Rule 424(b)(5)
File No. 33-55159
<PAGE>
SUBJECT TO COMPLETION
PRELIMINARY PROSPECTUS SUPPLEMENT DATED APRIL 6, 1995
PROSPECTUS SUPPLEMENT
(TO PROSPECTUS DATED SEPTEMBER 20, 1994)
4,000,000 SHARES
(UDRT LOGO)
% SERIES A CUMULATIVE REDEEMABLE PREFERRED STOCK
(NO PAR VALUE)
(LIQUIDATION PREFERENCE $25.00 PER SHARE)
Dividends on the % Series A Cumulative Redeemable Preferred Stock, no
par value (the "Preferred Stock"), of the Trust will be cumulative from the date
of original issue and will be payable quarterly on or about the fifteenth day of
January, April, July and October of each year, commencing July 15, 1995, at the
rate of % of the liquidation preference per annum. See "Description of
Preferred Stock -- Dividends."
The Preferred Stock is not redeemable prior to April , 2000. On and after
April , 2000, the Preferred Stock may be redeemed for cash at the option of
the Trust, in whole or in part, at a redemption price of $25.00 per share, plus
accrued and unpaid dividends, if any, thereon. The redemption price (other than
the portion thereof consisting of accrued and unpaid dividends) is payable
solely out of the sale proceeds of other capital stock of the Trust, which may
include shares of other series of preferred stock. The Preferred Stock has no
stated maturity and will not be subject to any sinking fund or mandatory
redemption (except pursuant to the ownership restrictions referred to below) and
will not be convertible into any other securities of the Trust. See "Description
of Preferred Stock -- Redemption." However, the Trust may redeem shares of
Preferred Stock at any time in order to preserve its status as a real estate
investment trust ("REIT") for federal income tax purposes. See "Description of
Capital Stock -- Redemption and Restrictions on Transfer" in the accompanying
Prospectus.
Application has been made to list the Preferred Stock on the New York Stock
Exchange.
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.
[CAPTION]
<TABLE>
PRICE TO UNDERWRITING PROCEEDS TO
PUBLIC (1) DISCOUNT (2) TRUST (3)
<S> <C> <C> <C>
Per Share............................................. $25.00 $ $
Total (4)............................................. $100,000,000 $ $
</TABLE>
(1) Plus accrued dividends, if any, from the date of original issue.
(2) The Trust has agreed to indemnify the several Underwriters against certain
liabilities, including liabilities under the Securities Act of 1933. See
"Underwriting."
(3) Before deducting expenses payable by the Trust estimated at $250,000.
(4) The Trust has granted the several Underwriters an option to purchase up to
an additional 600,000 shares to cover over-allotments. If all such shares
are purchased, the total Price to Public, Underwriting Discount and Proceeds
to Trust will be $115,000,000, $ and $ , respectively. See
"Underwriting."
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 shares of Preferred Stock are offered by the several Underwriters,
subject to prior sale, when, as and if delivered to and accepted by them,
subject to approval of certain legal matters by counsel for the Underwriters.
The Underwriters reserve the right to withdraw, cancel or modify such offer and
to reject orders in whole or in part. It is expected that delivery of the shares
will be made in New York, New York on or about April , 1995.
MERRILL LYNCH & CO.
ALEX. BROWN & SONS
INCORPORATED
DEAN WITTER REYNOLDS INC.
A.G. EDWARDS & SONS, INC.
GOLDMAN, SACHS & CO.
The date of this Prospectus Supplement is April , 1995.
<PAGE>
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE PREFERRED STOCK
OFFERED HEREBY AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN
MARKET. SUCH TRANSACTIONS MAY BE EFFECTED ON THE NEW YORK STOCK EXCHANGE OR
OTHERWISE. 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 139 properties include 122 apartment communities, containing
29,761 units, and 13 shopping centers, two warehouse/industrial properties and
two office properties. 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 two types of apartments:
newer properties than can be acquired at discounts from replacement cost and
properties that can be upgraded and repositioned by capital improvements and
intensive management. Beginning in 1991, the Trust embarked on a major expansion
of its apartment portfolio involving (i) the acquisition of apartment properties
having high occupancy levels and not requiring substantial renovation, and (ii)
entry into new markets, most recently the Fort Lauderdale/Miami area and
Memphis, Tennessee. 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 84 apartment properties containing
21,084 units at a total cost of approximately $669 million.
The Trust, a Virginia corporation, has its principal office at 10 South
Sixth 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
ACQUISITIONS
Since January 1, 1995, the Trust has acquired two apartment communities
(one in Memphis, Tennessee and the other in Atlanta, Georgia) aggregating 479
apartment units at a total cost of $16.4 million, including closing costs. These
acquisitions were made in part on internal analyses showing a weighted average
first year return on average investment of 10.1%.
In addition, the Trust has executed a contract to purchase a portfolio of
nine apartment properties containing 1,596 units for a total purchase price of
$65.5 million, excluding closing costs. Five of the properties containing 920
units are located in Maryland, three of the properties containing 532 units are
located in Virginia and one property containing 144 units is located in
Delaware. Closing on this portfolio is expected to occur during the second
quarter of 1995. If the transaction is consummated as planned, it is expected to
have an immediate positive impact on the Trust's operating results. While each
of the individual properties in the portfolio was valued based on a different
estimated first year return, when taken as a whole, the acquisition will be made
based upon internal analyses showing a weighted average first year return on
average investment of 10.0%. There can be no assurance that this proposed
acquisition will be consummated.
DISPOSITIONS
The Trust has entered into a contract to sell or exchange four strip
shopping centers located in Richmond, Virginia. The purchaser, a REIT, will pay
the Trust $12.2 million in cash and issue $9.0 million stated value of
convertible preferred stock. Closing on this transaction is scheduled to occur
prior to June 30, 1995.
In addition, the Trust has entered into separate contracts with unrelated
purchasers to sell or exchange three apartment properties containing 302 units
for an aggregate consideration of $10.1 million. These transactions are
scheduled to close prior to May 1, 1995. The Trust has also contracted to sell
land parcels at two of the shopping centers mentioned in the
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<PAGE>
preceding paragraph at an aggregate cash consideration of $2.4 million. These
land transactions are scheduled to close by September 30, 1995.
