consult the Participant through which it holds an
interest in the Debentures in order to ascertain the cut-off time by which
such an instruction must be given in order for timely notice to be
delivered to DTC or its nominee.
DEFEASANCE
The provisions of Article 14 of the Senior Indenture relating to
defeasance and covenant defeasance, which are described in the accompanying
Prospectus, will apply to the Debentures.
BOOK-ENTRY SYSTEM
The Debentures will be represented by a single global security (the
"Global Security ") and registered in the name of DTC or its nominee. Upon
the issuance of the Global Security, DTC or its nominee will credit, on its
book-entry registration and transfer system, the respective principal
amounts of the Debentures represented by the Global Security to the
accounts designated by the Underwriters. Ownership of beneficial interests
in the Global Security will be limited to institutions that have accounts
with DTC or its nominee ("Participants") and to persons that may hold
interests through Participants. Ownership of beneficial interests in the
Global Security will be shown only on, and the transfer of those ownership
interests will be effected only through, records maintained by such
Participants. The laws of some jurisdictions may require that certain
purchasers of securities take physical delivery of such securities in
definitive form. Such limits and laws may impair the ability to transfer
beneficial interests in the Global Security.
Notwithstanding any provision of the Senior Indenture or the
Debentures, the Global Security may not be exchanged in whole or in part
for Debentures registered, and no transfer of the Global Security in whole
or in part may be registered, in the name of any Person other than DTC or
any nominee of DTC unless (i) DTC has notified the Trust that it is
unwilling or unable to continue as depository for the Global Security or
has ceased to be qualified to act as such as required by the Senior
Indenture or (ii) there shall have occurred and be continuing an Event of
Default with respect to the Debentures. All Debentures issued in exchange
for the Global Security or any portion thereof will be registered in such
names as DTC may direct.
S-10
<PAGE>
As long as DTC or its nominee is the registered holder and owner of
the Global Security, DTC or such nominee, as the case may be, will be
considered the sole owner and holder of the Debentures for all purposes of
such Debentures and for all purposes under the Senior Indenture. Except in
the limited circumstances referred to above, owners of beneficial interests
in the Global Security will not be entitled to have the Debentures
registered in their names, will not receive or be entitled to receive
physical delivery of certificated Debentures in definitive form and will
not be considered to be the owners or holders of any Debentures under the
Senior Indenture or the Debentures. Payment of principal of, and interest
and premium, if any, on the Debentures will be made to DTC or its nominee,
as the case may be, as the registered owner or holder of the Global
Security.
Payments, transfers, exchanges and other matters relating to
beneficial interests in the Global Security may be subject to various
policies and procedures adopted by DTC from time to time. Neither the Trust
nor the Trustee 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 any Debentures or for
maintaining, supervising or reviewing any records relating to such
beneficial ownership interests or for any other aspect of the relationship
between DTC and its Participants or the relationship between such
Participants and the owners of beneficial interests in the Global Security
owning through such Participants.
The following is based on information furnished by DTC:
DTC is a limited-purpose trust company organized under the New York
Banking Law, a "banking organization" within the meaning of the New York
Banking Law, a member of the Federal Reserve System, a "clearing
corporation" within the meaning of the New York Uniform Commercial Code,
and a "clearing agency" registered pursuant to the provisions of Section
17A of the Securities Exchange Act of 1934, as amended. DTC holds
securities that its Participants deposit with DTC. DTC also facilitates the
settlement among Participants of securities transactions, such as transfers
and pledges, in deposited securities through electronic computerized
book-entry changes in Participants' accounts, thereby eliminating the need
for physical movement of securities certificates. Direct Participants
include securities brokers and dealers (including the Underwriters), banks,
trust companies, clearing corporations, and certain other organizations
("Direct Participants"). DTC is owned by a number of its Direct
Participants and by the New York Stock Exchange, Inc., the American Stock
Exchange, Inc. and the National Association of Securities Dealers, Inc.
Access to the DTC system is also available to others such as securities
brokers and dealers, banks and trust companies that clear through or
maintain a custodial relationship with a Direct Participant, either
directly or indirectly. The rules applicable to DTC and its Participants
are on file with the Securities and Exchange Commission.
SAME-DAY SETTLEMENT AND PAYMENT
Settlement for the Debentures will be made by the Underwriters in
immediately available funds. All payments of principal and interest will be
made by the Trust in immediately available funds, so long as DTC continues
to make its Same-Day Funds Settlement System available to the Trust.
Secondary trading in long-term notes and debentures of corporate issuers
is generally settled in clearinghouse or next-day funds. In contrast, the
Debentures will trade in DTC's Same-Day Funds Settlement System, and
secondary market trading activity in the Debentures will therefore be
required by DTC to settle in immediately available funds. No assurance can
be given as to the effect, if any, of settlement in immediately available
funds on trading activity in the Debentures.
S-11
<PAGE>
UNDERWRITING
Subject to the terms and conditions set forth in the Underwriting
Agreement, the Trust has agreed to sell to each of the Underwriters named
below, and each of the Underwriters has severally agreed to purchase, the
principal amount of the Debentures set forth opposite its name below:
<TABLE>
<CAPTION>
PRINCIPAL AMOUNT
UNDERWRITER OF DEBENTURES
<S> <C>
Goldman, Sachs & Co.................................................................................. $ 60,000,000
Merrill Lynch, Pierce, Fenner & Smith Incorporated................................................... 60,000,000
NationsBanc Capital Markets, Inc. ................................................................... 30,000,000
Total......................................................................................... $150,000,000
</TABLE>
Under the terms and conditions of the Underwriting Agreement, the
Underwriters are committed to take and pay for all of the Debentures, if
any are taken.
The Underwriters propose to offer the Debentures in part directly to
the public at the initial public offering price set forth on the cover page
of this Prospectus Supplement and in part to certain securities dealers at
such price less a concession of .40% of the principal amount of the
Debentures. The Underwriters may allow, and such dealers may reallow, a
concession not to exceed .25% of the principal amount of the Debentures to
certain brokers and dealers. After the Debentures are released for sale to
the public, the offering price and other selling terms may from time to
time be varied by the Underwriters.
The Debentures are a new issue of securities with no established
trading market. The Trust has been advised by the Underwriters that the
Underwriters intend to make a market in the Debentures but are not
obligated to do so and may discontinue market making at any time without
notice. No assurance can be given as to the liquidity of the trading market
for the Debentures.
The Trust has agreed to indemnify the several Underwriters against
certain liabilities, including liabilities under the Securities Act of
1933, as amended.
NationsBanc Capital Markets, Inc. and NationsBank of Virginia, N.A.
are each wholly-owned subsidiaries of NationsBank Corporation, a bank
holding company. NationsBank of Virginia, N.A. is the Trustee under the
Senior Indenture. NationsBank of Virginia, N.A. also has lending
relationships with the Trust.
S-12
<PAGE>
<PAGE>
PROSPECTUS
$400,000,000
DEBT SECURITIES
PREFERRED STOCK
COMMON STOCK
United Dominion Realty Trust, Inc. (the "Trust") intends to issue from time
to time its (i) unsecured senior or subordinated debt securities (the "Debt
Securities"), (ii) shares of Preferred Stock, no par value ("Preferred Stock"),
and (iii) shares of Common Stock, $1 par value ("Common Stock"), having an
aggregate initial public offering price not to exceed $400,000,000 or the
equivalent thereof in one or more foreign currencies or composite currencies,
including European Currency Units, on terms to be determined at the time of
sale. The Debt Securities, the Preferred Stock and the Common Stock offered
hereby (collectively, the "Offered Securities") may be offered, separately or as
units with other Offered Securities, in separate series in amounts, at prices
and on terms to be determined at the time of sale and to be set forth in a
supplement to this Prospectus (a "Prospectus Supplement").
The Debt Securities will be direct unsecured obligations of the Trust and
may be either senior Debt Securities ("Senior Securities") or subordinated Debt
Securities ("Subordinated Securities"). The Senior Securities will rank equally
with all other unsecured and unsubordinated indebtedness of the Trust. The
Subordinated Securities will be subordinated to all existing and future Senior
Debt of the Trust, as defined. See "Description of Debt Securities."
