<PAGE>
Filed Pursuant to Rule 424(b)(2) Registration No. 33-54997
THE ACCOMPANYING FILING WAS OCCASIONED BY A TEMPORARY COMMUNICATIONS PROBLEM
THAT RESULTED IN MISSING DATA IN THE ORIGINAL FILING.
SUBJECT TO COMPLETION
PRELIMINARY PROSPECTUS SUPPLEMENT DATED AUGUST 30, 1994
PROSPECTUS SUPPLEMENT
(TO PROSPECTUS DATED AUGUST 29, 1994)
3,000,000 SHARES
[LOGO]
DUKE REALTY INVESTMENTS, INC.
COMMON STOCK
---------------------
Duke Realty Investments, Inc. (the "Company") is a self-administered and
self-managed real estate investment trust that began operations through a
predecessor in 1972. The Company owns a diversified portfolio of 120 income-
producing industrial, office and retail properties, encompassing approximately
11.9 million square feet and located in eight states, and 10 buildings
encompassing approximately 1.5 million square feet currently under development.
The Company also owns approximately 1,000 acres of land for future development.
The Company has the largest commercial real estate operations in Indianapolis
and Cincinnati and is one of the largest real estate companies in the Midwest.
The Company expects to continue to pay regular quarterly dividends to its
shareholders.
All of the shares of Common Stock offered hereby are being sold by the
Company. The Common Stock is listed on the New York Stock Exchange under the
symbol DRE. The last reported sale price for the Common Stock on August 25, 1994
was $26.75 per share.
---------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS
SUPPLEMENT OR THE PROSPECTUS TO WHICH IT RELATES. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
<TABLE>
<CAPTION>
PRICE TO UNDERWRITING PROCEEDS TO
PUBLIC DISCOUNT (1) COMPANY (2)
<S> <C> <C> <C>
Per Share.................................. $ $ $
Total (3).................................. $ $ $
<FN>
(1) The Company has agreed to indemnify the several Underwriters against
certain liabilities, including liabilities under the Securities Act of
1933, as amended. See "Underwriting."
(2) Before deducting expenses payable by the Company estimated at $575,000.
(3) The Company has granted the several Underwriters an option to purchase up
to an additional 450,000 shares of Common Stock to cover over-allotments.
If all such shares are purchased, the total Price to Public, Underwriting
Discount and Proceeds to Company will be $ , $ and $ ,
respectively. See "Underwriting."
</TABLE>
---------------------
THE ATTORNEY GENERAL OF THE STATE OF NEW YORK HAS NOT PASSED ON OR
ENDORSED THE MERITS OF THIS OFFERING. ANY REPRESENTATION
TO THE CONTRARY IS UNLAWFUL.
-------------------
The shares of Common Stock are offered by the several Underwriters, subject
to prior sale, when, as and if delivered to and accepted by them, subject to
approval of certain legal matters by counsel for the Underwriters. The
Underwriters reserve the right to withdraw, cancel or modify such offer and to
reject orders in whole or in part. It is expected that delivery of the shares of
Common Stock offered hereby will be made in New York, New York on or about
, 1994.
---------------------
MERRILL LYNCH & CO.
ALEX. BROWN & SONS
INCORPORATED
DEAN WITTER REYNOLDS INC.
A.G. EDWARDS & SONS, INC.
LEGG MASON WOOD WALKER
INCORPORATED
---------------------
The date of this Prospectus Supplement is September , 1994.
<PAGE>
[ MAP ]
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE COMMON SHARES
AT LEVELS ABOVE THOSE WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH
TRANSACTIONS MAY BE EFFECTED ON THE NEW YORK STOCK EXCHANGE, IN THE
OVER-THE-COUNTER MARKET OR OTHERWISE. SUCH STABILIZING, IF COMMENCED, MAY BE
DISCONTINUED AT ANY TIME.
S-2
<PAGE>
PROSPECTUS SUPPLEMENT SUMMARY
THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY, AND SHOULD BE READ IN
CONJUNCTION WITH, THE MORE DETAILED INFORMATION APPEARING ELSEWHERE IN THIS
PROSPECTUS SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS OR INCORPORATED HEREIN AND
THEREIN BY REFERENCE. UNLESS INDICATED OTHERWISE, (I) THE INFORMATION CONTAINED
IN THIS PROSPECTUS SUPPLEMENT ASSUMES NO EXERCISE OF THE UNDERWRITERS'
OVER-ALLOTMENT OPTIONS AND (II) INFORMATION IS PRESENTED AS OF JUNE 30, 1994.
ALL REFERENCES TO THE "COMPANY" IN THIS PROSPECTUS SUPPLEMENT AND THE
ACCOMPANYING PROSPECTUS INCLUDE THE COMPANY, THOSE ENTITIES OWNED OR CONTROLLED
BY THE COMPANY AND PREDECESSORS OF THE COMPANY, UNLESS THE CONTEXT INDICATES
OTHERWISE.
THE COMPANY
The Company is a self-administered and self-managed real estate investment
trust (a "REIT") that began operations through a predecessor in 1972. The
Company owns a diversified portfolio of 120 income-producing industrial, office
and retail properties (the "Properties"), encompassing approximately 11.9
million square feet and located in eight states, and 10 buildings encompassing
approximately 1.5 million square feet currently under development. The Company
also owns approximately 1,000 acres of unencumbered land (the "Land") for future
development, of which approximately 80% is zoned for industrial use and which is
typically located adjacent to the Properties. The Company provides leasing,
management, construction, development and other tenant-related services for the
Properties and certain properties owned by third parties. The Company has the
largest commercial real estate operations in Indianapolis and Cincinnati and is
one of the largest real estate companies in the Midwest. The Company believes
that the Midwest offers a relatively strong and stable economy compared to other
regions of the United States and provides significant growth potential due to
its central location, established manufacturing base, skilled work force and
moderate labor costs.
The Company has developed over 33 million square feet of commercial property
since its founding. The Company is one of the most active developers of
industrial properties in the United States, based on square footage under
construction. During the last five years, the Company developed an average of
approximately 2.0 million square feet per year. Since the Company completed its
reorganization and Common Stock offering in October of 1993, it has completed
development of 701,000 square feet and has acquired 894,000 square feet of
commercial properties which are 82% leased. Also, the Company currently has
under development approximately 1.5 million square feet of commercial space that
is 85% pre-leased and is expected to be completed by June, 1995.
The Company manages approximately 24 million square feet of property,
including 12 million square feet owned by third parties. The Company manages
approximately 30% of all suburban office, warehousing and light manufacturing
space in Indianapolis, and approximately 18% of all office, warehousing and
light manufacturing space in Cincinnati. In addition to providing services to
approximately 1,000 tenants in the Properties, the Company provides such
services to over 1,200 tenants in approximately 150 properties owned by others.
Based on published industry reports, the Company believes that it was
responsible in 1993 for approximately 35% of the net absorption (gross space
leased minus lease terminations and expirations) of warehousing and light
manufacturing space in Indianapolis and approximately 36% of the net absorption
of warehousing and light manufacturing space in Cincinnati. The Company believes
its dominant position in its markets gives it a competitive advantage in its
real estate activities.
After completion of this offering (the "Offering"), the seven senior
officers of the Company, who collectively have over 120 years of experience in
the real estate industry and have been with the Company for an average of 17
years, will beneficially own Common Stock and partnership interests ("Units")
exchangeable for Common Stock that represent approximately 17% of the Company's
Common Stock on a fully diluted basis.
S-3
<PAGE>
The following table provides an overview of the Properties.
SUMMARY OF PROPERTIES
<TABLE>
<CAPTION>
PERCENT
OF TOTAL
PERCENT ANNUAL NET EFFECTIVE OCCUPANCY
OF TOTAL NET EFFECTIVE ANNUAL AT
TYPE OF PROPERTY SQUARE FEET SQUARE FEET RENT (1) RENT JUNE 30, 1994
- ------------------------------------------ ------------ --------------- ------------- --------------- ---------------
<S> <C> <C> <C> <C> <C>
Industrial................................ 6,997,968 59% $ 27,243,000 36% 96.10%
Office.................................... 3,819,029 32% 39,540,000 52% 92.94%
Retail.................................... 1,062,879 9% 9,045,000 12% 91.22%
------------ --- ------------- --- -----
Total..................................... 11,879,876 100% $ 75,828,000 100% 94.65%
------------ --- ------------- --- -----
------------ --- ------------- --- -----
<FN>
- ------------------------
(1) Represents annual net effective rent due from tenants in occupancy as of
June 30, 1994. Annual net effective rent equals the average annual rental
property revenue over the terms of the respective leases, excluding
additional rent due as operating expense reimbursements, landlord
allowances for operating expenses and percentage rents.
</TABLE>
RECENT DEVELOPMENTS
REORGANIZATION AND 1993 OFFERING. In October, 1993, the Company acquired
substantially all of the properties and businesses of Duke Associates, a related
full-service commercial real estate firm operating primarily in the Midwest (the
"Reorganization"). As part of the Reorganization, the Company effected a 1 for
4.2 Reverse Stock Split relating to its existing shares and issued an additional
14,000,833 shares of Common Stock through an offering (the "1993 Offering"),
raising gross proceeds of $332.5 million. In July, 1994, the Company increased
its quarterly dividend from $.45 to $.47 per share.
DEVELOPMENT AND ACQUISITION ACTIVITY. Since the Reorganization and the 1993
Offering, the Company has completed the development of and placed in service
four properties with 701,000 square feet having a total cost of $12.2 million
and has acquired four properties with 894,000 square feet and the remaining 55%
joint venture interest in a previously developed property at a total cost of
$40.6 million. In addition, the Company has initiated the development of 10
buildings encompassing 1,479,000 square feet having a total cost of $69.7
million, which are expected to be completed and placed in service by June, 1995.
These property additions (the "New Properties"), totalling 3,074,000 square
feet, consist of 71% industrial, 7% office, 15% retail, and 7% medical office
projects. The total cost (including allocation of land) of the New Properties is
approximately $122.5 million. The New Properties have an average occupancy rate
as of August 25, 1994 of 83% and provide an initial 10.8% weighted average
annual unleveraged return on cost assuming no further lease-up. However, the
Company expects the stabilized weighted average annual unleveraged return on
cost (computed as property annual contractual net operating income ("NOI")
divided by total project costs) to be in excess of 12% with anticipated leasing
activity. The annual contractual NOI expected to be generated from the New
Properties, once placed in service, is anticipated to be $13.0 million and
increase to $15 million with anticipated leasing activity. Those New Properties
expected to be placed in service by October, 1994, are anticipated to generate
annualized contractual NOI of $7 million. By June, 1995, when all of the New
Properties are expected to be in service, the New Properties are anticipated to
produce an additional $8 million of annualized contractual NOI.
The total cost of the New Properties of $122.5 million includes currently
owned land basis of $8.2 million. The $8.2 million land investment represents
non-cash allocations of the portion of unencumbered Land inventory obtained
through the 1993 Reorganization and since used for new development. The
anticipated weighted average unleveraged annual return on cost for the New
Properties net of the Land basis is 13% compared to the 12% previously
discussed. The total net cost of the New Properties will be approximately
S-4
<PAGE>
$114.3 million. These costs will be funded on a permanent basis by the net
proceeds of this Offering which are expected to be approximately $75.2 million
with the remainder of the costs to be funded by debt financings having a
weighted average interest rate of 8.45% and a term of 6.6 years. The cost of the
New Properites incurred to date has been financed with interim financing
including the Company's $60 million revolving line of credit. Following the
Offering, the revolving line of credit facility will be fully available for
additional development and acquisition activities which the Company is currently
pursuing. The Company is currently negotiating to substantially increase the
amount of its revolving line of credit.
The following table sets forth information regarding the New Properties. All
of the New Properties are wholly-owned by the Company except for Xetron.
RECENT ACTIVITY
<TABLE>
<CAPTION>
COMPLETION OR PERCENT INITIAL
ANTICIPATED PROPERTY SQUARE LEASED OR LEASE
COMPLETION PROJECT/CLIENT LOCATION TYPE FEET PRE-LEASED(10) TERM
- ----------------------- ------------------- ---------------- ---------- --------- --------- -----------
<S> <C> <C> <C> <C> <C> <C>
COMPLETED DEVELOPMENT:
1st Qtr. 94 Xetron(1) Cincinnati, OH Industrial 100,193 100% 10 years
2nd Qtr. 94 Daydream Publishing Indianapolis, IN Industrial 98,000 100% 10 years
1st Qtr. 94 Caterpillar Indianapolis, IN Industrial 336,000 100% 6 years
2nd Qtr. 94 Redken Hebron, KY Industrial 166,400 100% 5 years
---------
700,593
---------
COMPLETED ACQUISITIONS:
2nd Qtr. 94 Xerox(2) Columbus, OH Office (2) 100% Varies
2nd Qtr. 94 C.R. Services(3) Hebron, KY Industrial 214,840 100% 10 years
Coldwater
2nd Qtr. 94 Crossing(4) Ft. Wayne, IN Retail 246,365 95% Varies
Park 100 Bldg
2nd Qtr. 94 126(5) Indianapolis, IN Industrial 60,100 100% Varies
3rd Qtr. 94 Park 100 Bldg 98(6) Indianapolis, IN Industrial 373,000 27% N/A
---------
894,305
---------
UNDER CONSTRUCTION:
3rd Qtr. 94 Veteran's Admin. Columbus, OH Medical 118,000 100% 20 years
3rd Qtr. 94 Indiana Insurance Columbus, OH Office 49,600 94% 10 years
3rd Qtr. 94 Galyan's Columbus, OH Retail 74,636 100% 20 years
3rd Qtr. 94 Sports Unlimited(7) Cincinnati, OH Retail 67,148 100% 20 years
4th Qtr. 94 Kohl's Cincinnati, OH Retail 80,684 100% 25 years
4th Qtr. 94 Silver Burdett Indianapolis, IN Industrial 553,900 100% 7 years
4th Qtr. 94 Park 100 Bldg 97(8) Indianapolis, IN Industrial 280,800 44% 5 years
1st Qtr. 95 Sterling Software Columbus, OH Office 57,660 100% 15 years
2nd Qtr. 95 St. Francis(9) Greenwood, IN Medical 95,579 36%(11) Varies
2nd Qtr. 95 John Alden Columbus, OH Office 101,200 100% 15 years
---------
1,479,207
---------
3,074,105
---------
---------
<FN>
- ------------------------------
(1) Developed through a joint venture in which the Company's unaffiliated joint
venture partner provided 100% of the financing. The Company has a 10%
limited partner equity interest.