There can be no assurance that any of these proposed transactions will be
consummated.
FINANCING
In February, 1995, the Trust sold 1,360,000 shares of Common Stock to a
group of institutional investors at a price of $13 1/8 per share.
The Trust anticipates that it will continue to finance its acquisition
program using a combination of debt, equity and convertible securities.
USE OF PROCEEDS
The net proceeds to the Trust from the sale of the 4,000,000 shares of
Preferred Stock offered hereby are estimated at $96,600,000 ($111,100,000 if the
Underwriters' over-allotment option is exercised in full). The Trust presently
intends to use the net proceeds (i) to fund the $65,500,000 purchase price of a
portfolio of nine properties as described under "Recent
Developments -- Acquisitions" and (ii) to repay $31,100,000 of notes payable
representing amounts outstanding under the Trust's bank lines of credit, having
a current weighted average interest rate of 6.87%, which are payable on demand.
The remaining net proceeds will be applied to the acquisition of additional
properties as suitable opportunities arise. Pending such use, the Trust will
reinvest the net proceeds in short-term money market instruments bearing
interest at market rates.
CAPITALIZATION
The following table sets forth the capitalization of the Trust at December
31, 1994, and as adjusted to give effect to (i) the issuance of 4,000,000 shares
of Preferred Stock offered hereby and the application of a portion of the net
proceeds thereof and (ii) the sale of 1,360,000 shares of Common Stock in
February, 1995. The table should be read in conjunction with the Trust's
consolidated financial statements incorporated herein by reference.
<TABLE>
<CAPTION>
DECEMBER 31, 1994
HISTORICAL AS ADJUSTED
<S> <C> <C>
(IN THOUSANDS)
Debt:
Mortgage notes payable.............................. $ 158,449 $ 158,449
8 1/2% Debentures due September 15, 2024............ 150,000 150,000
7 1/4% Notes due April 1, 1999...................... 75,000 75,000
Other notes payable................................. 143,215 119,065
Total debt....................................... 526,664 502,514
Shareholders' equity:
Preferred Stock, no par value; 25,000,000 shares
authorized:
% Series A Cumulative Redeemable Preferred
Stock, no shares issued and outstanding
(4,000,000 as adjusted).......................... -- 100,000
Common Stock, $1 par value;
100,000,000 shares authorized
50,355,640 shares issued and outstanding
(51,715,640 as adjusted)......................... 50,356 51,716
Additional paid-in capital.......................... 410,797 423,849
Notes receivable from officer shareholders.......... (5,991) (5,991)
Distributions in excess of net income............... (98,194) (98,194)
Total shareholders' equity....................... $ 356,968 $ 471,380
Total capitalization........................... $ 883,632 $ 973,894
</TABLE>
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SELECTED FINANCIAL DATA
The following table sets forth selected financial data for the Trust and
should be read in conjunction with the consolidated financial statements of the
Trust and related notes incorporated herein by reference.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
1990 1991 1992 1993 1994
(IN THOUSANDS, EXCEPT RATIO INFORMATION AND PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
OPERATING DATA
Income:
Income from property operations:
Rental income............................ $ 44,042 $ 51,250 $ 63,202 $ 89,084 $139,972
Property operating expenses.............. 17,969 20,956 26,503 37,859 58,649
Depreciation of real estate owned........ 10,464 12,845 15,732 19,764 29,049
15,609 17,449 20,967 31,461 52,274
Interest and other income.................. 273 79 1,402 708 756
15,882 17,528 22,369 32,169 53,030
Expenses:
Interest................................... 9,435 11,859 11,697 16,938 28,303
General and administrative................. 1,718 1,872 2,231 3,349 5,021
Other depreciation and amortization........ 173 219 300 596 588
11,326 13,950 14,228 20,883 33,912
Income before gains (losses) on investments
and extraordinary item..................... 4,556 3,578 8,141 11,286 19,118
Gains (losses) on sales of investments....... 417 26 -- (89) 108
Provision for possible investment losses..... -- -- (1,564) -- --
Income before extraordinary item............. 4,973 3,604 6,577 11,197 19,226
Extraordinary item -- early
extinguishment of debt..................... (103) (35) (242) -- (89)
Net income................................... $ 4,870 $ 3,569 $ 6,335 $ 11,197 $ 19,137
Net income per share:
Before extraordinary item.................. $ .21 $ .14 $ .19 $ .29 $ .41
Extraordinary item......................... -- -- (.01) -- --
$ .21 $ .14 $ .18 $ .29 $ .41
Weighted average number of shares
outstanding................................ 23,238 24,642 34,604 38,202 46,182
Distributions declared....................... $ 14,402 $ 15,872 $ 23,271 $ 27,988 $ 37,539
Distributions declared per share............. .62 .63 .66 .70 .78
OTHER DATA
Funds from operations(1)..................... $ 15,231 $ 17,158 $ 24,185 $ 31,658 $ 49,212
Ratio of earnings to fixed charges (2)(3).... 1.43x 1.27x 1.54x 1.64x 1.69x
Ratio of funds from operations to fixed
charges (1)(3)............................. 2.43x 2.32x 3.00x 2.80x 2.71x
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31,
1990 1991 1992 1993 1994
<S> <C> <C> <C> <C> <C>
BALANCE SHEET DATA
Real estate owned, at cost................... $294,205 $361,503 $454,115 $582,213 1,007,599
Total assets................................. 259,532 314,473 390,365 505,840 911,913
Mortgage and other notes payable............. 117,703 168,346 181,121 229,420 526,664
Convertible subordinated debentures.......... 14,987 -- -- -- --
Shareholders' equity......................... 118,154 136,152 197,677 259,963 356,968
</TABLE>
(1) 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.
(2) For purposes of computing this ratio, earnings consist of income before
extraordinary item plus fixed charges other than capitalized interest.
(3) Fixed charges consist of interest on borrowed funds (including capitalized
interest) and amortization of debt discount and expense.
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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.
