COMMERCIAL NET LEASE REALTY INC
S-3, 1998-09-29
REAL ESTATE INVESTMENT TRUSTS
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<PAGE>   1
 
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON SEPTEMBER 29, 1998
                                                      REGISTRATION NO. 333-
          POST-EFFECTIVE AMENDMENT NO. 1 TO REGISTRATION STATEMENT NO. 333-24773
================================================================================
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549
                               ------------------
 
                                    FORM S-3
                             REGISTRATION STATEMENT
                                     UNDER
                           THE SECURITIES ACT OF 1933
                               ------------------
 
                       COMMERCIAL NET LEASE REALTY, INC.
             (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
 
                                    MARYLAND
                 (STATE OR OTHER JURISDICTION OF INCORPORATION)
 
                                   56-1431377
                       (IRS EMPLOYER IDENTIFICATION NO.)
 
<TABLE>
<S>                                                           <C>
                                                                     KEVIN B. HABICHT, CHIEF FINANCIAL OFFICER
                                                                         COMMERCIAL NET LEASE REALTY, INC.
             455 SOUTH ORANGE AVENUE, SUITE 700                          455 SOUTH ORANGE AVENUE, SUITE 700
                   ORLANDO, FLORIDA 32801                                      ORLANDO, FLORIDA 32801
                 TELEPHONE: (407) 265-7348                                   TELEPHONE: (407) 265-7348
(ADDRESS, INCLUDING ZIP CODE AND TELEPHONE NUMBER, INCLUDING  (NAME, ADDRESS, INCLUDING ZIP CODE AND TELEPHONE NUMBER,
  AREA CODE, OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)            INCLUDING AREA CODE OF AGENT FOR SERVICE)
</TABLE>
 
                               ------------------
 
                                   COPIES TO:
 
                           THOMAS H. MCCORMICK, ESQ.
                        SHAW PITTMAN POTTS & TROWBRIDGE
                              2300 N STREET, N.W.
                             WASHINGTON, D.C. 20037
                                 (202) 663-8000
                               ------------------
 
   APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE OF THE SECURITIES TO THE
                                    PUBLIC:
 From time to time following the effective date of this Registration Statement.
                               ------------------
 
    If the only securities being registered on this form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. [ ]
 
    If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. [X]
 
    If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act of 1933, please check the
following box and list the Securities Act registration statement number of the
earlier effective registration statement for the same offering. [ ]
 
    If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act of 1933, check the following box and list the
Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ]
 
    If delivery of the prospectus is expected to be made pursuant to Rule 434 
of the Securities Act of 1933, please check the following box. [ ]

                        CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
                                                                        PROPOSED
                                                                        MAXIMUM     PROPOSED MAXIMUM      AMOUNT OF
               TYPE OF EACH CLASS OF                    AMOUNT BEING    OFFERING   AGGREGATE OFFERING    REGISTRATION
           SECURITIES TO BE REGISTERED(1)                REGISTERED      PRICE        PRICE(2)(4)         FEE(3)(4)
- ---------------------------------------------------------------------------------------------------------------------
<S>                                                     <C>             <C>        <C>                   <C>
Debt Securities.....................................
Preferred Stock, $0.01 par value....................
Depositary Shares...................................
Common Stock, $0.01 par value(5)....................    $188,240,152      (6)         $188,240,152        $55,531(7)
Common Stock Warrants...............................
===================================================================================================================== 
</TABLE>
 
(1) Offered Securities registered hereunder may be sold separately, together or
    as units with other Offered Securities registered hereunder.
(2) In U.S. Dollars or the equivalent thereof at the time of sale for any Debt
    Security denominated in one or more foreign currencies or units of two or
    more foreign currencies or composite currencies (such as European Currency
    Units).
(3) Estimated solely for purposes of calculating the registration fee. No
    separate consideration will be received for shares of Common Stock that are
    issued upon conversion of Debt Securities or shares of Preferred Stock. The
    aggregate maximum public offering price of all Offered Securities issued
    pursuant to this Registration Statement will not exceed $300,000,000. Debt
    Securities may be issued with original issue discount such that the
    aggregate initial public offering price will not exceed $300,000,000.
(4) Does not include $111,759,848 of unissued Offered Securities previously
    registered under Registration Statement No. 333-24773. A registration fee 
    of $38,538 was previously paid with respect to such amount.
(5) Including such indeterminate number of shares of Common Stock as may from
    time to time be issued at indeterminate prices or issuable upon exercise of
    the Common Stock Warrants to purchase Common Stock registered hereunder, as
    the case may be.
(6) Omitted pursuant to General Instruction II.D of Form S-3 under the
    Securities Act of 1933, as amended.
(7) Calculated pursuant to Rule 457(o) of the rules and regulations under the
    Securities Act of 1933, as amended.
 
                               ----------------------
 
    THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT 
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.
 
    Pursuant to Rule 429 of the General Rules and Regulations under the
Securities Act of 1933, the prospectus included herein also relates to
Registration Statement No. 333-24773.
=============================================================================== 
<PAGE>   2
 
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
 
                             SUBJECT TO COMPLETION
                PRELIMINARY PROSPECTUS DATED SEPTEMBER 29, 1998
 
                       [COMMERCIAL NET LEASE REALTY LOGO]
 
                                  $300,000,000
                       COMMERCIAL NET LEASE REALTY, INC.
              DEBT SECURITIES, PREFERRED STOCK, DEPOSITARY SHARES,
                     COMMON STOCK AND COMMON STOCK WARRANTS
                         ------------------------------
     Commercial Net Lease Realty, Inc. (the "Company") may from time to time
offer in one or more series (i) its debt securities (the "Debt Securities"),
which may be senior debt securities or subordinated debt securities, (ii)
Preferred Stock, par value $0.01 per share (the "Preferred Stock"), (iii)
Preferred Stock represented by depositary shares (the "Depositary Shares"), (iv)
Common Stock, par value $0.01 per share (the "Common Stock"), or (v) warrants to
purchase Common Stock (the "Common Stock Warrants"), with an aggregate public
offering price of up to $300,000,000 on terms to be determined at the time or
times of offering. The Debt Securities, Preferred Stock, Depositary Shares,
Common Stock or Common Stock Warrants (collectively, the "Offered Securities")
may be offered, separately or together, in separate classes or series in
amounts, at prices and on terms to be set forth in a supplement to this
Prospectus (a "Prospectus Supplement").
 
     The specific terms of the Offered Securities in respect of which this
Prospectus is being delivered will be set forth in the applicable Prospectus
Supplement and will include, where applicable: (i) in the case of Debt
Securities, the specific title, aggregate principal amount, ranking, currency,
form (which may be registered or bearer, or certificated or global), authorized
denominations, maturity, rate (or manner of calculation thereof) and time of
payment of interest, terms for redemption at the option of the Company or
repayment at the option of the holder thereof, terms for sinking fund payments,
terms for conversion into Common Stock or other securities of the Company, and
any public offering price; (ii) in the case of Preferred Stock, the designation
of any series, any dividend, liquidation, redemption, sinking fund, conversion,
voting and other rights, preferences and limitations, and the public offering
price; (iii) in the case of Depositary Shares, the number of whole or fractional
shares of Preferred Stock represented by each such Depositary Share; (iv) in the
case of Common Stock, any public offering price; and (v) in the case of Common
Stock Warrants, the duration, offering price, exercise price and detachability.
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 Company as a real estate
investment trust ("REIT") for federal income tax purposes.
 
     The applicable Prospectus Supplement will also contain information, where
applicable, about certain United States federal income tax considerations
relating to, and any listing on a securities exchange of, the Offered Securities
covered by such Prospectus Supplement.
 
     The Offered Securities may be offered directly, through agents designated
from time to time by the Company, or to or through underwriters or dealers. If
any agents or underwriters are involved in the sale of any of the Offered
Securities, their names and any applicable purchase price, fee, commission or
discount arrangement between or among them will be set forth or will be
calculable from the information set forth in the applicable Prospectus
Supplement. See "Plan of Distribution." No Offered Securities may be sold
without delivery of the applicable Prospectus Supplement describing the method
and terms of the offering of such class or series of Offered Securities.
                         ------------------------------
    THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
       AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS
         THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
            COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
                 PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
                             IS A CRIMINAL OFFENSE.
                         ------------------------------
 
                THE DATE OF THIS PROSPECTUS IS          , 1998.
<PAGE>   3
 
                             AVAILABLE INFORMATION
 
     The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and the rules and
regulations promulgated thereunder 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 Company with the Commission, may be inspected and
copied at the public reference facilities maintained by the Commission at Room
1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549, Seven
World Trade Center, 13th Floor, New York, New York 10048 and Suite 1400,
Northwestern Atrium Center, 500 West Madison Street, Chicago, Illinois 60661.
Copies of such material also can be obtained from the Public Reference Section
of the Commission at Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C.
20549, at prescribed rates. The Commission also maintains a Web site
(http://www.sec.gov) that contains reports, proxy and information statements and
other information regarding registrants, such as the Company, that file
electronically with the Commission. The Company's Common Stock is listed on the
New York Stock Exchange under the ticker symbol "NNN." Reports, proxy statements
and other information concerning the Company also may be inspected at the New
York Stock Exchange, 20 Broad Street, New York, New York 10005.
 
     The Company has filed with the Commission a registration statement (the
"Registration Statement") (of which this Prospectus is a part) on Form S-3 under
the Securities Act of 1933, as amended (the "Securities Act"), with respect to
the Offered Securities. This Prospectus does not contain all of the information
set forth in the Registration Statement, including the exhibits and schedules
thereto, certain parts of which are omitted as permitted by the rules and
regulations of the Commission. Statements contained in this Prospectus as to the
contents of any document are necessarily summaries of such documents, and in
each instance reference is made to the copy of such documents filed with the
Commission, each such statement being qualified in all respects by such
reference. For further information regarding the Company and the Offered
Securities, reference is hereby made to the Registration Statement and to the
exhibits and schedules filed or incorporated as a part thereof which may be
obtained from the Commission at its principal office in Washington, D.C. upon
payment of the fees prescribed by the Commission.
 
                INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
 
     The documents listed below have been filed by the Company under the
Exchange Act (Exchange Act file number 0-12989) with the Commission and are
incorporated herein by reference:
 
          a. Annual Report on Form 10-K for the fiscal year ended December 31,
     1997.
          b. Current Report on Form 8-K dated February 18, 1998, filed by the
     Company with the Commission on February 19, 1998.
          c. Current Report on Form 8-K dated March 20, 1998, filed by the
     Company with the Commission on March 20, 1998.
          d. Current Report on Form 8-K dated March 24, 1998, filed by the
     Company with the Commission on March 26, 1998.
          e. Current Report on Form 8-K dated March 25, 1998, filed by the
     Company with the Commission on March 26, 1998.
          f. Quarterly Report on Form 10-Q for the quarter ended March 31, 1998.
          g. Quarterly Report on Form 10-Q for the quarter ended June 30, 1998.
 
     All documents filed by the Company pursuant to Sections 13(a), 13(c), 14
and 15(d) of the Exchange Act subsequent to the date of this Prospectus and
prior to the termination of the offering of the Offered Securities shall be
deemed to be incorporated by reference in this Prospectus and to be part hereof
from the date of filing such documents.
 
     Any statement contained herein, or in a document incorporated or deemed to
be incorporated by reference herein, shall be deemed to be modified or
superseded for purposes of this Prospectus to the extent
 
                                        2
<PAGE>   4
 
that a statement contained herein or in any subsequently filed document 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.
 
     The Company will provide without charge to each person, including any
beneficial owner, to whom a copy of this Prospectus is delivered, on the written
request of any such person, a copy of any or all of the documents incorporated
herein by reference, except the exhibits to such documents (unless such exhibits
are specifically incorporated by reference in such documents). Requests for such
copies should be directed to Kevin B. Habicht, Commercial Net Lease Realty,
Inc., 455 South Orange Avenue, Suite 700, Orlando, Florida 32801 (telephone
number: (407)265-7348).
 
                                  THE COMPANY
 
     Commercial Net Lease Realty, Inc., a Maryland corporation (the "Company"),
is a fully integrated self-administered real estate investment trust ("REIT")
formed in 1984 that acquires, owns, develops and manages a diversified portfolio
of high-quality, single-tenant, freestanding properties leased to major retail
businesses generally under full-credit, long-term commercial net leases. As of
June 30, 1998, the Company owned 254 properties and a 20 percent ownership
interest in nine additional properties held in an unconsolidated partnership
(together, the "Properties"). The Properties were acquired for an aggregate
purchase price of approximately $605 million and having an annualized cash on
cost return (on an Inclusive Cost basis as defined below) of approximately
10.1%. For the purposes of the Prospectus, "Inclusive Cost" means all costs
related to acquisitions, including but not limited to the purchase price, legal
fees and expenses, commissions and title insurance.
 
     The Company acquires, owns, develops and manages freestanding retail
properties that are located within intensive commercial corridors near traffic
generators such as regional malls, business developments and major
thoroughfares. These properties, which generally have purchase prices of up to
$10 million, attract a wide array of established retail tenants, such as Barnes
& Noble, Eckerd Drug and OfficeMax. Consequently, management believes that such
properties offer attractive opportunities for stable current returns and
potential capital appreciation. In addition, management believes that the
location and design of properties in this niche provide flexibility in use and
tenant selection and an increased likelihood of advantageous re-lease terms upon
expiration or early termination of the related leases.
 
     Properties acquired by the Company are generally newly constructed or
re-developed as of the time of acquisition. In addition, the Company generally
acquires properties that are subject to a lease in order to avoid the risks
inherent in initial leasing. The Company's leases typically provide that the
tenant bears responsibility for substantially all property costs and expenses
associated with ongoing maintenance and operation, including utilities, property
taxes and insurance ("triple-net" leases), and generally also provide that the
tenant is responsible for roof and structural repairs. The Company's leases
typically do not limit the Company's recourse against the tenant and any
guarantor in the event of a default and for this reason are considered "full-
credit" leases. The Properties are leased on a long-term basis, generally 10 to
20 years, with renewal options for an additional 10 to 20 years. As of December
31, 1997, the average remaining initial lease term of the Properties was
approximately 14 years. Leases representing approximately 90 percent of
annualized base rental income from the Properties (the "Base Rent") as of
December 31, 1997, have initial terms extending until at least December 31,
2007. Approximately 83 percent of Base Rent is derived from leases that provide
for periodic, contractually fixed increases in base rent.
 
     The principal office of the Company is located at 455 South Orange Avenue,
Suite 700, Orlando, Florida 32801 and the Company's telephone number is
(407)265-7348.
 
                                USE OF PROCEEDS
 
     Unless otherwise described in the applicable Prospectus Supplement, the
Company intends to use the net proceeds from the sale of the Offered Securities
for general corporate purposes, which may include the repayment of certain
indebtedness outstanding at such time, the acquisition of single tenant
freestanding
                                        3
<PAGE>   5
 
properties as suitable opportunities arise and the expansion and improvement of
certain properties in the Company's portfolio.
 
       RATIOS OF EARNINGS TO FIXED CHARGES AND PREFERRED STOCK DIVIDENDS
 
     The Company's ratio of earnings to fixed charges for the six months ended
June 30, 1998 was 3.00, and for the years ended December 31, 1997, 1996, 1995,
1994 and 1993 was 3.43, 3.49, 4.06, 12.86 and 9.77, respectively. Earnings from
operations for the six months ended June 30, 1998 includes a non-cash charge of
$4.7 million associated with the costs incurred in acquiring the Company's
advisor from an affiliate. Excluding this charge, the ratio of earnings to fixed
charges for the six months ended June 30, 1998 would be 3.70. There were no
shares of Preferred Stock outstanding for any of the periods shown above.
Accordingly, the ratio of earnings to combined fixed charges and Preferred Stock
dividends is identical to the ratio of earnings to fixed charges.
 
     For the purposes of computing these ratios, earnings have been calculated
by adding fixed charges (excluding capitalized interest) to income before taxes.
Fixed charges consist of interest costs, whether expensed or capitalized, and
amortization of debt expense and discount or premium relating to any
indebtedness, whether expensed or capitalized.
 
                         DESCRIPTION OF DEBT SECURITIES
 
GENERAL
 
     The Debt Securities will be direct obligations of the Company, which may be
secured or unsecured, and which may be senior or subordinated indebtedness of
the Company. The Debt Securities may be issued under one or more indentures,
each dated as of a date before the issuance of the Debt Securities to which it
relates and in the form that has been filed as an exhibit to the Registration
Statement of which this Prospectus is a part, subject to such amendments or
supplements as may be adopted from time to time. Each such indenture
(collectively, the "Indenture") will be entered into between the Company and a
trustee (the "Trustee"), which may be the same Trustee. The Indenture will be
subject to, and governed by, the Trust Indenture Act of 1939, as amended. The
statements made hereunder relating to the Indenture and the Debt Securities are
summaries of the 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 Indenture and such Debt Securities. Capitalized terms used but not
defined herein shall have the respective meanings set forth in the Indenture.
 
TERMS
 
     The particular terms of the Debt Securities offered by a Prospectus
Supplement will be described in the particular Prospectus Supplement, along with
any applicable modifications of or additions to the general terms of the Debt
Securities as described herein and in the applicable Indenture and any
applicable federal income tax considerations. Accordingly, for a description of
the terms of any series of Debt Securities, reference must be made to both the
Prospectus Supplement relating thereto and the description of the Debt
Securities set forth in this Prospectus.
 
     Except as set forth in any Prospectus Supplement, the Debt Securities may
be issued without limits as to aggregate principal amount, in one or more
series, in each case as established from time to time by the Company's Board of
Directors or as set forth in the applicable Indenture or one or more indentures
supplemental to the Indenture. All Debt Securities of one series need not be
issued at the same time and, unless otherwise provided, a series may be
reopened, without the consent of the holders of the Debt Securities of such
series, for issuance of additional Debt Securities of such series.
 
     Each Indenture will provide that the Company may, but need not, designate
more than one Trustee thereunder, each with respect to one or more series of
Debt Securities. Any Trustee under an Indenture may resign or be removed with
respect to one or more series of Debt Securities, and a successor trustee may be
appointed to act with respect to such series. If two or more persons are acting
as Trustee with respect to
                                        4
<PAGE>   6
 
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 and, except as otherwise indicated herein, any
action described herein to be taken by a 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.
 
     The following summaries set forth certain general terms and provisions of
the Indenture and the Debt Securities. The Prospectus Supplement relating to the
series of Debt Securities being offered will contain further terms of such Debt
Securities, including the following specific terms:
 
          (1) the title of such Debt Securities;
 
          (2) the aggregate principal amount of such Debt Securities and any
     limit on such aggregate principal amount;
 
          (3) the percentage of the principal amount at which such Debt
     Securities will be issued and, if other than the principal amount thereof,
     the portion of the principal amount thereof payable upon declaration of
     acceleration of the maturity thereof, or (if applicable) the portion of the
     principal amount of such Debt Securities which is convertible into Common
     Stock or other equity securities of the Company, or the method by which any
     such portion shall be determined;
 
          (4) if such Debt Securities are convertible, any limitation to the
     ownership or transferability of the Common Stock or other equity securities
     of the Company into which such Debt Securities are convertible in
     connection with the preservation of the Company's status as a REIT;
 
          (5) the date or dates, or the method for determining the date or
     dates, on which the principal of such Debt Securities will be payable;
 
          (6) the rate or rates (which may be fixed or variable), or the method
     by which such rate or rates shall be determined, at which such Debt
     Securities will bear interest, if any;
 
          (7) the date or dates, or the method for determining the date or
     dates, from which any such interest will accrue, the dates upon which any
     such interest will be payable, the record dates for payment of such
     interest or the method by which any such dates shall be determined, the
     persons to whom such interest shall be payable, and the basis upon which
     interest shall be calculated if other than that of a 360-day year of twelve
     30-day months;
 
          (8) the place or places where the principal of (and premium, if any)
     or interest, if any, on such Debt Securities will be payable, where such
     Debt Securities may be surrendered for conversion or registration of
     transfer or exchange, and where notices or demands to or upon the Company
     in respect to such Debt Securities and the applicable Indenture may be
     served;
 
          (9) the period or periods within which, the price or prices at which,
     and the terms and conditions upon which such Debt Securities may be
     redeemed, as a whole or in part, at the option of the Company, if the
     Company is to have such an option;
 
          (10) the obligation, if any, of the Company to redeem, repay or
     purchase such Debt Securities pursuant to any sinking fund or analogous
     provision or at the option of a holder thereof, and the period or periods
     within which, the price or prices at which and the terms and conditions
     upon which such Debt Securities will be redeemed, repaid or purchased, as a
     whole or in part, pursuant to such obligation;
 
          (11) if other than U.S. dollars, the currency or currencies in which
     such Debt Securities are denominated and payable, which may be a foreign
     currency or units of two or more foreign currencies or a composite currency
     or currencies, and the terms and conditions relating thereto;
 
          (12) whether the amount of payments of principal (and premium, if any)
     or interest, if any, on such Debt Securities may be determined with
     reference to an index, formula or other method (which index, formula or
     method may, but need not be, based on a currency, currencies, currency unit
     or units or composite currency or currencies) and the manner in which such
     amounts shall be determined;
 
                                        5
<PAGE>   7
 
          (13) any additions to, modifications of or deletions from the terms of
     such Debt Securities with respect to the events of default or covenants set
     forth in the applicable Indenture;
 
          (14) whether such Debt Securities will be issued in certificated or
     book-entry form;
 
          (15) whether such Debt Securities will be in registered or bearer form
     or both and, if and to the extent in registered form, the denominations
     thereof if other than $1,000 and any integral multiple thereof and, if and
     to the extent in bearer form, the denominations thereof and terms and
     conditions relating thereto;
 
          (16) the applicability, if any, of the defeasance and covenant
     defeasance provisions described herein or set forth in the applicable
     Indenture, or any modification thereof;
 
          (17) the terms, if any, upon which such Debt Securities may be
     convertible into Common Stock or other equity securities of the Company
     (and the class thereof) and the terms and conditions upon which such
     conversion will be effected, including, without limitation, the initial
     conversion price or rate and the conversion period;
 
          (18) whether and under what circumstances the Company will pay
     additional amounts on such Debt Securities in respect of any tax,
     assessment or governmental charge and, if so, whether the Company will have
     the option to redeem such Debt Securities in lieu of making such payment;
 
          (19) the provisions, if any, relating to the security provided for
     such Debt Securities; and
 
          (20) any other terms of such Debt Securities not inconsistent with the
     provisions of the applicable 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"). Any material U.S. federal income tax,
accounting and other considerations applicable to Original Issue Discount
Securities will be described in the applicable Prospectus Supplement.
 
     Except as may be set forth in the applicable Prospectus Supplement, the
Debt Securities will not contain any provisions that would limit the ability of
the Company to incur indebtedness or that would afford holders of Debt
Securities protection in a highly leveraged or similar action involving the
Company or in the event of a change of control of the Company. However, certain
restrictions on ownership and transfers of the Company's Common Stock and the
Company's other equity securities designed to preserve its status as a REIT may
act to prevent or hinder a change of control. See "Description of Common
Stock -- Restrictions on Ownership." Reference is made to the applicable
Prospectus Supplement for information with respect to any deletion from,
modification of or addition to the events of default or covenants of the Company
that are described below, including any addition of a covenant or other
provision providing event risk or similar protection.
 
DENOMINATIONS, INTEREST, REGISTRATION AND TRANSFER
 
     Unless otherwise described in the applicable Prospectus Supplement, the
Debt Securities of any series will be issuable in denominations of $1,000 and
integral multiples thereof.
 
     Unless otherwise specified in the applicable Prospectus Supplement, the
principal of (and premium, if any) and interest on any series of Debt Securities
will be payable at the applicable Trustee's corporate trust office, the address
of which will be set forth in the applicable Prospectus Supplement; provided,
however, that, at the Company's option, payment of interest may be made by check
mailed to the address of the person entitled thereto as it appears in the
applicable register for such Debt Securities or by wire transfer of funds to
such person at an account maintained within the United States.
 
     Any interest not punctually paid or duly provided for on any date upon
which interest is payable with respect to a Debt Security ("Defaulted Interest")
will forthwith cease to be payable to the holder on the applicable regular
record date and may either be paid to the person in whose name such Debt
Security is registered at the close of business on a special record date (the
"Special Record Date") for the payment of such Defaulted Interest to be fixed by
the applicable Trustee, notice of which shall be given to the holder of
                                        6
<PAGE>   8
 
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.
 