(2) Originally developed prior to the Reorganization in a joint venture; the
Company has acquired the 55% interest of its unaffiliated joint venture
partner.
(3) Originally developed in a joint venture; the Company has acquired the 57%
interest of its unaffiliated joint venture partner.
(4) A retail center anchored by Cub Foods, Walgreens, and Ben Franklin; Walmart
and Service Merchandise also own stores in this center (114,000 and 50,000
square feet, respectively).
(5) A warehouse facility at Park 100 Business Park where the Company currently
owns or manages 1.7 million square feet of similar space having a 2.6%
vacancy rate.
(6) A bulk warehouse facility at Park 100 Business Park where the Company
currently owns or manages 4.4 million square feet of similar space which is
fully occupied. Land is available for 300,000 square feet of additional
development.
</TABLE>
S-5
<PAGE>
<TABLE>
<S> <C>
(7) Anchor tenant of 51,000 square feet has a lease term of 20 years.
(8) This bulk warehouse was originally committed to without any pre-leasing. A
five year lease has been signed for 122,400 square feet of space. The
building is located at Park 100 Business Park where the Company currently
owns or manages 4.4 million square feet of similar space which is fully
occupied.
(9) Medical office building to be attached to the new $80 million ambulatory
care center on the St. Francis Hospital south campus. The Company owns the
building and has a leasehold interest in the land underlying the building.
(10) Represents completed leasing activity through August 25, 1994.
(11) This represents leases for which tenants have committed, but for which the
actual leases have not been executed.
</TABLE>
LAND ACTIVITY. Upon completion of the Reorganization and the 1993 Offering,
the Company had approximately 1,128 acres of unencumbered Land to be used
primarily for its development activities. Subsequent to the 1993 Offering, the
Company has used 125 acres of Land in its development activities. Approximately
58 acres have been sold and 15 acres have been leased. Additionally, the Company
acquired 63 acres during the second quarter of 1994 bringing the Company's total
unencumbered Land inventory held for development to approximately 1,000 acres.
THIRD PARTY DEVELOPMENT AND MANAGEMENT ACTIVITIES. Since the Reorganization
and the 1993 Offering, the Company has increased the square footage of property
managed for third parties from 11.8 million to 12.1 million square feet and has
obtained the following third party construction and development contracts:
<TABLE>
<CAPTION>
SQUARE FOOTAGE
PROPERTY LOCATION UNDER DEVELOPMENT PRODUCT TYPE COMPLETION DATE
- ---------------------- ------------------ ------------------ ------------ ------------------
<S> <C> <C> <C> <C>
Federated Cincinnati, OH 200,000 Office October 1994
Hendrickson-Turner Lebanon, IN 120,000 Industrial February 1995
ETS Indianapolis, IN 56,000 Industrial November 1994
American Trans Air Indianapolis, IN 45,000 Office August 1994
Honey Baked Ham Cincinnati, OH 28,000 Office December 1993
A-Copy Milford, CT 27,400 Office April 1994
Jewish Hospital Cincinnati, OH 18,000 Office January 1995
Goodwill Industries Indianapolis, IN 11,250 Retail September 1994
</TABLE>
THE OFFERING
<TABLE>
<S> <C>
Common Stock Offered........................................ 3,000,000 shares (1)
Common Stock to be Outstanding After the Offering........... 23,495,630 shares (2)
Use of Proceeds............................................. Principally to retire interim
financing incurred to fund
the Company's development and
acquisition activities and to
fund current development and
acquisition projects.
New York Stock Exchange Symbol.............................. DRE
<FN>
- ------------------------
(1) Assumes the Underwriters' over-allotment option to purchase up to 450,000
shares of Common Stock is not exercised. See "Underwriting."
(2) Includes 833,333 unregistered shares of Common Stock and 4,449,486 Units
issued by Duke Realty Limited Partnership (the "Operating Partnership")
which are exchangeable by the holder for shares of Common Stock. Does not
include Common Stock issuable upon exercise of outstanding employee stock
options, which represented 681,500 shares at June 30, 1994.
</TABLE>
S-6
<PAGE>
SUMMARY CONSOLIDATED FINANCIAL DATA
<TABLE>
<CAPTION>
PRO FORMA FOR
REORGANIZATION (1)
-----------------------------
SIX MONTHS SIX MONTHS YEAR ENDED
ENDED ENDED DECEMBER 31,
JUNE 30, JUNE 30, ----------------
1994 1993 1993 1992
---------- ---------- ------- -------
(IN THOUSANDS, EXCEPT PROPERTIES AND PER
SHARE DATA)
<S> <C> <C> <C> <C>
OPERATING DATA:
Revenues:
Rental properties....................................... $41,843 $39,065 $79,639 $74,439
Property management, maintenance and leasing fees....... 5,393 4,836 11,496 12,248
Construction and development fees....................... 2,963 1,328 4,875 4,370
Interest and other income............................... 1,068 1,095 1,893 1,105
---------- ---------- ------- -------
Total operating revenue................................... $51,267 $46,324 $97,903 $92,162
---------- ---------- ------- -------
---------- ---------- ------- -------
Interest expense.......................................... $ 8,723 $ 8,450 $17,280 $16,900
Depreciation and amortization............................. 8,138 9,163 18,078 18,026
Equity in earnings of unconsolidated companies............ 593 147 598 223
Income before minority interest........................... 15,534 11,228 24,978 18,366
Net income................................................ $11,420 $ 8,922 $19,076 $14,346
---------- ---------- ------- -------
---------- ---------- ------- -------
Net income per share...................................... $ 0.71 $ 0.56 $ 1.19 $ 0.89
---------- ---------- ------- -------
---------- ---------- ------- -------
OTHER DATA:
Funds from Operations (2)................................. $23,238 $20,502 $42,166 $36,624
Funds from Operations per share/Unit...................... $ 1.13 $ 1.00 $ 2.06 $ 1.79
Common Stock outstanding (3).............................. 20,478 20,478 20,478 20,478
Number of Properties at end of period..................... 120 114 114 111
Square feet available at end of period.................... 11,880 10,867 10,867 10,573
</TABLE>
<TABLE>
<CAPTION>
JUNE 30,
1994
--------
<S> <C>
BALANCE SHEET DATA:
Rental property, before accumulated depreciation.......... $589,317
Total assets.............................................. $692,487
Total debt................................................ $301,394
Shareholders' equity...................................... $343,493
</TABLE>
<TABLE>
<S> <C>
<FN>
- ------------------------
(1) Reflects October, 1993 Reorganization of the Company, including the Reverse
Stock Split, the acquisition by the Company of substantially all of the
assets of Duke Associates (a group of approximately 170 affiliated
partnerships and corporations) and the issuance of an additional 14,001
shares of Common Stock. Presented as if the companies were combined as of
January 1, 1992.
(2) Funds from Operations, as defined by the National Association of Real
Estate Investment Trusts ("NAREIT"), is net income adjusted for
depreciation and amortization and gains or losses from property sales.
Funds from Operations does not represent cash flows from operations as
defined by generally accepted accounting principles, should not be
considered as an alternative to net income as an indicator of the Company's
operating performance and is not indicative of cash available to fund all
cash flow needs.
(3) Includes 4,432 Units as of June 30, 1994 held by persons other than the
Company which are exchangeable for Common Stock.
</TABLE>
S-7
<PAGE>
THE COMPANY
The Company is a self-administered and self-managed REIT that began
operations through a predecessor in 1972. The Company owns a diversified
portfolio of 120 income-producing industrial, office and retail Properties,
encompassing approximately 11.9 million square feet and located in eight states,
and 10 buildings encompassing approximately 1.5 million square feet currently
under development. The Company also owns approximately 1,000 acres of
unencumbered Land for future development, of which approximately 80% is zoned
for industrial use and which is typically located adjacent to the Properties.
The Company provides leasing, management, construction, development and other
tenant-related services for the Properties and certain properties owned by third
parties. The Company has the largest commercial real estate operations in
Indianapolis and Cincinnati and is one of the largest real estate companies in
the Midwest. The Company believes that the Midwest offers a relatively strong
and stable economy compared to other regions of the United States and provides
significant growth potential due to its central location, established
manufacturing base, skilled work force and moderate labor costs.
The Company has developed over 33 million square feet of commercial property
since its founding. The Company is one of the most active developers of
industrial properties in the United States, based on square footage under
construction. During the last five years, the Company developed an average of
approximately 2.0 million square feet per year. Since the Company completed its
Reorganization and 1993 Offering, it has completed development of 701,000 square
feet and has acquired 894,000 square feet of commercial properties which are 82%
leased. Also, the Company currently has under development approximately 1.5
million square feet of commercial space that is 85% pre-leased and is expected
to be completed by June, 1995.
The Company manages approximately 24 million square feet of property,
including 12 million square feet owned by third parties. The Company manages
approximately 30% of all suburban office, warehousing and light manufacturing
space in Indianapolis, and approximately 18% of all office, warehousing and
light manufacturing space in Cincinnati. In addition to providing services to
approximately 1,000 tenants in the Properties, the Company provides such
services to over 1,200 tenants in approximately 150 properties owned by others.
Based on published industry reports, the Company believes that it was
responsible in 1993 for approximately 35% of the net absorption (gross space
leased minus lease terminations and expirations) of warehousing and light
manufacturing space in Indianapolis and for approximately 36% of the net
absorption of warehousing and light manufacturing space in Cincinnati. The
Company believes its dominant position in its market gives it a competitive
advantage in its real estate activities.
After completion of the Offering, the seven senior officers of the Company,
who collectively have over 120 years of experience in the real estate industry
and have been with the Company for an average of 17 years, will beneficially own
Common Stock and Units exchangeable for Common Stock that represent
approximately 17% of the Company's Common Stock on a fully diluted basis.
BUSINESS STRATEGY
The Company's business objective is to increase its Funds from Operations
per share by (i) maintaining and increasing property occupancy and rental rates
through the aggressive management of its portfolio of existing properties; (ii)
expanding existing properties; (iii) developing and acquiring new properties;
and (iv) providing a full line of real estate services to the Company's tenants
and to third parties. As a fully integrated commercial real estate firm, the
Company believes that its in-house leasing, management, development and
construction services and the Company's significant base of commercially zoned
and unencumbered land in existing business parks should give the Company a
competitive advantage in its future development activities.
The Company believes that the analysis of real estate opportunities and
risks can be done most effectively at regional or local levels. As a result, the
Company intends to continue its emphasis on increasing its market share and
effective rents in its existing markets primarily within the Midwest. The
Company also expects to utilize its approximately 1,000 acres of Land and its
many business relationships with more than
S-8
<PAGE>
2,200 commercial tenants to expand its build-to-suit business (development
projects substantially pre-leased to a single tenant) and to pursue other
development and acquisition opportunities in its existing markets and elsewhere,
primarily in the Midwest. The Company believes that this regional focus will
allow it to assess market supply and demand for real estate more effectively as
well as to capitalize on its strong relationships with its tenant base.
The Company's policy is to develop and seek to acquire Class A commercial
properties located in markets with high growth potential for Fortune 500
companies and other quality regional and local firms. The Company's industrial
and suburban office development focuses on business parks and mixed-use
developments suitable for development of multiple projects on a single site and
where the Company can create and control the business environment. These
business parks and mixed-use developments generally include restaurants and
other amenities which the Company believes create an atmosphere that is
particularly efficient and desirable. The Company's retail development focuses
on community, power and neighborhood centers in its existing markets. As a fully
integrated real estate company, the Company is able to arrange for or provide to
its industrial, office and retail tenants not only well located and well
maintained facilities, but also additional services such as build-to-suit
construction, tenant finish construction, expansion flexibility and advertising
and marketing services.
THE MIDWEST REAL ESTATE MARKET
The Company believes that the Midwest offers a relatively strong and stable
economy compared to other regions of the United States and provides significant
growth potential due to its central location, established manufacturing base,
skilled work force and moderate labor costs. In addition, the interstate highway
systems serving Indianapolis, Cincinnati and Columbus, principal markets in
which the Properties are located, help make those cities prime warehouse and
distribution locations. According to the Chicago Association of Commerce and
Industry, these three cities rank first, third and fourth, respectively, in
being centrally located to the top 100 markets in the United States.