Beginning in 1995, the Trust will implement the new definition of funds
from operations recently adopted by the
National Association of Real Estate Investment Trusts. If this definition had
been available for adoption in 1994, the Trust's reported funds from operations
would have been approximately $1.0 million lower than under the definition used
by the Trust.
YEAR ENDED DECEMBER 31, 1994
For 1994, the Trust reported significant increases over 1993 in rental
income, income from property operations, income before gains (losses) on
investments and extraordinary item, net income and funds from operations. Since
the beginning of 1993, the Trust acquired 15,450 apartment units (63 apartment
communities) representing a 112% expansion in the number of apartment units
owned during that period. These additional apartment units provided a
substantial portion of the reported increases noted above. However, the improved
performance of the Trust's mature group of 13,832 apartment units (57 apartment
communities) acquired prior to 1993 also contributed to the increases,
particularly when considered on a per share basis. The Trust considers an
apartment community to be mature after it has been owned for a full calendar
(fiscal) year.
For 1994, the Trust's mature apartment properties provided approximately
53% of the Trust's rental income and 51% of its net operating income (rental
income less rental expenses). Total rental income from these units grew 6.2% in
1994 reflecting an increase in economic occupancy to 94.3% compared to 91.6% for
1993 and growth in average rents and other income of 3.3%. The improvement in
occupancy reflected stronger apartment markets throughout the Trust's region.
Rental expenses at these properties increased 2.3% resulting in a decrease in
the operating expense ratio (the ratio of rental expenses to rental income) of
1.7% to 44.0%. The increase in rental expenses was moderated by lower
advertising, rental promotions, electricity, and interior painting and cleaning
expenses caused by the combination of stronger occupancy and lower tenant
turnover. Turnover (measured by move-outs) was 57% for 1994. The combination of
increased occupancy, higher rents and only a moderate operating expense increase
led to an increase in net operating income from these mature apartment units of
approximately $3.6 million or 9.5%. For the 15,450 apartments in the 63
apartment communities acquired by the Trust since the beginning of 1993, average
occupancy was 92.8% and the operating expense ratio was 43.1% during 1994. For
the 29,282 apartments in the 120 communities owned on December 31, 1994,
occupancy averaged 93.7% and the operating expense ratio was 43.6% for the full
year 1994. For 1993, the 17,914 units then owned had occupancy of 91.5% and an
expense ratio of 45.5% for that year. For 1994, net operating income from
commercial properties increased $221,000 or 3% over 1993.
For 1994, depreciation expense increased $9.3 million with substantially
all of the increase attributable to the portfolio expansion that has occurred
over the past 24 months. Interest expense increased approximately $11.4 million
in 1994 over 1993. The Trust used both debt and equity to finance its growth
over the past two years; however, the Trust used more debt relative to equity in
1994 than it did in 1993. The increase in interest expense of approximately $.17
per share also reflects the rising interest rate environment of 1994 when rates
were generally higher than in 1993.
LIQUIDITY AND CAPITAL RESOURCES
As a qualified REIT, the Trust distributes a substantial portion of its
cash flow to its shareholders in the form of dividends. Over the past few years,
the Trust has sought to reduce its payout ratio (the ratio of distributions
declared per share to funds from operations) from above 90% to approximately
75%. For 1994, the dividend payout ratio was 73% compared to 84% for 1993 and
94% for 1992. The Trust presently intends to maintain a dividend payout ratio in
the 75%-80% range and to retain sufficient cash to cover its normal operating
needs, including routine replacements. For 1994, the Trust's cash flow from
operating activities exceeded cash distributions paid to shareholders by
approximately $19.5 million. The Trust utilizes a variety of primarily external
financing sources to fund portfolio growth, major capital improvement programs
and balloon debt payments. The Trust has frequently utilized its bank lines of
credit to temporarily finance these expenditures and has subsequently replaced
this short-term bank debt with longer term debt or equity.
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<PAGE>
The Trust has, from time to time, used derivative instruments to
synthetically alter on-balance sheet liabilities or to hedge anticipated
financing transactions. No such derivative contracts were outstanding at
December 31, 1994. Derivative contracts did not have a material impact on
results of operations during the three years then ended.
For 1994, the Trust's cash flow from operating activities increased
substantially as a result of the significant expansion of the Trust's portfolio
as discussed below and above under "Results of Operations".
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. During the year, the Trust added one bank to its lending group and
expanded its total bank lines of credit to $103.5 million. On April 7, 1994, the
Trust completed a $75 million public offering of 7 1/4% Senior Notes due April
1, 1999. The Notes were priced at 99.833% to yield 7.29% to maturity. The
proceeds of the offering aggregated $74.3 million. Near the end of June, 1994
the Trust completed a public offering of 8,479,400 shares of its Common Stock at
$14.25 per share. Net proceeds of the offering, after deducting underwriting
commissions and direct offering costs, were approximately $114 million. On
September 27, 1994, the Trust completed a $150 million public offering of 8 1/2%
Debentures due September 15, 2024. The Debentures include an investor "put"
feature which grants each Debentureholder a one-time option to redeem Debentures
at the end of 10 years. The Debentures were priced at 99.689% to yield 8.55% to
maturity. In anticipation of this transaction, the Trust entered into two
interest rate hedge transactions involving futures contracts in an effort to
lock-in the interest rate applicable to the Debentures. These interest rate
protection agreements were terminated at the time the Debentures were issued and
had the economic effect of reducing the interest rate to 8.22% for the initial
10 years of the term. Net proceeds of the Debenture sale approximated $148.4
million. Also during 1994, the Trust completed new tax-exempt multifamily
housing bond financings or assumed such bond financings in connection with
certain acquisitions in the aggregate amount of approximately $71 million ($12
million of which was defeased pending refunding).
During 1994, the Trust acquired 26 properties (one of which was
subsequently sold) in a portfolio purchase for approximately $171 million. Also
during the year the Trust acquired 21 additional apartment properties containing
6,115 units for approximately $238 million which includes approximately $56
million of mortgage or tax-exempt bond financings encumbering the properties
acquired.