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 designation, aggregate principal amount, currency,
denomination, maturity, priority, interest rate, time of payment of interest,
terms of redemption at the option of the Trust or repayment at the option of the
holder or for sinking fund payments, terms for conversion into or exchange for
other Offered Securities and the initial public offering price; (ii) in the case
of Preferred Stock, the series designation and number of shares and the
dividend, liquidation, redemption, conversion, voting and other rights and the
initial public offering price; (iii) in the case of Common Stock, the initial
public offering price; and (iv) in the case of all Offered Securities, whether
such Offered Securities will be offered separately or as a unit with other
Offered Securities. In addition, such specific terms may include limitations on
direct or beneficial ownership and restrictions on transfer of the Offered
Securities, in each case as may be appropriate to preserve the status of the
Trust as a qualified real estate investment trust ("REIT") under the Internal
Revenue Code of 1986, as amended (the "Code").
The applicable Prospectus Supplement will also contain information, where
applicable, concerning certain United States federal income tax considerations
relating to, and any listing on a securities exchange of, the Offered Securities
covered thereby.
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
designated agents or any underwriters are involved in the sale of Offered
Securities, they will be identified and their compensation will be described in
the applicable Prospectus Supplement. See "Plan of Distribution." No Offered
Securities may be sold without delivery of the applicable Prospectus Supplement
describing such Offered Securities and the method and terms of the offering
thereof.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
THE ATTORNEY GENERAL OF THE STATE OF NEW YORK HAS NOT PASSED ON OR ENDORSED THE
MERITS OF THIS OFFERING. ANY REPRESENTATION TO THE CONTRARY IS
UNLAWFUL. THE DATE OF THIS PROSPECTUS IS SEPTEMBER 20, 1994.
<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"). Such reports, proxy
statements and other information filed by the Trust with the Commission can be
inspected and copied at the public reference facilities maintained by the
Commission at Room 1024, 450 Fifth Street, N.W., Washington, D.C. 20549, and at
its Regional Offices at Suite 1400, Northwestern Atrium Center, 500 West Madison
Street, Chicago, Illinois 60661 and Suite 1300, 7 World Trade Center, New York,
New York 10048, and can also be inspected and copied at the offices of the New
York Stock Exchange, 20 Broad Street, New York, New York 10005. Copies of such
material can be obtained from the Public Reference Section of the Commission at
450 Fifth Street, N.W., Washington, D.C. 20549, upon payment of the prescribed
fees.
This Prospectus is part of a registration statement on Form S-3 (together
with all amendments and exhibits, the "Registration Statement") filed by the
Trust with the Commission under the Securities Act of 1933, as amended (the
"Securities Act"). This Prospectus does not contain all the information set
forth in the Registration Statement, certain parts of which are omitted in
accordance with the rules of the Commission. For further information, reference
is made to the Registration Statement.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed by the Trust with the Commission under the
Exchange Act are hereby incorporated by reference in this Prospectus: (i) the
Trust's annual report on Form 10-K for the year ended December 31, 1993; (ii)
the Trust's quarterly reports on Form 10-Q for the quarters ended March 31 and
June 30, 1994; (iii) the Trust's Current Report on Form 8-K dated April 15,
1994; (iv) the Trust's Current Report on Form 8-K dated May 17, 1994; (v) the
Trust's Current Report on Form 8-K dated May 26, 1994; (vi) the Trust's Current
Report on Form 8-K dated July 1, 1994; (vii) the Trust's Current Report on Form
8-K dated August 31, 1994; and (viii) the description of the Common Stock
contained in the Trust's registration statement on Form 8-A dated April 19, 1990
filed under the Exchange Act, including any amendment or reports filed for the
purpose of updating such description. All documents filed by the Trust pursuant
to Section 13(a), 13(c), 14 or 15(d) of the Exchange Act prior to the
termination of the offering of all of the Offered Securities shall be deemed to
be incorporated by reference herein.
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,
in any accompanying Prospectus Supplement relating to a specific offering of
Offered Securities or in any other subsequently filed document, as the case may
be, which also is or is deemed to be incorporated by reference herein, modifies
or supersedes such statement. Any such statement so modified or superseded shall
not be deemed, except as so modified or superseded, to constitute a part of this
Prospectus or any accompanying Prospectus Supplement.
The Trust will provide on request and without charge to each person to whom
this Prospectus is delivered a copy (without exhibits) of any or all documents
incorporated by reference into this Prospectus. Requests for such copies should
be directed to United Dominion Realty Trust, Inc., 10 South 6th Street, Suite
203, Richmond, Virginia 23219-3802, Attention: Secretary (telephone
804/780-2691).
2
<PAGE>
THE TRUST
The Trust, founded in 1972, is a self-administered equity real estate
investment trust that owns and operates apartments in the Mid-Atlantic and
Southeast from Delaware to Florida. It is a fully integrated real estate company
that acquires, improves, operates, manages and selectively sells properties with
the primary goal of maximizing its funds from operations, while increasing the
value of its real estate through capital improvements and intensive management.
The Trust's 129 properties include 111 apartment communities containing
26,943 apartment units, and 14 shopping centers, two warehouse/industrial
properties and two office properties containing a total of approximately two
million square feet of rentable space. Most of the Trust's properties are
located in the Southeast. Management believes that the Trust has benefitted from
the population and job growth within this region and that this region will
continue to provide attractive demographic and economic patterns conducive to
real estate investment in the 1990's.
The Trust's investment policy has been to acquire apartment properties
presenting the opportunity for higher occupancy, increased rents and enhanced
property values through a program of renovation, refurbishment and intensive
property management. Beginning in 1991, the Trust embarked on a major expansion
of its apartment portfolio involving the acquisition of apartment properties
having high occupancy levels and not requiring substantial renovation and entry
into new geographic markets in contiguous states, most notably Florida. The
properties have been acquired generally at significant discounts from
replacement cost and at attractive current yields. Since the beginning of 1991,
the Trust has acquired 74 apartment properties containing 18,331 units at a
total cost of approximately $563 million.
The Trust has paid continuous quarterly distributions to its shareholders
since 1973 and has increased its distributions each year during the past 18
years. The current indicated annual distribution is $.78 per share. In past
years, a portion of the Trust's distributions to shareholders has been
designated as a non-taxable return of capital for federal income tax purposes.
The Trust, a Virginia corporation, has its principal office at 10 South 6th
Street, Suite 203, Richmond, Virginia 23219-3802, and its telephone number is
(804) 780-2691. Unless the context indicates otherwise, the term "Trust," as
used herein, includes the Trust and its subsidiaries, all of which are
wholly-owned.
USE OF PROCEEDS
Unless otherwise set forth in the applicable Prospectus Supplement, the net
proceeds from the sale of the Offered Securities will be used for general
corporate purposes, which may include repayment of indebtedness, making
improvements to properties and the acquisition of additional properties.
CERTAIN RATIOS
The following table sets forth the Trust's consolidated ratios of earnings
to fixed charges and funds from operations to fixed charges for the periods
shown.
<TABLE>
<CAPTION>
SIX MONTHS
YEAR ENDED DECEMBER 31, ENDED JUNE 30,
1989 1990 1991 1992 1993 1993 1994
<S> <C> <C> <C> <C> <C> <C> <C>
Ratio of earnings to fixed
charges......................... 1.45x 1.43x 1.27x 1.54x 1.64x 1.56x 1.70x
Ratio of funds from
operations to fixed charges..... 2.08x 2.43x 2.32x 3.00x 2.80x 2.68x 2.88x
</TABLE>
The ratios of earnings to fixed charges were computed by dividing earnings
by fixed charges and the ratios of funds from operations to fixed charges were
computed by dividing funds from operations by fixed charges. For purposes of
computing these ratios, earnings consist of income before extraordinary items
plus fixed charges other than capitalized interest, and fixed charges consist of
interest on borrowed funds (including capitalized interest) and amortization of
debt discount and expense. Funds from operations is defined as income before
gains (losses) on investments and extraordinary items adjusted for certain
non-cash items, primarily real estate depreciation. To date, the Trust has not
issued any shares of Preferred Stock; therefore, the ratios of earnings to
combined fixed charges and preferred share dividends and funds from operations
to combined fixed charges and preferred share dividends are the same as those
presented in the table.