Employment statistics are generally a useful measure of the viability of a
commercial real estate market because the demand for retail, office and
industrial space in a geographic area is usually linked to the levels of
business activity and disposable income. According to the applicable state labor
statistics departments and the United States Department of Labor's Bureau of
Labor Statistics, the unemployment rate for June, 1994 was 4.0%, 4.7% and 4.2%
in the Indianapolis, Cincinnati and Columbus metropolitan areas, respectively,
compared to 6.2% for the United States. Additionally, total employment has
increased 10.1%, 9.7% and 10.6% since January 1, 1989 for the Indianapolis,
Cincinnati and Columbus metropolitan areas, respectively, compared to 8.3% for
the United States.
INDIANAPOLIS, INDIANA. With over 1.4 million residents, Indianapolis is
Indiana's largest metropolitan area. With a central location at the intersection
of four interstate highways, Indianapolis continues to attract new growth by
offering a skilled workforce and stable economic base. Indianapolis' economic
base includes distribution, government, manufacturing, retail trade, service and
tourism related industries. According to the Indianapolis Chamber of Commerce,
United Airlines, Federal Express and Dow-Elanco are establishing major new
facilities in Indianapolis which are expected to create 20,000 new jobs. The
Indianapolis industrial market continues to improve as evidenced by a declining
vacancy rate. According to CB Commercial Real Estate Group, Inc. ("CB
Commercial"), the industrial vacancy rate has decreased 1.2% over the twelve
months ended March 31, 1994 to 4.0%, which is strong as compared to the national
industrial vacancy average of 7.9%, as reported by CB Commercial. According to
LANDAUER REAL ESTATE COUNSELORS' 1994 REAL ESTATE MARKET FORECAST, Indianapolis
is rated as the best warehouse and distribution market in the United States.
CINCINNATI, OHIO. Cincinnati is the second largest metropolitan area in
Ohio with a population of over 1.5 million. With an unemployment rate which is
below the national average, Cincinnati's economic base is healthy and diverse.
Balanced between major Fortune 500 employers (a total of 17 are headquartered in
the
S-9
<PAGE>
region, including Proctor & Gamble, US Shoe, Chiquita Brands, Kroger Company and
Federated Department Stores) and entrepreneurial enterprises, Cincinnati's
economic base includes banking, distribution, manufacturing, retail trade and
service related industries. Relatively low taxes, an expanding airport (a major
North American hub for Delta Airlines) and aggressive state and local incentive
packages designed to attract new business have contributed to major corporate
relocations in Cincinnati. Additionally, PLACES RATED ALMANAC, in its most
recent edition, ranked Cincinnati as North America's best city in which to live.
Indicative of the economic strength in Cincinnati, the industrial vacancy rate
as reported by CB Commercial declined by 1.6% to 4.8% over the twelve months
ended March 31, 1994, which is below the national average of 7.9%.
COLUMBUS, OHIO. The Columbus metropolitan area has a population of
approximately 1.4 million and is the third largest metropolitan area in Ohio.
The city's central location, well-trained workforce and high quality of life
have established Columbus as a major transportation and distribution center.
Major retail corporations such as Sears, Eddie Bauer, JC Penney, Consolidated
Stores and The Limited have developed regional distribution centers in the area.
Columbus' economic base includes distribution, government, manufacturing, retail
trade and service related industries. The industrial vacancy rate of 3.2% as of
March 31, 1994 was the third lowest of the 37 markets researched by CB
Commercial in the United States. This vacancy rate represents a decrease of 1.6%
over the previous twelve months and is well below the national average of 7.9%
as reported by CB Commercial.
RECENT DEVELOPMENTS
REORGANIZATION AND 1993 OFFERING. As part of its 1993 Reorganization, the
Company acquired substantially all of the properties and businesses of Duke
Associates, a related full-service commercial real estate firm operating
primarily in the Midwest. The Company also effected a 1 for 4.2 Reverse Stock
Split relating to its existing shares and in the 1993 Offering issued an
additional 14,000,833 shares of Common Stock, raising gross proceeds of $332.5
million. In July, 1994, the Company increased its quarterly dividend from $.45
to $.47 per share.
DEVELOPMENT AND ACQUISITION ACTIVITY. Since the Reorganization and the 1993
Offering, the Company has completed the development of and placed in service
four properties with 701,000 square feet having a total cost of $12.2 million
and has acquired four properties with 894,000 square feet and the remaining 55%
joint venture interest in a previously developed property at a total cost of
$40.6 million. In addition, the Company has initiated the development of 10
buildings encompassing 1,479,000 square feet having a total cost of $69.7
million, which are expected to be completed and placed in service by June, 1995.
These property additions (the "New Properties"), totalling 3,074,000 square
feet, consist of 71% industrial, 7% office, 15% retail, and 7% medical office
projects. The total cost (including allocation of land) of the New Properties is
approximately $122.5 million. The New Properties have an average occupancy rate
as of August 25, 1994 of 83% and provide an initial 10.8% weighted average
annual unleveraged return on cost (computed as property annual contractual NOI
divided by total costs) assuming no further lease-up. However, the Company
expects the weighted average annual unleveraged return on cost to be in excess
of 12% with anticipated leasing activity. The annual contractual NOI expected to
be generated from the New Properties, once placed in service, is anticipated to
be $13 million and increase to $15 million with anticipated leasing activity.
Those New Properties expected to be placed in service by October, 1994, are
anticipated to generate annualized contractual NOI of $7 million. By June, 1995,
when all of the New Properties are expected to be in service, the New Properties
are anticipated to produce an additional $8 million of annualized contractual
NOI.
The total cost of the New Properties of $122.5 million includes currently
owned land basis of $8.2 million. The $8.2 million land investment represents
non-cash allocations of the portion of unencumbered Land inventory obtained
through the 1993 Reorganization and since used for new development. The
anticipated weighted average unleveraged annual return cost for the New
Properties net of the Land basis is 13%
S-10
<PAGE>
compared to the 12% previously discussed. The total net cost of the New
Properties will be approximately $114.3 million. These costs will be funded on a
permanent basis by the net proceeds of this Offering which are expected to be
approximately $75.2 million with the remainder of the costs to be funded by debt
financings having a weighted average interest rate of 8.45% and a term of 6.6
years. The cost of the New Properties incurred to date has been financed with
interim financing including the Company's $60 million revolving line of credit.
Following the Offering, the revolving line of credit facility will be fully
available for additional development and acquisition activity which the Company
is currently pursuing. The Company is currently negotiating to substantially
increase the amount of its revolving line of credit.
The following table sets forth information regarding the New Properties. All
of the New Properties are wholly-owned by the Company except for Xetron.
RECENT ACTIVITY
<TABLE>
<CAPTION>
COMPLETION OR PERCENT INITIAL
ANTICIPATED PROPERTY SQUARE LEASED OR LEASE
COMPLETION PROJECT/CLIENT LOCATION TYPE FEET PRE-LEASED (10) TERM
- --------------------- ---------------------- --------------- --------- --------- ------------------- ---------
<S> <C> <C> <C> <C> <C> <C>
COMPLETED
DEVELOPMENT:
1st Qtr. 94 Xetron(1) Cincinnati, OH Industrial 100,193 100% 10 years
Indianapolis,
2nd Qtr. 94 Daydream Publishing IN Industrial 98,000 100% 10 years
Indianapolis,
1st Qtr. 94 Caterpillar IN Industrial 336,000 100% 6 years
2nd Qtr. 94 Redken Hebron, KY Industrial 166,400 100% 5 years
---------
700,593
---------
COMPLETED
ACQUISITIONS:
2nd Qtr. 94 Xerox(2) Columbus, OH Office (2) 100% Varies
2nd Qtr. 94 C.R. Services(3) Hebron, KY Industrial 214,840 100% 10 years
2nd Qtr. 94 Coldwater Crossing(4) Ft. Wayne, IN Retail 246,365 93% Varies
Indianapolis,
2nd Qtr. 94 Park 100 Bldg 126(5) IN Industrial 60,100 100% Varies
Indianapolis,
3rd Qtr. 94 Park 100 Bldg 98(6) IN Industrial 373,000 27% N/A
---------
894,305
---------
UNDER CONSTRUCTION:
3rd Qtr. 94 Veteran's Admin. Columbus, OH Medical 118,000 100% 20 years
3rd Qtr. 94 Indiana Insurance Columbus, OH Office 49,600 94% 10 years
3rd Qtr. 94 Galyan's Columbus, OH Retail 74,636 100% 20 years
3rd Qtr. 94 Sports Unlimited(7) Cincinnati, OH Retail 67,148 100% 20 years
4th Qtr. 94 Kohl's Cincinnati, OH Retail 80,684 100% 25 years
Indianapolis,
4th Qtr. 94 Silver Burdett IN Industrial 553,900 100% 7 years
Indianapolis,
4th Qtr. 94 Park 100 Bldg 97(8) IN Industrial 280,800 44% 5 years
1st Qtr. 95 Sterling Software Columbus, OH Office 57,660 100% 15 years
2nd Qtr. 95 St. Francis(9) Greenwood, IN Medical 95,579 36%(11) Varies
2nd Qtr. 95 John Alden Columbus, OH Office 101,200 100% 15 years
---------
1,479,207
---------
3,074,105
---------
---------
<FN>
- ------------------------------
(1) Developed through a joint venture in which the Company's unaffiliated joint
venture partner provided 100% of the financing. The Company has a 10%
limited partner equity interest.
(2) Originally developed prior to the Reorganization in a joint venture; the
Company has acquired the 55% interest of its unaffiliated joint venture
partner.
(3) Originally developed in a joint venture; the Company has acquired the 57%
interest of its unaffiliated joint venture partner.
(4) A retail center anchored by Cub Foods, Walgreens, and Ben Franklin; Walmart
and Service Merchandise also own stores in this center (114,000 and 50,000
square feet, respectively).
(5) A warehouse facility at Park 100 Business Park where the Company currently
owns or manages 1.7 million square feet of similar space having a 2.6%
vacancy rate.
(6) A bulk warehouse facility at Park 100 Business Park where the Company
currently owns or manages 4.4 million square feet of similar space which is
fully occupied. Land is available for 300,000 square feet of additional
development.
</TABLE>
S-11
<PAGE>
<TABLE>
<S> <C>
(7) Anchor tenant of 51,000 square feet has a lease term of 20 years.
(8) This bulk warehouse was originally committed to without any pre-leasing. A
five year lease has been signed for 122,400 square feet of space. The
building is located at Park 100 Business Park where the Company currently
owns or manages 4.4 million square feet of similar space which is fully
occupied.
(9) Medical office building to be attached to the new $80 million ambulatory
care center on the St. Francis Hospital south campus. The Company owns the
building and has a leasehold interest in the land underlying the building.
(10) Represents completed leasing activity through August 25, 1994.
(11) This represents leases for which tenants have committed, but for which the
actual leases have not been executed.
</TABLE>
LAND ACTIVITY. Upon completion of the Reorganization and the 1993 Offering,
the Company had approximately 1,128 acres of unencumbered Land to be used
primarily for its development activities. Subsequent to the 1993 Offering, the
Company has used 125 acres of Land in its development activities. Approximately
58 acres have been sold and 15 acres have been leased. Additionally, the Company
acquired 63 acres during the second quarter of 1994 bringing the Company's total
unencumbered Land inventory held for development to approximately 1,000 acres.
THIRD PARTY DEVELOPMENT AND MANAGEMENT ACTIVITIES. Since the Reorganization
and the 1993 Offering, the Company has increased the square footage of property
managed for third parties from 11.8 million to 12.1 million square feet has
obtained the following third party construction and development contracts:
<TABLE>
<CAPTION>
SQUARE FOOTAGE PRODUCT COMPLETION
PROPERTY LOCATION UNDER DEVELOPMENT TYPE DATE
- ---------------------- ------------------ ------------------ ----------- ------------------
<S> <C> <C> <C> <C>
Federated Cincinnati, OH 200,000 Office October 1994
Hendrickson-Turner Lebanon, IN 120,000 Industrial February 1995
ETS Indianapolis, IN 56,000 Industrial November 1994
American Trans Air Indianapolis, IN 45,000 Office August 1994
Honey Baked Ham Cincinnati, OH 28,000 Office December 1993
A-Copy Milford, CT 27,400 Office April 1994
Jewish Hospital Cincinnati, OH 18,000 Office January 1994
Goodwill Industries Indianapolis, IN 11,250 Retail September 1994
</TABLE>
USE OF PROCEEDS
The net proceeds to the Company from the sale of the Common Stock offered
hereby are estimated at approximately $75.2 million (approximately $86.6 million
if the Underwriters' over-allotment option is exercised in full), assuming an
offering price of $26.75 per share (the closing price of the Common Stock on the
New York Stock Exchange on August 25, 1994). The Company intends to use
approximately $60 million of the proceeds of the Offering to retire interim
financing which has been incurred to fund the Company's development and
acquisition activities and the remainder of the proceeds to fund current
development and acquisition projects. Pending such uses, the net proceeds may be
invested in short-term income producing investments such as commercial paper,
government securities or money market funds that invest in government
securities.
S-12
<PAGE>
PRICE RANGE OF COMMON STOCK AND DIVIDEND HISTORY
The Common Stock is listed on the New York Stock Exchange under the symbol
DRE. The following table sets forth the high and low sale prices of the Common
Stock of the periods indicated and the dividend paid per share for each such
period.