During 1994, the Trust also made approximately $18.9 million of capital
improvements to its property portfolio. This amount includes approximately $7.2
million of improvements at the Trust's 13,832 mature apartment units that had
been owned since the beginning of 1993. Excluding six properties that were
acquired in the latter part of 1992 and which still were undergoing
rehabilitation in 1994, the remaining 12,069 mature units averaged $299 per unit
in capital expenditures.
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.
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<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 two types of
apartment properties: newer properties that can be acquired at discounts from
replacement cost and properties that can be upgraded and repositioned by capital
improvements and intensive management. Over the past few years, the Trust has
also expanded into new geographic markets in contiguous states, most notably
Florida. Since the beginning of 1991, the Trust has acquired 84 apartment
properties containing 21,084 units at a total cost of approximately $669
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 December 31, 1994, approximately $750 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 1994 over 1993, 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 strong, averaging
3.1% in 1994, the highest of the four Census Bureau regions
and approximately 50% higher than the national average.
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<PAGE>
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 racquetball courts. The average cost for the
Trust's apartments, including all renovations and refurbishment costs, was
approximately $31,700 per unit at December 31, 1994. During the fourth quarter
of 1994, apartment occupancy averaged 93.9% overall and 95.1% for the mature
13,832 units which were acquired prior to 1993.
The following chart shows the geographic distribution of the Trust's
apartment properties.
<TABLE>
<CAPTION>
PERCENTAGE
NUMBER OF NUMBER OF
APARTMENT OF APARTMENT
PROPERTIES UNITS UNITS
<S> <C> <C> <C>
Columbia, South Carolina.......................... 11 3,218 11%
Richmond, Virginia................................ 12 3,170 11
Baltimore/Washington.............................. 11 2,621 9
Raleigh, North Carolina........................... 8 2,440 8
Charlotte, North Carolina......................... 12 2,334 8
Tampa/Clearwater, Florida......................... 7 1,999 7
Orlando, Florida.................................. 6 1,773 6
Atlanta, Georgia.................................. 6 1,634 5
Greenville/Spartanburg, South Carolina............ 7 1,330 4
Hampton Roads, Virginia (1)....................... 5 1,140 4
Memphis, Tennessee................................ 4 935 3
Wilmington, North Carolina........................ 4 889 3
Miami/Fort Lauderdale, Florida.................... 4 884 3
Nashville, Tennessee.............................. 3 842 3
Greensboro, North Carolina........................ 2 447 1
Other Florida..................................... 4 1,112 4
Other North Carolina.............................. 4 841 3
Other Virginia.................................... 4 570 2
Other Georgia..................................... 2 468 2
Other South Carolina.............................. 2 408 1
Alabama........................................... 2 382 1
Delaware.......................................... 2 324 1
Total........................................ 122 29,761 100%
</TABLE>
(1) The Norfolk/Virginia Beach/Newport News/Hampton area.
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DESCRIPTION OF PREFERRED STOCK
This description of the particular terms of the Preferred Stock
supplements, and to the extent inconsistent therewith replaces, the description
of the general terms and provisions of the Preferred Stock set forth in the
accompanying Prospectus, to which description reference is hereby made.
GENERAL
The Trust is authorized to issue up to 25,000,000 shares of preferred
stock, no par value ("preferred stock"), in one or more series, with such
designations, powers, preferences and rights of the shares of such series and
the qualifications, limitations or restrictions thereon, including, but not
limited to, the fixing of the dividend rights, dividend rate or rates,
conversion rights, voting rights, rights and terms of redemption (including
sinking fund provisions), the redemption price or prices, and the liquidation
preferences, in each case, if any, as the Board of Directors of the Trust may
determine by adoption of an amendment of the Trust's Restated Articles of
Incorporation, as amended (the "Articles"), without any further vote or action
by the shareholders. See "Description of Capital Stock -- Preferred Stock" in
the accompanying Prospectus. The Preferred Stock is a series of the Trust's
preferred stock.
On April , 1995, the Board of Directors of the Trust adopted an amendment
of the Articles determining the terms of a series of preferred stock consisting
of up to 4,600,000 shares, designated % Series A Cumulative Redeemable
Preferred Stock. The following summary of the terms and provisions of the
Preferred Stock does not purport to be complete and is qualified in its entirety
by reference to the pertinent sections of the Articles and the Articles of
Amendment designating the Preferred Stock, each of which is available from the
Trust.
The transfer agent, registrar and dividend disbursing agent for the
Preferred Stock will be Mellon Securities Trust Company, Pittsburgh,
Pennsylvania.
Application has been made to list the Preferred Stock on the New York Stock
Exchange.
DIVIDENDS
Holders of shares of the Preferred Stock shall be entitled to receive, when
and as declared by the Board of Directors, out of funds legally available for
the payment of dividends, cumulative preferential cash dividends at the rate of
% of the liquidation preference per annum (equivalent to $ per share). Such
dividends shall be cumulative from the date of original issue and shall be
payable quarterly in arrears on the fifteenth day of each January, April, July
and October or, if not a business day, the next succeeding business day (each, a
"Dividend Payment Date"). The first dividend, which will be paid on July 15,
1995, will be for less than a full quarter. Such dividend and any dividend
payable on the Preferred Stock for any partial dividend period will be computed
on the basis of a 360-day year consisting of twelve 30-day months. Dividends
will be payable to holders of record as they appear in the stock records of the
Trust at the close of business on the applicable record date, which shall be the
first day of the calendar month in which the applicable Dividend Payment Date
falls on or such other date designated by the Board of Directors of the Trust
for the payment of dividends that is not more than 30 nor less than 10 days
prior to such Dividend Payment Date (each, a "Dividend Record Date").
No dividends on shares of Preferred Stock shall be declared by the Board of
Directors of the Trust or paid or set apart for payment by the Trust at such
time as the terms and provisions of any agreement of the Trust, including any
agreement relating to its indebtedness, prohibits such declaration, payment or
setting apart for payment or provides that such declaration, payment or setting
apart for payment would constitute a breach thereof or a default thereunder, or
if such declaration or payment shall be restricted or prohibited by law.