3
<PAGE>
DESCRIPTION OF DEBT SECURITIES
GENERAL
The Senior Securities are to be issued under an indenture dated as of April
1, 1994, as supplemented from time to time (the "Senior Indenture"), between the
Trust and NationsBank of Virginia, N.A. (the "Senior Indenture Trustee"), and
the Subordinated Securities are to be issued under an indenture dated as of
August 1, 1994, as supplemented from time to time (the "Subordinated
Indenture"), between the Trust and Crestar Bank (the "Subordinated Indenture
Trustee"). The term "Trustee," as used herein, shall refer to the Senior
Indenture Trustee or the Subordinated Indenture Trustee, as appropriate. The
forms of the Senior Indenture and the Subordinated Indenture (being sometimes
referred to herein collectively as the "Indentures" and individually as an
"Indenture") are filed as exhibits to the Registration Statement and are
respectively available for inspection at the corporate trust office of the
Senior Indenture Trustee in Atlanta, Georgia, and the corporate trust office of
the Subordinated Indenture Trustee in Richmond, Virginia, or as described under
"Available Information." The Indentures are subject to, and governed by, the
Trust Indenture Act of 1939, as amended (the "TIA"). The statements made
hereunder relating to the Indentures and the Debt Securities are summaries of
certain provisions thereof, do not purport to be complete and are subject to,
and are qualified in their entirety by reference to, all provisions of the
Indentures and the Debt Securities. All section references appearing herein are
to sections of the Indentures, and capitalized terms used but not defined herein
have the respective meanings set forth in the Indentures and the Debt
Securities.
TERMS
The Debt Securities will be direct, unsecured obligations of the Trust. The
indebtedness represented by the Senior Securities will rank equally with all
other unsecured and unsubordinated indebtedness of the Trust. The indebtedness
represented by the Subordinated Securities will be subordinated in right of
payment to the prior payment in full of the Senior Debt of the Trust, as
described under "Subordination."
Each Indenture provides that the Debt Securities may be issued without
limit as to aggregate principal amount, in one or more series, in each case as
established from time to time in or pursuant to authority granted by a
resolution of the Board of Directors of the Trust or as established in one or
more indentures supplemental to such Indenture. Debt Securities may be issued
with terms different from those of Debt Securities previously issued; all Debt
Securities of one series need not be issued at the same time and, unless
otherwise provided, a series may be reopened, without the consent of the Holders
of the Debt Securities of such series, for issuances of additional Debt
Securities of such series (Section 301 of each Indenture).
Each Indenture provides that there may be more than one Trustee thereunder,
each with respect to one or more series of Debt Securities. Any Trustee under
either Indenture may resign or be removed with respect to one or more series of
Debt Securities, and a successor Trustee may be appointed to act with respect to
such series (Section 608 of each Indenture). In the event that two or more
persons are acting as Trustee with respect to different series of Debt
Securities, each such Trustee shall be a Trustee of a trust under the applicable
Indenture separate and apart from the trust administered by any other Trustee
(Sections 101 and 609 of each Indenture), and, except as otherwise indicated
herein, any action described herein 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.
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 and whether such Debt Securities
are Senior Securities or Subordinated Securities;
(2) the aggregate principal amount of such Debt Securities and any
limit on such principal amount;
(3) the percentage of the principal amount at which such Debt
Securities will be issued and, if other than the principal amount thereof,
the portion of the principal amount payable upon declaration of
acceleration of the maturity thereof, or (if applicable) the portion of the
principal amount of such Debt Securities that is convertible into Capital
Stock of the Trust, or the method by which any such portion will be
determined;
4
<PAGE>
(4) 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 Capital Stock of the Trust into which such Debt
Securities are convertible;
(5) the date or dates, or the method by which such date or dates will
be determined, on which the principal of such Debt Securities will be
payable and the amount of principal payable thereon;
(6) the rate or rates (which may be fixed or variable) at which such
Debt Securities will bear interest, if any, or the method by which such
rate or rates will be determined, the date or dates from which such
interest will accrue or the method by which such date or dates will be
determined, the Interest Payment Dates on which any such interest will be
payable and the Regular Record Dates for such Interest Payment Dates, or
the method by which such Dates will be determined, and the basis upon which
interest will be calculated if other than that of a 360-day year consisting
of twelve 30-day months;
(7) the place or places where the principal of (and premium or
Make-Whole Amount (as defined in each Indenture), if any), interest, if
any, on, and Additional Amounts, if any, payable in respect of, such Debt
Securities will be payable, where such Debt Securities may be surrendered
for registration of transfer or exchange and where notices or demands to or
upon the Trust in respect of such Debt Securities and the applicable
Indenture may be served;
(8) the period or periods within which, the price or prices (including
premium or Make-Whole Amount, if any) at which, the currency or currencies,
currency unit or units or composite currency or currencies in which and
other 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
the option;
(9) 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
or the date or dates on which, the price or prices at which, the currency
or currencies, currency unit or units or composite currency or currencies
in which, and other terms and conditions upon which such Debt Securities
will be redeemed, repaid or purchased, in whole or in part, pursuant to
such obligation;
(10) whether such Debt Securities will be in registered or bearer form
and terms and conditions relating thereto, and, if other than $1,000 and
any integral multiple thereof, the denominations in which any registered
Debt Securities will be issuable and, if other than $5,000, the
denomination or denominations in which any bearer Debt Securities will be
issuable;
(11) if other than United States dollars, the currency or currencies
in which such Debt Securities will be denominated and payable, which may be
a foreign currency or units of two or more foreign currencies or a
composite currency or currencies;
(12) whether the amount of payments of principal of (and premium or
Make-Whole Amount, if any) or interest, if any, on such Debt Securities may
be determined with reference to an index, formula or other method (which
index, formula or method may be based, without limitation, on one or more
currencies, currency units, composite currencies, commodities, equity
indices or other indices), and the manner in which such amounts will be
determined;
(13) whether the principal of (and premium or Make-Whole Amount, if
any) or interest or Additional Amounts, if any, on such Debt Securities are
to be payable, at the election of the Trust or a Holder thereof, in a
currency or currencies, currency unit or units or composite currency or
currencies other than that in which such Debt Securities are denominated or
stated to be payable, the period or periods within which, and the terms and
conditions upon which, such election may be made, and the time and manner
of, and identity of the exchange rate agent with responsibility for,
determining the exchange rate between the currency or currencies, currency
unit or units or composite currency or currencies in which such Debt
Securities are denominated or stated to be payable and the currency or
currencies, currency unit or units or composite currency or currencies in
which such Debt Securities are to be so payable;
(14) provisions, if any, granting special rights to the Holders of
such Debt Securities upon the occurrence of such events as may be
specified;
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(15) any deletions from, modifications of or additions to the Events
of Default or covenants of the Trust with respect to such Debt Securities,
whether or not such Events of Default or covenants are consistent with the
Events of Default or covenants set forth in the applicable Indenture;
(16) whether such Debt Securities will be issued in certificated or
book-entry form;
(17) the applicability, if any, of the defeasance and covenant
defeasance provisions of Article Fourteen of the applicable Indenture;
(18) 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
rather than pay such Additional Amounts (and the terms of any such option);
and
(19) any other terms of such Debt Securities not inconsistent with the
provisions of the applicable Indenture (Section 301 of each Indenture).
The Debt Securities may provide for less than the entire principal amount
thereof to be payable upon declaration of acceleration of the maturity thereof
("Original Issue Discount Securities") (Section 502 of each Indenture). Special
United States federal income tax, accounting and other considerations applicable
to Original Issue Discount Securities will be described in the applicable
Prospectus Supplement.
DENOMINATIONS, INTEREST, REGISTRATION AND TRANSFER
Unless otherwise specified in the applicable Prospectus Supplement, the
Debt Securities of any series issued in registered form will be issuable in
denominations of $1,000 and integral multiples thereof. Unless otherwise
specified in the applicable Prospectus Supplement, the Debt Securities of any
series issued in bearer form will be issuable in denominations of $5,000
(Section 302 of each Indenture).
Unless otherwise specified in the applicable Prospectus Supplement, the
principal of (and premium or Make-Whole Amount, if any) and interest on any
series of Senior Securities will be payable at the corporate trust office of the
Senior Indenture Trustee located at 715 Peachtree Street, N.E., Midtown Center,
7th Floor, Atlanta, Georgia 30308-1297 and the principal of (and premium or
Make-Whole Amount, if any) and interest on any series of Subordinated Securities
will be payable at the corporate trust office of the Subordinated Indenture
Trustee located at 919 East Main Street, Richmond, Virginia 23219; provided that
at the option of the Trust payment of interest on any series of Debt Securities
may be made by check mailed to the address of the Person entitled thereto as it
appears in the Security Register for such series or by wire transfer of funds to
such Person at an account maintained within the United States (Sections 301,
305, 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
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 referred
to above. In addition, subject to certain limitations imposed upon Debt
Securities issued in book-entry form, the Debt Securities of any series may be
surrendered for conversion or registration of transfer thereof at the corporate
trust office of the applicable Trustee referred to above. Every Debt Security
surrendered for conversion, registration of transfer or exchange shall be duly
endorsed or accompanied by a written instrument of transfer. No service charge
will be made for any registration or 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 applicable 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
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approve a change in the location through which 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 either 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).