<TABLE>
<CAPTION>
CLOSING PRICES
PER SHARE (1)
-------------------- DIVIDENDS
QUARTERLY PERIOD HIGH LOW PER SHARE (1)
- -------------------------------------------------------------------------------- --------- --------- ---------------
<S> <C> <C> <C>
1992
First Quarter................................................................. $ 16.80 $ 13.65 $ 0.42
Second Quarter................................................................ 18.38 15.23 0.42
Third Quarter................................................................. 17.33 15.75 0.42
Fourth Quarter................................................................ 16.80 14.70 0.42
1993
First Quarter................................................................. 22.05 15.75 0.42
Second Quarter................................................................ 21.53 18.38 0.42
Third Quarter................................................................. 24.68 19.42 0.42
Fourth Quarter (2)............................................................ 26.00 22.13 0.45
1994
First Quarter................................................................. 26.00 21.00 0.45
Second Quarter................................................................ 27.25 23.50 0.47
Third Quarter (through August 25, 1994)....................................... 27.13 25.38 --
<FN>
- ------------------------
(1) All information for periods prior to the Fourth Quarter of 1993 has been
adjusted for the 1 for 4.2 Reverse Stock Split effected in October, 1993 as
part of the Reorganization.
(2) In October, 1993 the Company acquired substantially all of the properties
and businesses of Duke Associates, a related full-service commercial real
estate firm operating primarily in the Midwest. As part of this
Reorganization, the Company effected a 1 for 4.2 Reverse Stock Split of its
existing shares and issued an additional 14,000,833 shares of Common Stock
in the 1993 Offering.
</TABLE>
The last reported sale price of the Common Stock on the New York Stock
Exchange on August 25, 1994 was $26.75 per share. As of August 25, 1994, there
were 1,695 registered holders of Common Stock.
Since its organization in 1986, the Company has paid regular and
uninterrupted dividends. The Company intends to continue to declare quarterly
dividends on its Common Stock. However, no assurances can be given as to the
amounts of future dividends as such dividends are subject to the Company's cash
flow from operations, earnings, financial condition, capital requirements and
such other factors as the board of directors deems relevant. If the shares being
issued in this Offering are outstanding on the applicable record date, the
holders thereof on such record date will be entitled to receive any dividend
which may be declared by and at the discretion of the Board of Directors for the
Third Quarter.
DIVIDEND REINVESTMENT PLAN
The Company has an Automatic Dividend Reinvestment Plan (the "Plan") which
allows stockholders to acquire additional shares of Common Stock by
automatically reinvesting cash dividends. Common Stock is acquired pursuant to
the Plan at a price equal to the prevailing market price of such Common Stock,
without payment of any brokerage commission or service charge. The Plan also
allows participating stockholders to purchase Common Stock pursuant to the same
terms and in the same manner as cash dividends are invested in amounts of not
less than $100 and more than $3,000 per calendar quarter, without payment of any
brokerage commission or service charge. Stockholders who do not participate in
the Plan continue to receive cash dividends, as declared. As of August 25, 1994,
approximately 19% of the Company's registered stockholders participated in the
Plan.
S-13
<PAGE>
CAPITALIZATION
The following table sets forth the capitalization of the Company as of June
30, 1994 and as adjusted to give effect to the Offering and the anticipated use
of the proceeds thereof as described under "Use of Proceeds."
<TABLE>
<CAPTION>
AT JUNE 30, 1994
------------------------
HISTORICAL AS ADJUSTED
---------- -----------
(IN THOUSANDS)
<S> <C> <C>
Mortgage and Construction Debt.................................................. $ 301,394 $301,394(2)
---------- -----------
Shareholders' Equity:
Preferred Stock ($.01 par value),
5,000 shares authorized, none issued
Common Stock ($.01 par value),
45,000 shares authorized; 16,046 outstanding; 19,046 outstanding as adjusted
(1).......................................................................... 160 190
Additional paid-in-capital.................................................... 377,450 452,681
Distributions in excess of net income......................................... (34,117) (34,117)
---------- -----------
Total Shareholders' Equity.................................................... 343,493 418,754
---------- -----------
Total Capitalization............................................................ $ 644,887 $720,148
---------- -----------
---------- -----------
<FN>
- ------------------------
(1) Does not include 4,449 shares reserved for issuance upon exchange of issued
and outstanding Units.
(2) Includes the effect of the $60 million mortgage loan closed subsequent to
June 30, 1994 and assumes that the proceeds from the Offering and the
mortgage loan are used to fully retire the Company's line of credit
facility and fund new development and acquisition costs.
</TABLE>
S-14
<PAGE>
SELECTED CONSOLIDATED FINANCIAL DATA
The following sets forth selected financial and operating information on a
pro forma basis for the Company for the years ended December 31, 1993 and 1992
and for the six months ended June 30, 1993. The pro forma information is
presented as if the 1993 Offering and the Reorganization had occurred as of
January 1, 1992. Also set forth are selected historical financial data for the
Company as of and for the six months ended June 30, 1994, which were derived
from the Company's financial statements, which are incorporated by reference in
the accompanying Prospectus.
The following selected financial information should be read in conjunction
with "Management's Discussion and Analysis of Financial Condition and Results of
Operations" for the Company and the financial statements incorporated by
reference in the accompanying Prospectus.
<TABLE>
<CAPTION>
PRO FORMA FOR REORGANIZATION
(1)
-----------------------------
YEAR ENDED
SIX MONTHS SIX MONTHS DECEMBER 31,
ENDED JUNE ENDED JUNE ----------------
30, 1994 30, 1993 1993 1992
---------- ---------- ------- -------
(IN THOUSANDS, EXCEPT PROPERTIES AND PER
SHARE DATA)
<S> <C> <C> <C> <C>
OPERATING DATA:
Revenues:
Rental properties....................................... $ 41,843 $39,065 $79,639 $74,439
Property management, maintenance and leasing fees....... 5,393 4,836 11,496 12,248
Construction and development fees....................... 2,963 1,328 4,875 4,370
Interest and other income............................... 1,068 1,095 1,893 1,105
---------- ---------- ------- -------
Total operating revenue................................... $ 51,267 $46,324 $97,903 $92,162
---------- ---------- ------- -------
---------- ---------- ------- -------
Interest expense.......................................... $ 8,723 $ 8,450 $17,280 $16,900
Depreciation and amortization............................. 8,138 9,163 18,078 18,026
Equity in earnings of unconsolidated companies............ 593 147 598 223
Income before minority interest........................... 15,534 11,228 24,978 18,366
Net income................................................ $ 11,420 $ 8,922 $19,076 $14,346
---------- ---------- ------- -------
---------- ---------- ------- -------
Net income per share...................................... $ 0.71 $ 0.56 $ 1.19 $ 0.89
---------- ---------- ------- -------
---------- ---------- ------- -------
OTHER DATA:
Funds from Operations (2)................................. $ 23,238 $20,502 $42,166 $36,624
Funds from Operations per share/Unit...................... $ 1.13 $ 1.00 $ 2.06 $ 1.79
Common Stock outstanding (3).............................. 20,478 20,478 20,478 20,478
Number of Properties at end of period..................... 120 114 114 111
Square feet available at end of period.................... 11,880 10,867 10,867 10,573
</TABLE>
<TABLE>
<CAPTION>
JUNE 30,
1994
---------
<S> <C>
BALANCE SHEET DATA:
Rental property, before accumulated depreciation.......... $589,317
Total assets.............................................. $692,487
Total debt................................................ $301,394
Shareholders' equity...................................... $343,493
<FN>
- --------------------------
(1) Reflects October, 1993 Reorganization of the Company, including the Reverse
Stock Split, the acquisition by the Company of substantially all of the
assets of Duke Associates (a group of approximately 170 affiliated
partnerships and corporations) and the issuance of an additional 14,001
shares of Common Stock. Presented as if the companies were combined as of
January 1, 1992.
(2) Funds from Operations, as defined by NAREIT, is net income adjusted for
depreciation and amortization and gains or losses from property sales.
Funds from Operations does not represent cash flows from operations as
defined by generally accepted accounting principles, should not be
considered as an alternative to net income as an indicator of the Company's
operating performance and is not indicative of cash available to fund all
cash flow needs.
(3) Includes 4,432 Units as of June 30, 1994 held by persons other than the
Company which are exchangeable for Common Stock.
</TABLE>
S-15
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
REORGANIZATION AND 1993 OFFERING
In the Reorganization, the Company acquired substantially all of the
properties and businesses of Duke Associates, a related full-service commercial
real estate firm operating primarily in the Midwest, effected a 1 for 4.2
Reverse Stock Split of its existing shares and issued an additional 14,000,833
shares of Common Stock in the 1993 Offering. Substantially all of the $309.3
million of net proceeds of the 1993 Offering were used to repay indebtedness of
the reorganized Company. As a result of the Reorganization, the Company's
Properties are owned through the Operating Partnership, of which the Company is
the sole general partner and owner of approximately 78% of the Units. Following
the Offering, the Company will own approximately 81% of the Units.
RESULTS OF OPERATIONS -- SIX MONTHS ENDED JUNE 30, 1994 COMPARED TO PRO FORMA
FOR THE SIX MONTHS ENDED JUNE 30, 1993
The revenues from rental properties increased from $39.1 million on a pro
forma basis for the six months ended June 30, 1993 to $41.8 million for the six
months ended June 30, 1994. This $2.7 million increase is primarily attributed
to an expansion of the property portfolio, an increase in the occupancy of the
Properties and increasing net effective rents, offset by the establishment of a
reserve for accrued straight-line rents receivable of $750,000.
Service operations and other revenue increased from $7.3 million on a pro
forma basis for the six months ended June 30, 1993 to $9.4 million for the six
months ended June 30, 1994. This $2.1 million increase results primarily from
increased leasing fees of the managed properties portfolio and increased
construction management and development fees resulting from increased
construction and development activity.
Primarily as a result of the revenue increases above, net income increased
from $8.9 million on a pro forma basis for the six months ended June 30, 1993 to
$11.4 million for the six months ended June 30, 1994.
The occupancy at June 30, 1994 for all of the Properties in which the
Company owns a whole or partial interest was 96.1% for the industrial properties
(91.2% at June 30, 1993), 92.9% for the office and medical office properties
(88.3% at June 30, 1993), and 91.2% for the retail properties (91.3% at June 30,
1993), for an overall occupancy rate of 94.6% (90.8% at June 30, 1993).
Management expects occupancy to remain stable because only 6% and 12% of the
Company's portfolio is subject to leases expiring in the rest of 1994 and 1995,
respectively.
FUNDS FROM OPERATIONS
Management believes that Funds from Operations is the industry standard for
reporting the operations of real estate investment trusts. Funds from Operations
were $23.2 million or $1.13 per fully diluted share for the six months ended
June 30, 1994 compared to $20.5 million or $1.00 per fully diluted share on a
pro forma basis for the six months ended June 30, 1993. This growth is due
primarily to portfolio expansion, increased average occupancy of the portfolio
and increased earnings from the service operations.
At June 30, 1994, the Company had approximately 1.5 million square feet of
property under development which was approximately 85% pre-leased. This
development is expected to contribute significantly to the Company's future
growth of Funds from Operations. See "Recent Developments."
While management believes that Funds from Operations is the most relevant
and widely used measure of the Company's operating performance, such amounts do
not represent cash flow from operations as defined by generally accepted
accounting principles, should not be considered as an alternative to net income
as an indicator of the Company's operating performance, and are not indicative
of cash available to fund all cash flow needs.
S-16
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
The Company pays regular quarterly dividends with a general policy of
distributing no more than 90% of Funds from Operations. The dividend paid in
May, 1994 and the dividend payable August 31, 1994 represent 81% of the first
and second quarter Funds from Operations, respectively. The Company has in place
a $60.0 million revolving credit facility which is being used to fund existing
and new development costs, property acquisitions and to provide working capital
when needed. The Company is currently in negotiations with the line of credit
lenders to substantially increase the size of the credit facility. The Company
closed in August, a seven year, $60.0 million mortgage loan commitment from an
institutional lender which bears interest at a fixed rate of 8.72%.
Approximately $41 million of this commitment was funded in August, 1994 with the
remaining $19 million expected to be funded in September and December of 1994.
The proceeds were used to fund land purchases, retire existing debt, replenish
working capital and to fund development in process. Additional development costs
for new projects and acquisitions will be funded through the proceeds of this
Offering, the existing revolving line of credit, the remaining mortgage loan
commitment and other construction and acquisition financing.
The Company intends to limit its debt to no more than 50% of its total
market capitalization. The Company's debt to total market capitalization at June
30, 1994 was 36.7%. Following the Offering, the Company's debt to total market
capitalization will be 32.4%, assuming a stock price of $26.75 per share. After
the Offering, the Company could incur up to $327.1 million of additional debt
and remain within its 50% debt to total market capitalization guideline,
assuming a stock price of $26.75 per share.
At June 30, 1994, the Company had mortgage debt outstanding of $243.9
million, a construction loan outstanding of $944,000 and $56.5 million
outstanding on its revolving line of credit, for total debt outstanding of
$301.4 million. The mortgage debt bears a weighted average interest rate of
6.93% and matures at varying dates through 2018. Scheduled principal
amortization on the mortgage debt was $784,000 for the six months ended June
30,1994 and will be $761,000 for the remainder of 1994. The construction loan
bears interest at prime plus 1% and matures in October of 1994. The revolving
line of credit bears interest at LIBOR plus 2% (effective rate of 6.133% at June
30, 1994) and matures in March 1996. Upon closing of the $60.0 million permanent
loan, the pro forma total debt outstanding would bear a weighted average
interest rate of 7.29%, of which only 2.6% is currently floating rate debt. A
portion of the proceeds of the Offering will be utilized to temporarily payoff
the revolving line of credit, making it fully available for future acquisitions
and development. The total debt in unconsolidated subsidiaries at June 30, 1994
is $49.2 million, of which the Company's percentage share is $11.0 million. The
unconsolidated subsidiary debt has a weighted average interest rate of 6.6% of
which only 16.2% is currently floating rate debt.