     Subject to certain limitations applicable to 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. In
addition, subject to certain limitations applicable to 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. Every Debt Security surrendered for conversion,
registration of transfer or exchange must be duly endorsed or accompanied by a
written instrument of transfer. No service charge will be made for any
registration of transfer or exchange of any Debt Securities, but the Company may
require payment of a sum sufficient to cover any tax or other governmental
charge payable in connection therewith. If the applicable Prospectus Supplement
refers to any transfer agent (in addition to the Trustee) initially designated
by the Company with respect to any series of Debt Securities, the Company may at
any time rescind the designation of any such transfer agent or approve a change
in the location at which any such transfer agent acts, except that the Company
will be required to maintain a transfer agent in each place of payment for such
series. The Company may at any time designate additional transfer agents with
respect to any series of Debt Securities.
 
     Neither the Company nor any Trustee will be required (i) to 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) to 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) to 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.
 
MERGER, CONSOLIDATION OR SALE
 
     Each Indenture will provide that the Company may consolidate with, or sell,
lease or convey all or substantially all of its assets to, or merge with or
into, any other corporation, provided that (a) either the Company must be the
continuing corporation, or the successor corporation (if other than the Company)
formed by or resulting from any such consolidation or merger or which shall have
received the transfer of such assets must expressly assume payment of the
principal of (and premium, if any), and interest on, all of the outstanding Debt
Securities and the due and punctual performance and observance of all of the
covenants and conditions contained in the applicable Indenture; (b) immediately
after giving effect to such transaction and treating any indebtedness which
becomes an obligation of the Company or any subsidiary as a result thereof as
having been incurred by the Company or such subsidiary at the time of such
transaction, no event of default under the applicable 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 officer's certificate
and legal opinion concerning such conditions shall be delivered to the Trustee.
 
CERTAIN COVENANTS
 
     Existence.  Except as permitted under "-- Merger, Consolidation or Sale,"
the Indenture will require the Company to do or cause to be done all things
necessary to preserve and keep in full force and effect its corporate existence,
rights (by articles of incorporation, bylaws or statute) and franchises;
provided, however, that the Company will not be required to preserve any right
or franchise if it determines that the preservation thereof is no longer
desirable in the conduct of its business.
 
     Maintenance of Properties.  The Indenture will require the Company to 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 and must
cause to be made all necessary repairs, renewals, replacements, betterments and
improvements thereof, all as in the judgment of the Company may be necessary so
that the business carried on in connection therewith may be properly and
advantageously conducted at all times; provided, however, that
 
                                        7
<PAGE>   9
 
the Company and its subsidiaries will not be prevented from selling or otherwise
disposing for value its properties in the ordinary course of business.
 
     Insurance.  The Indenture will require the Company to, and to cause each of
its subsidiaries to, keep or cause to be kept in force upon all of its
properties and operations policies of insurance carried with responsible
companies in such amounts and covering all such risks as shall be customary in
the industry in accordance with prevailing market conditions and availability.
 
     Payment of Taxes and Other Claims.  The Indenture will require the Company
to pay or discharge or cause to be paid or discharged (or, if applicable, cause
to be transferred to bond or other security), before the same shall become
delinquent, (a) all taxes, assessments and governmental charges levied or
imposed upon it or any subsidiary or upon the income, profits or property of the
Company or any subsidiary, and (b) all lawful claims for labor, materials and
supplied which, if unpaid, might by law become a lien upon the property of the
Company or any subsidiary, provided, however, that the Company will not be
required to pay or discharge (or transfer to bond or other security) or cause to
be paid or discharged any such tax, assessment, charge or claim whose amount,
applicability or validity it being contested in good faith by appropriate
proceedings.
 
     Provision of Financial Information.  Whether or not the Company is subject
to Section 13 or 15(d) of the Exchange Act, the Indenture will require the
Company, within 15 days after each of the respective dates by which the Company
would have been required to file annual reports, quarterly reports and other
documents with the Commission if the Company were so subject, (a) to transmit by
mail to all holders of Debt Securities, as their names and addresses appear in
the applicable register for such Debt Securities, without cost to such holders,
copies of the annual reports, quarterly reports and other documents that the
Company would have been required to file with the Commission pursuant to Section
13 or 15(d) of the Exchange Act if the Company were subject to such Sections,
(b) to file with the Trustee copies of the annual reports, quarterly and other
documents that the Company would have been required to file with the Commission
pursuant to Section 13 or 15(d) of the Exchange Act if the Company were subject
to such Sections, and (c) to supply promptly upon written request and payment of
the reasonable cost of duplication and delivery, copies of such documents to any
prospective holder of Debt Securities.
 
     Additional Covenants.  Any additional covenants of the Company with respect
to any of the series of Debt Securities will be set forth in the Prospectus
Supplement relating thereto.
 
EVENTS OF DEFAULT, NOTICE AND WAIVER
 
     Unless otherwise provided in the applicable indenture, the Indenture will
provide 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 on any Debt Security of such series; (b)
default in the payment of the principal of (or premium, if any, on) any Debt
Security of such series 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 Company contained in the applicable
Indenture (other than a covenant added to such Indenture solely for the benefit
of a series of Debt Securities issued thereunder other than such series),
continued for 60 days after written notice as provided in such Indenture; (e)
default under any evidence of indebtedness of the Company or any mortgage,
indenture or other instrument under which such indebtedness is issued or by
which such indebtedness is secured which results in the acceleration of
indebtedness in an aggregate principal amount exceeding $10,000,000, but only if
such indebtedness is not discharged or such acceleration is not rescinded or
annulled as provided in the applicable Indenture; (f) certain events of
bankruptcy, insolvency or reorganization, or court appointment of a receiver,
liquidator or trustee, of the Company or of any Significant Subsidiary or of the
respective property of either; and (g) any other event of default provided with
respect to that series of Debt Securities. The term "Significant Subsidiary"
means each significant subsidiary (as defined in Regulation S-X promulgated
under the Securities Act) of the Company.
 
     If an Event of Default under any Indenture with respect to Debt Securities
of any series issued thereunder at the time outstanding occurs and is
continuing, then in every such case the applicable Trustee or the holders of not
less than 25% in principal amount of the outstanding Debt Securities of that
series may
                                        8
<PAGE>   10
 
declare the principal amount (or, if the Debt Securities of that series are
Original Issue Discount Securities or indexed securities, such portion of the
principal amount as may be specified in the terms thereof) of all of the Debt
Securities of that series to be due and payable immediately by written notice
thereof to the Company (and to the applicable Trustee if given by the holders).
However, at any time after such a declaration of acceleration with respect to
Debt Securities of such series (or of all Debt Securities then outstanding under
such Indenture, as the case may be) has been made, the holders of not less than
a majority in principal amount of Debt Securities of such series (or of each
series of Debt Securities then outstanding under such Indenture, as the case may
be) may rescind and annul such declaration and its consequences if (a) the
Company shall have deposited with such Trustee all required payments of the
principal of (and premium, if any) and interest on the Debt Securities of such
series (or of all Debt Securities then outstanding under such Indenture, as the
case may be), plus certain fees, expenses, disbursements and advances of the
applicable Trustee and (b) all events of default, other than the nonpayment of
accelerated principal (or specified portion thereof) with respect to Debt
Securities of such series (or of all Debt Securities then outstanding under such
Indenture, as the case may be) have been cured or waived as provided in such
Indenture. The Indenture will also provide that the holders of not less than a
majority in principal amount of the Debt Securities of any series (or of each
series of Debt Securities then outstanding under the applicable Indenture, as
the case may be) may waive any past default with respect to such series and its
consequences, except a default (x) in the payment of the principal of (or
premium, if any) or interest on any Debt Security of such series or (y) in
respect of a covenant or provision contained in such Indenture that cannot be
modified or amended without the consent of the holder of each outstanding Debt
Security affected thereby.
 
     The Indenture will provide that the Trustee thereunder is required to give
notice to the holders of Debt Securities issued thereunder within 90 days of a
default under the Indenture unless such default shall have been cured or waived;
provided, however, that such Trustee may withhold notice to the holders of any
such series of Debt Securities of any default with respect to such series
(except a default in the payment of the principal of (or premium, if any) or
interest 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 specified
responsible officers of the Trustee consider such withholding to be in the
interest of such holders.
 
     The Indenture will provide that no holder of Debt Securities of any series
issued thereunder may institute any proceeding, judicial or otherwise, with
respect to such Indenture or for any remedy thereunder, except in the case of
the failure of the applicable Trustee, for 60 days, to act after it has received
a written request to institute proceedings in respect of an event of default
from the holders of not less than 25% in principal amount of the outstanding
Debt Securities of such series, as well as an offer of reasonable indemnity.
This provision will not prevent, however, any holder of Debt Securities from
instituting suit for the enforcement of payment of the principal of (and
premium, if any) and interest on the Debt Securities held by that holder at the
respective due dates thereof.
 
     Subject to provisions in the Indenture relating to its duties in case of
default, the Trustee thereunder is under no obligation to exercise any of its
rights or powers under such Indenture at the request or direction of any holders
of any series of Debt Securities then outstanding under such Indenture, unless
such holders shall have offered to such Trustee reasonable security or
indemnity. The holders of not less than a majority in principal amount of the
outstanding Debt Securities of any series (or of each series of Debt Securities
then outstanding under such Indenture, as the case may be) shall have the right
to direct the time, method and place of conducting any proceeding for any remedy
available to such Trustee, or of exercising any trust or power conferred upon
such Trustee. However, such Trustee may refuse to follow any direction which is
in conflict with any law or such Indenture, which may involve such Trustee in
personal liability or which may be unduly prejudicial to the holders of Debt
Securities of such series not joining therein.
 
     Within 120 days after the close of each fiscal year, the Company must
delivery to each Trustee under the Indentures a certificate, signed by one of
several specified officers, stating whether such officer has knowledge of any
default under the Indenture and, if so, specifying each such default and the
nature and status thereof.
 
                                        9
<PAGE>   11
 
MODIFICATION OF THE INDENTURES
 
     Modifications and amendments of any Indenture may be made only with the
consent of the holders of not less than a majority in principal amount of all
outstanding Debt Securities issued thereunder which are affected by such
modification or amendment; provided, however, that no such modification or
amendment may, without the consent of the holder of each such Debt Security
affected thereby, (a) change the stated maturity of the principal of, or any
installment of interest (or premium, if any) on, any such Debt Security; (b)
reduce the principal amount of, or the rate of amount of interest on, or any
premium payable on redemption of, any such Debt Security, or reduce the amount
of principal of an Original Issue Discount Security that would be due and
payable upon declaration of acceleration of the maturity thereof or would be
provable in bankruptcy, or adversely affect any right of repayment of the holder
of any such Debt Security; (c) change the place of payment, or the currency or
currencies, for payment of principal of, or premium, if any, or interest on 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 such Indenture; or (f) modify any of the
foregoing provisions or any of the provisions relating to the waiver of certain
past defaults or certain covenants, except to increase the required percentage
to effect such action or to provide that certain other provisions may not be
modified or waived without the consent of the holder of such Debt Security.
 
     The holders of a majority in aggregate principal amount of outstanding Debt
Securities of each series may, on behalf of all holders of Debt Securities of
that series, waive, insofar as that series is concerned, compliance by the
Company with certain covenants in the applicable Indenture, including those
described in "-- Certain Covenants."
 
     Modifications and amendments of the Indenture may be made by the Company
and the Trustee without the consent of any holder of Debt Securities issued
thereunder for any of the following purposes: (a) to evidence the succession of
another person to the Company as obligor under such Indenture; (b) to add to the
covenants of the Company for the benefit of the holders of all or any series of
Debt Securities issued thereunder or to surrender any right or power conferred
upon the Company in such Indenture; (c) to add events of default for the benefit
of the holders of all or any series of Debt Securities issued thereunder; (d) to
add or change any provisions of such Indenture to facilitate the issuance of, or
to liberalize certain terms of, Debt Securities issued thereunder in bearer
form, or to permit or facilitate the issuance of such Debt Securities in
uncertificated form, provided that such action shall not adversely affect the
interests of the holders of such Debt Securities of any series in any material
respect; (e) to change or eliminate any provision of such Indenture, provided
that any such change or elimination shall become effective only when there are
no Debt Securities outstanding of any series issued thereunder created prior
thereto which are entitled to the benefit of such provision; (f) to secure the
Debt Securities issued thereunder; (g) to establish the form or terms of Debt
Securities of any series issued thereunder, including the provisions and
procedures, if applicable, for the conversion of such Debt Securities into
Common Stock of the Company; (h) to provide for the acceptance of appointment by
a successor Trustee or facilitate the administration of the trusts under such
Indenture by more than one Trustee; (i) to cure any ambiguity, defect or
inconsistency in such Indenture, provided that such action shall not adversely
affect the interests of holders of Debt Securities of any series issued
thereunder in any material respect; or (j) to supplement any of the provisions
of such Indenture to the extent necessary to permit or facilitate defeasance and
discharge of any series of such Debt Securities issued thereunder, provided that
such action shall not adversely affect the interests of the holders of the Debt
Securities of any series issued thereunder in any material respect.
 
     The Indenture will provide that in determining whether the holders of the
requisite principal amount of outstanding Debt Securities of a series issued
thereunder have given any request, demand, authorization, direction, notice,
consent or waiver thereunder or whether a quorum is present at a meeting of
holders of such Debt Securities, (a) the principal amount of an Original Issue
Discount Security that shall be deemed to be outstanding shall be the amount of
the principal thereof that would be due and payable as of the date of such
determination upon declaration of acceleration of the maturity thereof; (b) the
principal amount of a Debt
                                       10
<PAGE>   12
 
Security denominated in a foreign currency that shall be deemed outstanding
shall be the U.S. dollar equivalent, determined on the issue date for such Debt
Security, of the principal amount (or, in the case of an Original Issue Discount
Security, the U.S. dollar equivalent on the issue date of such Debt Security of
the amount determined as provided in (a) above); (c) the principal amount of an
indexed security that shall be deemed outstanding shall be the principal face
amount of such indexed security at original issuance, unless otherwise provided
with respect to such indexed security in the applicable Indenture; and (d) Debt
Securities owned by the Company or any other obligor upon the Debt Securities or
any affiliate of the Company or of such other obligor shall be disregarded.
 
     The Indenture will contain provisions for convening meetings of the holders
of Debt Securities of a series issued thereunder. A meeting may be called at any
time by the Trustee and also, upon request, by the Company or the holders of at
least 25% in principal amount of the outstanding Debt Securities of such series,
in any such case upon notice given as provided in the applicable Indenture.
Except for any consent that must be given by the holder of each Debt Security
affected by certain modifications and amendments of the Indenture, any
resolution presented at a meeting or adjourned meeting duly reconvened at which
a quorum is present may be adopted by the affirmative vote of the holders of a
majority in principal amount of the outstanding Debt Securities of that series;
provided, however, that, except as referred to above, any resolution with
respect to any request, demand, authorization, direction, notice, consent,
waiver or other action that may be made, given or taken by the holders of a
specified percentage which is less than a majority in principal amount of the
outstanding Debt Securities of a series may be adopted at a meeting or adjourned
meeting duly reconvened at which a quorum is present by the affirmative vote of
the holders of such specified percentage in principal amount of the outstanding
Debt Securities of that series. Any resolution passed or decision taken at any
meeting of holders of Debt Securities of any series duly held in accordance with
the Indenture will be binding on all holders of Debt Securities of that series.
The quorum at any meeting called to adopt a resolution, and at any reconvened
meeting, will be persons holding or representing a majority in principal amount
of the outstanding Debt Securities of a series; provided, however, that if any
action is to be taken at such meeting with respect to a consent or waiver which
may be given by the holders of not less than a specified percentage in principal
amount of the outstanding Debt Securities of a series, the persons holding or
representing such specified percentage in principal amount of the outstanding
Debt Securities of such series will constitute a quorum.
 
     Notwithstanding the provisions described above, if any action is to be
taken at a meeting of holders of Debt Securities of any series with respect to
any request, demand, authorization, direction, notice, consent, waiver or other
action that the applicable Indenture expressly provides may be made, given or
taken by the holders of a specified percentage in principal amount of all
outstanding Debt Securities affected thereby, or of the holders of such series
and one or more additional series: (a) there shall be no minimum quorum
requirement for such meeting and (b) the principal amount of the outstanding
Debt Securities of such series that vote in favor of such request, demand,
authorization, direction, notice, consent, waiver or other action shall be taken
into account in determining whether such request, demand, authorization,
direction, notice, consent, waiver or other action has been made, given or taken
under the Indenture.
 
DISCHARGE, DEFEASANCE AND COVENANT DEFEASANCE
 
     Unless otherwise indicated in the applicable Prospectus Supplement, the
Company may discharge certain obligations to holders of any series of Debt
Securities that have not already been delivered to the Trustee for cancellation
and that either have become due and payable or will become due and payable
within one year (or scheduled for redemption within one year) by irrevocably
depositing with such Trustee, in trust, funds in such currency or currencies,
currency unit or units or composite currency or currencies in which such Debt
Securities are payable in an amount sufficient to pay the entire indebtedness on
such Debt Securities in respect of principal (and premium, if any) and interest
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.
 
     The Indenture will provide that, unless otherwise indicated in the
applicable Prospectus Supplement, the Company may elect either (a) to defease
and be discharged from any and all obligations (except for the obligation to pay
additional amounts, if any, upon the occurrence of certain events of tax,
assessment or
                                       11
<PAGE>   13
 
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) with respect to such Debt Securities ("defeasance")
or (b) to be released from its obligations with respect to such Debt Securities
under the applicable Indenture (being the restrictions described under the
caption "-- Certain Covenants") or if provided in the applicable Prospectus
Supplement, its obligations with respect to any other covenant, and any omission
to comply with such obligations shall not constitute a default or an event of
default with respect to such Debt Securities ("covenant defeasance"), in either
case upon the irrevocable deposit by the Company with the applicable Trustee, in
trust, of an amount, in such currency or currencies, currency unit or units or
composite currency or currencies in which such Debt Securities are payable at
stated maturity, or Government Obligations (as defined below), or both,
applicable to such Debt Securities which through the scheduled payment of
principal and interest in accordance with their terms will provide money in an
amount sufficient to pay the principal of (and premium, 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 Company
has delivered to the applicable Trustee an opinion of Counsel (as specified in
the applicable Indenture) to the effect that the holders of such Debt Securities
will not recognize income, gain or loss for U.S. federal income tax purposes as
a result of such defeasance or covenant defeasance and will be subject to U.S.
federal income tax on the same amounts, in the same manner and at the same times
as would have been the case if such defeasance or covenant defeasance had not
occurred, 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 law occurring after the date of such
Indenture. In the event of such defeasance, the holders of such Debt Securities
would thereafter be able to look only to such trust fund for payment of
principal (and premium, if any) and interest.
 
     "Government Obligations" means securities which are (a) 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 (b) obligations of
a person controlled or supervised by and acting as an agency or instrumentality
of the United States of America or such government which issued the foreign
currency in which the Debt Securities of such series are payable, the payment of
which is unconditionally guaranteed as a full faith and credit obligation by the
United States of America or such other government, which, in either case, are
not callable or redeemable at the option of the issuer thereof, and 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.
 
     Unless otherwise provided in the applicable Prospectus Supplement, if after
the Company has deposited funds and/or Government Obligations to effect
defeasance or covenant defeasance with respect to Debt Securities of any series,
(a) the holder of a Debt Security of such series is entitled to, and does, elect
pursuant to the applicable Indenture or the terms of such Debt Security to
receive payment in a currency, currency unit or composite currency other than
that in which such deposit has been made in respect of such Debt Security, or
(b) a Conversion Event (as defined below) occurs in respect of the currency,
currency unit or composite currency in which such deposit has been made, the
indebtedness represented by such Debt Security shall be deemed to have been, and
will be, fully discharged and satisfied through the payment of the principal of
(and premium, if any) and interest on such Debt Security as they become due out
of the proceeds yielded by converting the amount so deposited in respect of such
Debt Security into the currency, currency unit or composite currency in which
such Debt Security becomes payable as a result of such election or such
cessation of usage based on the applicable market exchange rate. "Conversion
Event" means the cessation of
 
                                       12
<PAGE>   14
 
use of (i) a currency, currency unit or composite currency both by the
government of the country which issued such currency and for the settlement of
actions by a central bank or other public institution 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 described in the applicable Prospectus Supplement, all payments of
principal of (and premium, if any) and interest on any Debt Security that is
payable in a Foreign Currency that ceases to be used by its government of
issuance shall be made in U.S. dollars.
 
     In the event the Company effects covenant defeasance with respect to any
Debt Securities and such Debt Securities are declared due and payable because of
the occurrence of any event of default, other than the event of default
described in clause (d) under "-- Events of Default, Notice and Waiver" with
respect to the specified sections in the applicable Indenture (which Sections
would no longer be applicable to such Debt Securities) or clause (g) thereunder
with respect to any other covenants as to which there has been covenant
defeasance, the amount in such currency, currency unit or composite currency in
which such Debt Securities are payable and Government Obligations on deposit
with the applicable Trustee, will be sufficient to pay amounts due on such Debt
Securities at the time of their stated maturity but may not be sufficient to pay
amounts due on such Debt Securities at the time of the acceleration resulting
from such event of default. In any such event, the Company would remain liable
to make payments 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.
 
CONVERTIBLE DEBT SECURITIES
 
     The terms and conditions, if any, upon which the Debt Securities are
convertible into Common Stock will be set forth in the applicable Prospectus
Supplement relating thereto. Such terms will include whether such Debt
Securities are convertible into Common Stock, the conversion price (or manner of
calculation thereof), the conversion period, provisions as to whether conversion
will be at the option of the holders or the Company, the events requiring an
adjustment of the conversion price and provisions affecting conversion in the
event of the redemption of such Debt Securities and any restrictions on
conversion, including restrictions directed at maintaining the Company's REIT
status.
 
     Reference is made to the section captioned "Description of Common Stock"
for a general description of the Common Stock to be acquired upon the conversion
of Debt Securities, including a description of certain restrictions on the
ownership of the Common Stock.
 
BOOK-ENTRY DEBT SECURITIES
 
     The Debt Securities of a series may be issued in whole or in part in the
form of one or more global securities (the "Global Securities") that will be
deposited with, or on behalf of, a depositary identified in the applicable
Prospectus Supplement relating to such series. Global Securities may be issued
in either registered or bearer form and in either temporary or permanent form.
The specific terms of the depositary arrangement with respect to a series of
Debt Securities will be described in the applicable Prospectus Supplement
relating to such series.
 
                         DESCRIPTION OF PREFERRED STOCK
 
     The authorized capital stock of the Company consists of 90,000,000 shares
of Common Stock, par value $0.01 per share, 15,000,000 shares of Preferred
Stock, par value $0.01 per share (the Common Stock and the Preferred Stock
together are referred to as the "Capital Stock"), and 105,000,000 shares of
Excess Stock, par value $0.01 per share, issuable in exchange for Capital Stock
as described below under "Description of
 
                                       13
<PAGE>   15
 
Common Stock -- Restrictions on Ownership." At September 28, 1998, the Company
had no shares of Preferred Stock outstanding.
 
GENERAL
 
     Under the Company's articles of incorporation, the Board of Directors may
from time to time establish and issue one or more series of Preferred Stock
without shareholder approval. The Board of Directors may, subject to the express
provisions of any other series of Preferred Stock then outstanding, alter the
designation, classify or reclassify any unissued Preferred Stock by setting or
changing the number, designation, preference, conversion or other rights, voting
powers, restrictions, limitations as to dividends, qualifications and terms or
conditions of redemption of such series. Because the Board of Directors has the
power to establish the preferences and rights of each series of Preferred Stock,
it may afford the holders of any series of Preferred Stock preferences, powers
and rights, voting or otherwise, senior to the rights of holders of Common
Stock. Preferred Stock will, when issued, be fully paid and nonassessable.
 
     The following description of Preferred Stock sets forth certain general
terms and provisions of Preferred Stock to which any Prospectus Supplement may
relate. The statements below describing Preferred Stock are in all respects
subject to and qualified in their entirety by reference to the applicable
provisions of the Company's articles of incorporation and the Company's bylaws.
 