MERGER, CONSOLIDATION OR SALE
The Trust may consolidate with, or sell, lease or convey all or
substantially all of its assets to, or merge with or into, any other entity,
provided that (a) either the Trust shall be the continuing entity, or the
successor entity (if other than the Trust) formed by or resulting from any such
consolidation or merger or which shall have received the transfer of such assets
is a Person organized and existing under the laws of the United States or any
State thereof and shall expressly assume payment of the principal of (and
premium or Make-Whole Amount, 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 each Indenture; (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 an Indenture, and no event which, after notice or the lapse of time, or
both, would become such an Event of Default, shall have occurred and be
continuing; and (c) an Officers' Certificate and legal opinion covering such
conditions shall be delivered to the Trustee (Sections 801 and 803 of each
Indenture).
CERTAIN COVENANTS
SENIOR INDENTURE LIMITATIONS ON INCURRENCE OF DEBT. The Senior Indenture
provides that 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 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 60% of the sum of (without
duplication) (i) the Trust's Total Assets as of the end of the calendar 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 and (ii) the purchase price of any real
estate assets or mortgages receivable acquired, and the amount of any securities
offering proceeds received (to the extent such proceeds were not used to acquire
real estate assets or mortgages receivable or used to reduce Debt), by the Trust
or any Subsidiary since the end of such calendar quarter, including those
proceeds obtained in connection with the incurrence of such additional Debt
(Section 1004 of the Senior Indenture). The Subordinated Indenture does not
limit the incurrence of Debt.
In addition to the foregoing limitation on the incurrence of Debt, the
Senior Indenture provides that 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 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 Trust's Total Assets (Section 1004 of the Senior
Indenture).
In addition to the foregoing limitations on the incurrence of Debt, the
Senior Indenture provides that the Trust will not, and will not permit any
Subsidiary to, incur any Debt if the ratio of Consolidated Income Available for
Debt Service (as defined below) to the Annual Service Charge (as defined below)
for the four consecutive fiscal quarters most recently ended prior to the date
on which such additional Debt is to be incurred shall have been less than 1.5,
on a pro forma basis after giving effect thereto and to the application of the
proceeds therefrom, and calculated on the assumption that (i) such Debt and any
other Debt incurred by the Trust and its Subsidiaries since the first day
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of such four-quarter period and the application of the proceeds therefrom,
including to refinance other Debt, had occurred at the beginning of such period;
(ii) the repayment or retirement of any other Debt by the Trust and its
Subsidiaries since the first day of such four-quarter period had been incurred,
repaid or retired at the beginning of such period (except that, in making such
computation, the amount of Debt under any revolving credit facility shall be
computed based upon the average daily balance of such Debt during such period);
(iii) in the case of Acquired Debt (as defined below) or Debt incurred in
connection with any acquisition since the first day of such four-quarter period,
the related acquisition had occurred as of the first day of such period with the
appropriate adjustments with respect to such acquisition being included in such
pro forma calculation; and (iv) in the case of any acquisition or disposition by
the Trust or its Subsidiaries of any asset or group of assets since the first
day of such four-quarter period, whether by merger, stock purchase or sale, or
asset purchase or sale, such acquisition or disposition or any related repayment
of Debt had occurred as of the first day of such period with the appropriate
adjustments with respect to such acquisition or disposition being included in
such pro forma calculation (Section 1004 of the Senior Indenture).
As used herein,
"ACQUIRED DEBT" means Debt of a Person (i) existing at the time such Person
becomes a Subsidiary or (ii) assumed in connection with the acquisition of
assets from such Person, in each case, other than Debt incurred in connection
with, or in contemplation of, such Person becoming a Subsidiary or such
acquisition. Acquired Debt shall be deemed to be incurred on the date of the
related acquisition of assets from any Person or the date the acquired Person
becomes a Subsidiary.
"ANNUAL SERVICE CHARGE" as of any date means the maximum amount which is
payable in any period for interest on, and original issue discount of, Debt of
the Trust and its Subsidiaries and the amount of dividends which are payable in
respect of any Disqualified Stock (as defined below).
"CAPITAL STOCK" means, with respect to any Person, any capital stock
(including preferred stock), shares, interests, participations or other
ownership interests (however designated) of such Person and any rights (other
than debt securities convertible into or exchangeable for corporate stock),
warrants or options to purchase any thereof.
"CONSOLIDATED INCOME AVAILABLE FOR DEBT SERVICE" for any period means Funds
from Operations (as defined below) of the Trust and its Subsidiaries plus
amounts which have been deducted for interest on Debt of the Trust and its
Subsidiaries.
"DEBT" of the Trust or any Subsidiary means any indebtedness of the Trust,
or any Subsidiary, whether or not contingent, in respect of (without
duplication) (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) the reimbursement obligations, contingent or
otherwise, in connection with any letters of credit actually issued or amounts
representing the balance deferred and unpaid of the purchase price of any
property or services, except any such balance that constitutes an accrued
expense or trade payable, or all conditional sale obligations or obligations
under any title retention agreement, (iv) the principal amount of all
obligations of the Trust or any Subsidiary with respect to redemption, repayment
or other repurchase of any Disqualified Stock or (v) 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 to the extent, in the case of items of
indebtedness under (i) through (iii) above, 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 of 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), Debt 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).
"DISQUALIFIED STOCK" means, with respect to any Person, any Capital Stock
of such Person which by the terms of such Capital Stock (or by the terms of any
security into which it is convertible or for which it is exchangeable or
exercisable), upon the happening of any event or otherwise (i) matures or is
mandatorily redeemable, pursuant to a sinking fund obligation or otherwise, (ii)
is convertible into or exchangeable or exercisable for Debt or Disqualified
Stock or (iii) is redeemable at the option of the holder thereof, in whole or in
part, in each case on or prior to the Stated Maturity of the series of Debt
Securities.
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"FUNDS FROM OPERATIONS" for any period means income before gains (losses)
on investments and extraordinary items plus amounts which have been deducted,
and minus amounts which have been added, for the following non-cash items
(without duplication): (a) provision for federal income taxes of the Trust and
its Subsidiaries, (b) amortization of debt discount, (c) provision for property
depreciation and amortization, (d) the effect of any noncash charge resulting
from a change in accounting principles in determining income before gains
(losses) on investments and extraordinary items for such period and (e)
amortization of deferred charges, as reflected in the financial statements of
the Trust and its Subsidiaries for such period determined on a consolidated
basis in accordance with generally accepted accounting principles.
"TOTAL ASSETS" as of any date means the sum of (i) the Trust's
Undepreciated Real Estate Assets and (ii) all other assets of the Trust
determined in accordance with generally accepted accounting principles (but
excluding intangibles).
"UNDEPRECIATED REAL ESTATE ASSETS" as of any date means the cost (original
cost plus capital improvements) 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.
Except as described above, the Indentures do not contain any provisions
that would limit the ability of the Trust to incur indebtedness or that would
afford Holders of the 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, the Articles of Incorporation of the Trust include
provisions for mandatory redemption and stopping transfer of its Common Stock
designed to preserve the Trust's status as a REIT. The Code provides that
concentration of more than 50% in value of direct or indirect ownership of
Common Stock in five or fewer individual shareholders during the last six months
of any year will result in disqualification of the Trust as a REIT. Enforcement
of the provisions of the Trust's Articles of Incorporation would prevent such
concentration and, therefore, prevent or hinder a change of control. 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 herein, including any addition of a
covenant or other provision providing event risk or similar protection.
EXISTENCE. Except as described above 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 the existence, rights (charter and statutory)
and franchises of the Trust and its Subsidiaries; provided, however, that the
Trust shall not be required to preserve any right or franchise if it determines
that the preservation thereof is no longer desirable in the conduct of the
business of the Trust and its Subsidiaries as a whole and that the loss thereof
is not disadvantageous in any material respect to the Holders of the Debt
Securities of any series (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 of for value their 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 insured against loss or damage in an amount at
least equal to their then full insurable value with financially sound and
reputable insurance companies (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 become delinquent, (i) all taxes,
assessments and governmental charges levied or imposed upon it or any Subsidiary
or upon the income, profits or property of the 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; 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 whose amount,
applicability or validity is being contested in good faith by appropriate
proceedings (Section 1008 of each Indenture).