Rental and Service Operation revenue have been the principal sources of
capital used to fund the Company's operating expenses, debt service and
recurring capital expenditures. Recurring capital expenditures for the first six
months of 1994 were $2.2 million. Funds Available for Distribution (Funds from
Operations adjusted for straight-line rent and recurring capital expenditures)
for the six months ended June 30, 1994 were $20.3 million, resulting in a payout
ratio for the dividends for such period of 92.7% of Funds Available for
Distribution.
At June 30, 1994, scheduled maturities of the mortgage debt were as follows:
<TABLE>
<CAPTION>
MATURITIES
--------------
YEAR (IN THOUSANDS)
---------------------------------------------------
<S> <C>
Through December 31, 1994.......................... $ 761
1995............................................... 6,032
1996............................................... 61,647
1997............................................... 4,124
1998............................................... 88,079
1999............................................... 1,936
2000............................................... 2,350
2001............................................... 2,291
2002............................................... 2,494
2003............................................... 67,643
Thereafter......................................... 6,593
--------------
Total.......................................... $243,950
--------------
--------------
</TABLE>
S-17
<PAGE>
PROPERTIES
GENERAL
The Company owns whole or partial interests in (i) the Properties,
consisting of 120 industrial, office and retail income-producing properties
located in Indiana, Ohio, Illinois, Michigan, Tennessee, Kentucky, Wisconsin and
Missouri; (ii) 10 buildings currently under development and (iii) the Land,
consisting of approximately 1,000 acres of unencumbered land for future
development in Indiana, Ohio, Illinois, Kentucky, and Tennessee. The Properties
are comprised of a broad range of product types which include bulk and medium
bulk warehouse and distribution facilities, light manufacturing facilities,
multi-tenant flex space buildings, suburban office buildings, downtown office
buildings, and neighborhood, power and community shopping centers. Substantially
all of the Properties were originally developed by the Company. The total square
footage in the Properties is approximately 11.9 million, consisting of
approximately 7.0 million square feet of industrial space, approximately 3.8
million square feet of office space and approximately 1.1 million square feet of
retail space. The average annual net effective rental per leased square foot at
June 30, 1994 was $6.66. The total annual net effective rental income of the
Properties based upon tenants in occupancy as of June 30, 1994 is approximately
$75.8 million, with $27.2 million relating to the industrial Properties, $39.6
million relating to the office Properties and $9.0 million relating to the
retail Properties. At June 30, 1994, the Properties were approximately 95%
leased.
The following table gives a summary of the location and type of Properties
by square footage.
SQUARE FOOTAGE OF PROPERTIES BY STATE AND TYPE OF PROPERTY
<TABLE>
<CAPTION>
STATE INDUSTRIAL OFFICE RETAIL TOTAL
- ----------------------------------------- ---------- ---------- ---------- ------------
<S> <C> <C> <C> <C>
Indiana.................................. 3,919,381 1,084,610 440,335 5,444,326
Ohio..................................... 1,806,047 2,489,200 418,827 4,714,074
Illinois................................. 126,000 -- 170,963 296,963
Tennessee................................ 323,700 -- -- 323,700
Kentucky................................. 669,240 -- -- 669,240
Missouri................................. -- -- 32,754 32,754
Michigan................................. -- 245,219 -- 245,219
Wisconsin................................ 153,600 -- -- 153,600
---------- ---------- ---------- ------------
Total................................ 6,997,968 3,819,029 1,062,879 11,879,876
---------- ---------- ---------- ------------
---------- ---------- ---------- ------------
Percent of total..................... 59% 32% 9% 100%
---------- ---------- ---------- ------------
---------- ---------- ---------- ------------
</TABLE>
The following table sets forth the aggregate average percent leased for all
of the Properties during the last three years.
AVERAGE OCCUPANCY
(ALL PROPERTIES)
<TABLE>
<CAPTION>
SQUARE FEET AVERAGE
YEAR AVAILABLE OCCUPANCY
- -------------------------------------------------------------------- ------------ -------------
<S> <C> <C>
Through June 30, 1994............................................... 11,879,876 93.9%
1993................................................................ 10,864,245 92.1%
1992................................................................ 10,572,874 89.3%
1991................................................................ 10,062,903 84.1%
</TABLE>
The following table shows lease expirations for leases in place as of June
30, 1994 for each of the ten years beginning with the remainder of 1994 for the
Properties, assuming none of the tenants exercises early termination or renewal
options.
S-18
<PAGE>
LEASE EXPIRATIONS
(ALL PROPERTIES)
<TABLE>
<CAPTION>
ANNUAL NET PERCENT OF
EFFECTIVE ANNUAL NET PERCENT OF
NET RENTABLE ANNUAL NET RENT PER EFFECTIVE TOTAL LEASED
AREA (IN SQ. EFFECTIVE SQ. FT. RENT SQ. FT.
YEAR OF NUMBER OF FT.) SUBJECT RENT UNDER UNDER REPRESENTED REPRESENTED
LEASE LEASES TO EXPIRING EXPIRING EXPIRING BY EXPIRING BY EXPIRING
EXPIRATION EXPIRING LEASES LEASES (1) LEASES (1) LEASES LEASES
- ----------- ----------- ------------ ------------- ----------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
1994 114 646,616 $ 3,882,820 $ 6.00 5.12% 5.75%
1995 191 1,323,616 8,411,276 $ 6.35 11.09% 11.77%
1996 206 1,711,087 9,782,094 $ 5.72 12.90% 15.22%
1997 143 1,080,216 7,248,617 $ 6.71 9.56% 9.61%
1998 136 1,562,538 9,046,254 $ 5.79 11.93% 13.90%
1999 88 1,379,023 8,978,952 $ 6.51 11.84% 12.27%
2000 28 883,312 5,889,516 $ 6.67 7.77% 7.86%
2001 20 408,274 3,047,436 $ 7.46 4.02% 3.63%
2002 11 267,898 2,903,379 $ 10.90 3.85% 2.38%
2003 9 154,192 1,809,197 $ 11.73 2.39% 1.37%
2004 and 30 1,827,387 14,828,563 $ 8.14 19.53% 16.24%
thereafter
--- ------------ -------------
TOTAL 976 11,244,159 $ 75,828,104 $ 6.74
--- ------------ -------------
--- ------------ -------------
<FN>
- ------------------------
(1) Represents annual net effective rent due from tenants in occupancy as of
June 30, 1994. Annual net effective rent equals the average annual rental
property revenue over the terms of the respective leases, excluding
additional rent due as operating expense reimbursements, landlord
allowances for operating expenses and percentage rents.
</TABLE>
INDUSTRIAL PROPERTIES
The industrial Properties are primarily in industrial or business parks that
have been developed by the Company and include all types of warehouse and light
manufacturing buildings from multi-tenant flex space facilities providing leased
space as small as 1,200 square feet to bulk distribution facilities providing
leased space of more than 500,000 square feet. Approximately 73% of the square
footage of the industrial properties is contained in bulk distribution
facilities. The diversity of industrial buildings allows the Company to cater to
many segments of the industrial market and renders the Company less dependent
upon any specific market segment.
The following table sets forth the aggregate average percent leased and
annual net effective rental per leased square foot of available square footage
for all of the industrial Properties during the last three years.
S-19
<PAGE>
AVERAGE OCCUPANCY AND AVERAGE RENTALS
(INDUSTRIAL PROPERTIES)
<TABLE>
<CAPTION>
ANNUAL NET
EFFECTIVE RENTAL
SQUARE FEET AVERAGE PER LEASED SQUARE
YEAR AVAILABLE OCCUPANCY FOOT (1)
- ------------------------------------------------------------ ----------- -------------- -----------------
<S> <C> <C> <C>
Through June 30, 1994....................................... 6,997,968 95.3% $3.97(2)(3)
1993........................................................ 6,235,835 93.2% $4.06(3)
1992........................................................ 5,962,235 89.7% $3.91
1991........................................................ 5,962,235 84.8% $3.92
<FN>
- ------------------------
(1) Calculated as the average annual rental property revenue over the terms of
the respective leases, excluding tenant reimbursements for operating
expenses and excluding landlord allowances for operating expenses, divided
by the average total square feet under lease during the year.
(2) The average annual net effective rental per square foot decreased in the
first six months of 1994 because the increase in square footage available
relates primarily to bulk warehouse space which provides a lower average
annual net effective rent per square foot.
(3) During 1993 and the first six months of 1994, 822,128 and 895,194 square
feet, respectively, were leased or renewed at an average annual net
effective rental per leased square foot of $4.83.
</TABLE>
The following table shows lease expirations for leases in place as of June
30, 1994, for each of the ten years beginning with the remainder of 1994, for
the industrial Properties, assuming none of the tenants exercises early
termination or renewal options.
LEASE EXPIRATIONS
(INDUSTRIAL PROPERTIES)
<TABLE>
<CAPTION>
ANNUAL
NET NET PERCENT OF PERCENT OF
RENTABLE EFFECTIVE ANNUAL NET TOTAL
AREA (IN ANNUAL NET RENT PER EFFECTIVE LEASED SQ.
NUMBER SQ. FT.) EFFECTIVE SQ. FT. RENT FT.
YEAR OF OF SUBJECT TO RENT UNDER UNDER REPRESENTED REPRESENTED
LEASE LEASES EXPIRING EXPIRING EXPIRING BY EXPIRING BY EXPIRING
EXPIRATION EXPIRING LEASES LEASES(1) LEASES(1) LEASES LEASES
- ---------- -------- ---------- ----------- --------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
1994 41 482,663 $ 2,197,220 $ 4.55 8.07% 7.18%
1995 62 754,801 2,689,445 $ 3.56 9.87% 11.22%
1996 73 1,119,598 3,978,869 $ 3.55 14.61% 16.65%
1997 38 596,879 2,288,973 $ 3.83 8.40% 8.88%
1998 45 1,085,355 4,249,120 $ 3.91 15.60% 16.14%
1999 30 901,996 3,623,537 $ 4.02 13.30% 13.41%
2000 13 634,889 2,682,186 $ 4.22 9.85% 9.44%
2001 7 271,576 1,519,722 $ 5.60 5.58% 4.04%
2002 1 600 4,660 $ 7.77 .02% .01%
2003 -- -- -- -- -- --
2004 and 10 876,938 4,009,043 $ 4.57 14.70% 13.03%
thereafter
--- ---------- -----------
TOTAL 320 6,725,295 $27,242,775 $ 4.05
--- ---------- -----------
--- ---------- -----------
<FN>
- ------------------------
(1) Represents annual net effective rent due from tenants in occupancy as of
June 30, 1994. Annual net effective rent equals the average annual rental
property revenue over the terms of the respective leases, excluding
additional rent due as operating expense reimbursements, landlord
allowances for operating expenses and percentage rents.
</TABLE>
S-20
<PAGE>
OFFICE PROPERTIES
The Company's portfolio of office Properties includes three downtown
buildings as well as 39 suburban office buildings located in developed business
parks and mixed-use developments with excellent interstate access and
visibility. The Company believes that all of its office Properties are among the
highest in quality available to tenants in its markets. This diverse mix of
office buildings is occupied by tenants spanning all segments of the office
market.
The following table sets forth the aggregate average percent leased and
annual net effective rental per leased square foot of available square footage
for all of the office Properties during the last three years.
AVERAGE OCCUPANCY AND AVERAGE RENTALS
(OFFICE PROPERTIES)
<TABLE>
<CAPTION>
ANNUAL NET
EFFECTIVE RENTAL
SQUARE FEET AVERAGE PER LEASED SQUARE
YEAR AVAILABLE OCCUPANCY FOOT (1)
- ------------------------------------------------------------ ----------- -------------- -----------------
<S> <C> <C> <C>
Through June 30, 1994....................................... 3,819,029 92.1% $10.92(2)
1993........................................................ 3,811,904 90.5% $10.91(2)
1992........................................................ 3,811,904 88.9% $10.89
1991........................................................ 3,305,162 83.7% $10.75
<FN>
- ------------------------
(1) Calculated as the average annual rental property revenue over the terms of
the respective leases, excluding tenant reimbursements for operating
expenses and excluding landlord allowances for operating expenses, divided
by the average total square feet under lease during the year.
(2) During 1993 and the first six months of 1994, 670,686 and 196,791 square
feet, respectively, were leased or renewed at an average annual net
effective rental per leased square foot of $10.28.
</TABLE>
The following table shows lease expirations for leases in place as of June
30, 1994, for each of the ten years beginning with the remainder of 1994, for
the office Properties, assuming none of the tenants exercises early termination
or renewal options.
S-21
<PAGE>
LEASE EXPIRATIONS
(OFFICE PROPERTIES)
<TABLE>
<CAPTION>
NET
RENTABLE ANNUAL NET PERCENT OF PERCENT OF
AREA (IN EFFECTIVE ANNUAL NET TOTAL
SQ. FT.) ANNUAL NET RENT PER EFFECTIVE LEASED SQ.
NUMBER SUBJECT EFFECTIVE SQ. FT. RENT FT.