     The Prospectus Supplement relating to any Preferred Stock offered thereby
will contain the specific terms thereof, including, without limitation: (i) the
designation of the series, which may be by distinguishing number, letter or
title; (ii) the dividend rate on the shares of the series, if any, whether any
dividends shall be cumulative and, if so, from which date or dates, and the
relative rights of priority, if any, of payment of dividends on shares of the
series; (iii) the redemption rights, including conditions and the price or
prices, if any, for shares of the series; (iv) the terms and amounts of any
sinking fund for the purchase or redemption of shares of the series; (v) the
rights of the shares of the series in the event of any voluntary or involuntary
liquidation, dissolution or winding up of the affairs of the Company, and the
relative rights of priority, if any, of payment of shares of the series; (vi)
whether the shares of the series shall be convertible into shares of any other
class or series, or any other security, of the Company or any other corporation
or other entity, and, if so, the specification of such other class or series of
such other security, the conversion price or prices or dates on which such
shares shall be convertible and all other terms and conditions upon which such
conversion may be made; (vii) restrictions on the issuance of shares of the same
series or of any other class or series; (viii) the voting rights, if any, of the
holders of shares of the series; and (ix) any other relative rights, preferences
and limitations on that series.
 
RANK
 
     Unless otherwise specified in the Prospectus Supplement, Preferred Stock
will, with respect to dividend rights and rights upon liquidation, dissolution
or winding up of the Company, rank (i) senior to all classes or series of Common
Stock of the Company, and to all equity securities ranking junior to Preferred
Stock, (ii) on a parity with all equity securities issued by the Company the
terms of which specifically provide that such equity securities rank on a parity
with Preferred Stock; and (iii) junior to all equity securities issued by the
Company the terms of which specifically provide that such equity securities rank
senior to Preferred Stock. The term "equity securities" does not include
convertible debt securities.
 
DIVIDENDS
 
     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 Company
legally available for payment, cash dividends (or dividends in kind or in other
property if expressly permitted and described in the applicable Prospectus
Supplement) at such rates and on such dates as will be set forth in the
applicable Prospectus Supplement. Each such dividend shall be payable to holders
of record as they appear on the share transfer books of the Company on such
record dates as shall be fixed by the Board of Directors of the Company.
 
                                       14
<PAGE>   16
 
     Dividends on any series of Preferred Stock may be cumulative or
non-cumulative, as provided in the applicable Prospectus Supplement. Dividends,
if cumulative, will be cumulative from and after the date set forth in the
applicable Prospectus Supplement. If the Board of Directors fails to declare a
dividend payable on a dividend payment date on any series of Preferred Stock for
which dividends are noncumulative, then the holders of such series of Preferred
Stock will have no right to receive a dividend in respect of the dividend period
ending on such dividend payment date, and the Company will have no obligation to
pay the dividend accrued for such period, whether or not dividends on such
series are declared payable on any future dividend payment date.
 
     Unless otherwise specified in the Prospectus Supplement, if any shares of
Preferred Stock of any series are outstanding, no full dividends shall be
declared or paid or set apart for payment on any Capital Stock of the Company of
any other class or series ranking, as to dividends, on a parity with or junior
to the Preferred Stock of such series for any period unless (i) if such series
of Preferred Stock has a cumulative dividend, full cumulative dividends have
been or contemporaneously are declared and paid or declared and a sum sufficient
for the payment thereof set apart for such payment on the Preferred Stock of
such series for all past dividend periods and the then-current dividend period
or (ii) if such series of Preferred Stock does not have a cumulative dividend,
full dividends for the then-current dividend period have been or
contemporaneously are declared and paid or declared and a sum sufficient for the
payment thereof set apart for such payment on the Preferred Stock of such
series. When dividends are not paid in full (or a sum sufficient for such full
payment is not so set apart) upon Preferred Stock of any series and the shares
of any other series of Preferred Stock ranking on a parity as to dividends with
the Preferred Stock of such series, all dividends declared upon Preferred Stock
of such series and any other series of Preferred Stock ranking on a parity as to
dividends with such Preferred Stock shall be declared pro rata so that the
amount of dividends declared per share of Preferred Stock of such series 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 Preferred Stock of such
series (which shall not include any accumulation in respect of unpaid dividends
for prior dividend periods if such shares of Preferred Stock do not have a
cumulative dividend) and such other series of Preferred Stock bear to each
other. No interest, or sum of money in lieu of interest, shall be payable in
respect of any dividend payment or payments on Preferred Stock of such series
which may be in arrears.
 
     Except as provided in the immediately preceding paragraph, unless (i) if
such series of Preferred Stock has a cumulative dividend, full cumulative
dividends on the Preferred Stock of such series have been or contemporaneously
are declared and paid or declared and a sum sufficient for the payment thereof
set apart for payment for all past dividend periods and the then-current
dividend period, and (ii) if such series of Preferred Stock does not have a
cumulative dividend, full dividends on the Preferred Stock of such series have
been or contemporaneously are declared and paid or declared and a sum sufficient
for the payment thereof set apart for payment for the then-current dividend
period, no dividends (other than in Common Stock or other Capital Stock ranking
junior to the Preferred Stock of such series as to dividends and upon
liquidation) shall be declared or paid or set aside for payment or other
distribution upon the Common Stock, or any other Capital Stock of the Company
ranking junior to or on a parity with the Preferred Stock of such series as to
dividends or upon liquidation, nor shall any Common Stock, or any other
Preferred Stock of the Company ranking junior to or on a parity with the
Preferred Stock of such series as to dividends or upon liquidation be redeemed,
purchased or otherwise acquired for any consideration (or any moneys be paid to
or made available for a sinking fund for the redemption of any such shares) by
the Company (except by conversion into or exchange for other Capital Stock of
the Company ranking junior to the Preferred Stock of such series as to dividends
and upon liquidation).
 
REDEMPTION
 
     If so provided in the applicable Prospectus Supplement, any series of
Preferred Stock will be subject to mandatory redemption or redemption at the
option of the Company, in whole or in part, in each case upon the terms, at the
times and at the redemption prices set forth in such Prospectus Supplement.
 
     The Prospectus Supplement relating to a series of Preferred Stock that is
subject to mandatory redemption will specify the number of shares of such
Preferred Stock that shall be redeemed by the Company
                                       15
<PAGE>   17
 
in each year commencing after a date to be specified, at a redemption price per
share to be specified, together with an amount equal to all accrued and unpaid
dividends thereon (which shall not, if such Preferred Stock does not have a
cumulative dividend, include any accumulation in respect of unpaid dividends for
prior dividend periods) to the date of redemption. The redemption price may be
payable in cash or other property, as specified in the applicable Prospectus
Supplement. If the redemption price for Preferred Stock of any series is payable
only from the net proceeds of the issuance of Capital Stock of the Company, the
terms of such Preferred Stock may provide that, if no such Capital Stock shall
have been issued or to the extent the net proceeds from any issuance are
insufficient to pay in full the aggregate redemption price then due, such
Preferred Stock shall automatically and mandatorily be converted into the
applicable class or series of Capital Stock of the Company pursuant to
conversion provisions specified in the applicable Prospectus Supplement.
 
     Notwithstanding the foregoing, unless (i) if such series of Preferred Stock
has a cumulative dividend, full cumulative dividends on all Preferred Stock of
any series 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 current dividend period and (ii) if such
series on Preferred Stock does not have a cumulative dividend, full dividends of
the Preferred Stock of any series have been or contemporaneously are declared
and paid or declared and a sum sufficient for the payment thereof set apart for
payment for the then-current dividend period, no Preferred Stock of any series
shall be redeemed unless all outstanding Preferred Stock of such series are
simultaneously redeemed; provided, however, that the foregoing shall not prevent
the purchase or acquisition of Preferred Stock of such series to preserve the
REIT status of the Company or pursuant to a purchase or exchange offer made on
the same terms to holders of all outstanding Preferred Stock of such series. In
addition, unless (i) if such series of Preferred Stock has a cumulative
dividend, full cumulative dividends on all outstanding Preferred Stock of any
series have been or contemporaneously are declared and paid or declared and a
sum sufficient for the payment thereof set apart for payment for all past
dividends periods and the then-current dividend period, and (ii) if such series
of Preferred Stock does not have a cumulative dividend, full dividends on the
Preferred Stock of any series have been or contemporaneously are declared and
paid or declared and a sum sufficient for the payment thereof set apart for
payment for the then-current dividend period, the Company shall not purchase or
otherwise acquire directly or indirectly any Preferred Stock of such series
(except by conversion into or exchange for Capital Stock of the Company ranking
junior to the Preferred Stock of such series as to dividends and upon
liquidation); provided, however, that the foregoing shall not prevent the
purchase or acquisition of Preferred Stock of such series to preserve the REIT
status of the Company or pursuant to a purchase or exchange offer made on the
same terms to holders of all outstanding Preferred Stock of such series.
 
     If fewer than all of the outstanding Preferred Stock of any series are to
be redeemed, the number of shares to be redeemed will be determined by the
Company, and such shares may be redeemed pro rata from the holders of record of
such shares in proportion to the number of such shares held or for which
redemption is requested by such holder (with adjustments to avoid redemption of
fractional shares) or by lot in a manner determined by the Company.
 
     Notice of redemption will be mailed at least 30 days but not more than 60
days before the redemption date to each holder of record of Preferred Stock of
any series to be redeemed at the address shown on the share transfer books of
the Company. Each notice shall state: (i) the redemption date; (ii) the number
of shares and the series of Preferred Stock to be redeemed; (iii) the redemption
price; (iv) the place or places where certificates for such shares are to be
surrendered for payment of the redemption price; (v) that dividends on the
shares to be redeemed will cease to accrue on such redemption date; and (vi) the
date upon which the holder's conversion rights, if any, as to such shares shall
terminate. If fewer than all of the Preferred Stock of any series are to be
redeemed, the notice mailed to each such holder thereof shall also specify the
number of shares of Preferred Stock to be redeemed from each such holder. If
notice of redemption of any Preferred Stock has been given and if the funds
necessary for such redemption have been set aside by the Company in trust for
the benefit of the holders of any Preferred Stock so called for redemption, then
from and after the redemption date dividends will cease to accrue on such
Preferred Stock, and all rights of the holders of such shares will terminate,
except the right to receive the redemption price.
 
                                       16
<PAGE>   18
 
LIQUIDATION PREFERENCE
 
     Upon any voluntary or involuntary liquidation, dissolution or winding up of
the affairs of the Company, then, before any distribution or payment shall be
made to the holders of any Common Stock or any other class or series of Capital
Stock of the Company ranking junior to the Preferred Stock in the distribution
of assets upon any liquidation, dissolution or winding up of the Company, the
holders of each series of Preferred Stock shall be entitled to receive out of
assets of the Company legally available for distribution to shareholders
liquidating distributions in the amount of the liquidation preference per share
(set forth in the applicable Prospectus Supplement), plus an amount equal to all
dividends accrued and unpaid thereon (which shall not include any accumulation
in respect of unpaid dividends for prior dividend periods if such Preferred
Stock does not have a cumulative dividend). 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 Company. In the event that, upon any such voluntary or involuntary
liquidation, dissolution or winding up, the available assets of the Company are
insufficient to pay the amount of the liquidating distributions on all
outstanding Preferred Stock and the corresponding amounts payable on all shares
of other classes or series of Capital Stock of the Company ranking on a parity
with the Preferred Stock in the distribution of assets, then the holders of the
Preferred Stock and all other such classes or series of Capital Stock shall
share ratably in any such distribution of assets in proportion to the full
liquidating distributions to which they would otherwise be respectively
entitled.
 
     If liquidating distributions shall have been made in full to all holders of
Preferred Stock, the remaining assets of the Company shall be distributed among
the holders of any other classes or series of Capital Stock ranking junior to
the Preferred Stock upon liquidation, dissolution or winding up, according to
their respective rights and preferences and in each case according to their
respective number of shares. For such purposes, the consolidation or merger of
the Company with or into any other corporation, trust or entity, or the sale,
lease or conveyance of all or substantially all of the property or business of
the Company, shall not be deemed to constitute a liquidation, dissolution or
winding up of the Company.
 
VOTING RIGHTS
 
     Holders of Preferred Stock will not have any voting rights, except as set
forth below or as otherwise from time to time required by law or as indicated in
the applicable Prospectus Supplement.
 
     Unless provided otherwise for any series of Preferred Stock, so long as any
shares of Preferred Stock remain outstanding, the Company will not, without the
affirmative vote or consent of the holders of at least two-thirds of each series
of Preferred Stock outstanding at the time, given in person or by proxy, either
in writing or at a meeting (such series voting separately as a class), (i)
authorize or create, or increase the authorized or issued amount of, any class
or series of Capital Stock ranking senior to such series of Preferred Stock with
respect to the payment of dividends or the distribution of assets upon
liquidation, dissolution or winding up or reclassify any authorized capital
shares of the Company into 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 Company's
articles of incorporation or the designating amendment for such series of
Preferred Stock, whether by merger, consolidation or otherwise (an "Event"), so
as to materially and adversely affect any right, preference, privilege or voting
power of such series of Preferred Stock or the holders thereof; provided,
however, with respect to the occurrence of any of the Events set forth in (ii)
above, so long as the Preferred Stock remain outstanding with the terms thereof
materially unchanged, taking into account that upon the occurrence of an Event,
the Company may not be the surviving entity, the occurrence of any such Event
shall not be deemed to materially and adversely affect such rights, preferences,
privileges or voting power of holders of Preferred Stock and provided further
that (x) any increase in the amount of the authorized Preferred Stock or the
creation or issuance of any other series of Preferred Stock, or (y) any increase
in the amount of authorized shares of such series or any other series of
Preferred Stock, in each case ranking on a parity with or junior to the
Preferred Stock of such series with respect to payment of dividends or the
distribution of assets upon liquidation, dissolution or winding up, shall not be
deemed to materially and adversely affect such rights, preferences, privileges
or voting powers.
 
                                       17
<PAGE>   19
 
     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 of such series shall have
been redeemed or called for redemption and sufficient funds shall have been
deposited in trust to effect such redemption.
 
CONVERSION RIGHTS
 
     The terms and conditions, if any, upon which any series of Preferred Stock
is convertible into Common Stock will be set forth in the applicable Prospectus
Supplement relating thereto. Such terms will include the number of shares of
Common Stock into which the shares of Preferred Stock are convertible, the
conversion price (or manner of calculation thereof), the conversion period,
provisions as to whether conversion will be at the option of the holders of
Preferred Stock or the Company, the events requiring an adjustment of the
conversion price and provisions affecting conversion in the event of the
redemption of such series of Preferred Stock.
 
RESTRICTIONS ON OWNERSHIP
 
     As discussed below under "Description of Common Stock -- Restrictions on
Ownership," for the Company to qualify as a REIT under the Code, not more than
50% in value of its outstanding equity securities of all classes may be owned,
directly or indirectly, by five or fewer individuals (as defined in the Code to
include certain entities) during the last half of a taxable year. To assist the
Company in meeting this requirement, the Company may take certain actions to
limit the beneficial ownership, directly or indirectly, by a single person of
the Company's outstanding equity securities, including any Preferred Stock of
the Company. Therefore, the designating amendment for each series of Preferred
Stock may contain provisions restricting the ownership and transfer of Preferred
Stock.
 
BOOK-ENTRY PREFERRED STOCK
 
     The Preferred Stock of a series may be issued in whole or in part in the
form of one or more Global Securities that will be deposited with, or on behalf
of, a depositary identified in the applicable Prospectus Supplement relating to
such series. Global Securities may be issued in either registered or bearer form
and in either temporary or permanent form. The specific terms of the depositary
arrangement with respect to a series of Preferred Stock will be described in the
applicable Prospectus Supplement relating to such series.
 
REGISTRAR AND TRANSFER AGENT
 
     The Registrar and Transfer Agent for the Preferred Stock will be set forth
in the applicable Prospectus Supplement.
 
                        DESCRIPTION OF DEPOSITARY SHARES
 
GENERAL
 
     The Company may issue receipts ("Depositary Receipts") for Depositary
Shares, each of which will represent a fractional interest or a share of a
particular series of a class of Preferred Stock, as specified in the applicable
Prospectus Supplement. Shares of Preferred Stock of each series represented by
Depositary Shares will be deposited under a separate Deposit Agreement (each, a
"Deposit Agreement") among the Company, the depositary named therein (such
depositary or its successor, the "Preferred Stock Depositary") and the holders
from time to time of the Depositary Receipts. Subject to the terms of the
Deposit Agreement, each owner of a Depositary Receipt will be entitled, in
proportion to the fractional interest of a share of the particular series of
shares of Preferred Stock represented by the Depositary Shares evidenced by such
Depositary Receipt, to all the rights and preferences of the shares of Preferred
Stock represented by such Depositary Shares (including dividend, voting,
conversion, redemption and liquidation rights). At September 28, 1998, the
Company had no Depositary Shares issued or outstanding.
 
                                       18
<PAGE>   20
 
     The Depositary Shares will be evidenced by Depositary Receipts issued
pursuant to the applicable Deposit Agreement. Immediately following the issuance
and delivery of the Preferred Stock by the Company to the Preferred Stock
Depositary, the Company will cause the Preferred Stock Depositary to issue, on
behalf of the Company, the Depositary Receipts. Copies of the applicable form of
Deposit Agreement and Depositary Receipt may be obtained from the Company upon
request.
 
DIVIDENDS AND OTHER DISTRIBUTIONS
 
     The Preferred Stock Depositary will distribute all cash dividends or other
cash distributions received in respect of the Preferred Stock to the record
holders of the Depositary Receipts evidencing the related Depositary Shares in
proportion to the number of such Depositary Receipts owned by such holder,
subject, if set forth in the applicable Prospectus Supplement, to certain
obligations of holders to file proofs, certificates and other information and to
pay certain charges and expenses to the Preferred Stock Depositary.
 
     In the event of a distribution other than in cash, the Preferred Stock
Depositary will distribute property received by it to the record holders of
Depositary Receipts entitled thereto, subject, if set forth in the applicable
Prospectus Supplement, to certain obligations of holders to file proofs,
certificates and other information and to pay certain charges and expenses to
the Preferred Stock Depositary, unless the Preferred Stock Depositary determines
that it is not feasible to make such distribution, in which case the Preferred
Stock Depositary may, with the approval of the Company, sell such property and
distribute the net proceeds from such sale to such holders.
 
WITHDRAWAL OF SHARES
 
     Unless otherwise specified in the applicable Prospectus Supplement, upon
surrender of the Depositary Receipts at the corporate trust office of the
Preferred Stock Depositary (unless the related Depositary Shares have previously
been called for redemption), the holders thereof will be entitled to delivery at
such office, to or upon such holder's order, of the number of whole or
fractional shares of Preferred Stock and any money or other property represented
by the Depositary Shares evidenced by such Depositary Receipts. Holders of
Depositary Receipts will be entitled to receive whole or fractional shares of
the related Preferred Stock on the basis of the proportion of shares of
Preferred Stock represented by each Depositary Share as specified in the
applicable Prospectus Supplement, but holders of such Preferred Stock will not
thereafter be entitled to receive Depositary Shares therefor. If the Depositary
Receipts delivered by the holder evidence a number of Depositary Shares in
excess of the number of Depositary Shares representing the number of shares of
Preferred Stock to be withdrawn, the Preferred Stock Depositary will deliver to
such holder at the same time a new Depositary Receipt evidencing such excess
number of Depositary Shares.
 
REDEMPTION OF DEPOSITARY SHARES
 
     Whenever the Company redeems Preferred Stock held by the Preferred Stock
Depositary, the Preferred Stock Depositary will redeem as of the same redemption
date the number of Depositary Shares representing the shares of Preferred Stock
so redeemed, provided the Company shall have paid in full to the Preferred Stock
Depositary the redemption price of the Preferred Stock to be redeemed plus an
amount equal to any accrued and unpaid dividends (except, with respect to
noncumulative shares of Preferred Stock, dividends for the current dividend
period only) thereon to the date fixed for redemption. The redemption price per
Depositary Share will be equal to the fraction of the redemption price and any
other amounts per share payable with respect to the Preferred Stock specified in
the applicable Prospectus Supplement. If less than all the Depositary Shares are
to be redeemed, the Depositary Shares to be redeemed will be selected by the
Preferred Stock Depositary by lot.
 
     After the date fixed for redemption, the Depositary Shares so called for
redemption will no longer be deemed to be outstanding and all rights of the
holders of the Depositary Receipts evidencing the Depositary Shares so called
for redemption will cease, except the right to receive any moneys payable upon
such redemption and any money or other property to which the holders of such
Depositary Receipts were entitled upon such redemption upon surrender thereof to
the Preferred Stock Depositary.
 
                                       19
<PAGE>   21
 
VOTING OF THE UNDERLYING PREFERRED STOCK
 
     Upon receipt of notice of any meeting at which the holders of shares of
Preferred Stock are entitled to vote, the Preferred Stock Depositary will mail
the information contained in such notice of meeting to the record holders of the
Depositary Receipts evidencing the Depositary Shares that represent such shares
of Preferred Stock. Each record holder of Depositary Receipts evidencing
Depositary Shares on the record date (which will be the same date as the record
date for the Preferred Stock) will be entitled to instruct the Preferred Stock
Depositary as to the exercise of the voting rights pertaining to the amount of
shares of Preferred Stock represented by such holder's Depositary Shares. The
Preferred Stock Depositary will vote the amount of shares of Preferred Stock
represented by such Depositary Shares in accordance with such instructions, and
the Company will agree to take all reasonable action that may be deemed
necessary by the Preferred Stock Depositary in order to enable the Preferred
Stock Depositary to do so. The Preferred Stock Depositary will abstain from
voting the amount of shares of Preferred Stock represented by such Depositary
Shares to the extent it does not receive specific instructions from the holders
of Depositary Receipts evidencing such Depositary Shares.
 
LIQUIDATION PREFERENCE
 
     In the event of liquidation, dissolution or winding up of the Company,
whether voluntary or involuntary, each holder of a Depositary Receipt will be
entitled to the fraction of the liquidation preference accorded each share of
Preferred Stock represented by the Depositary Share evidenced by such Depositary
Receipt, as set forth in the applicable Prospectus Supplement.
 
CONVERSION OF PREFERRED STOCK
 
     The Depositary Shares, as such, are not convertible into shares of Common
Stock or any other securities or property of the Company. Nevertheless, if so
specified in the applicable Prospectus Supplement relating to an offering of
Depositary Shares, the Depositary Receipts may be surrendered by holders thereof
to the Preferred Stock Depositary with written instructions to the Preferred
Stock Depositary to instruct the Company to cause conversion of the shares of
Preferred Stock represented by the Depositary Shares evidenced by such
Depositary Receipts into whole shares of Common Stock or other shares of Capital
Stock, as the case may be, and the Company will agree that upon receipt of such
instructions and any amounts payable in respect thereof, it will cause the
conversion thereof utilizing the same procedures as those provided for delivery
of shares of Preferred Stock to effect such conversion. If the Depositary Shares
evidenced by a Depositary Receipt are to be converted in part only, one or more
new Depositary Receipts will be issued for any Depositary Shares not to be
converted. No fractional shares of Common Stock will be issued upon conversion,
and if such conversion will result in a fractional share being issued, an amount
will be paid in cash by the Company equal to the value of the fractional
interest based upon the closing price of the Common Stock on the last business
day prior to the conversion.
 
AMENDMENT AND TERMINATION OF THE DEPOSIT AGREEMENT
 
     The form of Depositary Receipt evidencing the Depositary Shares which
represent the shares of Preferred Stock and any provision of the Deposit
Agreement may at any time be amended by agreement between the Company and the
Preferred Stock Depositary. However, any amendment that materially and adversely
alters the rights of the holders of Depositary Receipts will not be effective
unless such amendment has been approved by the existing holders of at least a
majority of the Depositary Shares evidenced by the Depositary Receipts then
outstanding.
 
     The Deposit Agreement may be terminated by the Company upon not less than
30 days' prior written notice to the Preferred Stock Depositary if (i) such
termination is to preserve the Company's status as a REIT or (ii) a majority of
each class of Preferred Stock affected by such termination consents to such
termination, whereupon the Preferred Stock Depositary shall deliver or make
available to each holder of Depositary Receipts, upon surrender of the
Depositary Receipts held by such holder, such number of whole or fractional
shares of Preferred Stock as are represented by the Depositary Shares evidenced
by such Depositary Receipts.
 
                                       20
<PAGE>   22
 
In addition, the Deposit Agreement will automatically terminate if (i) all
outstanding Depositary Shares shall have been redeemed, (ii) there shall have
been a final distribution in respect of the related shares of Preferred Stock in
connection with any liquidation, dissolution or winding up of the Company and
such distribution shall have been distributed to the holders of Depositary
Receipts evidencing the Depositary Shares representing such shares of Preferred
Stock or (iii) each related share of Preferred Stock shall have been converted
into Capital Stock of the Company not so represented by Depositary Shares.
 