PROVISION OF FINANCIAL INFORMATION. Whether or not the 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
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reports, quarterly reports and other documents which the Trust would have been
required to file with the Commission pursuant to such Section 13 and 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
Trustee 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).
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
payable on any Debt Security of such series; (b) default in the payment of the
principal of (or premium or Make-Whole Amount, if any, on) any Debt Security of
such series at its Maturity; (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 Indenture (other than a
covenant added to the Indenture solely for the benefit of a series of Debt
Securities issued thereunder other than such series), continued for 60 days
after written notice as provided in the Indenture; (e) default under any bond,
debenture, note, mortgage, indenture or instrument under which there may be
issued or by which there may be secured or evidenced any indebtedness for money
borrowed by the Trust (or by any Subsidiary, the repayment of which the Trust
has guaranteed or for which the Trust is directly responsible or liable as
obligor or guarantor) having an aggregate principal amount outstanding of at
least $10,000,000, whether such indebtedness now exists or shall hereafter be
created, which default shall have resulted in such indebtedness being declared
due and payable prior to the date on which it would otherwise have become due
and payable, without such acceleration having been rescinded or annulled within
10 days after written notice as provided in the Indenture; (f) the entry by a
court of competent jurisdiction of one or more judgments, orders or decrees
against the Trust or any Subsidiary in an aggregate amount (excluding amounts
fully covered by insurance) in excess of $10,000,000 and such judgments, orders
or decrees remain undischarged, unstayed and unsatisfied in an aggregate amount
(excluding amounts fully covered by insurance) in excess of $10,000,000 for a
period of 30 consecutive days; (g) certain events of bankruptcy, insolvency or
reorganization, or court appointment of a receiver, liquidator or trustee of the
Trust or any Significant Subsidiary or for all or substantially all of either of
its property; and (h) any other Event of Default provided with respect to such
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, and premium or Make-Whole Amount,
if any, on, all of the Debt Securities of that series to be due and payable
immediately by written notice thereof to the Trust (and to the Trustee if given
by the Holders). However, at any time after such 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 Trustee, the Holders of not less than a majority in principal amount of
the Outstanding Debt Securities of such series (or of all Debt Securities then
Outstanding under the applicable Indenture, as the case may be) may rescind and
annul such declaration and its consequences if (a) the Trust shall have
deposited with the Trustee all required payments of the principal of (and
premium or Make-Whole Amount, if any) and interest, and any Additional Amounts,
on the Debt Securities of such series (or of all Debt Securities then
Outstanding under the applicable Indenture, as the case may be), plus certain
fees, expenses, disbursements and advances of the Trustee and (b) all Events of
Default, other than the nonpayment of accelerated principal (or specified
portion thereof and the premium or Make-
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Whole Amount, if any) or interest, with respect to the Debt Securities of such
series (or of all Debt Securities then Outstanding under the applicable
Indenture, as the case may be) have been cured or waived as provided in the
Indenture (Section 502 of each Indenture). Each Indenture also provides that the
Holders of not less than a majority in principal amount of the Outstanding Debt
Securities of any series (or of all Debt Securities then Outstanding under the
applicable Indenture, as the case may be) may waive any past default with
respect to such series and its consequences, except a default (x) in the payment
of the principal of (or premium or Make-Whole Amount, if any) or interest or
Additional Amounts payable 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 Holder of each Outstanding Debt
Security affected thereby (Section 513 of each Indenture).
Each Trustee is required to give notice to the Holders of Debt Securities
within 90 days of a default under the applicable Indenture; provided, however,
that such Trustee may withhold notice to the Holders of any series of Debt
Securities of any default with respect to such series (except a default in the
payment of the principal of (or premium or Make-Whole Amount, if any) or
interest or Additional Amounts 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 such 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 such
Indenture or for any remedy thereunder, except in the case of failure of the
Trustee, for 60 days, to act after it has received a written request to
institute proceedings in respect of an Event of Default from the Holders of not
less than 25% in principal amount of the Outstanding Debt Securities of such
series, as well as an offer of reasonable indemnity (Section 507 of each
Indenture). This provision will not prevent, however, any Holder of Debt
Securities from instituting suit for the enforcement of payment of the principal
of (and premium or Make-Whole Amount, if any), interest on and Additional
Amounts payable with respect to, such Debt Securities at the respective due
dates thereof (Section 508 of each Indenture).
MODIFICATION OF THE INDENTURES
Modifications and amendments of either Indenture may be made with the
consent of the Holders of not less than a majority in principal amount of all
Outstanding Debt Securities issued under such Indenture that 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
or Make-Whole Amount, if any), or any installment of principal of or interest or
Additional Amounts payable on, any such Debt Security; (b) reduce the principal
amount of, or the rate or amount of interest on, or any premium or Make-Whole
Amount payable on redemption of, or any Additional Amounts payable with respect
to, any such Debt Security, or reduce the amount of principal of an Original
Issue Discount Security or Make-Whole Amount, if any, 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 (and premium or Make-Whole Amount, 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
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 the 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 such Debt Security
(Section 902 of each Indenture).
The Holders of not less than a majority in principal amount of Outstanding
Debt Securities issued under either Indenture have the right to waive compliance
by the Trust with certain covenants in such Indenture (Section 1012 of each
Indenture).
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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 Indenture in right of payment to the prior payment in full of all
Senior Debt (Sections 1601 and 1602 of the Subordinated Indenture), but the
obligation of the Trust to make payment of the principal and interest on the
Subordinated Securities will not otherwise be affected (Section 1608 of the
Subordinated Indenture). No payment of principal or interest may be made on the
Subordinated Securities at any time if a default on Senior Debt exists that
permits the holders of such Senior Debt to accelerate its maturity and the
default is the subject of judicial proceedings or the Trust receives notice of
the default (Section 1603 of the Subordinated Indenture). After all Senior Debt
is paid in full and until the Subordinated Securities are paid in full, holders
will be subrogated to the rights of holders of Senior Debt to the extent that
distributions otherwise payable to holders have been applied to the payment of
Senior Debt (Section 1607 of the Subordinated Indenture). By reason of such
subordination, in the event of a distribution of assets upon insolvency, certain
general creditors of the Trust may recover more, ratably, than holders of the
Subordinated Securities.
Senior Debt is defined in the Subordinated 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 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, and (3) the
Subordinated Securities (Section 101 of the Subordinated Indenture). At July 31,
1994, Senior Debt aggregated approximately $378 million. There are no
restrictions in the Subordinated Indenture upon the creation of additional
Senior Debt. However, the Senior Indenture contains limitations on incurrence of
indebtedness by the Trust. See " -- Certain Covenants -- SENIOR INDENTURE
LIMITATIONS ON INCURRENCE OF DEBT."
DISCHARGE, DEFEASANCE AND COVENANT DEFEASANCE
Under each Indenture, the Trust may discharge certain obligations to
Holders of any series of Debt Securities issued thereunder that have not already
been delivered to the applicable Trustee for cancellation and that either have
become due and payable or will become due and payable within one year (or
scheduled for redemption within one year) by irrevocably depositing with the
applicable Trustee, in trust, funds in such currency or currencies, currency
unit or units or composite currency or currencies in which such Debt Securities
are payable in an amount sufficient to pay the entire indebtedness on such Debt
Securities in respect of principal (and premium or Make-Whole Amount, if any)
and interest and any Additional Amounts payable to the date of such deposit (if
such Debt Securities have become due and payable) or to the Stated Maturity or
Redemption Date, as the case may be (Section 401 of each Indenture).
Each Indenture provides that, if the provisions of Article Fourteen thereof
are made applicable to the Debt Securities of or within any series pursuant to
Section 301 of such Indenture, the 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
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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
provisions of each Indenture described under " -- Certain Covenants," or, if
provided pursuant to Section 301 of each Indenture, its obligations with respect
to any other covenant, and any omission to comply with such obligations shall
not constitute a default or an Event or 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 currency
units or composite currency or currencies in which such Debt Securities are
payable at Stated Maturity, or Government Obligations (as defined below), or
both, applicable to such Debt Securities which through the scheduled payment of
principal and interest in accordance with their terms will provide money in an
amount sufficient to pay the principal of (and premium or Make-Whole Amount, if
any) and interest on such Debt Securities, and any mandatory sinking fund or
analogous payments thereon, on the scheduled due dates therefor.