YEAR OF OF TO RENT UNDER UNDER REPRESENTED REPRESENTED
LEASE LEASES EXPIRING EXPIRING EXPIRING BY EXPIRING BY EXPIRING
EXPIRATION EXPIRING LEASES LEASES (1) LEASES (1) LEASES LEASES
- ---------- -------- --------- ----------- ---------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
1994 52 122,042 $ 1,255,969 $10.29 3.18% 3.44%
1995 104 499,305 5,024,927 $10.06 12.71% 14.07%
1996 89 437,194 4,395,010 $10.05 11.12% 12.32%
1997 71 384,878 3,887,406 $10.10 9.83% 10.84%
1998 64 396,145 3,927,893 $ 9.92 9.93% 11.16%
1999 42 431,209 4,796,290 $11.12 12.13% 12.15%
2000 9 199,693 2,767,454 $13.86 7.00% 5.63%
2001 10 107,798 1,261,727 $11.70 3.19% 3.04%
2002 4 174,853 2,055,108 $11.75 5.20% 4.93%
2003 5 117,696 1,479,320 $12.57 3.74% 3.32%
2004 and 9 678,544 8,689,089 $12.81 21.97% 19.10%
thereafter
--- --------- -----------
TOTAL 459 3,549,357 $39,540,193 $11.14
--- --------- -----------
--- --------- -----------
<FN>
- ------------------------
(1) Represents annual net effective rent due from tenants in occupancy as of
June 30, 1994. Annual net effective rent equals the average annual rental
property revenue over the terms of the respective leases, excluding
additional rent due as operating expense reimbursements, landlord
allowances for operating expenses and percentage rents.
</TABLE>
RETAIL PROPERTIES
The retail Properties, which also cater to a variety of retail markets,
include one regional shopping center, 10 neighborhood shopping centers, three
shopping centers designed primarily to serve the business parks in which they
are located and three free-standing single tenant buildings. The retail
Properties are generally located in upscale suburban and high growth areas.
The following table sets forth the aggregate average percent leased and
annual net effective rental per leased square foot for all of the retail
Properties during the last three years.
AVERAGE OCCUPANCY AND AVERAGE RENTALS
(RETAIL PROPERTIES)
<TABLE>
<CAPTION>
ANNUAL NET
EFFECTIVE RENTAL
SQUARE FEET AVERAGE PER LEASED SQUARE
YEAR AVAILABLE OCCUPANCY FOOT (1)
- ------------------------------------------------------------ ----------- -------------- -----------------
<S> <C> <C> <C>
Through June 30, 1994....................................... 1,062,879 90.8% $8.92(2)
1993........................................................ 816,506 91.2% $9.04(2)
1992........................................................ 795,506 87.2% $8.85
1991........................................................ 795,506 81.0% $8.70
<FN>
- ------------------------
(1) Calculated as the average annual rental property revenue over the terms of
the respective leases, excluding tenant reimbursements for operating
expenses and excluding landlord allowances for operating expenses, divided
by the average total square feet under lease during the year.
(2) During 1993 and the first six months of 1994, 73,668 and 60,008 square
feet, respectively, were leased or renewed at an average annual net
effective rental per leased square foot of $11.28.
</TABLE>
S-22
<PAGE>
The following table shows lease expirations for leases in place as of June
30, 1994, for each of the ten years beginning with the remainder of 1994, for
the retail Properties, assuming none of the tenants exercises early termination
or renewal options.
LEASE EXPIRATIONS
(RETAIL PROPERTIES)
<TABLE>
<CAPTION>
NET ANNUAL
RENTABLE NET PERCENT OF PERCENT OF
AREA (IN EFFECTIVE ANNUAL NET TOTAL
SQ. FT.) ANNUAL NET RENT PER EFFECTIVE LEASED SQ.
NUMBER SUBJECT EFFECTIVE SQ. FT. RENT FT.
YEAR OF OF TO RENT UNDER UNDER REPRESENTED REPRESENTED
LEASE LEASES EXPIRING EXPIRING EXPIRING BY EXPIRING BY EXPIRING
EXPIRATION EXPIRING LEASES LEASES(1) LEASES(1) LEASES LEASES
- ---------- -------- -------- ---------- --------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
1994 21 41,911 $ 429,631 $10.25 4.75% 4.32%
1995 26 69,510 696,904 $10.03 7.71% 7.17%
1996 43 154,295 1,408,215 $ 9.13 15.57% 15.91%
1997 34 98,459 1,072,238 $10.89 11.85% 10.16%
1998 27 81,038 869,241 $10.73 9.61% 8.36%
1999 16 45,818 559,125 $12.20 6.18% 4.73%
2000 6 48,730 439,876 $ 9.03 4.86% 5.03%
2001 3 28,900 265,987 $ 9.20 2.94% 2.98%
2002 6 92,445 843,611 $ 9.13 9.33% 9.54%
2003 4 36,496 329,877 $ 9.04 3.65% 3.76%
2004 and 11 271,905 2,130,431 $ 7.84 23.55% 28.04%
thereafter
--- -------- ----------
TOTAL 197 969,507 $9,045,136 $ 9.33
--- -------- ----------
--- -------- ----------
<FN>
- ------------------------
(1) Represents annual net effective rent due from tenants in occupancy as of
June 30, 1994. Annual net effective rent equals the average annual rental
property revenue over the terms of the respective leases, excluding
additional rent due as operating expense reimbursements, landlord
allowances for operating expenses and percentage rents.
</TABLE>
LAND
Substantially all the Land is located adjacent to the Properties in
industrial or business parks that have been developed by the Company.
Approximately 80% of the Land is zoned for industrial use, with the remainder
zoned for either office or retail use. All of the Land is unencumbered, has
available to it appropriate utilities and is ready for immediate development.
The Company believes that approximately 125 buildings containing approximately
13.3 million square feet of commercial development can be constructed on the
Land. The Company believes that the Land gives it a competitive advantage over
other real estate companies operating in its markets.
The following table describes the acreage and zoning of the Land as of June
30, 1994.
S-23
<PAGE>
LAND HELD FOR DEVELOPMENT
<TABLE>
<CAPTION>
YEAR COMPANY'S
DESCRIPTION/LOCATION ZONED USE ACQUIRED ACREAGE OWNERSHIP
- -------------------------------------- ----------- ----------- ----------- --------------
<S> <C> <C> <C> <C>
Park 100 Business Park Industrial 1972-1993 353.1 100%
Indianapolis, IN
South Park Business Center Industrial 1989 36.1 100%
Greenwood, IN
Park 50 TechneCenter Industrial 1977/1989 60.9 100%
Cincinnati, OH
World Park Industrial 1987/1991 126.5 100%
Cincinnati, OH
Southpark Business Center Industrial 1989 16.8 100%
Hebron, KY
Governor's Pointe Industrial 1986 51.1 100%(1)
Cincinnati, OH
Haywood Oaks TechneCenter Industrial 1988 26.7 100%
Nashville, TN
Park 101 Industrial 1986 60.1 100%
Decatur, IL
Southpointe Industrial 1994 53.7 100%
Columbus, OH
Parkwood Crossing Office 1989 45.0 50%(2)
Indianapolis, IN
Hamilton Crossing Office 1988 94.9 50%(2)
Carmel, IN
Merchant Street Office 1990 5.6 100%
Cincinnati, OH
Tri-County Office Park Office 1986 3.2 100%
Cincinnati, OH
American Center Office 1990 2.6 100%
Nashville, TN
Corporate Park at Tuttle Crossing Office 1989/1994 16.5 100%
Columbus, OH
Fidelity Drive Office 1984 10.0 100%
Cincinnati, OH
South Park Business Center Retail 1989 20.1 100%
Greenwood, IN
Governor's Plaza Retail 1988 1.1 100%
Cincinnati, OH
Greenwood Corner Retail 1986 0.4 100%
Indianapolis, IN
</TABLE>
S-24
<PAGE>
<TABLE>
<CAPTION>
YEAR COMPANY'S
DESCRIPTION/LOCATION ZONED USE ACQUIRED ACREAGE OWNERSHIP
- -------------------------------------- ----------- ----------- ----------- --------------
<S> <C> <C> <C> <C>
Coldwater Crossing Retail 1994 8.4 100%
Ft. Wayne, IN
Sawmill Road Retail 1994 1.5 100%
Columbus, OH
<FN>
- ------------------------
(1) Pursuant to a land contract whereby the Company is the purchaser.
(2) This Land is owned by a partnership in which the Company is a 50% partner.
</TABLE>
TENANTS
The Company's Properties have a diverse and stable base of approximately
1,000 tenants. Many of the tenants are Fortune 500 companies and engage in a
wide variety of businesses, including manufacturing, retailing, wholesale trade,
distribution, and professional services. Approximately 50% of the square footage
of the Properties is occupied by tenants with a net worth based on book value of
$100 million or greater. More than 80% of the gross leasable area of the
Properties is occupied by tenants who have been in business for more than 10
years. The Company renewed 70% of the tenants available to be renewed over the
18 months ended June 30, 1994, on approximately 2 million square feet up for
renewal. No single tenant accounts for more than 5% of the Company's total
revenues.
The following table sets forth information regarding the 10 largest tenants
of the Properties based upon 1993 base contractual rental revenue.
<TABLE>
<CAPTION>
LEASE PERCENTAGE 1993 BASE PERCENTAGE OF
EXPIRATION SQUARE OF TOTAL RENTAL BASE RENTAL
TENANT LOCATION DATE FOOTAGE SQUARE FEET REVENUES (4) RENTAL REVENUES
- ------------------------- ------------ ----------- --------- ----------- --------------- ---------------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
General Electric......... Cincinnati Varies(1) 269,011 2.3% $ 3,896 4.7%
SDRC..................... Cincinnati 4/30/11 240,513 2.0% 2,286 2.7%
Lenscrafters, Inc........ Cincinnati 12/31/99 156,779 1.3% 2,250 2.7%
LCI Communications....... Cincinnati 11/30/05 164,639 1.4% 2,195 2.6%
Associated Group......... Indianapolis Varies(2) 188,988 1.6% 1,845 2.2%
Federated Dept. Stores... Cincinnati 4/30/99(3) 157,584 1.3% 1,820 2.2%
Cincinnati Enquirer...... Cincinnati 6/30/12 117,301 1.0% 1,689 2.0%
Cincinnati Bell
Telephone............... Cincinnati 4/14/96 92,551 .8% 1,629 2.0%
Ordernet Services,
Inc..................... Cincinnati 9/30/00 106,300 .9% 1.613 2.0%
Champion Spark Plugs..... Indianapolis 10/14/98 512,777 4.3% 1,327 1.6%
--------- --- ------- ---
TOTAL.................... 2,006,443 16.9% $20,550 24.7%
--------- --- ------- ---
--------- --- ------- ---
<FN>
- ------------------------
(1) General Electric represents a total of 10 leases, with maturities ranging
from 1994 to 1997.
(2) Associated Group (Blue Cross/Blue Shield) represents a total of seven
leases under various tenant names, with maturities ranging from 1996 to
1998.
(3) Tenant has exercised an option to terminate 114,434 square feet of the
indicated space to relocate in October, 1994 into a new facility being
developed on a third party fee basis by the Company. The Company has
obtained management of the new facility and is negotiating with prospects
to re-lease the space to be vacated.
(4) Base rental revenues represent the annualized gross contractual rent as of
December 31, 1993 including landlord operating expense allowances and
excluding tenant operating expense reimbursements.
</TABLE>
S-25
<PAGE>
TABLE OF PROPERTIES
The following table sets forth information concerning the Company's
properties as of June 30, 1994.
<TABLE>
<CAPTION>
COMPANY'S SQUARE PERCENT
NAME/LOCATION OWNERSHIP YEAR BUILT FEET LEASED (1) SIGNIFICANT TENANTS (2)
- -------------------------- ---------- -------------- ------- ---------- -----------------------------------
<S> <C> <C> <C> <C> <C>
INDUSTRIAL
Indianapolis, Indiana
PARK 100 BUSINESS PARK
Building 38 100% 1978 6,000 100% Langford's Collision (100%)
Building 43 100% 1971 26,871 100% Integrated Clinical (100%)
Building 74 10%-50%(3) 1988 257,400 100% South Carolina Tees (35%), Ternes
Packaging - Indiana (65%)
Building 76 10%-50%(3) 1988 81,695 100% Telamon Corp. (26%), Howard W. Sams
(19%), Pro-Vet Cos., Inc. (25%),
Ingersoll-Rand (20%)
Building 77 100% 1988 193,400 100% Service Graphics (65%), Federal
Mogul Corp. (35%)
Building 78 10%-50%(3) 1988 512,777 100% Champion Spark Plug (100%)
Building 79 100% 1988 66,000 80% Encor Technologies, Inc. (53%),
Braun Media Services, Inc. (13%)
Building 80 100% 1988 66,000 88% Data Chem., Inc. (26%), Arcane
Leasing Resources (13%), SSI
Medical Services (10%), Hercules
Hydraulics (12%), Coast to Coast
Analytical (20%)
</TABLE>
S-26
<PAGE>
<TABLE>
<CAPTION>
COMPANY'S SQUARE PERCENT
NAME/LOCATION OWNERSHIP YEAR BUILT FEET LEASED (1) SIGNIFICANT TENANTS (2)
- -------------------------- ---------- -------------- ------- ---------- -----------------------------------
<S> <C> <C> <C> <C> <C>
Building 83 100% 1989 96,000 100% Midwest Roll Forming (30%), Tank
Construction (10%), Telamon Corp.