Covenants in its term and revolving credit agreements provide generally that the
Trust may not pay dividends in excess of the sum of (i) current "cash flow,"
(ii) varying additional amounts and (iii) the proceeds of capital stock
offerings subsequent to varying dates, all as defined in the particular
agreement, but such covenants permit the Trust to pay dividends in an amount
necessary to maintain its qualification as a REIT.
Notwithstanding the foregoing, dividends on the Preferred Stock will accrue
whether or not the Trust has earnings, whether or not there are funds legally
available for the payment of such dividends and whether or not such dividends
are declared. Accrued but unpaid dividends on the Preferred Stock will not bear
interest. Holders of the Preferred Stock will not be entitled to any dividends
in excess of full cumulative dividends as described above. See "Description of
Capital Stock -- Preferred Stock -- DIVIDEND RIGHTS" in the accompanying
Prospectus.
If, for any taxable year, the Trust elects to designate as "capital gain
dividends" (as defined in Section 857 of the Code) any portion (the "Capital
Gains Amount") of the dividends (as determined for federal income tax purposes)
paid or made
S-9
<PAGE>
available for the year to holders of all classes of stock (the "Total
Dividends"), then the portion of the Capital Gains Amount that shall be
allocable to the holders of Preferred Stock shall be the amount that the total
dividends (as determined for federal income tax purposes) paid or made available
to the holders of the Preferred Stock for the year bears to the Total Dividends.
No full dividends shall be declared or paid or set apart for payment on the
preferred stock of the Trust of any other series ranking, as to dividends, on a
parity with or junior to the Preferred Stock for any period unless full
cumulative dividends have been or contemporaneously are declared and paid or
declared and a sum sufficient for the payment thereof set apart for such payment
on the Preferred Stock for all past dividend periods and the then current
dividend period. When dividends are not paid in full (or a sum sufficient for
such full payment is not so set apart) upon the shares of Preferred Stock and
the shares of any other series of preferred stock ranking on a parity as to
dividends with the Preferred Stock, all dividends declared upon shares of
Preferred Stock and any other series of preferred stock ranking on a parity as
to dividends with the Preferred Stock shall be declared pro rata so that the
amount of dividends declared per share on the Preferred Stock and such other
series of preferred stock shall in all cases bear to each other the same ratio
that accrued dividends per share on the shares of Preferred Stock and such other
series of preferred stock bear to each other.
Except as provided in the immediately preceding paragraph, unless full
cumulative dividends on the Preferred Stock have been or contemporaneously are
declared and paid or declared and a sum sufficient for the payment thereof set
apart for payment for all past dividend periods and the then current dividend
period, no dividends (other than in Common Stock or other capital stock ranking
junior to the Preferred Stock as to dividends and upon liquidation) shall be
declared or paid or set aside for payment or other distribution shall be
declared or made upon the Common Stock or any other capital stock of the Trust
ranking junior to or on a parity with the Preferred Stock as to dividends or
upon liquidation, nor shall any Common Stock or any other capital stock of the
Trust ranking junior to or on a parity with the Preferred Stock as to dividends
or upon liquidation be redeemed, purchased or otherwise acquired for any
consideration (or any moneys be paid to or made available for a sinking fund for
the redemption of any shares of any such stock) by the Trust (except by
conversion into or exchange for other capital stock of the Trust ranking junior
to the Preferred Stock as to dividends and upon liquidation).
Any dividend payment made on shares of the Preferred Stock shall first be
credited against the earliest accrued but unpaid dividend due with respect to
such shares which remains payable.
LIQUIDATION RIGHTS
In the event of any liquidation, dissolution or winding up of the Trust,
the holders of shares of Preferred Stock are entitled to be paid out of the
assets of the Trust legally available for distribution to its stockholders a
liquidation preference of $25.00 per share, plus an amount equal to any accrued
and unpaid dividends to the date of payment, before any distribution of assets
is made to holders of Common Stock or any other capital stock that ranks junior
to the Preferred Stock as to liquidation rights. After payment of the full
amount of the liquidating distributions to which they are entitled, the holders
of Preferred Stock will have no right or claim to any of the remaining assets of
the Trust. The consolidation or merger of the Trust with or into any other
corporation, or the sale, lease, transfer or conveyance of all or substantially
all of the property or business of the Trust, shall not be deemed to constitute
a liquidation, dissolution or winding up of the Trust. For further information
regarding the rights of the holders of the Preferred Stock upon the liquidation,
dissolution or winding up of the Trust, see "Description of Capital
Stock -- Preferred Stock -- LIQUIDATION PREFERENCE" in the accompanying
Prospectus.
REDEMPTION
The Preferred Stock is not redeemable prior to April , 2000. On and after
April , 2000, the Trust, at its option upon not less than 30 nor more than 60
days' written notice, may redeem shares of the Preferred Stock, in whole or in
part, at any time or from time to time, for cash at a redemption price of $25.00
per share, plus all accrued and unpaid dividends thereon to the date fixed for
redemption (except as provided below), without interest. The redemption price of
the Preferred Stock (other than the portion thereof consisting of accrued and
unpaid dividends) is payable solely out of the sale proceeds of other capital
stock of the Trust, which may include other series of preferred stock, and from
no other source. Holders of Preferred Stock to be redeemed shall surrender such
Preferred Stock at the place designated in such notice and shall be entitled to
the redemption price and any accrued and unpaid dividends payable upon such
redemption following such surrender. If notice of redemption of any shares of
Preferred Stock has been given and if the funds necessary for such redemption
have been set aside by the Trust in trust for the benefit of the holders of any
shares of Preferred Stock so called for redemption, then from and after the
redemption date dividends will cease to accrue on such shares of Preferred
Stock, such shares of Preferred Stock shall no longer be deemed outstanding and
all rights of the holders of such shares will terminate, except the right to
receive the redemption price. If less than all the outstanding Preferred Stock
is to be redeemed, the Preferred Stock to be redeemed
S-10
<PAGE>
shall be selected pro rata (as nearly as may be practicable without creating
fractional shares) or by any other equitable method determined by the Trust.