Such a trust may only be established if, among other things, the Trust has
delivered to the applicable Trustee an Opinion of Counsel (as specified in each
Indenture) to the effect that the Holders of such Debt Securities will not
recognize income, gain or loss for United States federal income tax purposes as
a result of such defeasance or covenant defeasance and will be subject to United
States federal income tax on the same amounts, in the same manner and at the
same times as would have been the case if such defeasance or covenant defeasance
had not occurred, and such Opinion of Counsel, in the case of defeasance, must
refer to and be based upon a ruling of the Internal Revenue Service or a change
in applicable United States federal income tax laws occurring after the date of
such Indenture (Section 1404 of each Indenture).
"GOVERNMENT OBLIGATIONS" means securities which are (i) direct obligations
of the United States of America or the government which issued the Foreign
Currency in which the Debt Securities of a particular series are payable, for
the payment of which its full faith and credit is pledged or (ii) obligations of
a Person controlled or supervised by and acting as an agency or instrumentality
of the United States of America or the government which issued the Foreign
Currency in which the Debt Securities of such series are payable, the payment of
which is unconditionally guaranteed as a full faith and credit obligation by the
United States of America or such other government, which, in either case, are
not callable or redeemable at the option of the issuer thereof, and shall also
include a depository receipt issued by a bank or trust company as custodian with
respect to any such Government Obligation or a specific payment of interest on
or principal of any such Government Obligation held by such custodian for the
account of the holder of a depository receipt, provided that (except as required
by law) such custodian is not authorized to make any deduction from the amount
payable to the holder of such depository receipt from any amount received by the
custodian in respect of the Government Obligation or the specific payment of
interest on or principal of the Government Obligation evidenced by such
depository receipt (Section 101 of each Indenture).
Unless otherwise provided in the applicable Prospectus Supplement, if after
the 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 either Indenture or the terms of such Debt Security
to receive payment in a currency, currency unit or composite currency other than
that in which such deposit has been made in respect of such Debt Security, or
(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 or Make-Whole Amount, 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 currency, currency unit or composite currency (other than the ECU
or other currency unit) both by the government of the country that issued such
currency and for the settlement of transactions by a central bank or other
public institutions of or within the international banking community, (ii) the
ECU both within the European Monetary System and for the settlement of
transactions by public institutions of or within the European Communities or
(iii) any currency unit or composite currency other than the ECU for the
purposes for which it was established. Unless otherwise provided in the
applicable Prospectus Supplement, all payments of principal of (and premium or
Make-Whole Amount, if any) and interest on any Debt Security that is payable in
a Foreign Currency that
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ceases to be used by its government of issuance shall be made in United States
dollars (Section 101 of each Indenture).
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 either 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 a covenant as to
which there has been covenant defeasance, the amount in such currency, currency
unit or composite currency in which such Debt Securities are payable, and
Government Obligations on deposit with the Trustee, will be sufficient to pay
amounts due on such Debt Securities at the time of their Stated Maturity but may
not be sufficient to pay amounts due on such Debt Securities at the time of the
acceleration resulting from such Event of Default. However, the 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 Capital Stock of the Trust will be set forth in the applicable
Prospectus Supplement relating thereto. Such terms will include whether such
Debt Securities are convertible into Capital Stock of the Trust, 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.
BOOK-ENTRY SYSTEM
The Debt Securities of a series may be issued in whole or in part in the
form of one or more global securities ("Global Securities") that will be
deposited with, or on behalf of a depository (the "Depository") identified in
the Prospectus Supplement relating to such series. Global Securities, if any,
are expected be deposited with The Depository Trust Company, as Depository.
Global Securities may be issued in fully registered form and may be issued in
either temporary or permanent form. 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 such
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 Prospectus Supplement relating to
such series. The Trust expects that unless otherwise indicated in the applicable
Prospectus Supplement 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 directly by the
Trust. Ownership of beneficial interests in such 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 Depository for such Global Security 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
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Securities represented by such Global Security for all purposes under the
applicable Indenture. Except as described 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 represented by such
Global Security registered in their names, will not receive or be entitled to
receive physical delivery of any such Debt Securities in definitive form and
will not be considered the owners or holders thereof under the applicable
Indenture.
Payments of principal of, any premium or Make-Whole Amount 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. None of the Trust,
the Trustee, 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 any Debt Securities or its
nominee, upon receipt of any payment of principal, premium, Make-Whole Amount,
interest or Additional Amounts in respect of the Global Security representing
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 as shown on the records of such
Depository or its nominee. The Trust also expects that payments by Participants
to owners of beneficial interests in such Global Security held through such
Participants will be governed by standing instructions and customary practices,
as is the case with securities held for the account of customers in bearer form
or registered in street name. Such payments will be the responsibility of such
Participants.
If a Depository for any 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 in
exchange for the Global Security representing such Debt Securities. In addition,
the Trust may at any time and in its sole discretion, subject to any limitations
described in the Prospectus Supplement relating to such Debt Securities,
determine not to have any of such Debt Securities represented by one or more
Global Securities and in such event will issue individual Debt Securities in
exchange for the Global Security or Securities representing such Debt
Securities. Individual Debt Securities so issued will be issued in denominations
of $1,000 and integral multiples thereof.
TRUSTEES
NationsBank of Virginia, N.A., and Crestar Bank have lending relationships
with the Trust.
DESCRIPTION OF CAPITAL STOCK
GENERAL
The Trust is authorized to issue 100,000,000 shares of Common Stock, $1 par
value, and 25,000,000 shares of Preferred Stock, no par value. At August 3,
1994, there were 50,210,440 shares of Common Stock outstanding and no shares of
Preferred Stock outstanding.
The following statements with respect to the capital stock of the Trust are
subject to the detailed provisions of the Trust's Restated Articles of
Incorporation, as amended (the "Articles"), and bylaws (the "Bylaws") as
currently in effect. These statements do not purport to be complete, or to give
full effect to the terms of the provisions of statutory or common law, and are
subject to, and are qualified in their entirety by reference to, the terms of
the Articles and Bylaws, which are filed as exhibits to the Registration
Statement.
COMMON STOCK
Holders of Common Stock are entitled to receive dividends when and as
declared by the Board of Directors after payment of, or provision for, full
cumulative dividends on and any required redemptions of shares of Preferred
Stock then outstanding. Holders of Common Stock have one vote per share and
non-cumulative voting rights, which means that holders of more than 50% of the
shares voting can elect all of the directors if they choose to do so, and, in
such event, the holders of the remaining shares will not be able to elect any
directors. In the event of any voluntary or involuntary liquidation or
dissolution of the Trust, holders of Common Stock are entitled to share
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ratably in the distributable assets of the Trust remaining after satisfaction of
the prior preferential rights of the Preferred Stock and the satisfaction of all
debts and liabilities of the Trust. Holders of Common Stock do not have
preemptive rights.
The Transfer Agent for the Common Stock is Mellon Securities Trust Company,
Pittsburgh, Pennsylvania. The Common Stock is traded on the New York Stock
Exchange under the symbol "UDR."
PREFERRED STOCK
The following description of the terms of the Preferred Stock sets forth
certain general terms and provisions of the Preferred Stock to which a
Prospectus Supplement may relate. Specific terms of any series of Preferred
Stock offered by a Prospectus Supplement will be described in that Prospectus
Supplement. The description set forth below is subject to and qualified in its
entirety by reference to the Articles of Amendment to the Articles fixing the
preferences, limitations and relative rights of a particular series of Preferred
Stock.
GENERAL. Under the Articles, the Board of Directors of the Trust is
authorized, without further shareholder action, to provide for the issuance of
up to 25,000,000 shares of Preferred Stock, in one or more series, with such
voting powers and with such designations, preferences and relative,
participating, optional or other special rights, and qualifications, limitations
or restrictions, as the Board of Directors shall approve.
The Preferred Stock will have the dividend, liquidation, redemption,
conversion and voting rights set forth below unless otherwise provided in the
Prospectus Supplement relating to a particular series of Preferred Stock.
Reference is made to the Prospectus Supplement relating to the particular series
of Preferred Stock offered thereby for specific terms, including: (i) the title
and liquidation preference per share of such Preferred Stock and the number of
shares offered; (ii) the price at which such series will be issued; (iii) the
dividend rate (or method of calculation), the dates on which dividends shall be
payable and the dates from which dividends shall commence to accumulate; (iv)
any redemption or sinking fund provisions of such series; (v) any conversion
provisions of such series; and (vi) any additional dividend, liquidation,
redemption, sinking fund and other rights, preferences, privileges, limitations
and restrictions of such series.