(25%), State Lottery Commission
(22%), Bel Hybrids & Magnetics
(13%)
Building 84 100% 1989 96,000 100% Magnetech Corp. (27%), Datagraphic,
Inc. (18%), Courterco, Inc. (30%),
Nina International, Inc. (25%)
Building 85 10%-50%(3) 1989 180,100 100% Pepsico, Inc. (100%)
Building 87 10%-50%(3) 1989 350,000 100% Epson America, Inc. (100%)
Building 89 10%-50%(3) 1990 311,600 100% Becton Dickinson & Co. (100%)
Building 91 10%-50%(3) 1990 144,000 100% Pepsico, Inc. (60%), Cabot Safety
Corp. (40%)
Building 92 10%-50%(3) 1991 45,917 100% Keebler Company (100%)
Building 95 100% 1993 336,000 100% Caterpillar Logistics (100%)
Building 109 100% 1985 46,000 82% Createc Corp. (16%), First Data
Resources (12%), NBG Ent. (11%),
Quick Change (12%), Wabash Valley
Power Assoc. (12%)
Building 117 10%-50%(3) 1988 135,600 99% Accordia School Benefits (29%)
Building 120 10%-50%(3) 1989 54,982 100% Nat'l Retail Hardware (38%),
Peoples Bank & Trust (40%)
</TABLE>
S-27
<PAGE>
<TABLE>
<CAPTION>
COMPANY'S SQUARE PERCENT
NAME/LOCATION OWNERSHIP YEAR BUILT FEET LEASED (1) SIGNIFICANT TENANTS (2)
- -------------------------- ---------- -------------- ------- ---------- -----------------------------------
<S> <C> <C> <C> <C> <C>
Building 122 100% 1990 73,274 96% Haynes & Pittenger (38%), RJE
Interiors, Inc. (14%), Acordia
Health Industry (28%)
Building 125 100% 1994 98,000 100% Day Dream Publishing, Inc. (100%)
Building 126 100% 1984 60,100 64% Harlan Bakeries, Inc. (26%),
Ackerman Chacco Co., Inc. (14%),
Amarr Cos., Inc. (13%), Commercial
Movers, Inc. (11%)
SHADELAND STATION
Buildings 204 & 205 100% 1984 48,600 87% Southwestern Bell (80%)
HUNTER CREEK BUSINESS PARK
Building 1 10%-50%(3) 1989 86,500 100% Trilithic (41%), Nissin Int'l
Transport (22%), Exhaust Prod.
Warehouse (15%), Lazarus Real
Estate, Inc. (22%)
Building 2 10%-50%(3) 1989 202,560 100% Wal-Mart Stores (100%)
HILLSDALE TECHNECENTER
Building 4 100% 1987 73,874 88% Dugdale Communications (13%),
Community Hospitals (31%), Net
Midwest, Inc. (12%)
Building 5 100% 1987 67,500 92% Wiltrout Sales (17%), Advanced
Automation Tech. (12%)
Building 6 100% 1987 64,000 100% Adminastar (100%)
</TABLE>
S-28
<PAGE>
<TABLE>
<CAPTION>
COMPANY'S SQUARE PERCENT
NAME/LOCATION OWNERSHIP YEAR BUILT FEET LEASED (1) SIGNIFICANT TENANTS (2)
- -------------------------- ---------- -------------- ------- ---------- -----------------------------------
<S> <C> <C> <C> <C> <C>
Carmel, Indiana
HAMILTON CROSSING
Building 1 100% 1989 51,825 86% Charles Schwab & Co. (30%), Bacompt
Systems, Inc. (28%)
Greenwood, Indiana
SOUTH PARK BUSINESS CENTER
Building 2 100% 1990 86,806 99% Acordia Construction Benefits
(12%), American Electronics, Inc.
(10%), Pro Industries (11%)
Cincinnati, Ohio (4)
PARK 50 TECHNECENTER
Building 20 100% 1987 96,000 60% Computer Technology (31%)
Building 25 100% 1989 78,328 100% Zonic Corp. (45%), SDRC (25%),
Hyper Shoppes, Inc. (30%)
GOVERNOR'S POINTE
4700 Building 100% 1987 76,400 89% Allen Bradley Co. (19%), Konica
Business Machines (12%)
4800 Building 100% 1989 80,000 92% General Electric (50%), Community
Mutual Ins. Co. (27%)
4900 Building 100% 1987 76,400 90% Federated Dept. Stores (57%),
Intergraph Corporation (13%)
WORLD PARK
Building 5 100% 1987 59,700 75% Amerimed Equip. (17%), Pak/ Teem,
Inc. (11%)
</TABLE>
S-29
<PAGE>
<TABLE>
<CAPTION>
COMPANY'S SQUARE PERCENT
NAME/LOCATION OWNERSHIP YEAR BUILT FEET LEASED (1) SIGNIFICANT TENANTS (2)
- -------------------------- ---------- -------------- ------- ---------- -----------------------------------
<S> <C> <C> <C> <C> <C>
Building 6 100% 1987 92,400 100% Caterpillar Logistics (56%),
Omnicare, Inc. (26%), Copy
Duplicating Products (11%)
Building 7 100% 1987 96,000 100% CTL-Aerospace (100%)
Building 8 100% 1989 192,000 100% Container Corp. (38%), Duplex
Products, Inc. (31%), Dobson
Moving & Storage (13%), Perkins
Restaurant Co. (18%)
Building 9 100% 1989 58,800 89% Lenscrafters (20%), Philips Medical
Systems (20%)
Building 11 100% 1989 96,000 90% Cincinnati Screen Supply (20%), The
U.S. Shoe Corp. (70%)
Building 14 100% 1989 166,400 100% Kenco/Microage (62%), Suntory Water
Group (12%)
Building 15 100% 1990 93,600 100% Stolle Research & Develop (100%)
Building 16 100% 1989 93,600 100% Valvoline, Inc. (100%)
ENTERPRISE BUSINESS PARK
Building A 100% 1990 87,400 95% The Future Now, Inc. (38%),
Advanced Office Systems (14%)
Building B 100% 1990 84,940 87% General Electric Supply (11%),
Payless Cashways, Inc. (18%)
Cincinnati, Ohio (4)
TRI-COUNTY BUSINESS PARK
Xetron 10%(5) 1994 100,193 100% Xetron (100%)
</TABLE>
S-30
<PAGE>
<TABLE>
<CAPTION>
COMPANY'S SQUARE PERCENT
NAME/LOCATION OWNERSHIP YEAR BUILT FEET LEASED (1) SIGNIFICANT TENANTS (2)
- -------------------------- ---------- -------------- ------- ---------- -----------------------------------
<S> <C> <C> <C> <C> <C>
OTHER INDUSTRIAL --
CINCINNATI
U.S. Post Office 40%(6) 1992 57,886 100% U.S. Postal Service (100%)
Building
Columbus, Ohio
PET FOODS
Pet Foods Distribution 100% 1993 120,000 100% Pet Foods (100%)
Building
Hebron, Kentucky (7)
SOUTHPARK BUSINESS
CENTER
Building 1 100% 1990 96,000 100% James & Loretta England (44%),
Surgical Laser Technology (33%),
Quality Food & Vending (13%),
Drysdale Direct Express (10%)
Building 3 100% 1991 192,000 73% Cincinnati Terminal Warehouse (73%)
CR Services 100% 1994 214,840 100% SKF USA, Inc. (100%)
Redken Laboratories 100% 1994 166,400 100% Redken Laboratories, Inc. (100%)
Decatur, Illinois
PARK 101 BUSINESS CENTER
Building 3 100% 1979 75,600 74% Illinois Power Company (12%)
Building 8 100% 1980 50,400 84% Federal Express (14%), Decatur
Office Systems (14%), Hinckley-
Schmitt, Inc. (13%)
</TABLE>
S-31
<PAGE>
<TABLE>
<CAPTION>
COMPANY'S SQUARE PERCENT
NAME/LOCATION OWNERSHIP YEAR BUILT FEET LEASED (1) SIGNIFICANT TENANTS (2)
- -------------------------- ---------- -------------- ------- ---------- -----------------------------------
<S> <C> <C> <C> <C> <C>
Nashville, Tennessee
HAYWOOD OAKS
TECHNECENTER
Building 2 100% 1988 50,400 100% Beacon Int'l, U.S.A. (19%), Major
Video Concepts (31%), Synermed,
Inc. (17%)
Building 3 100% 1988 52,800 100% Copper & Brass Sales (23%), ATEC
Associates, Inc. (30%), Tennessee
Scale Works (14%), Virogroup, Inc.
(25%)
Building 4 100% 1988 46,800 100% US Telecom Inc/ Sprint (62%),
Product Assembly (17%)
Building 5 100% 1988 60,300 96% Allen-Bradley Co., Inc. (28%)
Building 6 100% 1989 113,400 100% Primus Automotive (48%)
Milwaukee, Wisconsin
Music Box Building 33%(8) 1993 153,600 100% San Francisco Music Box Company, a
subsidiary of The Woolworth
Companies (100%)
OFFICE
Indianapolis, Indiana
PARK 100 BUSINESS PARK
Building 34 100% 1979 22,272 82% James H. Drew Corp. (20%), Indiana
Properties, Inc. (12%), Million &
Co., P.C. (12%)
</TABLE>
S-32
<PAGE>
<TABLE>
<CAPTION>
COMPANY'S SQUARE PERCENT
NAME/LOCATION OWNERSHIP YEAR BUILT FEET LEASED (1) SIGNIFICANT TENANTS (2)
- -------------------------- ---------- -------------- ------- ---------- -----------------------------------
<S> <C> <C> <C> <C> <C>
Building 116 100% 1988 35,700 100% Technalysis, Inc. (37%), Woolpert
Consultants (37%)
Building 118 100% 1988 35,700 100% Benicorp Ins. (33%), Kosene &
Kosene Dev. (12%), Construction
Magazine Grp. (15%), Acordia
Senior Benefits (20%), Policy
Management Systems (20%)
Building 119 100% 1989 53,300 97% Anthem Health Sys. (91%)
CopyRite Building 50%(9) 1992 48,000 100% Alco Standard Corporation (100%)
WOODFIELD AT THE
CROSSING
Two Woodfield Crossing 100% 1987 117,818 90% General Accident Ins. Co. (19%)
Three Woodfield Crossing 100% 1989 259,777 90% E.F.S., Inc. (20%), Medi-Span, Inc.
(10%)
PARKWOOD CROSSING
Parkwood I 50%(10) 1990 108,281 98% Tandem Computer (12%), VanGuard
Services (11%)
SHADELAND STATION
7240 Shadeland Station 67%(11) 1985 45,585 98% Den-Mat Corp. (14%), James River
Paper Co., Inc. (44%)
7330 Shadeland Station 100% 1988 42,619 100% American Family Ins. (78%), Medcor
Data (12%)
7340 Shadeland Station 100% 1989 32,235 100% Truevision, Inc. (75%), Analysts
International (25%)
</TABLE>
S-33
<PAGE>
<TABLE>
<CAPTION>
COMPANY'S SQUARE PERCENT
NAME/LOCATION OWNERSHIP YEAR BUILT FEET LEASED (1) SIGNIFICANT TENANTS (2)
- -------------------------- ---------- -------------- ------- ---------- -----------------------------------
<S> <C> <C> <C> <C> <C>
7351 Shadeland Station 100% 1983 27,740 76% Mgmt. Computer (23%), Northside
Counseling (11%), Garrison &
Kiefer (14%), Action Systems
Associates (10%)
7369 Shadeland Station 100% 1989 15,551 100% Truevision, Inc. (70%), Fairbanks
Hospital, Inc. (14%), Techsoft
Systems, Inc. (16%)
7400 Shadeland Station 100% 1990 49,544 100% Edward B. Morris Assoc. (27%),
Ryland Mortgage Company (12%)
KEYSTONE AT THE CROSSING
F.C. Tucker Building 100% 1978 4,840 100% F. C. Tucker (100%)
(12)
3520 Commerce Crossing 100% 1976 30,000 100% Indiana Wesleyan University (100%)
(13)
Carmel, Indiana
CARMEL MEDICAL CENTER
Building I (14) 100% 1985 40,060 100% Indiana Institute for Low Back Care
(17%), Carmel OB/ GYN (12%)
Building II (14) 100% 1989 39,973 100% St. Vincent Sports Med. (35%), St.
Vincent Hosp. & Health (31%)
Greenwood, Indiana
SOUTH PARK BUSINESS
CENTER
Building 1 100% 1989 39,715 96% Alverno Admin (11%), Brylane L.P.
(29%), Cummins Engine Co., Inc.