Unless full cumulative dividends on all shares of Preferred Stock shall
have been or contemporaneously are declared and paid or declared and a sum
sufficient for the payment thereof set apart for payment for all past dividend
periods and the then current dividend period, no shares of Preferred Stock shall
be redeemed unless all outstanding shares of Preferred Stock are simultaneously
redeemed; PROVIDED, HOWEVER, that the foregoing shall not prevent the purchase
or acquisition of shares of Preferred Stock pursuant to a purchase or exchange
offer made on the same terms to holders of all outstanding shares of Preferred
Stock. Unless full cumulative dividends on all outstanding shares of Preferred
Stock have been or contemporaneously are declared and paid or declared and a sum
sufficient for the payment thereof set apart for payment for all past dividend
periods and the then current dividend period, the Trust shall not purchase or
otherwise acquire directly or indirectly any shares of Preferred Stock (except
by exchange for capital stock of the Trust ranking junior to the Preferred Stock
as to dividends and upon liquidation).
Notice of redemption will be given by publication in a newspaper of general
circulation in the City of New York, such publication to be made once a week for
two successive weeks commencing not less than 30 nor more than 60 days' prior to
the redemption date. A similar notice will be mailed by the Trust, postage
prepaid, not less than 30 nor more than 60 days' prior to the redemption date,
addressed to the respective holders of record of the Preferred Stock to be
redeemed at their respective address as they appear on the stock transfer
records of the Trust. No failure to give such notice or any defect thereto or in
the mailing thereof shall affect the validity of the proceedings for the
redemption of any shares of Preferred Stock except as to the holder to whom
notice was defective or not given. Each notice shall state: (i) the redemption
date; (ii) the redemption price; (iii) the number of shares of Preferred Stock
to be redeemed; (iv) the place or places where the Preferred Stock is to be
surrendered for payment of the redemption price; and (v) that dividends on the
shares to be redeemed will cease to accrue on such redemption date. If less than
all the Preferred Stock held by any holder is to be redeemed, the notice mailed
to such holder shall also specify the number of shares of Preferred Stock to be
redeemed.
The holders of Preferred Stock at the close of business on a Dividend
Record Date will be entitled to receive the dividend payable with respect to
such Preferred Stock on the corresponding Dividend Payment Date notwithstanding
the redemption thereof between such Dividend Record Date and the corresponding
Dividend Payment Date or the Trust's default in the payment of the dividend due.
Except as provided above, the Trust will make no payment or allowance for unpaid
dividends, whether or not in arrears, on called Preferred Stock.
The Preferred Stock has no stated maturity and will not be subject to any
sinking fund or mandatory redemption (except as provided under "Description of
Capital Stock -- Redemption and Restrictions on Transfer" in the accompanying
Prospectus).
VOTING RIGHTS
Holders of the Preferred Stock will not have any voting rights, except as
set forth below or as otherwise from time to time required by law.
Whenever dividends on any shares of Preferred Stock shall be in arrears for
six or more consecutive quarterly periods, the holders of such shares of
Preferred Stock (voting separately as a class with all other series of preferred
stock upon which like voting rights have been conferred and are exercisable)
will be entitled to vote for the election of two additional directors of the
Trust at a special meeting called by the holders of record of at least 10% of
the Preferred Stock or the holders of any other series of preferred stock so in
arrears (unless such request is received less than 90 days before the date fixed
for the next annual or special meeting of the shareholders) or at the next
annual meeting of shareholders, and at each subsequent annual meeting until all
dividends accumulated on such shares of Preferred Stock for the past dividend
periods and the then current dividend period shall have been fully paid or
declared and a sum sufficient for the payment thereof set aside for payment. In
such case, the entire Board of Directors of the Company will be increased by two
directors.
So long as any shares of Preferred Stock remain outstanding, the Trust
shall not, without the affirmative vote of the holders of at least a majority of
the shares of the Preferred Stock outstanding at the time, (i) authorize or
create, or increase the authorized or issued amount of, any class or series of
capital stock ranking prior to the Preferred Stock with respect to payment of
dividends or the distribution of assets upon liquidation, dissolution or winding
up or reclassify any authorized capital stock of the Trust into any such shares,
or create, authorize or issue any obligation or security convertible into or
evidencing the right to purchase any such shares; or (ii) amend, alter or repeal
the provisions of the Articles, whether by merger, consolidation or otherwise,
so as to materially and adversely affect any right, preference, privilege or
voting power of
S-11
<PAGE>
the Preferred Stock or the holders thereof; PROVIDED, HOWEVER, that any increase
in the amount of the authorized preferred stock or the creation or issuance of
any other series of preferred stock, or any increase in the amount of authorized
shares of such series, in each case ranking on a parity with or junior to the
Preferred Stock with respect to payment of dividends or the distribution of
assets upon liquidation, dissolution or winding up, shall not be deemed to
materially and adversely affect such rights, preferences, privileges or voting
powers.
The foregoing voting provisions will not apply if, at or prior to the time
when the act with respect to which such vote would otherwise be required shall
be effected, all outstanding shares of Preferred Stock shall have been redeemed
or called for redemption upon proper notice and sufficient funds shall have been
deposited in trust to effect such redemption.
Under Virginia law, notwithstanding anything to the contrary set forth
above, if shareholder voting is otherwise required by law, holders of the
Preferred Stock will be entitled to vote as a class upon a proposed amendment to
the Articles, whether or not entitled to vote thereon by the Articles, if the
amendment would increase or decrease the aggregate number of authorized shares
of Preferred Stock; effect an exchange or reclassification, or create a right of
exchange, of the Preferred Stock for or into shares of another class or of
shares of another class into Preferred Stock; change the designation,
preferences, rights or limitations of all or part of the Preferred Stock; change
shares of Preferred Stock into a different number of shares of Preferred Stock;
create a new class, or change a subordinate class into a class, having dividend
or liquidation rights superior or equal to those of the Preferred Stock or
increase the rights, preferences or number of authorized shares of a class
having such dividend or liquidation rights; divide the Preferred Stock into
series, designate such series and determine its terms; or cancel or otherwise
affect rights to accumulated but undeclared dividends on the Preferred Stock.
CONVERSION
The Preferred Stock is not convertible into or exchangeable for any other
property or securities of the Trust.