The Preferred Stock will, when issued, be fully paid and nonassessable.
Unless otherwise specified in the Prospectus Supplement relating to a particular
series of Preferred Stock, each series will rank on a parity as to dividends and
distributions in the event of a liquidation with each other series of Preferred
Stock and, in all cases, will be senior to the Common Stock.
DIVIDEND RIGHTS. Holders of Preferred Stock of each series will be entitled
to receive, when, as and if declared by the Board of Directors, out of assets of
the Trust legally available therefor, cash dividends at such rates and on such
dates as are set forth in the Prospectus Supplement relating to such series of
Preferred Stock. Such rate may be fixed or variable or both and may be
cumulative, noncumulative or partially cumulative.
If the applicable Prospectus Supplement so provides, as long as any shares
of Preferred Stock are outstanding, no dividends will be declared or paid or any
distributions be made on the Common Stock, other than a dividend payable in
Common Stock, unless the accrued dividends on each series of Preferred Stock
have been fully paid or declared and set apart for payment and the Trust shall
have set apart all amounts, if any, required to be set apart for all sinking
funds, if any, for each series of Preferred Stock.
If the applicable Prospectus Supplement so provides, when dividends are not
paid in full upon any series of Preferred Stock and any other series of
Preferred Stock ranking on a parity as to dividends with such series of
Preferred Stock, all dividends declared upon such series of Preferred Stock and
any other series of Preferred Stock ranking on a parity as to dividends will be
declared pro rata so that the amount of dividends declared per share on such
series of Preferred Stock and such other series will in all cases bear to each
other the same ratio that accrued dividends per share on such series of
Preferred Stock and such other series bear to each other.
Each series of Preferred Stock will be entitled to dividends as described
in the Prospectus Supplement relating to such series, which may be based upon
one or more methods of determination. Different series of Preferred Stock may be
entitled to dividends at different dividend rates or based upon different
methods of determination. Except as provided in the applicable Prospectus
Supplement, no series of Preferred Stock will be entitled to participate in the
earnings or assets of the Trust.
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RIGHTS UPON LIQUIDATION. In the event of any voluntary or involuntary
liquidation, dissolution or winding up of the Trust, the holders of each series
of Preferred Stock will be entitled to receive out of the assets of the Trust
available for distribution to shareholders the amount stated or determined on
the basis set forth in the Prospectus Supplement relating to such series, which
may include accrued dividends, if such liquidation, dissolution or winding up is
involuntary or may equal the current redemption price per share (otherwise than
for the sinking fund, if any, provided for such series) provided for such series
set forth in such Prospectus Supplement, if such liquidation, dissolution or
winding up is voluntary, and on such preferential basis as is set forth in such
Prospectus Supplement. If, upon any voluntary or involuntary liquidation,
dissolution or winding up of the Trust, the amounts payable with respect to
Preferred Stock of any series and any other shares of stock of the Trust ranking
as to any such distribution on a parity with such series of Preferred Stock are
not paid in full, the holders of Preferred Stock of such series and of such
other shares will share ratably in any such distribution of assets of the Trust
in proportion to the full respective preferential amounts to which they are
entitled or on such other basis as is set forth in the applicable Prospectus
Supplement. The rights, if any, of the holders of any series of Preferred Stock
to participate in the assets of the Trust remaining after the holders of other
series of Preferred Stock have been paid their respective specified liquidation
preferences upon any liquidation, dissolution or winding up of the Trust will be
described in the Prospectus Supplement relating to such series.
REDEMPTION. A series of Preferred Stock may be redeemable, in whole or in
part, at the option of the Trust, and may be subject to mandatory redemption
pursuant to a sinking fund, in each case upon terms, at the times, the
redemption prices and for the types of consideration set forth in the Prospectus
Supplement relating to such series. The Prospectus Supplement relating to a
series of Preferred Stock which is subject to mandatory redemption shall specify
the number of shares of such series 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 any accrued and unpaid dividends
thereon to the date of redemption.
If, after giving notice of redemption to the holders of a series of
Preferred Stock, the Trust deposits with a designated bank funds sufficient to
redeem such Preferred Stock, then from and after such deposit, all shares called
for redemption will no longer be outstanding for any purpose, other than the
right to receive the redemption price and the right to convert such shares into
other classes of capital stock of the Trust. The redemption price will be stated
in the Prospectus Supplement relating to a particular series of Preferred Stock.
Except as indicated in the applicable Prospectus Supplement, the Preferred
Stock is not subject to any mandatory redemption at the option of the holder.
SINKING FUND. The Prospectus Supplement for any series of Preferred Stock
will state the terms, if any, of a sinking fund for the purchase or redemption
of that series.
CONVERSION RIGHTS. The Prospectus Supplement for any series of Preferred
Stock will state the terms, if any, on which shares of that series are
convertible into shares of Common Stock or another series of Preferred Stock.
The Preferred Stock will have no preemptive rights.
VOTING RIGHTS. Except as indicated in the Prospectus Supplement relating to
a particular series of Preferred Stock, or except as expressly required by
Virginia law, a holder of Preferred Stock will not be entitled to vote. Except
as indicated in the Prospectus Supplement relating to a particular series of
Preferred Stock, in the event the Trust issues full shares of any series of
Preferred Stock, each such share will be entitled to one vote on matters on
which holders of such series of Preferred Stock are entitled to vote.
Under Virginia law, the affirmative vote of the holders of a majority of
the outstanding shares of all series of Preferred Stock, voting as a separate
voting group, will be required for (i) the authorization of any class of stock
ranking prior to or on parity with Preferred Stock or the increase in the number
of authorized shares of any such stock, (ii) any increase in the number of
authorized shares of Preferred Stock and (iii) certain amendments to the
Articles that may be adverse to the rights of Preferred Stock outstanding.
TRANSFER AGENT AND REGISTRAR. The transfer agent, registrar and dividend
disbursement agent for a series of Preferred Stock will be selected by the Trust
and be described in the applicable Prospectus Supplement. The registrar for
shares of Preferred Stock will send notices to shareholders of any meetings at
which holders of Preferred Stock have the right to vote on any matter.
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DIVIDEND RESTRICTIONS
Covenants in its loan agreements with certain lenders restrict the payment
of distributions in excess of the sum of (i) current "cash flow," (ii) varying
additional amounts and (iii) the proceeds of Common Stock offerings subsequent
to various dates, all as defined in the particular loan agreement. The covenants
do not prohibit the Trust from paying distributions in order to continue its
qualification as a REIT under the Code.
AFFILIATED TRANSACTIONS
The Virginia Stock Corporation Act contains provisions governing
"Affiliated Transactions" designed to deter uninvited takeovers of Virginia
corporations. These provisions, with several exceptions discussed below, require
approval of material acquisition transactions between a Virginia corporation and
any holder of more than 10% of any class of its outstanding voting shares (an
"Interested Shareholder") by the holders of at least two-thirds of the remaining
voting shares. For three years following the time that the Interested
Shareholder becomes an owner of 10% of the outstanding voting shares, Virginia
corporations cannot engage in an Affiliated Transaction with such Interested
Shareholder without approval of two-thirds of the voting shares other than those
shares beneficially owned by the Interested Shareholder, and majority approval
of the "Disinterested Directors." At the expiration of the three year period,
the statute requires approval of Affiliated Transactions by two-thirds of the
voting shares other than those beneficially owned by the Interested Shareholder
absent an exception. The principal exceptions to the special voting requirement
apply to transactions proposed after the three year period has expired and
require either that the transaction be approved by a majority of the
corporation's Disinterested Directors or that the transaction satisfy the
fair-price requirements of the law.
The Virginia Stock Corporation Act also provides that shares acquired in a
transaction that would cause the acquiring person's voting strength to cross any
of three thresholds (20%, 33%, or 50%) have no voting rights unless granted by a
majority vote of shares not owned by the acquiring person or any officer or
employee-director of the Trust. An acquiring person may require the Trust to
hold a special meeting of shareholders to consider the matter within 50 days of
its request.