CHARGES OF PREFERRED STOCK DEPOSITARY
 
     The Company will pay all transfer and other taxes and governmental charges
arising solely from the existence of the Deposit Agreement. In addition, the
Company will pay the fees and expenses of the Preferred Stock Depositary in
connection with the performance of its duties under the Deposit Agreement.
However, unless otherwise specified in the applicable Prospectus Supplement,
holders of Depositary Receipts will pay the fees and expenses of the Preferred
Stock Depositary for any duties requested by such holders to be performed which
are outside of those expressly provided for in the Deposit Agreement.
 
RESIGNATION AND REMOVAL OF DEPOSITARY
 
     The Preferred Stock Depositary may resign at any time by delivering to the
Company notice of its election to do so, and the Company may at any time remove
the Preferred Stock Depositary, any such resignation or removal to take effect
upon the appointment of a successor Preferred Stock Depositary. A successor
Preferred Stock Depositary must be appointed within 60 days after delivery of
the notice of resignation or removal and must be a bank or trust company having
its principal office in the United States and having a combined capital and
surplus of at least $50,000,000.
 
MISCELLANEOUS
 
     The Preferred Stock Depositary will forward to holders of Depositary
Receipts any reports and communications from the Company which are received by
the Preferred Stock Depositary with respect to the related shares of Preferred
Stock.
 
     Neither the Preferred Stock Depositary nor the Company will be liable if it
is prevented from or delayed in, by law or any circumstances beyond its control,
performing its obligations under the Deposit Agreement. The obligations of the
Company and the Preferred Stock Depositary under the Deposit Agreement will be
limited to performing their duties thereunder in good faith and without
negligence, gross negligence or willful misconduct, and the Company and the
Preferred Stock Depositary will not be obligated to prosecute or defend any
legal proceeding in respect of any Depositary Receipts, Depositary Shares or
shares of Preferred Stock represented thereby unless satisfactory indemnity is
furnished. The Company and the Preferred Stock Depositary may rely on written
advice of counsel or accountants, or information provided by persons presenting
shares of Preferred Stock represented thereby for deposit, holders of Depositary
Receipts or other persons believed to be competent to give such information, and
on documents believed to be genuine and signed by a proper party.
 
     If the Preferred Stock Depositary shall receive conflicting claims,
requests or instructions from any holders of Depositary Receipts, on the one
hand, and the Company, on the other hand, the Preferred Stock Depositary shall
be entitled to act on such claims, requests or instructions received from the
Company.
 
                          DESCRIPTION OF COMMON STOCK
 
     The authorized Capital Stock of the Company consists of 90,000,000 shares
of Common Stock and 15,000,000 shares of Preferred Stock. There also is
authorized 105,000,000 shares of Excess Stock, issuable in exchange for Capital
Stock, as described below under "-- Restrictions on Ownership." At September 28,
1998, the Company had outstanding 29,363,143 shares of Common Stock. All issued
and outstanding shares of Common Stock are duly authorized, validly issued,
fully paid and nonassessable.
 
                                       21
<PAGE>   23
 
GENERAL
 
     The following description of the Common Stock sets forth certain general
terms and provisions of the Common Stock to which any Prospectus Supplement may
relate, including a Prospectus Supplement providing that Common Stock will be
issuable upon conversion of Debt Securities or Preferred Stock or upon the
exercise of the Warrants to purchase Common Stock issued by the Company. The
statements below describing the Common Stock are in all respects subject to and
qualified in their entirety by reference to the applicable provisions of the
Company's articles of incorporation and bylaws.
 
COMMON STOCK
 
     The holders of Common Stock elect all directors and are entitled to one
vote per share on all matters submitted to a vote of the stockholders.
Stockholders are entitled to receive dividends when, as and if declared by the
Board of Directors out of funds legally available for that purpose. Upon any
liquidation, dissolution or winding up of the Company, holders of Common Stock
are entitled to share pro rata in any distribution to stockholders. Holders of
Common Stock have no preemptive, subscription or conversion rights. The Common
Stock will, when issued, be fully paid and nonassessable and will not be subject
to preemptive or other similar rights.
 
     The Company purchased from six limited partnerships and one general
partnership 14 properties in July 1992, and purchased from a trust one property
in August 1993, in exchange for the issuance to the partnerships and the trust
of an aggregate of 346,172 restricted shares of Common Stock (the "CNL
Transaction"). All of the shares issued in connection with the CNL Transaction
are subject to piggyback registration rights under certain circumstances.
 
RESTRICTIONS ON OWNERSHIP
 
     For the Company to qualify as a REIT, not more than 50 percent in value of
its outstanding Capital Stock may be owned, directly or indirectly, by five or
fewer individuals (as defined in the Code to include certain entities) during
the last half of a taxable year; the shares must be beneficially owned (without
reference to any rules of attribution) by 100 or more persons during at least
335 days of a taxable year of 12 months or during a proportionate part of a
shorter taxable year; and certain other requirements must be satisfied. See
"Federal Income Tax Considerations -- Taxation of the Company."
 
     To ensure that five or fewer individuals do not own more than 50 percent in
value of the outstanding Common Stock, the Company's articles of incorporation
provide that, subject to certain exceptions, no holder may own, or be deemed to
own by virtue of the attribution provisions of the Code, more than 9.8 percent
in value (the "Ownership Limit") of the outstanding Capital Stock. The Board of
Directors may waive the Ownership Limit if evidence satisfactory to the Company
and the Company's tax counsel is presented that such ownership will not then or
in the future jeopardize the Company's status as a REIT. As a condition of such
waiver, the Board of Directors may require opinions of counsel satisfactory to
it and/or an undertaking from the applicant with respect to preserving the
status of the company as a REIT.
 
     The Ownership Limit will not be automatically removed even if the REIT
provisions of the Code are changed so as to no longer contain any ownership
concentration limitation or if the ownership concentration limitation is
increased. In addition to preserving the Company's status as a REIT, the
Ownership Limit may prevent any person or small group of persons from acquiring
unilateral control of the Company.
 
     If the ownership, transfer or acquisition of shares of Common Stock, or
change in capital structure of the Company or other event or transaction would
result in (a) any Person (as defined below) owning (applying certain attribution
rules) Capital Stock in excess of the Ownership Limit, (b) fewer than 100
Persons owning the Capital Stock, (c) the Company being "closely held" within
the meaning of Section 856(h) of the Code, or (d) the Company otherwise failing
to qualify as a REIT, then the ownership, transfer or acquisition, or change in
capital structure or other event or transaction that would have such effect will
be void as to the purported transferee or owner, and the purported transferee or
owner will not have or acquire any rights to the Capital Stock to the extent
required to avoid such a result. Capital Stock owned, transferred or proposed to
be
 
                                       22
<PAGE>   24
 
transferred in excess of the Ownership Limit or which would otherwise jeopardize
the Company's status as a REIT will automatically be converted to Excess Stock.
A holder of Excess Stock is not entitled to distributions, voting rights, and
other benefits with respect to such shares except for the right to payment of
the purchase price for the shares (or, in the case of a devise or gift or
similar event which results in the issuance of Excess Stock, the fair market
value at the time of such devise or gift or event) and the right to certain
distributions upon liquidation. Any dividend or distribution paid to a proposed
transferee or holder of Excess Stock shall be repaid to the Company upon demand.
Excess Stock shall be subject to repurchase by the Company at its election. The
purchase price of any Excess Stock shall be equal to the lesser of (i) the price
paid in such purported transaction (or, in the case of a devise or gift or
similar event resulting in the issuance of Excess Stock, the fair market value
at the time of such devise or gift or event), or (ii) the fair market value of
such Common Stock on the date on which the Company or its designee determines to
exercise its repurchase right. If the foregoing transfer restrictions are
determined to be void or invalid by virtue of any legal decision, statute, rule
or regulation, then the purported transferee of any Excess Stock may be deemed,
at the option of the Company, to have acted as an agent on behalf of the Company
in acquiring such Excess Stock and to hold such Excess Stock on behalf of the
Company.
 
     For purposes of the Company's articles of incorporation, the term "Person"
shall mean an individual, corporation, partnership, estate, trust (including a
trust qualified under Section 401(a) or 501(c)(17) of the Code), a portion of a
trust permanently set aside to be used exclusively for the purposes described in
Section 642(c) of the Code, association, private foundation within the meaning
of Section 509(a) of the Code, joint stock company or other entity, or a group
as that term is used for purposes of Section 13(d)(3) of the Exchange Act; but
does not include an underwriter which participated in a public offering of
Capital Stock for a period of sixty (60) days following the purchase by such
underwriter of Capital Stock therein, provided that the foregoing exclusions
shall apply only if the ownership of such Capital Stock by such underwriter
would not cause the Company to fail to qualify as a REIT by reason of being
"closely held" within the meaning of Section 856(a) of the Code or otherwise
cause the Company to fail to qualify as a REIT.
 
     All certificates representing Capital Stock will bear a legend referring to
the restrictions described above.
 
     The articles of incorporation of the Company provide that all persons who
own, directly or by virtue of the attribution provisions of the Code, more than
5.0 percent of the outstanding Capital Stock, or such lower percentage as may be
required pursuant to regulations under the Code or as may be requested by the
Board of Directors, must file a written notice with the Company no later than
January 31 of each year with respect to the prior year containing (a) the name
and address of such owner, (b) the number of shares of Capital Stock owned by
such holder and (c) a description of how such shares are held. In addition, each
stockholder shall be required to disclose, upon demand, to the Company in
writing such information with respect to the direct indirect and constructive
ownership of shares as the directors deem necessary to comply with the
provisions of the Code as applicable to a REIT or to comply with the
requirements of any taxing authority or governmental agency.
 
     The ownership limitations described above may have the effect of precluding
acquisitions of control of the Company by a third party.
 
TRANSFER AGENT
 
     First Union National Bank is the Transfer Agent of the Common Stock.
 
                      DESCRIPTION OF COMMON STOCK WARRANTS
 
     The Company may issue Common Stock Warrants for the purchase of Common
Stock. Common Stock Warrants may be issued independently or together with any
other Offered Securities offered by any Prospectus Supplement and may be
attached to or separate from such Offered Securities. Each series of Common
Stock Warrants will be issued under a separate warrant agreement (each, a
"Warrant Agreement") to be entered into between the Company and a warrant agent
specified in the applicable Prospectus Supplement (the "Warrant Agent"). The
Warrant Agent will act solely as an agent of the Company in connection with the
 
                                       23
<PAGE>   25
 
Common Stock Warrants of such series and will not assume any obligation or
relationship of agency or trust for or with any holders or beneficial owners of
Common Stock Warrants. The following sets forth certain general terms and
provisions of the Common Stock Warrants offered hereby. Further terms of the
Common Stock Warrants and the applicable Warrant Agreements will be set forth in
the applicable Prospectus Supplement.
 
     The applicable Prospectus Supplement will describe the terms of the Common
Stock Warrants in respect of which this Prospectus is being delivered,
including, where applicable, the following: (a) the title of such Common Stock
Warrants; (b) the aggregate number of such Common Stock Warrants; (c) the price
or prices at which such Common Stock Warrants will be issued; (d) the number of
shares of Common Stock purchasable upon exercise of such Common Stock Warrants;
(e) the designation and terms of the other Offered Securities with which such
Common Stock Warrants are issued and the number of such Common Stock Warrants
issued with each such Offered Security; (f) the date, if any, on and after which
such Common Stock Warrants and the related Common Stock will be separately
transferable; (g) the price at which each share of Common Stock purchasable upon
exercise of such Common Stock Warrants may be purchased; (h) the date on which
the right to exercise such Common Stock Warrants shall commence and the date on
which such right shall expire; (i) the minimum or maximum amount of such Common
Stock Warrants which may be exercised at any one time; (j) information with
respect to book-entry procedures, if any; (k) any limitations on the acquisition
or ownership of such Common Stock Warrants which may be required in order to
maintain the status of the Company as a REIT; (l) a discussion of certain
federal income tax considerations; and (m) any other terms of such Common Stock
Warrants, including terms, procedures and limitations relating to the exchange
and exercise of such Common Stock Warrants.
 
     Reference is made to the section captioned "Description of Common Stock"
for a general description of the Common Stock to be acquired upon the exercise
of the Common Stock Warrants, including a description of certain restrictions on
the ownership of Common Stock.
 
                       FEDERAL INCOME TAX CONSIDERATIONS
 
INTRODUCTION
 
     The following is a summary of the material federal income tax consequences
of the ownership of the Capital Stock of the Company, prepared by Shaw Pittman
Potts & Trowbridge, tax counsel to the Company ("Tax Counsel"). This discussion
is based upon the laws, regulations, and reported rulings and decisions in
effect as of the date of this Prospectus (or, in the case of certain
regulations, proposed as of such date), all of which are subject to change,
retroactively or prospectively, and to possibly differing interpretations. This
discussion does not purport to deal with the federal income tax consequences
applicable to all investors in light of their particular investment
circumstances, or to all categories of investors, some of whom may be subject to
special rules (including, for example, insurance companies, tax-exempt
organizations, financial institutions, broker-dealers, foreign corporations and
persons who are not citizens or residents of the United States). No ruling on
the federal, state or local tax considerations relevant to the operation of the
Company, or to the purchase, ownership or disposition of the Common Stock or the
Preferred Stock has been requested from the Internal Revenue Service (the
"Service") or other tax authority. Tax Counsel has rendered certain opinions
discussed herein and believes that if the Service were to challenge the
conclusions of Tax Counsel, such conclusions should prevail in court. However,
opinions of counsel are not binding on the Service or on the courts, and no
assurance can be given that the conclusions reached by Tax Counsel would be
sustained in court. Investors should consult their own tax advisors in
determining the federal, state, local, foreign and other tax consequences to
them of the purchase, ownership and disposition of the Common Stock or the
Preferred Stock of the Company, the tax treatment of a REIT and the effect of
potential changes in applicable tax laws.
 
TAXATION OF THE COMPANY
 
     General.  Since its inception, the Company has elected, and believes it has
qualified, to be taxed as a REIT for federal income tax purposes, as defined in
Sections 856 through 860 of the Code. The provisions of
 
                                       24
<PAGE>   26
 
the Code pertaining to REITs are highly technical and complex. If various
conditions imposed by the Code are met, a REIT is, with limited exceptions, not
taxed at the corporate level on income that is currently distributed to the
REIT's stockholders. Undistributed income is taxed at regular corporate rates
and may be subject to a 4 percent excise tax. In addition, a REIT may be subject
to the "alternative minimum tax" on its items of tax preference and is subject
to income tax at the highest corporate rate on income from foreclosure property
and to penalty taxes on excessive unqualified income and prohibited
transactions.
 
     If the Company fails to qualify as a REIT for any taxable year and certain
relief provisions do not apply, the Company will be subject to federal income
tax (including alternative minimum tax) as an ordinary corporation on its
taxable income at regular corporate rates without any deduction or adjustment
for distributions to holders of Common Stock or Preferred Stock. To the extent
that the Company would, as a consequence, be subject to tax liability for any
such year, the amount of cash available for satisfaction of its liabilities and
for distribution to holders of Common Stock or Preferred Stock would be reduced.
Distributions to holders of Common Stock or Preferred Stock generally would be
taxable as ordinary income to the extent of current and accumulated earnings and
profits and, subject to certain limitations, would be eligible for the corporate
dividends received deduction, but there can be no assurance that any such
distributions would be made. The Company would not be eligible to elect REIT
status for the four subsequent taxable years, unless its failure to qualify was
due to reasonable cause and not willful neglect and unless certain other
requirements were satisfied.
 
     Opinion of Tax Counsel.  Based upon representations made by officers of the
Company with respect to relevant factual matters, upon the existing Code
provisions, rules and regulations promulgated thereunder (including proposed
regulations) and reported administrative and judicial interpretations thereof,
upon Tax Counsel's independent review of such documents and other information as
Tax Counsel deemed relevant in the circumstances and upon the assumption that
the Company will operate in the manner described in this Prospectus, Tax Counsel
has advised the Company that, in its opinion, (a) the Company has, for the years
1984 through 1997, met the requirements for qualification and taxation as a REIT
and (b) the Company's proposed method of operation will enable it to meet the
requirements for qualification and taxation as a REIT for 1998. It must be
emphasized, however, that the Company's ability to qualify as a REIT is
dependent upon actual operating results and future actions and events by the
Company and others, and no assurance can be given that the actual results of the
Company's operations and the future actions and events will enable the Company
to satisfy in any given year the requirements for qualification and taxation as
a REIT.
 
     Requirements for Qualification as a REIT.  As discussed more fully below,
the Code defines a REIT as a corporation (a) which is managed by one or more
trustees or directors; (b) the beneficial ownership of which is evidenced by
transferable shares, or by transferable certificates of beneficial interest; (c)
which would be taxable, but for Sections 856 through 860 of the Code, as a
domestic corporation; (d) which is neither a financial institution nor an
insurance company; (e) the beneficial ownership of which is held by 100 or more
persons; (f) which is not closely held; and (g) which meets certain other tests
regarding the nature of its assets and income and the amount of its
distributions.
 
     Ownership Tests.  More specifically, the ownership requirements of a REIT
are that (a) during the last half of each taxable year not more than 50 percent
of the Company's outstanding shares may be owned, directly or indirectly, by
five or fewer individuals and (b) there must be at least 100 stockholders on at
least 335 days of such 12-month taxable year (or a proportionate number of days
of a short taxable year). In order to meet these requirements, or to otherwise
obtain, maintain or reestablish REIT status, and for no other purpose, the
Company's articles of incorporation empower the Board of Directors to redeem, at
its option, a sufficient number of shares or to restrict the transfer thereof to
bring or to maintain the ownership of shares of the Company in conformity with
the requirements of the Code. The redemption price to be paid will be fair
market value as reflected in the latest quotations, or, if no quotations are
available, the net asset value of the shares as determined by the Board of
Directors.
 
     Under the Company's articles of incorporation, each holder of Capital Stock
is required, upon demand, to disclose to the Board of Directors in writing such
information with respect to direct and indirect ownership of shares of the
Company as the Board of Directors deems necessary to comply with provisions of
the Code
 
                                       25
<PAGE>   27
 
applicable to the Company, or to comply with the requirements of any other
appropriate taxing authority. Certain Treasury regulations govern the method by
which the Company is required to demonstrate compliance with these stock
ownership requirements and the failure to satisfy such regulations could cause
the Company to fail to qualify as a REIT. The Company has represented that it
has met, and expects to meet, these stock ownership requirements for each
taxable year.
 
     Asset Tests.  At the end of each quarter of a REIT's taxable year, at least
75 percent of the value of its total assets must consist of "real estate
assets," cash and cash items (including receivables) and government securities.
The balance of a REIT's assets generally may be invested without restriction,
except that holdings of securities not within the 75 percent class of assets
generally must not, with respect to any issuer, exceed 5 percent of the value of
the REIT's assets or 10 percent of the issuer's outstanding voting securities.
The term "real estate assets" includes real property, interests in real
property, leaseholds of land or improvements thereon, and any property
attributable to the temporary investment of new capital (but only if such
property is stock or a debt instrument and only for the one-year period
beginning on the date the REIT receives such capital). The Company has
represented that at the end of each quarter it has met, and expects in the
future to continue to meet, this asset test.
 
     Income Tests.  A REIT currently must meet two separate tests with respect
to its sources of income for each taxable year. In general, at least 75 percent
of a REIT's gross income (excluding income from prohibited transactions) for
each taxable year must be from rents from real property, interest on obligations
secured by mortgages on real property, gains from the sale or other disposition
of real property and certain other sources. In addition, a REIT must derive at
least 95 percent of its gross income (excluding income from prohibited
transactions) for each taxable year from any combination of the items of income
which qualify under the 75 percent test, from dividends and interest and from
gains from the sale, exchange or other disposition of certain stocks and
securities.
 
     Rents received by a REIT will qualify as "rents from real property" in
satisfying the gross income requirements described above only if several
conditions are met. First, the amount of rent must not be based in whole or in
part on the income or profits of any person. However, an amount received or
accrued generally will not be excluded from the term "rents from real property"
solely by reason of being based on a fixed percentage or percentages of receipts
of sales. The Company's leases provide for either fixed rent, sometimes with
scheduled escalations, or a fixed minimum rent and a percentage of gross
receipts in excess of some threshold. Second, the Code provides that rents
received from a tenant will not qualify as "rents from real property" in
satisfying the gross income tests if the Company, or an owner of 10 percent or
more of the Company, directly or constructively owns 10 percent or more of such
tenant (a "Related Party Tenant"). Third, if rent attributable to personal
property, leased in connection with a lease of real property, is greater than 15
percent of the total rent received under the lease, then the portion of rent
attributable to such personal property will not qualify as "rents from real
property." The Company anticipates that none of its gross annual income will be
considered attributable to rents that are based in whole or in part on the
income or profits of any person; that no more than a de minimis amount of its
gross annual income will be considered attributable to the rental of personal
property; and that none of its gross annual income will be from Related Party
Tenants. Finally, for rents received to qualify as "rents from real property,"
the Company generally must not operate or manage the property or furnish or
render services to tenants, other than through an "independent contractor" from
whom the Company derives no revenue. The "independent contractor" requirement,
however, does not apply to the extent the services provided by the Company are
"usually or customarily rendered" in connection with the rental space for
occupancy only and are not otherwise considered "rendered to the occupant."
However, a REIT is currently permitted to earn up to one percent of its gross
income from tenants, determined on a property-by-property basis, by furnishing
services that are noncustomary or provided directly to the tenants, without
causing the rental income to fail to quality as rents from real property. The
Company will provide certain services with respect to the Properties. The
Company does not anticipate that any of these services will be (a) of a type
other than those usually or customarily rendered in connection with the rental
space for occupancy only or (b) of a type considered rendered to any of the
occupants of the Properties.
 
     Should an entity fail to satisfy either or both of the 75 percent or 95
percent tests for any taxable year, it may still qualify as a REIT if (a) such
failure is due to reasonable cause and not willful neglect; (b) it reports
                                       26
<PAGE>   28
 
the nature and amount of each item of its income on a schedule attached to its
tax return for such year; and (c) the reporting of any incorrect information is
not due to fraud with intent to evade tax. However, even if these three
requirements were met and the REIT were not disqualified, a penalty tax of 100
percent would be imposed by reference to the amount by which the REIT failed the
75 percent or 95 percent test (whichever amount is greater).
 
     In addition to the 75 percent and 95 percent tests, for each taxable year
before 1998, a REIT was required to derive less than 30 percent of its gross
income (including gross income from prohibited transactions) from the sale or
other disposition of (i) real property held for less than four years (other than
foreclosure property or property involuntarily or compulsorily converted through
destruction, condemnation or similar events); (ii) stocks or securities held for
less than one year; and (iii) property sold or otherwise disposed of in a
prohibited transaction. The Company has represented that, for each taxable year
before 1998, it has not recognized gross income of a type, in an amount or at a
time which would have caused it to fail the 30 percent test.
 
     Distribution Requirements.  A REIT must distribute annually to its
stockholders ordinary income dividends in an amount equal to at least (a) 95
percent of the sum of (i) its "real estate investment trust taxable income"
(before deduction of dividends paid and excluding any net capital gains) and
(ii) the excess of net income from foreclosure property over the tax on such
income, minus (b) certain excess non-cash income. Real estate investment trust
taxable income generally is the taxable income of a REIT computed as if it were
an ordinary corporation, with certain adjustments. Distributions must be made in
the taxable year to which they relate or, if declared before the timely filing
of the REIT's tax return for such year and paid not later than the first regular
dividend payment after such declaration, in the following taxable year. To the
extent that the Company does not distribute all of its net capital gain or
distributes at least 95 percent, but less than 100 percent, of its real estate
investment trust taxable income, as adjusted, it will be subject to tax thereon
at regular ordinary and capital gain corporate tax rates. Furthermore, if the
Company should fail to distribute during each calendar year at least the sum of
(x) 85 percent of its ordinary income, (y) 95 percent of its net capital gain
net income for such year and (z) any undistributed taxable income from prior
periods, the Company would be subject to a 4 percent excise tax on the excess of
such required distribution over the amounts actually distributed.
 
     The Company has represented that it has made and intends to make
distributions to stockholders that will be sufficient to meet the annual
distribution requirements. Under some circumstances, however, it is possible
that the Company may not have sufficient funds from its operations to pay cash
dividends to satisfy these distribution requirements. If the cash available to
the Company is insufficient, the Company might raise cash in order to make the
distributions by borrowing funds, issuing new securities or selling assets. If
the Company ultimately were unable to satisfy the 95 percent distribution
requirement, it would fail to qualify as a REIT and, as a result, would be
subject to federal income tax as an ordinary corporation without any deduction
or adjustment for distributions to holders of the Common Stock or Preferred
Stock.
 