RESTRICTIONS ON OWNERSHIP
For information regarding restrictions on ownership of the Preferred Stock,
see "Description of Capital Stock -- Redemption and Restrictions on Transfer" in
the accompanying Prospectus.
CERTAIN FEDERAL INCOME TAX CONSIDERATIONS
The following summary of certain federal income tax considerations is based
on current law, is for general information only, and is not tax advice. This
discussion does not purport to deal with all aspects of taxation that may be
relevant to particular shareholders in light of their personal investment or tax
circumstances, or to certain types of shareholders (including insurance
companies, tax exempt organizations, financial institutions or broker dealers,
foreign corporations and persons who are not citizens or residents of the United
States) subject to special treatment under the federal income tax laws.
This Prospectus Supplement does not address the taxation of the Trust or
the impact on the Trust of its election to be taxed as a REIT. The discussion
set forth below assumes that the Trust qualifies as a REIT under the Code. If in
any taxable year the Trust were to fail to qualify as a REIT, the Trust would
not be allowed a deduction for distributions to shareholders in computing
taxable income and would be subject to federal income tax on its taxable income
at regular corporate rates. As a result, the funds available for distribution to
the Trust's shareholders would be reduced.
TAXATION OF TAXABLE DOMESTIC SHAREHOLDERS
DIVIDENDS AND OTHER DISTRIBUTIONS. As long as the Trust qualifies as a
REIT, distributions made to the Trust's taxable domestic shareholders (including
holders of Preferred Stock) out of current or accumulated earnings and profits
(and not designated as capital gain dividends) will be taken into account by
them as ordinary income and will not be eligible for the dividends received
deduction for corporations. For purposes of determining whether distributions on
the Preferred Stock are out of current or accumulated earnings and profits, the
earnings and profits of the Trust will be allocated first to the Preferred
Stock, and then allocated to the Trust's common stock. Distributions that are
designated as capital gain dividends will be taxed as long-term capital gains
(to the extent they do not exceed the Trust's actual net capital gain for the
taxable year) without regard to the period for which the holder has held its
Preferred Stock. However, corporate holders may be required to treat up to 20%
of certain capital gain dividends as ordinary income. Distributions in excess of
current and accumulated earnings and profits will not be taxable to a holder to
the extent that they do not exceed the adjusted tax basis of the holder's
shares, but rather will reduce the adjusted basis of such shares. To the extent
that such distributions exceed the adjusted basis of a holder's shares they will
be included in income as long-term capital gain (or short-term capital gain if
the shares have been held for one year or less) assuming the shares are a
capital asset in the hands of the holder. In addition, any dividend declared by
the Trust in October, November or December of any year payable to a shareholder
of record on a specified date in any such month shall be treated as both paid by
the Trust and received by the shareholder on December 31 of such year,
S-12
<PAGE>
provided that the dividend is actually paid by the Trust during January of the
following calendar year. Shareholders may not include in their individual income
tax returns any net operating losses or capital losses of the Trust.
SALE OR REDEMPTION OF PREFERRED STOCK. On the sale of shares of Preferred
Stock, gain or loss will be recognized by the holder in an amount equal to the
difference between (i) the amount of cash and fair market value of any property
received on such sale, and (ii) the holder's adjusted basis in the Preferred
Stock. Such gain or loss will be capital gain or loss if the shares of Preferred
Stock are held as capital assets, and will be long-term gain or loss if such
shares are held for more than one year. In general, any loss upon a sale or
exchange of shares by a holder who has held such shares for six months or less
(after applying certain holding period rules), will be treated as a long-term
capital loss to the extent of distributions from the Trust required to be
treated by such holder as long-term capital gain.
A redemption of Preferred Stock will be treated under Section 302 of the
Code as a distribution that is taxable at ordinary income tax rates as a
dividend (to the extent of the Trust's current or accumulated earnings and
profits), unless the redemption satisfies certain tests set forth in Section
302(b) of the Code enabling the redemption to be treated as a sale of the
Preferred Stock. The redemption will satisfy such tests if it (i) is
"substantially disproportionate" with respect to the holder (which will not be
the case if only Preferred Stock is redeemed, since it generally does not have
voting rights), (ii) results in a "complete termination" of the holder's stock
interest in the Trust, or (iii) is "not essentially equivalent to a dividend"
with respect to the holder, all within the meaning of Section 302(b) of the
Code. In determining whether any of these tests have been met, shares considered
to be owned by the holder by reason of certain constructive ownership rules set
forth in the Code, as well as shares actually owned, must generally be taken
into account. Because the determination as to whether any of the alternative
tests of Section 302(b) of the Code will be satisfied with respect to any
particular holder of Preferred Stock depends upon the facts and circumstances at
the time that the determination must be made, prospective investors are advised
to consult their own tax advisors to determine such tax treatment.
If a redemption of the Preferred Stock is treated as a distribution that is
taxable as a dividend, the amount of the distribution will be measured by the
amount of cash and the fair market value of any property received by the
shareholders. The shareholder's adjusted tax basis in such redeemed Preferred
Stock will be transferred to the holder's remaining stockholdings in the Trust.
If, however, the shareholder has no remaining stockholdings in the Trust, such
basis could be transferred to a related person or it may be lost.
BACKUP WITHHOLDING
The Trust will report to its domestic shareholders and the Internal Revenue
Service ("IRS") the amount of dividends paid during each calendar year, and the
amount of tax withheld, if any. Under the backup withholding rules, a
shareholder may be subject to backup withholding at the rate of 31% with respect
to dividends paid and redemptions unless such holder (a) is a corporation or
comes within certain other exempt categories and, when required, demonstrates
this fact, or (b) provides a taxpayer identification number, certifies that the
holder is not subject to backup withholding, and otherwise complies with
applicable requirements of the backup withholding rules. A shareholder that does
not provide the Trust with his correct taxpayer identification number may also
be subject to penalties imposed by the Internal Revenue Service. Any amount paid
as backup withholding will be creditable against the shareholder's income tax
liability.