REDEMPTION AND RESTRICTIONS ON TRANSFER
In order to preserve the Trust's status as a REIT as defined in the Code,
the Trust can redeem or stop the transfer of its shares. The Articles provide
that the Trust is organized to qualify as a REIT. Because the Code provides that
the concentration of more than 50% in value of the direct or indirect ownership
of its shares in five or fewer individual shareholders during the last six
months of any year would result in the disqualification of the Trust as a REIT,
the Articles provide that the Trust shall have the power (i) to redeem that
number of concentrated shares sufficient in the opinion of the Board of
Directors of the Trust to maintain or bring the direct or indirect ownership of
shares into conformity with the requirements of the Code, and (ii) to stop the
transfer of shares to any person whose acquisition thereof would, in the opinion
of the Trust's Board of Directors, result in such disqualification. The per
share redemption price of any shares redeemed by the Trust pursuant to this
provision shall be the last reported sale price for the shares as of the
business day preceding the day on which notice of redemption is given. The Board
of Directors of the Trust can require shareholders to disclose in writing to the
Trust such information with respect to ownership of its shares as it deems
necessary to comply with the REIT provisions of the Code.
REIT QUALIFICATION
The Trust operates in a manner intended to qualify for treatment as a REIT
under the Code. In general, a REIT which distributes to its shareholders at
least 95% of its taxable income (other than net capital gain) for a taxable year
and which meets certain other conditions will not be subject to federal income
taxation on income (including net capital gain) distributed for that year. If
the Trust fails to qualify in any taxable year, it will be taxed for federal
income tax purposes as a corporation for that year and distributions to
shareholders will not be deductible by the Trust in computing its taxable
income. Under such circumstances, the Trust also will be disqualified from being
treated as a REIT under the Code for the ensuing four fiscal years. Failure to
qualify could result in the Trust's incurring indebtedness and perhaps
liquidating investments in order to pay the resultant taxes.
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PLAN OF DISTRIBUTION
The Trust may sell Offered Securities to or through underwriters or may
sell Offered Securities to investors directly or through designated 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, or from time to time at market prices prevailing
at the time of sale, at prices related to such prevailing market prices or at
negotiated prices. The Trust also may, from time to time, authorize underwriters
acting as agents to offer and sell the Offered Securities upon the terms and
conditions set forth in any 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 (which may be changed from time to time) from the underwriters
and/or 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 the applicable Prospectus Supplement, the Trust will
authorize dealers acting as the Trust's agents to solicit offers by certain
institutions to purchase Offered Securities from the Trust at the public
offering price set forth in such Prospectus Supplement pursuant to Delayed
Delivery Contracts ("Contracts") providing for payment and delivery on the date
or dates stated in such Prospectus Supplement. Each Contract will be for an
amount not less than, and the principal amount of Offered Securities sold
pursuant to Contracts shall not be less nor more than, the respective amounts
stated in such Prospectus Supplement. Institutions with which Contracts, when
authorized, may be made include commercial and savings banks, insurance
companies, pension funds, investment companies, educational and charitable
institutions and other institutions, but will in all cases be subject to the
approval of the Trust. Contracts will not be subject to any conditions except
(i) the purchase by an institution of the Offered Securities covered by its
Contract 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)
the Trust shall have sold to such underwriters the total principal amount of the
Offered Securities less the principal amount thereof covered by Contracts. A
commission indicated in the Prospectus Supplement will be paid to agents and
underwriters soliciting purchases of Offered Securities pursuant to Contracts
accepted by the Trust. Agents and underwriters shall have no responsibility in
respect of the delivery or performance of Contracts.
Certain of the underwriters and their affiliates may be customers of,
engage in transactions with, and perform services for, the Trust in the ordinary
course of business.
LEGAL OPINIONS
The validity of the Offered Securities will be passed upon for the Trust by
Hunton & Williams, Richmond, Virginia. Brown & Wood, New York, New York will act
as counsel to any underwriters, dealers or agents.
EXPERTS
The financial statements of the Trust incorporated by reference in its
annual report on Form 10-K for the year ended December 31, 1993 have been
audited by Ernst & Young LLP, independent auditors, as set forth in their report
thereon included therein and incorporated herein by reference. Such financial
statements are incorporated herein by reference in reliance upon such report
given upon the authority of such firm as experts in accounting and auditing.
19
<PAGE>
The combined historical summary of gross income and direct operating
expenses of Holly Tree Park Apartments, Knolls at Newgate and Mallard Green
Apartments, included in the Trust's Current Report on Form 8-K, dated May 26,
1994, incorporated by reference in this Prospectus has been audited by BDO
Seidman, independent certified public accountants, to the extent and for the
periods set forth in their report incorporated herein by reference, and are
incorporated herein in reliance upon such report given upon the authority of
said firm as experts in auditing and accounting. The combined statement of
rental operations of Clover Financial Partnership Properties, included in the
Trust's Current Report on Form 8-K, dated May 26, 1994, incorporated by
reference herein, has been incorporated herein in reliance upon the report dated
May 19, 1994, of Alloy, Silverstein, Shapiro, Adams, Mulford & Co., independent
auditors, also incorporated by reference herein, and upon the authority of such
firm as experts in accounting and auditing. The statement of rental operations
of The Shire Apartments, included in the Trust's Current Report on Form 8-K,
dated April 15, 1994, incorporated by reference herein, has been incorporated
herein in reliance upon the report dated May 12, 1994, of L. P. Martin &
Company, P.C., independent auditors, also incorporated by reference herein, and
upon the authority of such firm as experts in accounting and auditing. The
statement of rental operations of Lakewood Place Apartments, included in the
Trust's Current Report on Form 8-K, dated April 15, 1994, incorporated by
reference herein, has been incorporated herein in reliance upon the report dated
May 13, 1994, of L. P. Martin & Company, P.C., independent auditors, also
incorporated by reference herein, and upon the authority of such firm as experts
in accounting and auditing. The statements of rental operations of River Place
Apartments and Lakeside North Apartments, included in the Trust's Current Report
on Form 8-K, dated April 15, 1994, incorporated by reference herein, have been
incorporated herein in reliance upon the reports dated May 24, 1994, of L. P.
Martin & Company, P.C., independent auditors, also incorporated by reference
herein, and upon the authority of such firm as experts in accounting and
auditing. The statement of rental operations of Walnut Creek Apartments,
included in the Trust's Current Report on Form 8-K, dated May 17, 1994,
incorporated by reference herein, has been incorporated herein in reliance upon
the report dated June 24, 1994, of L. P. Martin & Company, P.C., independent
auditors, also incorporated by reference herein, and upon the authority of such
firm as experts in accounting and auditing.
20
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS SUPPLEMENT OR THE
PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT
BE RELIED UPON AS HAVING BEEN AUTHORIZED. THIS PROSPECTUS SUPPLEMENT AND THE
PROSPECTUS DO NOT CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO
BUY ANY SECURITIES OTHER THAN THE SECURITIES DESCRIBED IN THIS PROSPECTUS
SUPPLEMENT OR AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY SUCH
SECURITIES IN ANY CIRCUMSTANCES IN WHICH SUCH OFFER OR SOLICITATION IS UNLAWFUL.
NEITHER THE DELIVERY OF THIS PROSPECTUS SUPPLEMENT OR THE PROSPECTUS NOR ANY
SALE MADE HEREUNDER OR THEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY
IMPLICTION THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE TRUST SINCE THE
DATE HEREOF OR THEREOF OR THAT THE INFORMATION CONTAINED HEREIN OR THEREIN IS
CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE OF SUCH INFORMATION.
TABLE OF CONTENTS
PROSPECTUS SUPPLEMENT
PAGE
The Trust....................................... S-2
Recent Developments............................. S-2
Use of Proceeds................................. S-3
Capitalization.................................. S-3
Selected Financial Data......................... S-4
Management's Discussion and
Analysis of Financial Condition
and Operations................................ S-6
Business........................................ S-8
Description of Debentures....................... S-9
Underwriting.................................... S-12
PROSPECTUS
Available Information............................ 2
Incorporation of Certain Documents by
Reference...................................... 2
The Trust........................................ 3
Use of Proceeds.................................. 3
Certain Ratios................................... 3
Description of Debt Securities................... 4
Description of Capital Stock..................... 15
Plan of Distribution............................. 19
Legal Opinions................................... 19
Experts.......................................... 19
$150,000,000
UNITED DOMINION LOGO
8 1/2% DEBENTURES DUE
SEPTEMBER 15, 2024
PROSPECTUS SUPPLEMENT
GOLDMAN, SACHS & CO.
MERRILL LYNCH & CO.
NATIONSBANC CAPITAL MARKETS, INC.