     If the Company were to fail to meet the 95 percent distribution requirement
as a result of an adjustment to the Company's tax returns by the Service, the
Company could maintain its qualification as a REIT by paying a "deficiency
dividend" (plus a penalty and interest) within a specified period which will be
permitted as a deduction in the taxable year with respect to which the
adjustment is made.
 
     Distributions to Holders of Preferred Stock.  Distributions with respect to
the Preferred Stock will be taxable as described below in "-- Taxation of
Taxable Domestic Stockholders," "-- Taxation of Tax-Exempt Stockholders" and
"-- Taxation of Foreign Stockholders."
 
     Redemption or Conversion of Preferred Stock to Common Stock.  Assuming that
Preferred Stock will not be redeemed or converted at a time when there are
distributions in arrears, in general, no gain or loss will be recognized for
federal income tax purposes upon the redemption or conversion of the Preferred
Stock at the option of the holder solely into Common Stock. The basis that a
holder will have for tax purposes in the Common Stock received will be equal to
the adjusted basis the holder had in the Preferred Stock so redeemed or
converted and, provided that the Preferred Stock was held as a capital asset,
the holding period for the Common Stock received will include the holding period
for the Preferred Stock redeemed or converted. A
                                       27
<PAGE>   29
 
holder, however, will generally recognize gain or loss on the receipt of cash in
lieu of a fractional share of Common Stock in an amount equal to the difference
between the amount of cash received and the holder's adjusted basis in such
fractional share.
 
     If a redemption or conversion occurs when there is a dividend arrearage on
the Preferred Stock and the fair market value of the Common Stock exceeds the
issue price of the Preferred Stock, a portion of the Common Stock received might
be treated as a dividend distribution taxable as ordinary income.
 
     Adjustments to Conversion Price.  Under section 305 of the Code, holders of
Preferred Stock may be deemed to have received a constructive distribution of
stock that is taxable as a dividend where the conversion ratio is adjusted to
reflect a cash or property distribution with respect to the common stock into
which it is convertible. An adjustment to the conversion price made pursuant to
a bona fide, reasonable adjustment formula that has the effect of preventing
dilution of the interest of the holders, however, will generally not be
considered to result in a constructive distribution of stock. Certain of the
possible adjustments provided in the Preferred Stock may not qualify as being
pursuant to a bona fide, reasonable adjustment formula. If a nonqualifying
adjustment were made, the holders of Preferred Stock might be deemed to have
received a taxable stock dividend.
 
     Taxation of Taxable Domestic Stockholders.  For any taxable year in which
the Company qualifies as a REIT for federal income tax purposes, distributions
by the Company to its stockholders that are United States persons (generally,
any person other than a nonresident alien individual, a foreign trust or estate
or a foreign partnership or corporation) generally will be taxed as ordinary
income. Amounts received by such United States persons that are properly
designated as capital gain dividends by the Company generally will be taxed as
long-term capital gain (to the extent that they do not exceed the Company's
actual net capital gain for the taxable year) without regard to the period for
which the stockholder has held his Common Stock or Preferred Stock. However,
corporate stockholders may be required to treat up to 20 percent of certain
capital gain dividends as ordinary income. Such ordinary income and capital gain
are not eligible for the dividends received deduction allowed to corporations.
Distributions to such United States persons in excess of the Company's current
or accumulated earnings and profits will be considered first a tax-free return
of capital, reducing the tax basis of each stockholder's Common Stock or
Preferred Stock and then, to the extent the distribution exceeds each
stockholder's basis, a gain realized from the sale of Common Stock or Preferred
Stock. The Company will notify each stockholder as to the portions of each
distribution which, in its judgment, constitute ordinary income, capital gain or
return of capital. Any dividend that is (a) declared by the Company in October,
November or December of any calendar year and payable to stockholders of record
on a specified date in such months and (b) actually paid by the Company in
January of the following year, shall be deemed to have been both paid by the
Company and received by the stockholders on December 31 of such calendar year
and, as a result, will be includable in gross income of the stockholders for the
taxable year which includes such December 31.
 
     Stockholders may not deduct on their income tax returns any net operating
or net capital losses of the Company. Net operating losses may be carried
forward by the Company for 15 years and used to reduce taxable income and the
amounts that the Company will be required to distribute in order to remain
qualified as a REIT. Net capital losses may be carried forward by the Company
for five years and used to reduce capital gains. Losses not used within the
relevant period expire.
 
     Upon the sale or other disposition of the Company's Common Stock or
Preferred Stock, a stockholder generally will recognize capital gain or loss
equal to the difference between this amount realized on the sale or other
disposition and the adjusted basis of the shares involved in the transaction.
Such gain or loss will be long-term capital gain or loss if, at the time of sale
or other disposition, the shares involved have been held for more than one year.
In addition, if a stockholder receives a capital gain dividend with respect to a
share of Common Stock or Preferred Stock which he has held for six months or
less at the time of sale or other disposition, any loss recognized by the
stockholder will be treated as long-term capital loss to the extent of the
amount of the capital gain dividend that was treated as long-term capital gain.
 
     Distributions from the Company and gain from the disposition of Common
Stock or Preferred Stock will not be treated as passive activity income and,
therefore, stockholders will not be able to apply any "passive
                                       28
<PAGE>   30
 
activity losses" against such income. Dividends from the Company (to the extent
they do not constitute a return of capital or capital gain dividends) and, on an
elective basis, capital gain dividends and gain from the disposition of Common
Stock or Preferred Stock generally will be treated as investment income for
purposes of the investment income limitation.
 
     The state and local income tax treatment of the Company and its
stockholders may not conform to the federal income tax treatment described
above. (For example, in most states, individual stockholders who are residents
of the state will be subject to state income tax on dividends and gains on their
shares in the Company, but the state of Delaware -- unlike most, if not all,
other states -- also taxes nonresident stockholders of a REIT on dividends and
gains from the REIT to the extent, if any, that such income is attributable to
property located in Delaware.) As a result, investors should consult their own
tax advisors for an explanation of how other state and local tax laws would
affect their investment in Common Stock or Preferred Stock.
 
     Backup Withholding.  The Company will report to its stockholders and the
IRS the amount of distributions paid during each calendar year, and the amount
of tax withheld, if any. Under the backup withholding rules, a stockholder may
be subject to backup withholding at a rate of 31 percent with respect to
distributions paid unless such other holder (i) is a corporation or comes within
certain other exempt categories and, when required, demonstrates this fact, or
(ii) provides a taxpayer identification number, certifies as to no loss of
exemption from backup withholding and otherwise complies with applicable
requirements of the backup withholding rules. A stockholder that does not
provide the Company with his correct taxpayer identification number also may be
subject to penalties imposed by the IRS. Any amount paid as backup withholding
will be creditable against the stockholder's income tax liability.
 
     Taxation of Tax-Exempt Stockholders.  Distributions by the Company to a
stockholder that is a tax-exempt entity generally will not constitute "unrelated
business taxable income" ("UBTI") as defined in Section 512(a) of the Code,
provided that the tax-exempt entity has not financed the acquisition of its
shares with "acquisition indebtedness" within the meaning of the Code and the
shares are not otherwise used in an unrelated trade or business of the
tax-exempt entity. For taxable years beginning after December 31, 1993, however,
qualified trusts that hold more than 10 percent (by value) of the shares of
certain REITs may be required to treat a certain percentage of the distributions
of such REITs as UBTI. The conditions which trigger this requirement do not
currently exist, and the Company does not anticipate that they will ever exist.
This requirement will apply only if (a) the REIT would not qualify as such for
federal income tax purposes but for the application of a "look-through"
exception to the five or fewer requirement applicable to shares being held by
qualified trusts and (b) the REIT is "predominantly held" by qualified trusts. A
REIT is predominantly held if either (i) a single qualified trust holds more
than 25 percent by value of the REIT interests or (ii) one or more qualified
trusts, each owning more than 10 percent by value of the REIT interests, hold in
the aggregate more than 50 percent of the REIT interests. The percentage of any
REIT dividend treated as UBTI is equal to the ratio of (i) the UBTI earned by
the REIT (treating the REIT as if it were a qualified trust and therefore
subject to tax on UBTI) to (ii) the total gross income (less certain associated
expenses of the REIT). A de minimis exception applies where the ratio set forth
in the preceding sentence is less than 5 percent for any year. For these
purposes, a qualified trust is any trust described in Section 401(a) of the Code
and exempt from tax under Section 501(a) of the Code. The provisions requiring
qualified trusts to treat a portion of REIT distributions as UBTI will not apply
if the REIT is able to satisfy the five or fewer requirements without relying
upon the "look-through" exception. The existing restrictions on ownership of
shares in the articles of incorporation will prevent the application of the
provisions treating a portion of the REIT distributions as UBTI to tax-exempt
entities purchasing shares pursuant to the Offering, absent a waiver of the
restrictions by the Board of Directors.
 
     Taxation of Foreign Stockholders.  The rules governing United States
federal income taxation of nonresident alien individuals, foreign corporations,
foreign participants and other foreign stockholders (collectively, "Non-U.S.
Stockholders") are complex, and no attempt will be made herein to provide more
than a summary of such rules. The following discussion assumes that the income
from investment in the Shares will not be effectively connected with the
Non-U.S. Stockholders' conduct of a United States trade or business. Prospective
Non-U.S. Stockholders should consult with their own tax advisors to determine
the
                                       29
<PAGE>   31
 
impact of federal, state and local laws with regard to an investment in Shares,
including any reporting requirements.
 
     Distributions that are not attributable to gain from sales or exchanges by
the Company of United States real property interests and not designated by the
Company as capital gain dividends will be treated as dividends of ordinary
income to the extent that they are made out of current and accumulated earnings
and profits of the Company. Such dividends ordinarily will be subject to a
withholding tax equal to 30% of the gross amount of the dividend, unless an
applicable tax treaty reduces or eliminates that tax. A number of U.S. tax
treaties that reduce the rate of withholding tax on corporate dividends do not
reduce, or reduce to a lesser extent, the rate of withholding applied to
dividends from a REIT. The Company expects to withhold U.S. income tax at the
rate of 30% on the gross amount of any such distributions paid to a Non-U.S.
Stockholder unless (i) a lower treaty rate applies (and, with regard to payments
on or after January 1, 1999, the Non-U.S. Stockholder files IRS Form W-8 with
the Company and, if the Shares are not traded on an established securities
market, acquires a taxpayer identification number from the IRS) or (ii) the
Non-U.S. Stockholder files an IRS Form 4224 (or, with respect to payments on or
after January 1, 1999, files IRS Form W-8 with the Company) with the Company
claiming that the distribution is effectively connected income. Distributions in
excess of the Company's current and accumulated earnings and profits will not be
taxable to a stockholder to the extent that such distributions do not exceed the
adjusted basis of the stockholder's Shares, but rather will reduce the adjusted
basis of such Shares. To the extent that distributions in excess of current and
accumulated earnings and profits exceed the adjusted basis of a Non-U.S.
Stockholders' Shares, such distributions will give rise to tax liability if the
Non-U.S. Stockholder would otherwise be subject to tax on any gain from the sale
or disposition of the Shares, as described below. If it cannot be determined at
the time a distribution is paid whether or not such distribution will be in
excess of current and accumulated earnings and profits, the distribution will be
subject to withholding at the rate of 30%. However, a Non-U.S. Stockholder may
seek a refund of such amounts from the IRS if it is subsequently determined that
such distribution was, in fact, in excess of the Company's current and
accumulated earnings and profits. Beginning with payments made on or after
January 1, 1999, the Company will be permitted, but not required, to make
reasonable estimates of the extent to which distributions exceed current or
accumulated earnings and profits. Such distributions will generally be subject
to a 10% withholding tax, which may be refunded to the extent it exceeds the
shareholder's actual U.S. tax liability, provided the required information is
furnished to the IRS.
 
     For any year in which the Company qualifies as a REIT, distributions that
are attributable to gain from sales or exchanges by the Company of United States
real property interests will be taxed to a Non-U.S. Stockholder under the
provisions of the Foreign Investment in Real Property Tax Act of 1980, as
amended ("FIRPTA"). Under FIRPTA, distributions attributable to gain from sales
of United States real property interests are taxed to a Non-U.S. Stockholder as
if such gain were effectively connected with a United States business. Non-U.S.
Stockholders would thus be taxed at the normal capital gain rates applicable to
U.S. Stockholders (subject to applicable alternative minimum tax and a special
alternative minimum tax in the case of nonresident alien individuals). Also,
distributions subject to FIRPTA may be subject to a 30% branch profits tax in
the hands of a foreign corporate stockholder not entitled to treaty exemption or
rate reduction. The Company is required by applicable Treasury Regulations to
withhold 35% of any distribution that could be designated by the Company as a
capital gain dividend. This amount is creditable against the Non-U.S.
Stockholder's FIRPTA tax liability.
 
     Gain recognized by a Non-U.S. Stockholder upon a sale of Shares generally
will not be taxed under FIRPTA if the Company is a "domestically controlled
REIT," defined generally as a REIT in which at all times during a specified
testing period less than 50% in value of the stock was held directly or
indirectly by foreign persons. The Company currently believes that it is, and
expects to continue to be, a "domestically controlled REIT," and in such case
the sale of Shares would not be subject to taxation under FIRPTA. However, gain
not subject to FIRPTA nonetheless will be taxable to a Non-U.S. Stockholder if
(i) investment in the Shares is treated as "effectively connected" with the
Non-U.S. Stockholders' U.S. trade or business, or (ii) the Non-U.S. Stockholder
is a nonresident alien individual who was present in the United States for 183
days or more during the taxable year and certain other conditions are met.
Effectively connected gain realized by a foreign corporate shareholder may be
subject to an additional 30% branch profits tax,
 
                                       30
<PAGE>   32
 
subject to possible exemption or rate reduction under an applicable tax treaty.
If the gain on the sale of Shares were to be subject to taxation under FIRPTA,
the Non-U.S. Stockholder would be subject to the same treatment as U.S.
Stockholders with respect to such gain (subject to applicable alternative
minimum tax and a special alternative minimum tax in the case of nonresident
alien individuals), and the purchaser of the Shares would be required to
withhold and remit to the Service 10% of the purchase price.
 
                              ERISA CONSIDERATIONS
 
     THE FOLLOWING IS A SUMMARY OF MATERIAL CONSIDERATIONS ARISING UNDER THE
EMPLOYEE RETIREMENT INCOME SECURITY ACT OF 1974, AS AMENDED ("ERISA") AND THE
PROHIBITED TRANSACTION PROVISIONS OF SECTION 4975 OF THE CODE THAT MAY BE
RELEVANT TO PROSPECTIVE INVESTORS. THIS DISCUSSION DOES NOT PURPORT TO DEAL WITH
ALL ASPECTS OF ERISA OR THE CODE THAT MAY BE RELEVANT TO PARTICULAR INVESTORS IN
LIGHT OF THEIR PARTICULAR CIRCUMSTANCES. A PROSPECTIVE INVESTOR THAT IS AN
EMPLOYEE BENEFIT PLAN SUBJECT TO ERISA, A TAX-QUALIFIED RETIREMENT PLAN, AN IRA,
OR A GOVERNMENTAL, CHURCH, OR OTHER PLAN THAT IS EXEMPT FROM ERISA IS ADVISED TO
CONSULT ITS OWN LEGAL ADVISOR REGARDING THE SPECIFIC CONSIDERATIONS ARISING
UNDER APPLICABLE PROVISIONS OF ERISA, THE CODE, AND STATE LAW WITH RESPECT TO
THE PURCHASE, OWNERSHIP, OR SALE OF THE OFFERED SECURITIES BY SUCH PLAN OR IRA.
 
FIDUCIARY DUTIES AND PROHIBITED TRANSACTIONS
 
     A fiduciary of a pension, profit-sharing, retirement or other employee
benefit plan subject to ERISA (an "ERISA Plan") should consider the fiduciary
standards under ERISA in the context of the ERISA Plan's particular
circumstances before authorizing an investment of any portion of the ERISA
Plan's assets in the Offered Securities. Accordingly, such fiduciary should
consider (a) whether the investment satisfies the diversification requirements
of Section 404(a)(1)(C) of ERISA; (b) whether the investment is in accordance
with the documents and instruments governing the ERISA Plan as required by
Section 404(a)(1)(D) of ERISA; (c) whether the investment is prudent under
Section 404(a)(1)(B) of ERISA; and (d) whether the investment is solely in the
interests of the ERISA Plan participants and beneficiaries and for the exclusive
purpose of providing benefits to the ERISA Plan participants and beneficiaries
and defraying reasonable administrative expenses of the ERISA Plan as required
by Section 404(a)(1)(A) of ERISA.
 
     In addition to the imposition of fiduciary standards, ERISA and Section
4975 of the Code prohibit a wide range of transactions between an ERISA Plan, an
IRA, or certain other plans (collectively, a "Plan") and persons who have
certain specified relationships to the Plan ("parties in interest" within the
meaning of ERISA and "disqualified persons" within the meaning of the Code).
Thus, a Plan fiduciary or person making an investment decision for a Plan also
should consider whether the acquisition or the continued holding of the Offered
Securities might constitute or give rise to a direct or indirect prohibited
transaction.
 
PLAN ASSETS
 
     The prohibited transaction rules of ERISA and the Code apply to
transactions with a Plan and also to transactions with the "plan assets" of a
Plan. The "plan assets" of a Plan include the Plan's interest in an entity in
which the Plan invests and, in certain circumstances, the assets of the entity
in which the Plan holds such interest. The term "plan assets" is not
specifically defined in ERISA or the Code, nor, as of the date hereof, has it
been interpreted definitively by the courts in litigation. On November 13, 1986,
the United States Department of Labor, the governmental agency primarily
responsible for administering ERISA, adopted a final regulation (the "DOL
Regulation") setting out the standards it will apply in determining whether an
equity investment in an entity will cause the assets of such entity to
constitute "plan assets." The DOL Regulation applies for purposes of both ERISA
and Section 4975 of the Code.
 
     Under the DOL Regulation, if a Plan acquires an equity interest in an
entity, which equity interest is not a "publicly-offered security," the Plan's
assets generally would include both the equity interest and an
                                       31
<PAGE>   33
 
undivided interest in each of the entity's underlying assets unless certain
specified exceptions apply. The DOL Regulation defines a publicly-offered
security as a security that is "widely held," "freely transferable," and either
part of a class of securities registered under Section 12(b) or 12(g) of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), or sold
pursuant to an effective registration statement under the Securities Act
(provided the securities are registered under the Exchange Act within 120 days
after the end of the fiscal year of the issuer during which the offering
occurred). Any Common Stock sold pursuant to this Prospectus and the applicable
Prospectus Supplement would be sold in an offering registered under the
Securities Act and is registered under Section 12(b) of the Exchange Act.
 
     The DOL Regulation provides that a security is "widely held" only if it is
part of a class of securities that is owned by 100 or more investors independent
of the issuer and of one another. However, a class of securities will not fail
to be "widely held" solely because the number of independent investors falls
below 100 subsequent to a public offering as a result of events beyond the
issuer's control. The Company believes the Common Stock to be "widely held."
 
     The DOL Regulation provides that whether a security is "freely
transferable" is a factual question to be determined on the basis of all the
relevant facts and circumstances. The DOL Regulation further provides that when
a security is part of an offering in which the minimum investment is $10,000 or
less, as may be the case with offerings of the Offered Securities, certain
restrictions ordinarily will not affect, alone or in combination, the finding
that such securities are freely transferable. The Company believes that the
restrictions imposed under the articles of incorporation on the transfer of the
Common Stock are limited to restrictions on transfer generally permitted under
the DOL Regulation and are not likely to result in the failure of the Common
Stock to be "freely transferable." See "Description of Common
Stock -- Restrictions on Ownership." The DOL Regulation only establishes a
presumption in favor of a finding of free transferability and, therefore, no
assurance can be given that the Department of Labor and the U.S. Treasury
Department would not reach a contrary conclusion with respect to the Common
Stock.
 
     Assuming that the Common Stock is "widely held" and "freely transferable,"
the Company believes that the Common Stock constitutes publicly-offered
securities for purposes of the DOL Regulation and that the assets of the Company
will not be deemed to be "plan assets" of any plan that invests in the Common
Stock.
 
     Additional ERISA considerations that apply to the acquisition or continued
holding of Offered Securities that are Common Stock Warrants, Preferred Stock,
Depositary Shares or Debt Securities that are convertible into equity securities
will be contained in the applicable Prospectus Supplement.
 
                              PLAN OF DISTRIBUTION
 
     The Company may sell the Offered Securities to one or more underwriters for
public offering and sale by them or may sell the Offered Securities to investors
directly or through agents. Any such underwriter or agent involved in the offer
and sale of the Offered Securities will be named in the applicable Prospectus
Supplement.
 
     Underwriters may offer and sell the Offered Securities at a fixed price or
prices, which may be changed, related to the prevailing market prices at the
time of sale, or at negotiated prices. The Company also may, from time to time,
authorize underwriters acting as the Company's agents to offer and sell the
Offered Securities upon the terms and conditions set forth in an applicable
Prospectus Supplement. In connection with the sale of Offered Securities,
underwriters may be deemed to have received compensation from the Company 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 from the
underwriters or commissions from the purchasers for whom they may act as agent.
 
     Any underwriting compensation paid by the Company 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.
                                       32
<PAGE>   34
 
Underwriters, dealers and agents may be entitled, under agreements entered into
with the Company, to indemnification against and contribution toward certain
civil liabilities, including liabilities under the Securities Act.
 
     If so indicated in the applicable Prospectus Supplement, the Company will
authorize dealers acting as the Company's agents to solicit offers by certain
institutions to purchase Offered Securities from the Company 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 aggregate principal amount of Securities sold
pursuant to Contracts shall be not less or more than, the respective amounts
stated in the applicable Prospectus Supplement. Institutions with whom
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 Company. Contracts will not be subject to any
conditions except (i) the purchase by an institution of the Offered Securities
covered by its Contracts shall not at the time of delivery be prohibited under
the laws of any jurisdiction in the United States to which such institution is
subject and (ii) if the Offered Securities are being sold to underwriters, the
Company shall have sold to such underwriters the total principal amount of the
Offered Securities less the principal amount thereof covered by Contracts.
 
     Certain of the underwriters and their affiliates may be customers of,
engage in transactions with and perform services for the Company and its
subsidiaries in the ordinary course of business.
 
                                    EXPERTS
 
     The financial statements of the Company as of December 31, 1997 and 1996,
and for each of the years in the three-year period ended December 31, 1997, have
been incorporated by reference from the Company's Annual Report on Form 10-K in
reliance upon the report of KPMG Peat Marwick LLP, independent certified public
accountants, incorporated by reference herein, and upon the authority of said
firm as experts in accounting and auditing.
 
                                 LEGAL MATTERS
 
     The validity of the Offered Securities will be passed upon for the Company
by Shaw Pittman Potts & Trowbridge, Washington, D.C., a partnership including
professional corporations. In addition, the description of federal income tax
consequences contained in this Prospectus is based upon the opinion of Shaw
Pittman Potts & Trowbridge.
 
                                       33
<PAGE>   35
 
                                    PART II
 
                     INFORMATION NOT REQUIRED IN PROSPECTUS
 
ITEM 14.  OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
 
     Set forth below are the amounts of fees and expenses (other than
underwriting discounts and commissions) to be paid by the Company in connection
with the offering of the Offered Securities. All amounts set forth below, with
the exception of the SEC Registration Fee, are estimated.
 
<TABLE>
<S>                                                           <C>
SEC Registration Fee........................................  $ 94,069(1)
Printing and Mailing Costs..................................  $200,000
Accounting Fees and Expenses................................  $ 50,000
Legal Fees and Expenses.....................................  $150,000
Miscellaneous...............................................  $ 10,000
                                                              --------
          Total.............................................  $504,069(1)
                                                              ========
</TABLE>
 
- ---------------
 
(1) Includes $111,759,848 of unissued Offered Securities previously registered
    under Registration Statement No. 333-24773. A registration fee of $38,538
    was previously paid with respect to such amount.
 
ITEM 15.  INDEMNIFICATION OF DIRECTORS AND OFFICERS
 
     The Company's Articles of Incorporation provide that the liability of the
directors and officers of the Company for money damages shall be eliminated to
the maximum extent permitted by Maryland law. Under current Maryland law, the
directors are liable to the Company or its stockholders for money damages only
for liability resulting from (i) acts or omissions committed in bad faith
involving active and deliberate dishonesty that were material to the cause of
action adjudicated, as established by a final judgment or (ii) actual receipt of
an improper benefit or profit in money, property or services. The Articles of
Incorporation also provide that no amendment thereto may limit or eliminate this
limitation of liability with respect to events occurring prior to the effective
date of such amendment.
 