TAXATION OF CERTAIN TAX-EXEMPT SHAREHOLDERS
Generally, a tax-exempt investor that is exempt from tax on its investment
income, such as an individual retirement account ("IRA") or a Section 401(k)
plan, that holds the Preferred Stock as an investment will not be subject to tax
on dividends paid by the Trust. However, if such tax-exempt investor is treated
as having purchased its Preferred Stock with borrowed funds, some or all of its
dividends from the Preferred Stock will be subject to tax. In addition, under
some circumstances certain pension plans (including Section 401(k) plans but
not, for example, IRAs) that own more than 10% (by value) of the Trust's
outstanding stock, including Common Stock, could be subject to tax on a portion
of their Preferred Stock dividends even if their Preferred Stock is held for
investment and is not treated as acquired with borrowed funds.
OTHER TAX CONSEQUENCES
The Trust and its shareholders may be subject to state or local taxation in
various state or local jurisdictions, including those in which it or they own
property, transact business or reside. The state and local tax treatment of the
Trust and its shareholders may not conform to the federal income tax
consequences discussed above. Consequently, prospective shareholders should
consult their own tax advisors regarding the effect of state and local tax laws
on an investment in the Trust.
S-13
<PAGE>
UNDERWRITING
Subject to the terms and conditions contained in the purchase agreement
(the "Purchase Agreement"), the Trust has agreed to sell to Merrill Lynch,
Pierce, Fenner & Smith Incorporated, Alex. Brown & Sons Incorporated, Dean
Witter Reynolds Inc., A.G. Edwards & Sons, Inc. and Goldman, Sachs & Co. (the
"Underwriters), and the Underwriters have severally agreed to purchase, the
respective number of shares of Preferred Stock set forth below opposite their
names. The Purchase Agreement provides that the obligations of the Underwriters
are subject to certain conditions precedent, and that the Underwriters will be
obligated to purchase all of the shares of Preferred Stock if any are purchased.
<TABLE>
<CAPTION>
NUMBER OF
UNDERWRITER SHARES
<S> <C>
Merrill Lynch, Pierce, Fenner & Smith
Incorporated..............................................................................
Alex. Brown & Sons Incorporated.......................................................................
Dean Witter Reynolds Inc. ............................................................................
A.G. Edwards & Sons, Inc. ............................................................................
Goldman, Sachs & Co. .................................................................................
Total..................................................................................... 4,000,000
</TABLE>
The Underwriters have advised the Trust that they propose initially to
offer the shares of Preferred Stock to the public at the public offering price
set forth on the cover page of this Prospectus Supplement, and to certain
dealers at such price less a concession not in excess of $. per share. The
Underwriters may allow, and such dealers may reallow, a discount not in excess
of $. per share to certain other dealers. After the initial public offering,
the public offering price, concession and discount may be changed.
The Trust has granted an option to the Underwriters, exercisable during the
30-day period after the date of this Prospectus Supplement, to purchase up to
600,000 additional shares of Preferred Stock at the price to the public set
forth on the cover page of this Prospectus Supplement, less the underwriting
discount. If the Underwriters exercise this option, each of the Underwriters
will have a firm commitment, subject to certain conditions, to purchase
approximately the same percentage thereof which the number of shares to be
purchased by it shown in the foregoing table bears to the 4,000,000 shares
offered hereby.
In the Purchase Agreement, the Trust has agreed to indemnify the
Underwriters against certain liabilities, including liabilities under the
Securities Act of 1933, as amended.
S-14
<PAGE>
PROSPECTUS
$400,000,000
(UDRT LOGO)
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).
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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.
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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) 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;
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<PAGE>
(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;
(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
5
<PAGE>
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 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).
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<PAGE>
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 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,
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"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.
"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
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<PAGE>
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 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,
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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-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).
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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).
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
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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 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
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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 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
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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
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.
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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 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.
15
<PAGE>
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.
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
16
<PAGE>
Preferred Stock will send notices to shareholders of any meetings at which
holders of Preferred Stock have the right to vote on any matter.
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.
17
<PAGE>
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.
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
18
<PAGE>
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.
19
<PAGE>
NO DEALER, SALESPERSON OR OTHER INDIVIDUAL HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED OR
INCORPORATED BY REFERENCE IN THIS PROSPECTUS SUPPLEMENT AND THE PROSPECTUS IN
CONNECTION WITH THE OFFER MADE BY THIS PROSPECTUS SUPPLEMENT AND THE PROSPECTUS
AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED
UPON AS HAVING BEEN AUTHORIZED BY THE TRUST OR THE UNDERWRITERS. THIS PROSPECTUS
SUPPLEMENT AND THE PROSPECTUS DO NOT CONSTITUTE AN OFFER TO SELL, OR A
SOLICITATION OF AN OFFER TO BUY, THE SHARES IN ANY JURISDICTION WHERE, OR TO ANY
PERSON TO WHOM, IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION. NEITHER THE
DELIVERY OF THIS PROSPECTUS SUPPLEMENT AND THE PROSPECTUS NOR ANY SALE MADE
HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS
BEEN NO CHANGE IN THE FACTS SET FORTH IN THIS PROSPECTUS SUPPLEMENT AND
PROSPECTUS OR IN THE AFFAIRS OF THE TRUST SINCE THE DATE HEREOF.
TABLE OF CONTENTS
PROSPECTUS SUPPLEMENT
<TABLE>
<CAPTION>
PAGE
<S> <C>
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-5
Business......................................... S-7
Description of Preferred Stock................... S-9
Certain Federal Income Tax Considerations........ S-12
Underwriting..................................... S-14
</TABLE>
PROSPECTUS
<TABLE>
<S> <C>
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..................... 14
Plan of Distribution............................. 18
Legal Opinions................................... 18
Experts.......................................... 18
</TABLE>
4,000,000 SHARES
(UDRT LOGO)
% SERIES A CUMULATIVE
REDEEMABLE PREFERRED STOCK
(NO PAR VALUE)
(LIQUIDATION PREFERENCE
$25.00 PER SHARE)
PROSPECTUS SUPPLEMENT
MERRILL LYNCH & CO.
ALEX. BROWN & SONS
INCORPORATED
DEAN WITTER REYNOLDS INC.
A.G. EDWARDS & SONS, INC.
GOLDMAN, SACHS & CO.
APRIL , 1995