     The Company's Articles of Incorporation and Bylaws require the Company to
indemnify its directors and officers to the fullest extent permitted by Maryland
law. Under current Maryland law, the Company will indemnify (i) any director or
officer who has been successful, on the merits or otherwise, in the defense of a
proceeding to which he was made a party by reason of his service in that
capacity, against reasonable expense incurred by him in connection with the
proceeding and (ii) any present or former director or officer against any claim
or liability unless it is established that (a) his act or omission was material
to the matter giving rise to the proceeding and was committed in bad faith or
was the result of active and deliberate dishonesty; (b) he actually received an
improper personal benefit in money, property or services; or (c) in the case of
a criminal proceeding, he had reasonable cause to believe that his act or
omission was unlawful. In addition, the Company's Bylaws require it to pay or
reimburse, in advance of the final disposition of a proceeding, reasonable
expenses incurred by a present or former director or officer or any person who
is or was serving at the request of the Company as a director, officer, employee
or agent of another corporation, partnership, joint venture, trust or other
enterprise, who is made a party to a proceeding by reason of his status as a
director, officer, employee or agent, to the fullest extent provided by Maryland
law. Current Maryland law provides that the Company shall have received, before
providing any such payment or reimbursement, (i) a written affirmation by the
director or officer of his good faith belief that he has met the standard of
conduct necessary for indemnification by the Company as authorized by Maryland
law and the Bylaws and (ii) a written undertaking by or on his behalf to repay
the amount paid or reimbursed by the Company if it shall ultimately be
determined that the standard of conduct was not met. The Company's Bylaws also
permit the Company to provide indemnification, payment or reimbursement of
expenses to any employee or agent of the Company in such capacity.
 
                                      II-1
<PAGE>   36
 
ITEM 16.  EXHIBITS
 
     The following exhibits, as noted, are filed herewith, previously have been
filed, or will be filed by amendment.
 
<TABLE>
<CAPTION>
  EXHIBIT NO.
 (PER EXHIBIT
   TABLES IN
  ITEM 601 OF
REGULATION S-K)                          DESCRIPTION
- ---------------                          -----------
<C>              <S>
     *1.1        Form of Underwriting Agreement for Debt Securities.
     *1.2        Form of Underwriting Agreement for Equity Securities.
      3.1        First Amended and Restated Articles of Incorporation of the
                 Registrant. Filed herewith.
      3.2        Bylaws of the Registrant (filed as Exhibit 3.3(ii) to
                 Amendment No. 2 to the Registrant's Registration Statement
                 No. 1-11290 on Form 8-B, and incorporated herein by
                 reference).
      4.1        Specimen Certificate of Common Stock, par value $0.01 per
                 share, of the Registrant (filed as Exhibit 3.4 to the
                 Registrant's Registration Statement No. 1-11290 on Form 8-B,
                 and incorporated herein by reference).
      4.2        Form of Indenture (filed as Exhibit 4.2 to the Registrant's
                 Registration Statement No. 33-61165 on Form S-3, and
                 incorporated herein by reference).
      4.3        Form of Debt Security (included in Exhibit 4.2).
     *4.4        Form of Common Stock Warrant Agreement.
      4.5        Form of Indenture (filed as Exhibit 4.1 to the Registrant's
                 Current Report on Form 8-K dated March 20, 1998, and
                 incorporated herein by reference).
     *4.6        Form of Certificate for Preferred Stock.
     *4.7        Form of Deposit Agreement and Depositary Receipt.
      5          Opinion of Counsel, including consent. Filed herewith.
      8          Opinion of Counsel regarding Tax Matters, including consent.
                 Filed herewith.
     12          Statement of Computation of Ratios of Earnings to Fixed
                 Charges and Preferred Stock Dividends. Filed herewith.
     23.1        Consent of KPMG Peat Marwick LLP. Filed herewith.
     23.2        Consent of Counsel. Included in Exhibits 5 and 8.
     24          Power of Attorney (contained on the signature page hereto).
    *25          Statement of Eligibility of Trustee on Form T-1.
</TABLE>
 
- ---------------
* To be filed by amendment or incorporated by reference in connection with the
  offering of the Offered Securities.
 
ITEM 17.  UNDERTAKINGS.
 
     (a) The undersigned registrant hereby undertakes:
 
          (1) To file, during any period in which offers or sales are being
     made, a post-effective amendment to this Registration Statement:
 
             (i) To include any prospectus required by Section 10(a)(3) of the
        Securities Act;
 
             (ii) To reflect in the prospectus any facts or events arising after
        the effective date of the Registration Statement (or the most recent
        post-effective amendment thereof) which, individually or in the
        aggregate, represent a fundamental change in the information set forth
        in the Registration Statement. Notwithstanding the foregoing, any
        increase or decrease in volume of securities offered (if the total
        dollar value of securities offered would not exceed that which was
        registered) and any deviation from the low or high and of the estimated
        maximum offering range may be reflected in the form of prospectus filed
        with the Commission pursuant to Rule 424(b) if, in the aggregate, the
        changes in volume and price represent no more than 20 percent change in
        the maximum aggregate offering price set forth in the "Calculation of
        Registration Fee" table in the effective Registration Statement; and
 
                                      II-2
<PAGE>   37
 
             (iii) To include any material information with respect to the plan
        of distribution not previously disclosed in the Registration Statement
        or any material change to such information in the Registration
        Statement.
 
     Provided, however, that paragraphs (a)(1)(i) and (a)(1)(ii) do not apply if
the information required to be included in a post-effective amendment by those
paragraphs is contained in periodic reports filed by the registrant pursuant to
Section 13 or Section 15(d) of the Exchange Act that are incorporated by
reference in the Registration Statement.
 
          (2) That, for the purpose of determining any liability under the
     Securities Act, each such post-effective amendment shall be deemed to be a
     new registration statement relating to the securities offered therein, and
     the offering of such securities at that time shall be deemed to be the
     initial bona fide offering thereof.
 
          (3) To remove from registration by means of a post-effective amendment
     any of the securities being registered which remain unsold at the
     termination of the offering.
 
     (b) The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act, each filing of the
registrant's annual report pursuant to Section 13(a) or Section 15(d) of the
Exchange Act that is incorporated by reference in the Registration Statement
shall be deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
 
     (c) Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise, the registrant
has been advised that in the opinion of the Commission such indemnification is
against public policy as expressed in the Securities Act and is, therefore,
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by the registrant of expenses incurred or
paid by a director, officer or controlling person of the registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Securities Act and will be governed by the final
adjudication of such issue.
 
                                      II-3
<PAGE>   38
 
                                   SIGNATURES
 
     Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Orlando, State of Florida on September 29, 1998.
 
                                          COMMERCIAL NET LEASE REALTY, INC.
                                          (Registrant)
 
                                          By:   /s/ JAMES M. SENEFF, JR.
                                            ------------------------------------
                                                    JAMES M. SENEFF, JR.
                                                   CHAIRMAN OF THE BOARD
 
                               POWER OF ATTORNEY
 
     KNOW ALL MEN BY THESE PRESENTS, that each of the undersigned hereby
constitutes and appoints James M. Seneff, Jr. and Gary M. Ralston and each of
them, his true and lawful attorneys-in-fact and agents, with full power of
substitution and resubstitution, for him and in his name, place and stead, in
any and all capacities, with full power to act alone, to sign any and all
documents (including both pre- and post-effective amendments in connection with
this Registration Statement), and to file the same, with all exhibits thereto,
and all documents in connection therewith, with the Securities and Exchange
Commission, granting onto said attorneys-in-fact and agents and each of them,
full power and authority to do and perform each and every act and thing
requisite and necessary to be done in and about the premises, as fully to all
intents and purposes as he might or could do in person, hereby ratifying and
confirming all that said attorneys-in-fact and agents, or either of them, or
their or his substitutes or substitute, may lawfully do or cause to be done by
virtue thereof.
 
     Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the capacity
and on the dates indicated.
 
<TABLE>
<CAPTION>
                      SIGNATURE                                        TITLE                        DATE
                      ---------                                        -----                        ----
<S>                                                    <C>                                   <C>
 
              /s/ JAMES M. SENEFF, JR.                         Chairman of the Board         September 29, 1998
- -----------------------------------------------------       and Chief Executive Officer
                James M. Seneff, Jr.                       (Principal Executive Officer)
 
                 /s/ GARY M. RALSTON                               President and             September 29, 1998
- -----------------------------------------------------         Chief Operating Officer
                   Gary M. Ralston
 
                /s/ KEVIN B. HABICHT                       Executive Vice President and      September 29, 1998
- -----------------------------------------------------         Chief Financial Officer
                  Kevin B. Habicht                      (Principal Financial and Accounting
                                                                     Officer)
 
                /s/ ROBERT A. BOURNE                        Vice Chairman of the Board       September 29, 1998
- -----------------------------------------------------
                  Robert A. Bourne
 
                  /s/ EDWARD CLARK                                   Director                September 29, 1998
- -----------------------------------------------------
                    Edward Clark
 
               /s/ CLIFFORD R. HINKLE                                Director                September 29, 1998
- -----------------------------------------------------
                 Clifford R. Hinkle
 
                  /s/ TED B. LANIER                                  Director                September 29, 1998
- -----------------------------------------------------
                    Ted B. Lanier
</TABLE>
 
                                      II-4
<PAGE>   39
 
                                    EXHIBITS
 
<TABLE>
<CAPTION>
EXHIBIT NO.                            DOCUMENT
- -----------                            --------
<C>          <S>                                                           
   *1.1      Form of Underwriting Agreement for Debt Securities.
   *1.2      Form of Underwriting Agreement for Equity Securities.
    3.1      First Amended and Restated Articles of Incorporation of the
             Registrant. Filed herewith.
    3.2      Bylaws of the Registrant (filed as Exhibit 3.3(ii) to
             Amendment No. 2 to the Registrant's Registration Statement
             No. 1-11290 on Form 8-B, and incorporated herein by
             reference).
    4.1      Specimen Certificate of Common Stock, par value $0.01 per
             share, of the Registrant (filed as Exhibit 3.4 to the
             Registrant's Registration Statement No. 1-11290 on Form 8-B,
             and incorporated herein by reference).
    4.2      Form of Indenture (filed as Exhibit 4.2 to the Registrant's
             Registration Statement No. 33-61165 on Form S-3, and
             incorporated herein by reference).
    4.3      Form of Debt Security (included in Exhibit 4.2).
   *4.4      Form of Common Stock Warrant Agreement.
    4.5      Form of Indenture (filed as Exhibit 4.1 to the Registrant's
             Current Report on Form 8-K dated March 20, 1998, and
             incorporated herein by reference).
   *4.6      Form of Certificate for Preferred Stock.
   *4.7      Form of Deposit Agreement and Depositary Receipt.
    5        Opinion of Counsel, including consent. Filed herewith.
    8        Opinion of Counsel regarding Tax Matters, including consent.
             Filed herewith.
   12        Statement of Computation of Ratios of Earnings to Fixed
             Charges and Preferred Stock Dividends. Filed herewith.
   23.1      Consent of KPMG Peat Marwick. Filed herewith.
   23.2      Consent of Counsel. Included in Exhibits 5 and 8.
   24        Power of Attorney (contained on the signature page hereto).
  *25        Statement of Eligibility of Trustee on Form T-1.
</TABLE>
 
- ---------------
* To be filed by amendment or incorporated by reference in connection with the
  offering of the Offered Securities.

<PAGE>   1
                                                                     EXHIBIT 3.1

                          FIRST AMENDED AND RESTATED
                          ARTICLES OF INCORPORATION
                                      OF
                      COMMERCIAL NET LEASE REALTY, INC.
                                      
                           -----------------------
                                      
        Commercial Net Lease Realty, Inc., a Maryland corporation (hereinafter,
the "Corporation"), hereby certifies to the Department of Assessments and
Taxation of the State of Maryland, that:


        FIRST: The Corporation desires to amend and restate its charter as
currently in effect.


        SECOND: Prior to this amendment and restatement the total number of
shares of all classes of capital stock that the Corporation had authority to
issue was one 180,000,000 shares, consisting of (i) 90,000,000 shares of common
stock, par value $0.01 per share: and (ii) 90,000,000 shares of excess stock,
par value $0.01 per share. The aggregate par value of all of the authorized
shares of all classes of capital stock having a par value was $1,800,000.00.
After this amendment and restatement the total number of shares of all classes
of capital stock that the Corporation will have authority to issue will be
210,000,000 shares consisting of (i) 90,000,000 shares of common stock, par
value $0.01; (ii) 15,000,000 shares of preferred stock, par value $0.01; and
105,000,000 shares of excess stock, par value $0.01. The aggregate par value of
all of the authorized shares of all classes of capital stock having a par value
will be $2,100,000.


        THIRD: The provisions of the charter which are now in effect and as
amended hereby, stated in accordance with the Maryland General Corporation Law
are as follows:

                                    ARTICLE I
                                      NAME

        The name of the Corporation is Commercial Net Lease Realty, Inc.


                                   ARTICLE II
                                    DURATION

        The duration of the Corporation is perpetual.


                                   ARTICLE III
                               PURPOSES AND POWERS

        The purpose for which the Corporation is formed is to engage in any
lawful business, act or activity for which corporations may be organized under
the laws of the State of Maryland and, in general, to possess and exercise all
the purposes, powers, rights and privileges granted to, or conferred upon,
corporations by the laws of the State of Maryland now or hereafter in force, and
to exercise any powers suitable, convenient or proper for the accomplishment of
the purposes herein enumerated, implied or incidental to the powers herein
enumerated or which at any time may appear conducive to or expedient for the
accomplishment of such purposes. The foregoing shall, 


<PAGE>   2

except where otherwise expressed, in no way be limited or restricted by
reference to or inference from the terms of any other clause of this or any
other provision of this Charter or of any amendment hereto or restatement
hereof, and shall each be regarded as independent and construed as powers as
well as purposes.

                                   ARTICLE IV
                       PRINCIPLE OFFICE AND RESIDENT AGENT

        The post office address of the principal office of the Corporation is
c/o The Corporation Trust Incorporated, 300 East Lombard Street, Baltimore, MD
21202. The resident agent of the Corporation is The Corporation Trust
Incorporated, 32 South Street, Baltimore, Maryland 21202. Said resident agent is
a Maryland corporation.



                                    ARTICLE V
                               BOARD OF DIRECTORS

        The number of directors shall be no less than three (3), unless a lesser
number is permitted pursuant to the terms of the Maryland General Corporation
Law as in effect from time to time or any successor statute thereto (the
"MGCL"). Subject to the foregoing, the number of directors of the Corporation
shall be fixed by the Bylaws of the Corporation and maybe increased or deceased
from time to time in such a manner as may be prescribed by the Bylaws. The
following persons will serve as directors of the Corporation until the annual
meeting and until their successors are elected and qualify:

               Robert A. Bourne             Ted B. Lanier
               Edward Clark                 James M. Seneff, Jr.
               Clifford R. Hinkle

                                   ARTICLE VI
                                AUTHORIZED STOCK

        SECTION 1. TOTAL CAPITALIZATION


        The total number of shares of all classes of capital stock that the
Corporation has authority to issue is two hundred ten million (210,000,000)
shares consisting of (i) ninety million (90,000,000) shares of common stock, par
value $0.01 (the "Common Stock"); (ii) fifteen million (15,000,000) shares of
preferred stock, par value $0.01 (the "Preferred Stock"); and one hundred five
million (105,000,000) shares of excess stock, par value $0.01 (the "Excess
Stock"). The aggregate par value of all of the authorized shares of all classes
of capital stock having a par value is $2,100,000.


        SECTION 2. CAPITAL STOCK


               A.  COMMON STOCK


                      (1)  COMMON STOCK SUBJECT TO TERMS OF PREFERRED STOCK. The
Common Stock shall be subject to the express terms of the Preferred Stock.


                                      -2-
<PAGE>   3

                      (2)  DIVIDEND RIGHTS.  The holders of shares of Common 
Stock shall be entitled to receive such dividends as may be declared by the
Board of Directors of the Corporation out of funds legally available therefor.


                      (3)  RIGHTS UPON LIQUIDATION. In the event of any
voluntary or involuntary liquidation, dissolution or winding up, or any
distribution of the assets, of the Corporation, the aggregate amount available
for distribution to holders of shares of Common Stock (including, for purposes
of this sentence, holders of shares of Excess Stock) shall be determined by
applicable law. Except as provided below, each holder of shares of the Common
Stock shall be entitled to receive that portion of such aggregate amount,
ratably with (i) each other holder of shares of Common Stock and (ii) each
holder of shares of Excess Stock, as the number of shares of the Common Stock
held by such holder bears to the total number of shares of Common Stock and
Excess Stock. Anything herein to the contrary notwithstanding, in no event
shall the amount payable to a holder of shares with respect to Excess Stock
hereunder exceed (i) the price per share such holder paid for the Common Stock
in the purported Transfer (as that term is defined in paragraph A of Section 3
of this Article VI) that resulted in the Excess Stock or (ii) if the holder did
not give full value for such Excess Stock (as through a gift, devise or other
event or transaction), a price per share equal to the Market Price (as the term
is defined in paragraph A of Section 3 of this Article VI) for the shares of
the Common Stock on the date of the purported Transfer that resulted in such
Excess Stock. Any amount available for distribution in excess of the foregoing
limitations shall be paid ratably to holders of Common Stock and other holders
of Excess Stock resulting from the exchange of Common Stock to the extent
permitted by the foregoing limitations.
                                   

                      (4). VOTING RIGHTS. Except as may be provided in this
Charter, and subject to the express terms of any series of Preferred Stock, the
holders of shares of the Common Stock shall have the exclusive right to vote on
all matters (as to which a common stockholder shall be entitled to vote) at all
meetings of the stockholders of the Corporation, and shall be entitled to one
(1) vote for each share of the Common Stock entitled to vote at such meetings.


               B.  PREFERRED STOCK


               The Preferred Stock may be issued from time to time in one or
more series as authorized by the Board of Directors. Prior to the issuance of
shares of each such series, the Board of Directors, by resolution, shall fix the
number of shares to be included in each series, and the terms, rights,
restrictions and qualifications of the shares of each series. The authority of
the Board of Directors with respect to each series shall include, but not be
limited to, determination of the following:


        (i)    The designation of the series, which may be by distinguishing
               number, letter or title;


        (ii)   The dividend rate on the shares of the series, if any, whether
               any dividends shall be cumulative and, if so, from which date or
               dates, and the relative rights of priority, if any, of payment of
               dividends on shares of the series;

                                      -3-
<PAGE>   4


        (iii)  The redemption rights, including conditions and the price or
               prices, if any, for shares of the series;


        (iv)   The terms and amounts of any sinking fund for the purchase or
               redemption of shares of the series;


        (v)    The rights of the shares of the series in the event of any
               voluntary or involuntary liquidation, dissolution or winding up
               of the affairs of the Corporation, and the relative rights of
               priority, if any, of payment of shares of the series;


        (vi)   Whether the shares of the series shall be convertible into shares
               of any other class or series, or any other security, of the
               Corporation or any other corporation or other entity, and, if so,
               the specification of such other class or series of such other
               security, the conversion price or prices or dates on which such
               shares shall be convertible and all other terms and conditions
               upon which such conversion may be made;


        (vii)  Restrictions on the issuance of shares of the same series or of
               any other class or series;


        (viii) The voting rights, if any, of the holders of shares of the
               series; and


        (ix)   Any other relative rights, preferences and limitations on that
               series.


        Subject to the express provisions of any other series of Preferred Stock
then outstanding, notwithstanding any other provision of this Charter, the Board
of Directors may increase or decrease (but not below the number of shares of
such series then outstanding) the number of shares, or alter the designation or
classify or reclassify any unissued shares of a particular series of Preferred
Stock, by fixing or altering, in one or more respects, from time to time before
issuing the shares, the terms, rights, restrictions and qualifications of the
shares of any such series of Preferred Stock.

        SECTION 3.    RESTRICTIONS ON TRANSFER; ACQUISITIONS AND
                      REDEMPTION SHARES


               A. DEFINITIONS. For purposes of Sections 3 and 4 of this Article
VI, the following terms shall have the following meanings:


                             "Beneficial Ownership" shall mean ownership of
               shares of Capital Stock by an individual who would be treated as
               an owner of such shares under Section 542(a)(2) of the Code,
               either directly or constructively through the application of
               Section 544, as modified by Section 856(h)(1)(B). For purposes of
               this definition, the term "individual" also shall include any
               organization, trust or other entity that is treated as an
               individual for purposes of Section 542(a)(2) of 

                                      -4-
<PAGE>   5

               the Code. The terms "Beneficial Owner," "Beneficially Own,"
               "Beneficially Owns" and "Beneficially Owned" shall have
               correlative meanings.


                             "Beneficiary" shall mean a beneficiary of the Trust
               as determined pursuant to paragraph A of Section 4 of this
               Article VI.


                             "Board of Directors" shall mean the Board of
               Directors of the Corporation.


                             "Bylaws" shall mean the Bylaws of the Corporation.


                             "Capital Stock" shall mean collectively the stock
               of the Corporation that is either Common Stock and Preferred
               Stock.


                             "Code" shall mean the Internal Revenue Code of
               1986, as amended from time to time, or any successor statute
               thereto. Reference to any provision of the Code shall mean such
               provision as in effect from time to time, as the same may be
               amended, and any successor thereto, as interpreted by any
               applicable regulations thereto and judicial decisions as in
               effect from time to time.


                             "Constructive Ownership" shall mean ownership of
               shares of Capital Stock by a Person who would be treated as an
               owner of such shares, either actually or constructively, through
               the application of Section 318 of the Code, as modified by
               Section 856(d)(5) thereof. The terms "Constructive Owner,"
               "Constructively Own," "Constructively Owns" and "Constructively
               Owned" shall have correlative meanings.


                             "Market Price" on any day shall mean the average of
               the Closing Prices for the ten (10) consecutive Trading Days
               immediately preceding such day (or those days during such 10-day
               period for which Closing Prices are available). The "Closing
               Price" on any day shall mean the last sale price, regular way, on
               such day or if no such sale takes place on that day, the average
               of the closing bid and asked prices, regular way, in either case
               as reported on the principal consolidated transaction reporting
               system with respect to securities listed or admitted to trading
               on the New York Stock Exchange or the American Stock Exchange, or
               if the Capital Stock is not so listed or admitted to trading, as
               reported in the principal consolidated transaction reporting
               system with respect to securities listed on the principal
               national securities exchange (including the National Market
               System of the National Association of Securities Dealers, Inc.
               Automated Quotation System) on which the Capital 

                                      -5-
<PAGE>   6

               Stock is listed or admitted to trading or, if the Capital Stock
               is not so listed or admitted to trading, the last quoted price,
               or if not quoted, the average of the high bid and low asked
               prices in the over-the-counter market, as reported by the
               National Association of Securities Dealers, Inc. Automated
               Quotation System or, if such system is no longer in use, the
               principal automated quotation system then in use or, if the
               Capital Stock is not so quoted by any such system, the average of
               the closing bid and asked prices as furnished by a professional
               market maker selected by the Board of Directors making a market
               in the Capital Stock or, if there is no such market maker or such
               closing prices otherwise are not available, the fair market value
               of the Capital Stock as of such day, as determined by the Board
               of Directors in its discretion.


                             "Ownership Limit" shall mean 9.8 percent of the
               Value of the outstanding Capital Stock.


                             "Person" shall mean an individual, corporation,
               partnership, estate, trust (including a trust qualified under
               Section 401(a) or 501(c)(17) of the Code), a portion of a trust
               permanently set aside for or to be used exclusively for the
               purposes described in Section 642(c) of the Code, association,
               private foundation within the meaning of Section 509(a) of the
               Code, joint stock company or other entity, or a group as that
               term is used for purposes of Section 13(d)(3) of the Securities
               Exchange Act of 1934, as amended; but does not include an
               underwriter which participated in a public offering of Capital
               Stock for a period of sixty (60) days following the purchase by
               such underwriter of Capital Stock therein, provided that the
               foregoing exclusion shall apply in an underwriting only if the
               ownership of such Capital Stock by such underwriter would not
               cause the Corporation to fail to qualify as a REIT by reason of
               being "closely held" within the meaning of Section 856(a) of the
               Code or otherwise cause the Corporation to fail to qualify as a
               REIT.


                             "Purported Beneficial Transferee" shall mean, with
               respect to any purported Transfer which results in Excess Stock,
               the purported beneficial transferee for whom the Purported Record
               Transferee would have acquired shares of Capital Stock if such
               Transfer had been valid under paragraph B of this Section 3.


                             "Purported Record Transferee" shall mean, with
               respect to any purported Transfer which results in Excess Stock,
               the record holder of the Capital Stock if such Transfer had been
               valid under paragraph B of this Section 3.

                                      -6-
<PAGE>   7


                             "REIT" shall mean a real estate investment trust
               under Sections 856 through 860 of the Code.


                             "Restriction Termination Date" shall mean the first
               day on which the Board of Directors and the stockholders of the
               Corporation determine that it is no longer in the best interests
               of the Corporation to attempt, or continue, to qualify as a REIT.


                             "Trading Day" shall mean a day on which the
               principal national securities exchange on which the Capital Stock
               is listed or admitted to trading is open for the transaction of
               business or, if the Capital Stock is not listed or admitted to
               trading, shall mean any day other than a Saturday, Sunday or
               other day on which banking institutions in the State of New York
               are authorized or obligated by law or executive order to close.


                             "Transfer" shall mean any sale, transfer, gift,
               hypothecation, assignment, devise or other disposition of Capital
               Stock (including (i) the granting of any option (including any
               option to acquire any option or any series of such options) or
               entering into any agreement for the sale, transfer or other
               disposition of Capital Stock or (ii) the sale, transfer,
               assignment or other disposition of any securities or rights
               convertible into or exchangeable for Capital Stock), whether
               voluntary or involuntary, of record, constructively or
               beneficially, and whether by operation of law or otherwise. The
               terms "Transfers" and "Transferred" shall have correlative
               meanings.


                             "Trust" shall mean the trust created pursuant to
               paragraph A of Section 4 of this Article VI.


                             "Trustee" shall mean the Corporation as trustee for
               the Trust, and any successor trustee appointed by the
               Corporation.


                             "Value" shall mean, as of any given date, the
               Market Price per share of each class of Capital Stock then
               outstanding, multiplied by the number of shares of such class
               then outstanding.


               B.  OWNERSHIP AND TRANSFER LIMITATION


                             (1)     Notwithstanding any other provision of 
this Charter, except as provided in paragraph I of this Section 3 and
Section 5 of this Article VI, prior to the Restriction Termination Date, no
Person shall Beneficially or Constructively Own shares of Capital Stock in
excess of the Ownership Limit.



                                      -7-
<PAGE>   8

                      (2)     Notwithstanding any other provision of this
Charter, except as provided in paragraph I of this Section 3 and Section 5 of
this Article VI, prior to the Restriction Termination Date, any Transfer, change
in the capital structure of the Corporation, or other purported change in
Beneficial or Constructive Ownership of Capital Stock that, if effective, would
result in any Person Beneficially or Constructively Owning Capital Stock in
excess of the Ownership Limit shall be void ab initio as to the Transfer, change
in the capital structure of the Corporation, or other purported change in
Beneficial or Constructive Ownership with respect to that number of shares of
Capital Stock which would otherwise be Beneficially or Constructively Owned by
Such Person in excess of the Ownership Limit, and neither the Purported
Beneficial Transferee nor the Purported Record Transferee shall acquire any
rights in that number of shares of Capital Stock.


                      (3)     Notwithstanding any other provision of this
Charter, except as provided in Section 5 of this Article VI, prior to the
Restriction Termination Date, any Transfer, change in the capital structure of
the Corporation, or other purported change in ownership of Capital Stock that,
if effective, would result in the Capital Stock being owned by fewer than 100
Persons (determined without reference to any rules of attribution) shall be void
ab initio as to the Transfer, change in the capital structure of the
Corporation, or other purported change in ownership with respect to that number
of shares which otherwise would be owned by the transferee, and the intended
transferee or subsequent owner (including a Beneficial Owner) shall acquire no
rights in that number of shares of Capital Stock.


                      (4)     Notwithstanding any other provisions of this
Charter except Section 5 of this Article VI, prior to the Restriction
Termination Date, any Transfer, change in the capital structure of the
Corporation, or other purported change in Beneficial Ownership of shares of
Capital Stock that, if effective, would cause the Corporation to fail to
qualify as a REIT by reason of being "closely held" within the meaning of
Section 856(h) of the Code or otherwise, directly or indirectly, would cause
the Corporation to fail to qualify as a REIT shall be void ab initio as to the
Transfer, change in the capital structure of the Corporation, or other
purported change in Beneficial Ownership with respect to that number of shares
of Capital Stock which would cause the Corporation to be "closely held" within
the meaning of Section 856(h) of the Code or otherwise, directly or indirectly,
would cause the Corporation to fail to qualify as a REIT, and the intended
transferee or subsequent Beneficial Owner shall acquire no rights in that
number of shares of Capital Stock.                      


               C.     EXCHANGE FOR EXCESS STOCK.


                      (1)     If, notwithstanding the other provisions 
contained in this Article VI, at any time prior to the Restriction Termination
Date, there is a purported Transfer, change in the capital structure of the
Corporation or other purported change in the Beneficial or Constructive
Ownership of Capital Stock such that any person would either Beneficially or
Constructively Own Capital Stock in excess of the Ownership Limit, then, except
as otherwise provided in paragraph I of this Section 3, such shares of Capital
Stock (rounded up to the next whole number of shares) in excess of the Ownership
Limit automatically shall be exchanged for an equal number of shares of Excess
Stock having terms, rights, restrictions and qualifications identical thereto,
except to the 

                                      -8-
<PAGE>   9

extent that this Article VI requires different terms. Such exchange shall be
effective as of the close of business on the business day next preceding the
date of the purported Transfer, change in capital structure or other change in
purported Beneficial or Constructive Ownership of Capital Stock.


                      (2)     If, notwithstanding the other provisions 
contained in this Article VI, prior to the Restriction Termination Date, there
is a purported Transfer, change in the capital structure of the Corporation or
other purported change in Beneficial Ownership of Capital Stock which, if
effective, would cause the Corporation to fail to qualify as a REIT by reason of
being "closely held" within the meaning of Section 856(h) of the Code, or
otherwise, directly or indirectly would cause the Corporation to fail to qualify
as a REIT, then the shares of Capital Stock (rounded up to the next whole number
of shares), being Transferred or which are otherwise affected by the change in
capital structure or other purported change in Beneficial Ownership and which,
in any case, would cause the Corporation to be "closely held" within the meaning
of such Section 856(h) or otherwise would cause the Corporation to fail to
qualify as a REIT automatically shall be exchanged for an equal number of shares
of Excess Stock having terms, rights, restrictions and qualifications identical
thereto, except to the extent that this Article VI requires different terms.
Such exchange shall be effective as of the close of business on the business day
next preceding the date of the purported Transfer, change in capital structure
or other purported change in Beneficial Ownership.


               D.     REMEDIES FOR BREACH. If the Board of Directors or its
designee shall at any time determine in good faith that a Transfer or change in
the capital structure of the Corporation has taken place in violation of
paragraph B of this Section 3 or that a Person intends to acquire or has
attempted to acquire Beneficial or Constructive Ownership of any shares of
Capital Stock in violation of paragraph B of this Section 3, the Board of
Directors or its designee shall take such actions as it deems advisable to
refuse to give effect to or to prevent such Transfer, change in capital
structure of the Corporation or other attempt to acquire Beneficial or
Constructive Ownership of any shares of Capital Stock, including, but not
limited to, refusing to give effect thereto on the books of the Corporation or
instituting injunctive proceedings with respect thereto; provided, however,
that any Transfer, change in the capital structure of the Corporation,
attempted Transfer or other attempt to acquire Beneficial or Constructive
Ownership of any shares of Capital Stock in violation of subparagraphs (2), (3)
and (4) of paragraph B of this Section 3 (as applicable) shall be void ab
initio and where applicable automatically shall result in the exchange
described in paragraph C of this Section 3, irrespective of any action (or
inaction) by the Board of Directors or its designee.
                                

               E.     NOTICE OF RESTRICTED TRANSFER. Any Person who acquires or
attempts to acquire Beneficial or Constructive Ownership of shares of Capital
Stock in violation of paragraph B of this Section 3 and any Person who
Beneficially or Constructively owns Excess Stock pursuant to paragraph C of this
Section 3 shall immediately give written notice to the Corporation, or, in the
event of a proposed or attempted Transfer or purported change in Beneficial
Ownership, shall give at least fifteen (15) days prior written notice to the
Corporation, of such event and shall promptly provide to the Corporation such
other information as the Corporation may request in 

                                      -9-
<PAGE>   10

order to determine the effect, if any, of such Transfer, attempted Transfer or
purported change in Beneficial Ownership on the Corporation's status as a REIT.


               F.     OWNERS REQUIRED TO PROVIDE INFORMATION.  Prior to the 
Restriction Termination Date:


                      (1)     Every Beneficial or Constructive Owner of more
than 5.0 percent, or such lower percentages as required pursuant to regulations
under the Code or as may be requested by the Board of Directors, of the Value
of the outstanding Capital Stock of the Corporation shall annually, no later
than January 31 of each calendar year, give written notice to the Corporation
stating (i) the name and address of such Beneficial or Constructive Owner; (ii)
the number of shares of Capital Stock Beneficially or Constructively Owned and
(iii) a description of how such shares are held. Each such Beneficial or
Constructive Owner promptly shall provide to the Corporation such additional
information as the Corporation, in its sole discretion, may request in order to
determine the effect, if any, of such Beneficial or Constructive Ownership on
the Corporation's status as a REIT and to ensure compliance with the Ownership
Limit.                                  


                      (2)     Each person who is a Beneficial or Constructive
Owner of Capital Stock and each Person (including the stockholder of record)
who is holding Capital Stock for a Beneficial or Constructive Owner promptly
shall provide to the Corporation such information as the Corporation, in its
sole discretion, may request in order to determine the Corporation's status as
a REIT, to comply with the requirements of any taxing authority or other
governmental agency, to determine any such compliance or to ensure compliance
with the Ownership Limit.


               G.     REMEDIES NOT LIMITED. Noting contained in this Article VI
except Section 5 hereof shall limit scope or application of the provisions of
this Section 3, the ability of the Corporation to implement or enforce
compliance with the terms thereof or the authority of the Board of Directors to
take any such other action or actions as it may deem necessary or advisable to
protect the Corporation and the interests of its stockholders by preservation of
the Corporation's status as a REIT and to ensure compliance with the Ownership
Limit, including, without limitation, refusal to give effect to a transaction on
the books of the Corporation.


               H.     AMBIGUITY. In the case of an ambiguity in the application
of any of the provisions of this Section 3, including any definition contained
in paragraph A hereof, the Board of Directors shall have the power and
authority, in its sole discretion, to determine the application of the
provisions of this Section 3 with respect to any situation based on the facts
known to it.
                                     

               I.     EXCEPTION. The Board of Directors, upon receipt of a
ruling from the Internal Revenue Service, an opinion of counsel, or other
evidence satisfactory to the Board of Directors, in its sole discretion, in
each case to the effect that the restrictions contained in subparagraph 3 and
subparagraph 4 of paragraph B of this Section 3 will not be violated, may
waive, in whole or in part, the application of the Ownership Limit with respect
to any Person. In connection with any exemption, the Board of Directors may
require such representations and undertakings from such Person and may impose
such other conditions as the Board deems         

                                      -10-
<PAGE>   11

necessary, in its sole discretion, to determine the effect, if any, of the
proposed Transfer on the Corporation's status as a REIT.


               J.     LIMITATIONS ON MODIFICATIONS.


                      (1)     The Ownership Limit may not be increased 
(nor may any additional ownership limitations be created) if, after giving
effect to such increase or creation, the Corporation would be "closely held"
within the meaning of Section 856(h) of the Code (assuming ownership of shares
of Capital Stock by all Persons equal to the greater of the Beneficial Ownership
of Capital Stock by such Person or the Ownership Limit).


                      (2)     Prior to any modification of the Ownership 
Limit, the Board of Directors may require such opinions of counsel, affidavits,
undertakings or agreements as it may deem necessary, advisable or prudent in
order to determine or ensure the Corporation's status a REIT.
                                        

               K.     LEGEND. Each certificate for shares of Capital Stock shall
bear substantially the following legend:


                             "The securities represented by this certificate are
               subject to restrictions on transfer for the purpose of
               maintenance of the Corporation's status as a real estate
               investment trust under the Internal Revenue Code of 1986, as
               amended (the "Code"). Except as otherwise provided pursuant to
               the Charter of the Corporation, no Person may (i) Beneficially or
               Constructively Own shares of Capital Stock in excess of 9.8
               percent of the Value of the outstanding shares of Capital Stock
               of the Corporation; or (ii) Beneficially Own Capital Stock which
               would result in the Corporation being "closely held" under
               Section 856(h) of the Code or otherwise would cause the
               Corporation to fail to qualify as a REIT. Any Person who attempts
               or proposes to Beneficially or Constructively Own shares of
               Capital Stock in excess of the above limitations must notify the
               Corporation in writing at least fifteen (15) days prior to the
               proposed or attempted transfer. If the transfer restrictions
               referred to herein are violated, the shares of Capital Stock
               represented hereby automatically will be exchanged for shares of
               Excess Stock and will be held in trust by the Corporation, all as
               provided in the Charter of the Corporation. All capitalized terms
               in this legend have the meanings identified in the Corporation's
               Charter, as the same may be amended or restated from time to
               time, a copy of which, including the restrictions on transfer,
               will be sent without charge to each stockholder who so requests."


                                      -11-
<PAGE>   12




        SECTION 4.  EXCESS STOCK.


                      A.     OWNERSHIP IN TRUST.  Upon any purported Transfer, 
change in the capital structure of the Corporation or other purported change in
Beneficial Ownership that results in Excess Stock pursuant to paragraph C of
Section 3 of this Article VI, such Excess Stock shall be deemed to have been
transferred to the Corporation as Trustee of a Trust for the benefit of such
Beneficiary or Beneficiaries to whom an interest in such Excess Stock may later
be transferred pursuant to paragraph E of this Section 4. Shares of Excess Stock
so held in trust shall be issued and outstanding stock of the Corporation. The
Purported Record Transferee shall have no rights in such Excess Stock except the
right to designate a transferee of such Excess Stock upon the terms specified in
paragraph E of this Section 4. The Purported Beneficial Transferee shall have no
rights in such Excess Stock except as provided in paragraph C of this Section 4.


                      B.     DIVIDEND RIGHTS.  Excess Stock shall not be 
entitled to any dividends. Any dividend or distribution paid prior to the
discovery by the Corporation that the shares of Capital Stock have been
exchanged for Excess Stock shall be repaid to the Corporation upon demand, and
any dividend or distribution declared but unpaid at the time of such discovery
shall be rescinded as void ab initio with respect to such shares of Excess
Stock.


                      C.     RIGHTS UPON LIQUIDATION.


                             (1)     Except as provided below, in the event of 
any voluntary or involuntary liquidation, dissolution or winding up, or any
other distribution of the assets, of the Corporation, each holder of shares of
Excess Stock resulting from the exchange of Preferred Stock of any specified
series shall be entitled to receive, ratably with each other holder of shares of
Excess Stock resulting from the exchange of shares of Preferred Stock of such
series and each holder of shares of Preferred Stock of such series, such accrued
and unpaid dividends, liquidation preferences and other preferential payments,
if any, as are due to holders of shares of Preferred Stock of such series. In
the event that holders of shares of any series of Preferred stock are entitled
to participate in the Corporation's distribution of its residual assets, each
holder of shares of Excess Stock resulting from the exchange of Preferred Stock
of any such series shall be entitled to participate, ratably with (i) each other
holder of shares of Excess stock resulting from the exchange of shares of
Preferred Stock of all series entitled to so participate; (ii) each holder of
shares of Preferred Stock of all series entitled to so participate; and (iii)
each holder of shares of Common Stock and Excess Stock resulting from the
exchange of shares of Common Stock (to the extent permitted by paragraph C of
Section 3 of Article VI hereof), that portion of the aggregate assets available
for distribution (determined in accordance with applicable law) as the number of
shares of such Excess Stock held by such holder bears to the total number of (i)
outstanding shares of Excess Stock resulting from the exchange of Preferred
Stock of all series entitled to so participate; (ii) outstanding shares of
Preferred Stock of all series entitled to so participate; and (iii) outstanding
shares of Common Stock and shares of Excess Stock resulting from the exchange of
shares of Common Stock. The Corporation, as holder of the Excess Stock in trust,
or, if the Corporation shall have been dissolved, any trustee appointed by the
Corporation prior to its dissolution, shall distribute ratably to the
Beneficiaries of the Trust, when determined, any such assets received in respect
of the Excess Stock in any liquidation, dissolution or winding up, or any

                                      -12-
<PAGE>   13

distribution of the assets, of the Corporation. Anything to the contrary herein
notwithstanding, in no event shall the amount payable to a holder with respect
to shares of Excess Stock resulting from the exchange of shares of Preferred
Stock exceed (i) the price per share such holder paid for the Preferred Stock in
the purported Transfer that resulted in the Excess Stock or (ii) if the holder
did not give full value for such Excess Stock (as through a gift, devise or
other event or transaction), a price per share equal to the Market Price for the
shares of Preferred Stock on the date of the purported Transfer that resulted in
such Excess Stock. Any amount available for distribution in excess of the
foregoing limitations shall be paid ratably to the holders of shares of
Preferred Stock and other holders of Excess Stock resulting from the exchange of
Preferred Stock to the extent permitted by the foregoing limitations.


                      (2)     Except as provided below, in the event of any
voluntary of involuntary liquidation, dissolution or winding up, or any other
distribution of the assets, of the Corporation, each holder of shares of Excess
Stock resulting from the exchange of Common Stock shall be entitled to receive,
ratably with (i) each other holder of shares of such Excess Stock and (ii) each
holder of Common Stock, that portion of the aggregate assets available for
distribution to holders of shares of Common Stock (including holders of Excess
Stock resulting from the exchange of Common Stock pursuant to paragraph C of
Section 3 of Article VI hereof), determined in accordance with applicable law,
as the number of shares of such Excess Stock held by such holder bears to the
total number of shares of outstanding Common Stock and outstanding Excess Stock
resulting from the exchange of Common Stock then outstanding. The Corporation,
as holder of the Excess Stock in trust, or, if the Corporation shall have been
dissolved, any trustee appointed by the Corporation prior to its dissolution,
shall distribute ratably to the Beneficiaries of the Trust, when determined,
any such assets received in respect of the Excess Stock in any liquidation,
dissolution or winding up, or any distribution of the assets, of the
Corporation. Anything herein to the contrary notwithstanding, in no event shall
the amount payable to a holder with respect to shares of Excess Stock exceed
(i) the price per share such holder paid for the Common Stock in the purported
Transfer that resulted in the Excess Stock or (ii) if the holder did not give
full value for such Excess Stock (as through a gift, devise or other event or
transaction), a price per share equal to the Market Price for the shares of
Common Stock on the date of the purported Transfer that resulted in such Excess
Stock. Any amount available for distribution in excess of the foregoing
limitations shall be paid ratably to the holders of shares of Common Stock and
other holders of Excess Stock resulting from the exchange of Common Stock to
the extent permitted by the foregoing limitations.
                                            

               D.     VOTING RIGHTS. The holders of shares of Excess Stock 
shall  not be entitled to vote on any matters (except as required by MGCL).


               E.     RESTRICTIONS ON TRANSFER; DESIGNATION OF BENEFICIARY.


                      (1)     Excess Stock shall not be transferable.  The 
Purported Record Transferee may freely designate a Beneficiary of its interest
in the Trust (representing the number of shares of Excess Stock held by the
Trust attributable to a purported Transfer that resulted in the Excess Stock, if
(i) the shares of Excess Stock held in the Trust would not be Excess Stock in
the hands of such Beneficiary and (ii) the Purported Beneficial Transferee does
not receive a price for 

                                      -13-
<PAGE>   14

designating such Beneficiary that reflects a price per share for such Excess
Stock that exceeds (x) the price per share such Purported Beneficial Transferee
paid for the Capital Stock in the purported Transfer that resulted in the Excess
Stock or (y) if the Purported Beneficial Transferee did not give value for such
shares of Excess Stock (as through a gift, device or other event or
transaction), a price per share equal to the Market Price for the shares of
Capital Stock on the date of the purported Transfer that resulted in the Excess
Stock. Upon such transfer of an interest in the Trust, the corresponding shares
of Excess Stock in the Trust automatically shall be exchanged for an equal
number of shares of Capital Stock and such shares of Capital Stock shall be
transferred of record to the Beneficiary of the interest in the Trust designated
by the Purported Record Transferee, as described above, if such Capital Stock
would not be Excess Stock in the hands of such Beneficiary. Prior to any
transfer of any interest in the Trust, the Purported Record Transferee must give
advance notice to the Corporation of the intended transfer and the Corporation
must have waived in writing its purchase rights under paragraph F of this
Section 4.


                      (2)    Notwithstanding the foregoing, if a Purported 
Beneficial Transferee receives a price for designating a Beneficiary of an
interest in the Trust that exceeds the amounts allowable under subparagraph (1)
of this paragraph E, such Purported Beneficial Transferee shall pay, or cause
the Beneficiary of the interest in the Trust to pay, such excess to the
Corporation.


                      (3)    If any of the transfer restrictions set forth in 
this paragraph E, or any application thereof, is determined to be void, invalid
or unenforceable by any court having jurisdiction over the issue, the Purported
Record Transferee may be deemed, at the option of the Corporation, to have acted
as the agent of the Corporation in acquiring the Excess Stock as to which such
restrictions would, by their terms, apply, and to hold such Excess Stock on
behalf of the Corporation.


               F.     PURCHASE RIGHT IN EXCESS STOCK. Shares of Excess Stock 
shall be deemed to have been offered for sale to the Corporation, or
its designee, at a price per share equal to the lesser of (i) the price per
share in the transaction that created such Excess Stock (or, in the case of
devise or gift, the Market Price at the time of such devise or gift) and (ii)
the Market Price of the Capital Stock exchanged for such Excess Stock on the
date the Corporation, or its designee, accepts such offer. The Corporation
shall have the right to accept such offer for a period of ninety (90) days
after the later of (i) the date of the purported Transfer, change in capital
structure of the Corporation or purported change in Beneficial Ownership which
resulted in such Excess Stock and (ii) the date on which the Board of Directors
determines in good faith that a Transfer, change in capital structure of the
Corporation or purported change in Beneficial Ownership resulting in Excess
Stock has occurred, if the Corporation does not receive a notice pursuant to
paragraph E of Section 3 of this Article VI, but in no event later than a
permitted Transfer pursuant to and in compliance with the terms of paragraph E
of this Section 4.


               G.     REMEDIES NOT LIMITED. Nothing contained in this Article VI
except Section 5 hereof shall limit scope or application of the provisions of
this Section 4, the ability of the Corporation to implement or enforce
compliance with the terms thereof or the authority of the Board of Directors to
take any such other action or actions as it may deem necessary or advisable to
protect the Corporation and the interests of its stockholders by preservation of
the 

                                      -14-
<PAGE>   15

Corporation's status as a REIT and to ensure compliance with the Ownership
Limit, including, without limitation, refusal to give effect to a transaction on
the books of the Corporation.


        SECTION 5.  SETTLEMENTS.

        Nothing in Sections 3 and 4 of this Article VI shall preclude the
settlement of any transaction with respect to the Capital Stock entered into
through the facilities of the New York Stock Exchange or other national
securities exchange on which the Capital Stock is listed.


        SECTION 6.    SEVERABILITY


        If any provision of this Article VI or any application of any such
provision is determined to be void, invalid or unenforceable by any court having
jurisdiction over the issue, the validity and enforceability of the remainder of
this Article VI shall not be affected and other applications of such provision
shall be affected only to the extent necessary to comply with the determination
of such court.

                                   ARTICLE VII
            MATTERS RELATING TO THE POWERS OF THE CORPORATION AND ITS
                           DIRECTORS AND STOCKHOLDERS


        The following provisions are hereby adopted for the purpose of defining,
limiting and regulating the powers of the Corporation and of the directors and
stockholders thereof:


        SECTION 1.   MATTERS RELATING TO THE BOARD OF DIRECTORS.


                      A.     AUTHORITY AS TO BYLAWS.        Except as otherwise 
provided herein, in furtherance and not in limitation of the powers conferred by
statute, the Board of Directors is expressly authorized to make, alter, amend or
repeal the Bylaws of the Corporation and the Corporation may, in its Bylaws,
confer powers on the Board of Directors in addition to these contained herein or
conferred by applicable law.


                      B.     AUTHORITY AS TO STOCK ISSUANCES.    The Board of 
Directors of the Corporation may authorize the issuance from time to time of
shares of its stock of any class, whether now or hereafter authorized, or
securities convertible into shares now or hereafter authorized, for such
consideration as the Board of Directors may deem advisable, subject to such
restrictions or limitations, if any, as may be set forth in the Charter or the
Bylaws of the Corporation or in the general laws of the State of Maryland.


                      C.     MANNER OF ELECTION.       Unless and except to the 
extent that the Bylaws of the Corporation shall so require, the election of
directors of the Corporation need not be by written ballot.

                                      -15-
<PAGE>   16


                      D.     REMOVAL OF DIRECTORS.   Any director may be 
removed from office at any time, with or without cause, by the affirmative vote
of the holders of a majority of the then outstanding Capital Stock entitled to
vote generally in the election of directors.


                      E.     PERMISSIBLE CRITERIA FOR CONSIDERATION OF BEST 
INTERESTS.   In determining what is in the best interest of the Corporation, a
director of the Corporation shall consider the interests of the stockholders of
the Corporation and, in his or her discretion, may consider the interests of the
Corporation's employees, suppliers, creditors and tenants and the long-term as
well as short-term interests of the Corporation and its stockholders, including
the possibility that these interests may be best served by the continued
independence of the Corporation.


                      F.     DETERMINATIONS BY BOARD.   The determination
as to any of the following matters, made in good faith by or pursuant
to the direction of the Board of Directors consistent with the Charter of the
Corporation and in the absence of actual receipt of an improper benefit in
money, property or services or active and deliberate dishonesty established by
a court, shall be final and conclusive and shall be binding upon the
Corporation and every holder of shares of its stock: (i) the amount of the net
income of the Corporation for any period and the amount of assets at any time
legally available for the payment of dividends, redemption of its stock or the
payment of other distributions on its stock; (ii) the amount of paid-in
surplus, net assets, other surplus, annual or other net profit, net assets in
excess of capital, undivided profits or excess of profits over losses on sales
of assets; the amount, purpose, time of creation, increase or decrease,
alteration or cancellation of any reserves or charges and the propriety thereof
(whether or not any obligation or liability for which such reserves shall have
been created shall have been paid or discharged); (iii) the fair value, or any
sale, bid or asked priced to be applied in determining the fair value, of any
asset owned or held by the Corporation; and (iv) any matters relating to the
acquisition, holding and disposition of any assets by the Corporation.


                      G.     RESERVED POWERS OF BOARD.   The enumeration and 
definition of particular powers of the Board of Directors included in this
Article VII shall in no way be limited or restricted by reference to or
inference from the terms of any other clause of this or any other provision of
the Charter of the Corporation, or construed or deemed by inference or otherwise
in any manner to exclude or limit the powers conferred upon the Board of
Directors under the laws of the State of Maryland as now or hereafter in force.


                      H.     ALTERATION OF AUTHORITY GRANTED TO THE BOARD OF 
DIRECTORS.   The affirmative vote of that proportion of the then-outstanding
Capital Stock necessary to approve an amendment to this Charter pursuant to the
MGCL and Article XI hereof shall be required to amend, repeal or adopt any
provision inconsistent with Section 1 of this Article VII or with Section 3.12
of the Bylaws of the Corporation (including defined terms therein).


                      I.     REIT QUALIFICATION.   The Board of Directors 
shall use its best efforts to cause the Corporation and its stockholders to
qualify for U.S. federal income tax treatment in accordance with the provisions
of the Code applicable to REITs. In furtherance of the foregoing, the Board of
Directors shall use its best efforts to take such actions as are necessary, and
may take 

                                      -16-
<PAGE>   17

such actions as it deems desirable (in its sole judgment and discretion) to
preserve the status of the Corporation as a REIT (as that term is defined in
paragraph A of Section 3 of Article VI hereof); provided, however, that in the
event that the Board of Directors determines, in its sole judgment and
discretion, that it is no longer in the best interests of the Corporation to
qualify as a REIT, the Board of Directors shall take such actions as are
required by the Code (as that term is defined in paragraph A of Section 3 of
Article VI hereof), the MGCL and other applicable law, to cause the matter of
termination of qualification as a REIT to be submitted to a vote of the
stockholders of the Corporation pursuant to paragraph A of Section 2 of this
Article VII.

        SECTION 2.    MATTERS RELATING TO THE STOCKHOLDERS.

               A.     TERMINATION OF REIT STATUS.      Notwithstanding anything 
contained in this Charter to the contrary, the affirmative vote of the holders
of a majority of the then-outstanding Capital Stock entitled to vote generally
in the election of directors and the approval of the Board of Directors shall be
required to terminate voluntarily the Corporation's status as a REIT (as that
term is defined in paragraph A of Section 3 of Article VI).


               B.     NO CUMULATIVE RIGHTS.      Stockholders of the 
Corporation shall not have cumulative voting rights in the election of 
directors.


               C.     NO PREEMPTIVE RIGHTS.      No holders of stock of the 
Corporation, of whatever class, shall have any preferential right of
subscription to any shares of stock of any class or to any securities
convertible into shares of stock of any class of the Corporation, nor any right
of subscription to any thereof.

                                  ARTICLE VIII
                              DIRECTORS' LIABILITY

        To the maximum extent that Maryland law in effect from time to time
permits limitation of the liability of directors and officers, no director or
officer of the Corporation shall be liable to the Corporation or its
stockholders for money damages. Neither the amendment nor repeal of this Article
VIII, nor the adoption or amendment of any provision of the Charter or Bylaws of
the Corporation inconsistent with this Article VIII, shall apply to or affect in
any respect the applicability of the preceding sentence with respect to any act
or failure to act which occurred prior to such amendment, repeal or adoption.

                                   ARTICLE IX
                                 INDEMNIFICATION

        Each person who is or was or who agrees to become a director or officer
of the Corporation, or each person who, while a director of the Corporation, is
or was serving or who agrees to serve, at the request of the Corporation, as a
director, officer, partner, joint venture, employee or trustee of another
corporation, partnership, joint venture, trust, employee benefit plan or other
enterprise (including the heirs, executor, administrators or estate of such
person), shall be indemnified by the Corporation, and shall be entitled to have
paid on his behalf or be reimbursed for reasonable expenses in advance of final
disposition of a proceeding, in accordance with the 

                                      -17-
<PAGE>   18

Bylaws of the Corporation, to the full extent permitted from time to time by the
Maryland General Corporation Law as the same exists or may hereafter be amended
(but, in the case of any such amendment, only to the extent that such amendment
permits the Corporation to provide broader indemnification rights than said law
permitted the Corporation to provide prior to such amendment) or any other
applicable laws presently or hereafter in effect. The Corporation shall have the
power, with the approval of the Board of Directors, to provide such
indemnification and advancement of expenses to any employee or agent of the
Corporation, in accordance with the Bylaws of the Corporation. Without limiting
the generality or the effect of the foregoing, the Corporation may enter into
one or more agreements with any person which provide for indemnification greater
or different than that provided in this Article IX. Any amendment or repeal of
this Article IX shall not adversely affect any right or protection existing
hereunder immediately prior to such amendment or repeal.

                                    ARTICLE X
                    APPLICATION OF CERTAIN PROVISIONS OF LAW

        SECTION 1.    BUSINESS COMBINATIONS.

        Notwithstanding any other provision of this Charter or any contrary
provision of law, Title 3, subtitle 6 of the Corporations and Associations
Article of the Annotated Code of Maryland, as amended from time to time, or any
successor statute thereto, shall not apply to any "business combination" (as
defined in Section 3.601(d) of the Corporations and Associations Article of the
Annotated Code of Maryland, as amended from time to time, or any successor
statute thereto) involving the Corporation.

        SECTION 2.    CONTROL SHARE TRANSACTIONS.

        Notwithstanding any other provision of this Charter or any contrary
provision of law, Title 3, subtitle 7 of the Corporations and Associations
Article of the Annotated Code of Maryland, as amended from time to time, or any
successor statute thereto shall not apply to any acquisition of shares of stock
of the Corporation.

                                   ARTICLE XI
                                    AMENDMENT

        The Corporation reserves the right at any time and from time to time to
amend, alter, change or repeal any provision contained in its Charter and any
other provisions authorized by the laws of the State of Maryland at the time in
force may be added or inserted in the manner now or hereafter prescribed herein
or by applicable law, and all rights, preferences and privileges of whatsoever
nature conferred upon stockholder, directors or any other persons whomsoever by
and pursuant to this Charter in its present form or as hereafter amended are
granted subject to the rights reserved in this Article XI; provided, however,
that any amendment or repeal of Articles VIII, IX or this Article XI of this
Charter shall not adversely affect any right or protection existing hereunder
immediately prior to such amendment or repeal.



                                      -18-
<PAGE>   19


        IN WITNESS WHEREOF, these First Amended and Restated Articles of
Incorporation are hereby executed by Gary M. Ralston, the President of the
Corporation, who hereby acknowledges that the First Amended and Restated
Articles of Incorporation are the act of the Corporation, and who does hereby
state under the penalties of perjury that the matters and facts set forth herein
with respect to authorization and approval of such Articles are true in all
material respects to the best of his knowledge, information and belief.


Dated:  August 10, 1998


                                            By:    /s/ Gary M. Ralston
                                                   ----------------------------
                                                   Gary M. Ralston, President


ATTEST


By:     /s/ Kevin B. Habicht
        -----------------------------
        Kevin B. Habicht, Secretary



                                      -19-



<PAGE>   1
                                                                       EXHIBIT 5



                [LETTERHEAD OF SHAW PITTMAN POTTS & TROWBRIDGE]



                               September 29, 1998



Commercial Net Lease Realty, Inc.
455 South Orange Avenue
Suite 700
Orlando, Florida        32801

         RE:     COMMERCIAL NET LEASE REALTY, INC.

Ladies and Gentlemen:

         We have acted as counsel to Commercial Net Lease Realty, Inc., a
Maryland corporation (the "Company"), in connection with the Registration
Statement on Form S-3 filed by the Company on September 29, 1998, with the
Securities and Exchange Commission under the Securities Act of 1933, as amended
(the "Registration Statement"), relating to the offering by the Company from
time to time of (i) one or more series of debt securities (the "Debt
Securities"), (ii) shares of preferred stock, par value $0.01 per share (the
"Preferred Stock"), (iii) shares of Preferred Stock represented by depositary
shares (the "Depositary Shares"), (iv) shares of common stock, par value $0.01
per share (the "Common Stock"), and (v) warrants to purchase Common Stock (the
"Common Stock Warrants"), with an aggregate initial public offering price of up
to $300,000,000.   The Debt Securities, Preferred Stock, Depositary Shares,
Common Stock and Common Stock Warrants are collectively referred to herein as
the "Offered Securities."

         In our capacity as counsel in connection with such registration, we
are familiar with the proceedings taken and proposed to be taken by the Company
in connection with the authorization and issuance of the Offered Securities,
and for purpose of this opinion have assumed that such proceedings will be
timely completed in the manner currently proposed.  In addition, we have made
such legal and factual examinations and inquiries, including an examination of
originals or copies, certified or otherwise identified to our satisfaction, of
such documents, corporate records and instruments as we have deemed necessary
or appropriate for purposes of this opinion.  Among such documents are the
Registration Statement, the First Amended and Restated Articles of
Incorporation of the Company certified as of a recent date by the State
Department of Assessments and Taxation of Maryland (the "Charter"), the by-laws
of the Company, resolutions adopted by the Board of Directors of the Company
(the "Board of Directors") in connection with
<PAGE>   2
Commercial Net Lease Realty, Inc.
September 29, 1998
Page 2




the matters contemplated by the Registration Statement, and the form of
Indenture (the "Indenture") to be entered into between the Company and a
financial institution organized under the laws of the United States of America
(the "Trustee").

         The Debt Securities will be issued pursuant to the Indenture, the
Depositary Shares will be issued under one or more deposit agreements (each, a
"Deposit Agreement"), and the Common Stock Warrants will be issued under one or
more warrant agreements (each, a "Warrant Agreement"), each to be between the
Company and a financial institution identified therein as depositary or warrant
agent (each, a "Depositary" or "Warrant Agent"), as the case may be.

         Subject to the foregoing and the other matters set forth herein, it is
our opinion, that, as of the date hereof:

         1.      When (i) the Debt Securities have been duly established under
the Indenture (including, without limitation, the adoption by the Board of
Directors of a resolution duly authorizing the issuance and delivery of the
Debt Securities), (ii) the Debt Securities have been duly authenticated by the
Trustee and (iii) the Debt Securities have been duly executed and delivered on
behalf of the Company against payment therefor in accordance with the terms and
provisions of the Indenture and as contemplated by the Registration Statement
and the applicable Prospectus Supplement, the Debt Securities will constitute
legally valid and binding obligations of the Company, enforceable against the
Company in accordance with their terms.

         2.      The Company has the authority, pursuant to its Charter, to
issue up to 15,000,000 shares of Preferred Stock.  Upon adoption by the Board
of Directors of a resolution in form and content as required by applicable law
specifying the designation, rights and preferences of one or more series of
Preferred Stock, filed as required by applicable law, and upon issuance and
delivery of full payment for such shares in the manner contemplated by the
Registration Statement and the applicable Prospectus Supplement and by such
resolution, such shares of Preferred Stock will be validly issued, fully paid
and nonassessable.

         3.      When (i) the final terms of the Depositary Shares and
applicable Deposit Agreement have been duly established in accordance with the
Charter, applicable law and resolutions of the Board of Directors, (ii) the
Board of Directors has adopted a resolution, in form and content as required by
applicable law, duly authorizing the issuance and delivery of the Depositary
Shares and (iii) the Depositary Shares have been duly executed and delivered by
the Company against payment therefor and countersigned by the applicable
Depositary in accordance with the applicable Deposit Agreement and delivered to
and paid for by the purchasers of the Depositary Shares in the manner
contemplated by the Registration Statement, the applicable Prospectus
Supplement and such resolutions of
<PAGE>   3
Commercial Net Lease Realty, Inc.
September 29, 1998
Page 3




the Board of Directors, the Depositary Shares will be validly issued, fully
paid and nonassessable.

         4.      The Company has the authority, pursuant to its Charter, to
issue up to 90,000,000 shares of Common Stock.  Upon adoption by the Board of
Directors of a resolution in form and content as required by applicable law,
and upon issuance and delivery of and full payment for such shares in the
manner contemplated by the Registration Statement and the applicable Prospectus
Supplement and by such resolution, such shares of Common Stock will be validly
issued, fully paid and nonassessable.


         5.      When (i) the final terms of the Common Stock Warrants and
applicable Warrant Agreement have been duly established in accordance with the
Charter, applicable law and resolutions of the Board of Directors, (ii) the
Board of Directors has adopted a resolution, in form and content as required by
applicable law, duly authorizing the issuance and delivery of the Common Stock
Warrants and (iii) the Common Stock Warrants have been duly executed and
delivered by the Company against payment therefor and countersigned by the
applicable Warrant Agent in accordance with the applicable Warrant Agreement
and delivered to and paid for by the purchasers of the Common Stock Warrants in
the manner contemplated by the Registration Statement, the applicable
Prospectus Supplement and such resolutions of the Board of Directors, the
Common Stock Warrants will constitute legally valid and binding obligations of
the Company, enforceable against the Company in accordance with their terms.

         We consent to your filing of this opinion as an exhibit to the
Registration Statement and to the reference to our firm under the caption
"Legal Matters" in the prospectus included therein.

                                        Very truly yours,

                                        /s/ Shaw Pittman Potts & Trowbridge

                                        Shaw Pittman Potts & Trowbridge

<PAGE>   1
                                                                       EXHIBIT 8


               [LETTERHEAD OF SHAW PITTMAN POTTS & TROWBRIDGE]


                               September 29, 1998





Commercial Net Lease Realty, Inc.
455 South Orange Avenue
Suite 700
Orlando, Florida  32801


Ladies and Gentlemen:


            On September 29, 1998, Commercial Net Lease Realty, Inc. ("NNN")
filed a registration statement on Form S-3 (Registration No. 333-_____) (the
"Registration Statement") with the Securities and Exchange Commission (the
"Commission"). In connection with the filing of the Registration Statement, you
have asked us to render an opinion with respect to the qualification of NNN as a
real estate investment trust ("REIT") under sections 856 through 860 of the
Internal Revenue Code of 1986, as amended (the "Code").


            We have served as special counsel for NNN in connection with the
filing of the Registration Statement and from time to time in the past have
represented NNN on specific matters as requested by NNN. Specifically for the
purpose of this opinion, we have examined and relied upon the following: copies
of NNN's First Amended and Restated Articles of Incorporation and any amendments
thereto; the Registration Statement; copies of executed leases covering real
property owned by NNN; and NNN's Form S-11 Registration Statement as filed with
the Commission on August 15, 1984.


            We have not served as general counsel to NNN and have not been
involved in decisions regarding the day-to-day operation of NNN and its
properties. We have, however, discussed the mode of operation of NNN with its
officers with a view to learning information relevant to the opinions expressed
herein and have received and relied upon a certificate from NNN with respect to
certain matters.


            We have discussed with management of NNN arrangements relating to
the management of its properties, the relationships of NNN with tenants of such
properties, and certain terms of leases of such properties to tenants, with a
view to assuring that (i) at the close of each quarter of the taxable years
covered by this opinion, it met the asset composition requirements set forth in
section 856(c)(5), (ii) with respect to years covered by this opinion, it
satisfied the 95% and 75% gross income tests set forth in sections 




<PAGE>   2
Commercial Net Lease Realty, Inc.
September 29, 1998
Page 2


856(c)(2) and (3), respectively, and (iii) with respect to tax years prior to
1998, it satisfied the 30% gross income test. We have further reviewed with
management of NNN the requirements that the beneficial ownership of a REIT be
held by 100 or more persons for at least 335/365ths of each taxable year and
that a REIT must satisfy the diversity of ownership requirements of section
856(h) as such requirements existed in the years covered by this opinion, and we
have been advised by management that at all times during the years covered by
this opinion (and specifically on each record date for the payment of dividends
during 1984 through the date hereof) NNN has had more than 1,000 shareholders of
record, that NNN maintains the records required by section 1.857-8 of the
Treasury Regulations, that no later than January 30 of each year it sent the
demand required by section 1.857-8(d) of the Treasury Regulations to each
shareholder of record owning one percent or more of the outstanding shares of
NNN on the appropriate date required by said regulation, and that the actual
ownership of NNN shares was such that, to the best knowledge of its management
(based upon responses to the aforesaid demands, any filing of a Schedule 13D
under the Securities Exchange Act of 1934, as amended, or any other sources of
information), NNN satisfied the applicable requirements of section 856(h).
Further, we have examined various property leases and lease supplements relating
to the properties that NNN owns, and although leases relating to certain
properties that NNN owns have not been made available to us, NNN has represented
with respect to such leases that they do conform in all material respects to a
form of lease agreement provided to us. On the basis of discussions with
management of NNN, we are not aware that NNN's election to be a REIT has been
terminated or challenged by the Internal Revenue Service or any other party, or
that NNN has revoked its election to be a REIT for any such prior year so as to
make NNN ineligible to qualify as a REIT for the years covered by this opinion.


            In rendering the opinions set forth herein, we are assuming that
copies of documents examined by us are true copies of originals thereof and that
the information concerning NNN set forth in NNN's federal income tax returns,
and in the Registration Statement, as well as the information provided to us by
NNN's management are true and correct. We have no reason to believe that such
assumptions are not warranted.


            Based upon the foregoing, we are of the opinion that: (a) NNN was a
"real estate investment trust" as defined by section 856(a) for its taxable
years ended December 31, 1984 through December 31, 1997, and its proposed method
of operation will enable it to meet the requirements for qualification and
taxation as a REIT for its taxable year ending December 31, 1998 and for all
future taxable years, and (b) NNN's wholly owned subsidiaries, Net Lease Realty
I, Inc., Net Lease Realty II, Inc., Net Lease Realty III, Inc., and Net Lease
Realty IV, Inc. were each "qualified REIT subsidiaries" as defined by section
856(i) for each taxable year of their existence and the proposed ownership of
these entities will enable them to meet the requirements for treatment as
"qualified REIT subsidiaries" for NNN's taxable year ending December 31, 1998
and for all future taxable years. With respect to the 1998 year and all future
years, however, we note that NNN's 



<PAGE>   3
Commercial Net Lease Realty, Inc.
September 29, 1998
Page 3


status as a real estate investment trust at any time is dependent among other
things upon its meeting the requirements of section 856 throughout the year and
for the year as a whole.


            This opinion is based upon the existing provisions of the Code (or
predecessor provisions, as applicable), rules and regulations (including
proposed regulations) promulgated thereunder, and reported administrative and
judicial interpretations thereof, all of which are subject to change, possibly
with retroactive effect. This opinion is limited to the specific matters covered
hereby and should not be interpreted to imply that the undersigned has offered
its opinion on any other matter.


            We hereby confirm that the statements set forth in the prospectus of
the Registration Statement under the heading "Federal Income Tax
Considerations," to the extent that they constitute matters of law or legal
conclusions with respect thereto, are correct in all material respects.


            We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement. We also consent to the reference to Shaw Pittman Potts &
Trowbridge under the captions "Federal Income Tax Considerations" and "Legal
Matters" in the prospectus of the Registration Statement. In giving such
consent, we do not consider that we are "experts," within the meaning of the
term used in the Act or the rules and regulations of the Commission promulgated
thereunder, with respect to any part of the Registration Statement, including
this opinion as an exhibit or otherwise.


                                               Very truly yours,


                                               SHAW PITTMAN POTTS & TROWBRIDGE





                                               By: /s/ CHARLES B. TEMKIN
                                                  ---------------------------
                                                  Charles B. Temkin, P.C.








<PAGE>   1

                                                                EXHIBIT 12

<TABLE>
<CAPTION>
                                        
                                        
                                           SIX MONTHS ENDED  ------------------ FISCAL YEAR ENDED DECEMBER 31,-------------------
                                             JUNE 30, 1998     1997          1996            1995         1994          1993
<S>                                          <C>               <C>           <C>             <C>           <C>          <C> 
Earnings from Operations                     13,902,673        30,384,643     19,839,374      12,707,271    8,915,373   3,521,914
                                                                           
Fixed Charges (excluding capitalized                                       
 interest):                                                                
      Interest expense                        5,868,152        11,477,929      7,206,291       3,834,388      497,670     381,075
      Amortization of Loan Costs                428,079           825,014        748,638         322,176      254,080      20,421
      Discount/Premium relating to                                         
      Indebtedness                                5,543                 0              0               0            0           0
                                             ----------        ----------     ----------       ---------    ---------   ---------
                                              6,301,774        12,302,943      7,954,929       4,156,564      751,750     401,496
                                                                           
                                             ----------        ----------     ----------      ----------    ---------   ---------
Earnings as adjusted                         20,204,447        42,687,586     27,794,303      16,863,835    9,667,123   3,923,410 
                                             ==========        ==========     ==========      ==========    =========   =========
                                                                           
                                                                           
Fixed Charges:                                                             
      Fixed Charges (per above)               6,301,774        12,302,943      7,954,929       4,156,564      751,750     401,496
      Capitalized Interest                      433,564           133,202              0               0            0           0
                                             ----------        ----------     ----------      ----------    ---------   ---------
Total Fixed Charges                           6,735,338        12,436,145      7,954,929       4,156,564      751,750     401,496
                                             ==========        ==========     ==========      ==========    =========   =========
                                                                           
                                                                           
Ratio of Earnings to Fixed Charges                 3.00              3.43           3.49            4.06        12.86        9.77
                                             ==========        ==========     ==========      ==========    =========   =========
</TABLE>

Note:  Earnings from operations for the six months ended June 30, 1998 includes
       a non-cash charge of $4,691,961 associated with the costs incurred in
       acquiring the Company's Advisor from an affiliate.  Excluding this
       charge, the ratio of earnings to fixed charges for the six months ended
       June 30, 1998 would be 3.70.
                

<PAGE>   1
                                                                    EXHIBIT 23.1

              CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS

The Board of Directors
Commercial Net Lease Realty, Inc.:

We consent to the use of our report incorporated herein by reference and to the
reference to our firm under the heading "Experts" in the prospectus.



KPMG PEAT MARWICK LLP

Orlando, Florida
September 25, 1998


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