(12%)
</TABLE>
S-34
<PAGE>
<TABLE>
<CAPTION>
COMPANY'S SQUARE PERCENT
NAME/LOCATION OWNERSHIP YEAR BUILT FEET LEASED (1) SIGNIFICANT TENANTS (2)
- -------------------------- ---------- -------------- ------- ---------- -----------------------------------
<S> <C> <C> <C> <C> <C>
Building 3 100% 1990 35,900 100% United Home Life Ins. (50%),
Personnel Management, Inc. (24%),
Philip Morris U.S.A. (12%)
Cincinnati, Ohio(4)
GOVERNOR'S HILL
8600 Governor's Hill 100% 1986 200,584 88% Lenscrafters (72%)
8700 Governor's Hill 100% 1985 58,617 100% General Electric Corp. (100%)
8790 Governor's Hill 100% 1985 58,177 99% General Electric Corp. (28%),
Tandem Computers, Inc. (14%)
8800 Governor's Hill 100% 1985 28,700 100% Southern Ohio Telephone (85%)
GOVERNOR'S POINTE
4605 Governor's Pointe 100% 1990 175,485 100% GE Capital (72%), Cincom Systems,
Inc. (16%)
4705 Governor's Pointe 100% 1988 140,984 100% Federated Dept. Stores (81%), Ford
Motor Company (19%)
4770 Governor's Pointe 100% 1986 76,037 66% Siemens Energy (7%)
PARK 50 TECHNECENTER
SDRC Building 100% 1991 221,215 100% SDRC (100%)
400 TechneCenter Drive 100% 1985 70,644 83% Philip Morris U.S.A. (11%),
Clermont Savings Bank (11%)
DOWNTOWN CINCINNATI
311 Elm Street (15) 100% 1902/1986(16) 90,127 100% Star Bank (75%), Space Design
Interior, Inc. (25%)
312 Plum Street 100% 1987 230,000 90% Cincinnati Bell (29%), Savings &
Loan Data Corp. (26%)
</TABLE>
S-35
<PAGE>
<TABLE>
<CAPTION>
COMPANY'S SQUARE PERCENT
NAME/LOCATION OWNERSHIP YEAR BUILT FEET LEASED (1) SIGNIFICANT TENANTS (2)
- -------------------------- ---------- -------------- ------- ---------- -----------------------------------
<S> <C> <C> <C> <C> <C>
312 Elm Street (17) 100% 1992 378,000 87% Cincinnati Enquirer (28%),
Prudential Insurance Co. (24%),
GSA (20%)
KENWOOD COMMONS
Building I 50%(18) 1986 46,470 100% Digital Communications (100%)
Building II 50%(18) 1986 46,434 88% Bethesda Health Care (16%), Cross &
Associates (18%)
OTHER OFFICE --
CINCINNATI
Triangle Office Park 100% 1965/1985(19) 172,650 84% Accufax (10%)
Fidelity Drive Building 100% 1972 38,000 100% Reuben H. Donnelley Corp. (100%)
Tri-County Office Park 100% 1971, 1973(&20) 102,166 59% Pope & Assoc. (13%)
1982
Columbus, Ohio
THE CORPORATE PARK AT
TUTTLE CROSSING
4600 Lakehurst 100% 1990 106,300 100% Ordernet Services (100%)
4650 Lakehurst 100% 1990 164,639 100% LCI Communications (Litel) (100%)
5555 Parkcenter 100% 1992 83,971 100% Xerox (33%), Metal Forge (30%),
VOCA (28%)
Livonia, Michigan
SEVEN MILE CROSSING
38705 Seven Mile (21) 100% 1988 113,066 95% Amoco Oil Co. (12%)
38701 Seven Mile (21) 100% 1989 132,153 99% U.S. Sprint Communications (21%)
</TABLE>
S-36
<PAGE>
<TABLE>
<CAPTION>
COMPANY'S SQUARE PERCENT
NAME/LOCATION OWNERSHIP YEAR BUILT FEET LEASED (1) SIGNIFICANT TENANTS (2)
- -------------------------- ---------- -------------- ------- ---------- -----------------------------------
<S> <C> <C> <C> <C> <C>
RETAIL
Indianapolis, Indiana
PARK 100 BUSINESS PARK
Woodland Shoppes 100% 1989 19,716 70% McTee, Inc. (18%), D.K. Brunchies,
Building 121 Inc. (18%), Dr. Jeffrey Golder
(11%)
Park 100 Retail Center 100% 1978 14,504 80% Little Bit of Italy (20%), The
Cleaning Shop (10%), Shoe Hospital
Corp. (10%), Park 100 Liquors
(21%)
CASTLETON CORNER
Michael's Plaza 100% 1984 46,374 92% Michael's Arts & Crafts (40%),
Hoosier Cash & Carry (28%)
Cub Plaza 100% 1986 60,136 93% Pet Food Supermarket (38%), Outback
Steakhouse, Inc. (12%)
Fort Wayne, Indiana
Coldwater Crossing 100% 1990 246,365 93% Cub Foods (26%), Regal Cinemas,
Inc. (13%)
Greenwood, Indiana
GREENWOOD CORNER
First Indiana Bank 100% 1988 2,400 100% First Indiana Bank (100%)
Branch
Greenwood Corner Shoppes 100% 1986 50,840 97% Fraziers Distributing (11%), Drug
Emporium (45%)
Dayton, Ohio
Sugarcreek Plaza 100% 1988 77,940 98% Drug Emporium (31%)
</TABLE>
S-37
<PAGE>
<TABLE>
<CAPTION>
COMPANY'S SQUARE PERCENT
NAME/LOCATION OWNERSHIP YEAR BUILT FEET LEASED (1) SIGNIFICANT TENANTS (2)
- -------------------------- ---------- -------------- ------- ---------- -----------------------------------
<S> <C> <C> <C> <C> <C>
Cincinnati, Ohio (4)
Governor's Plaza 100% 1990 181,493 100% Wal-Mart (63%)
King's Mall Shopping 100% 1990 52,661 83% Body Dynamics (26%), Evenson Cards
Center I Shop (11%), Grand Oriental (12%)
King's Mall Shopping 100% 1988 67,725 100% Pet Food Supermarket (37%),
Center II Discovery Zone (15%)
Steinberg's 85%(22) 1993 21,008 100% Steinberg's Inc. (100%)
Park 50 Plaza 100% 1989 18,000 28% Park 50 Copy (13%)
Ellisville, Missouri
Ellisville Plaza 100% 1987 32,754 84% Pier I Imports (22%), Fitzpatrick
Pharmacy (12%), Outback Steakhouse
(20%)
Bloomington, Illinois
Lakewood Plaza Shopping 100% 1987 84,410 94% Shoe Carnival (21%), Whitlock
Center Automotive (14%)
Champaign, Illinois
Market View 100% 1985 86,553 72% T.J. Maxx (29%), Silo #425 (14%)
Livonia, Michigan
Cooker Restaurant 100%(23) N/A N/A 100% Cooker Restaurant
INDUSTRIAL -- UNDER
CONSTRUCTION
Indianapolis, Indiana
PARK 100 BUSINESS PARK
Building 96 100% 1994 553,900 100% Silver Burdett Ginn, Inc. (100%)
Building 97 100% 1994 280,800 44% Butler-MacDonald, Inc. (44%)
</TABLE>
S-38
<PAGE>
<TABLE>
<CAPTION>
COMPANY'S SQUARE PERCENT
NAME/LOCATION OWNERSHIP YEAR BUILT FEET LEASED (1) SIGNIFICANT TENANTS (2)
- -------------------------- ---------- -------------- ------- ---------- -----------------------------------
<S> <C> <C> <C> <C> <C>
OFFICE -- UNDER
CONSTRUCTION
Columbus, Ohio
TUTTLE CROSSING
Building 3 100% 1994 49,600 94% Indiana Insurance (50%), Geraghty &
Miller, Inc. (39%)
Building 4 100% 1994 57,660 100% Sterling Software, Inc. (100%)
Building 5 100% 1994 101,200 60% John Alden Life Insurance (60%)
MEDICAL OFFICE -- UNDER
CONSTRUCTION
Columbus, Ohio
Veterans Administration 100% 1994 118,000 100% VA Hospital (100%)
Clinic
Greenwood, Indiana
St. Francis Medical 100%(24) 1994 95,579 21%(25) --
Building
RETAIL -- UNDER
CONSTRUCTION
Columbus, Ohio
Galyan's Trading Company 100% 1994 74,636 100% Galyan's Trading Co. (100%)
Cincinnati, Ohio (4)
Kohl's 100% 1994 80,684 100% Kohl's (100%)
Sports Unlimited 85% 1994 67,148 100% Cincinnati Sports (76%), Fore
Seasons Golf, Inc. (10%), Brown
Group Retail, Inc. (14%)
<FN>
- ------------------------
(1) Includes space leased, even if not occupied, as of June 30, 1994.
(2) Includes tenants leasing 10% or more of square footage in any one Property
(with the percentage of square footage in parentheses) or the largest
tenant if no tenant is over 10%.
(3) These buildings are owned by a partnership in which the Company is a joint
venture partner. The Company owns a 10% capital interest in the partnership
and will receive a 50% interest in the residual cash flow after payment of
a preferred return to the other partner on its capital interest.
</TABLE>
S-39
<PAGE>
<TABLE>
<S> <C>
(4) Properties designated to be in Cincinnati, Ohio may be in the greater
Cincinnati area.
(5) The Company owns a 10% interest in this building as a limited partner and
shares in the cash flow from the building in accordance with such ownership
interest.
(6) This building is owned by a limited partnership in which the Company has a
1% general partnership interest and a 39% limited partnership interest. The
Company shares in the cash flow from such building in accordance with the
Company's ownership interest.
(7) Although located in Hebron, Kentucky, this is considered part of the
greater Cincinnati, Ohio, or Covington, Kentucky area.
(8) The Company owns a 33-1/3% interest in this building as a limited partner
and shares in the cash flow from the building in accordance with such
ownership interest.
(9) The Company owns a 50% general partnership interest in this building with
the other 50% being owned by the tenant in the building. The Company shares
in the cash flow from the building in accordance with such partnership
interest.
(10) This building is owned by Parkwood Crossing Joint Venture, a partnership in
which the Company is a joint venture partner. The Company has a 50% general
partnership interest and shares in the cash flow from such building in
accordance with such ownership interest after payment of a cumulative
preferred return to the other partner.
(11) The Company owns a 66.67% general partnership interest in the partnership
owning this building. The remaining interest is owned by a former tenant in
the building. The Company shares in the cash flow of this building in
accordance with the Company's partnership interest.
(12) The Company has a leasehold interest in the land underlying this building
with a lease term expiring October 31, 2067.
(13) The Company has a leasehold interest in the building and the underlying
land with a lease term expiring May 9, 2006.
(14) The Company owns these buildings and has a leasehold interest in the land
underlying these buildings, with the lease term expiring November 16, 2043.
(15) The Company has a leasehold interest in the building and the underlying
land with a lease term expiring December 31, 2020. The Company has an
option to purchase the fee interest in the property at any time.
(16) This building was renovated in 1986.
(17) A portion of the land underlying this building is held by the Company as a
leasehold interest, with the lease term expiring March 31, 2021.
(18) These buildings are owned by Kenwood Office Associates, a partnership in
which the Company has a 50% general partnership interest. The Company
shares in the cash flow from such buildings in accordance with the
Company's ownership interest.
(19) This building was renovated in 1985.
(20) Tri-County Office Park has four buildings. One was built in 1971, two were
built in 1973, and one was built in 1982.
(21) The Company has a leasehold interest in the land underlying these
buildings, with a lease term expiring May 31, 2057, and the Company owns
the buildings.
(22) The Company has a contractual obligation to acquire a 100% ownership
interest in this building, which should occur prior to November 1, 1994.
</TABLE>
S-40
<PAGE>
<TABLE>
<S> <C>
(23) The Company holds the land under this building under a long-term lease with
the lease term expiring May 31, 2057 and subleases the land to the tenant
with the sublease term expiring on August 31, 2009. In the event of a
default by the tenant under the sublease, the Company would acquire title
to the building upon termination of the sublease.
(24) The Company will hold a leasehold interest in the land underlying this
owned building upon
completion for a term of 50 years commencing when the building is
completed, with two 20-year options.
(25) This represents leases for which tenants have committed, but for which the
actual leases have not been executed.
</TABLE>
S-41
<PAGE>
MANAGEMENT
The directors and executive officers of the Company are as follows:
<TABLE>
<CAPTION>
NAME AGE PRINCIPAL OCCUPATIONS AND OTHER DIRECTORSHIPS
- ------------------------- --- ---------------------------------------------------------------------------------
<S> <C> <C>
John W. Wynne (1) 61 Director and Chairman of the Board; Director of First Indiana Corporation;
retired from Bose McKinney & Evans, attorneys. Mr. Wynne is one of the original
founders of the Company.
Thomas L. Hefner (1) 47 Director; President and Chief Executive Officer. Mr. Hefner joined the Company in
1981 and became Chief Operating Officer in 1986. Before joining the Company he
served as a Vice President of Indiana National Bank and Senior Vice President of
INB Mortgage Corporation. He has also served as the General Manager of the
Company's Indiana operations.
Daniel C. Staton (1) 41 Director; Executive Vice President and Chief Operating Officer. Mr. Staton joined
the Company in 1981 and has been responsible for the Company's Ohio operations
since 1983.
Darell E. Zink, Jr. (1) 47 Director; Executive Vice President, Chief Financial Officer and Assistant
Secretary; Director of Inland Mortgage Corporation. Mr. Zink, Jr. joined the
Company in 1982. He is a former partner of the Indianapolis law firm of Bose
McKinney & Evans.
Geoffrey Button 45 Director; Executive Director of Wyndham Investments Limited, a property holding
company of Allied Lyons Pension Funds which has been an investor in a
substantial number of properties developed by the Company; Director of Major
Realty, a Florida-based development company.
Howard L. Feinsand 46 Director; Senior Vice President of Polaris Aircraft Leasing Corporation, a
wholly-owned subsidiary of G E Capital Services; formerly managing partner of
Golenbock and Barrell, attorneys, from 1987 to 1989.
John D. Peterson 60 Director; Chairman and Chief Executive Officer of City Securities Corporation, a
securities brokerage firm headquartered in Indianapolis, Indiana which he has
served in a variety of positions since 1955; Director of Capital Industries,
Inc., a distributor of truck parts and related services, and Lilly Industries,
Inc., a manufacturer of industrial coatings.
Dr. Sydney C. Reagan 78 Director; Professor Emeritus of Real Estate at Southern Methodist University;
Owner of Dr. Syd Reagan Real Estate, a commercial real estate investment and
brokerage firm. From 1982 to 1984, Dr. Reagan was Senior Vice President of
Robert Laam Company, a commercial real estate brokerage firm. Dr. Reagan was
Chairman of the Real Estate Department from 1955 to 1976 and Professor at the
Cox School of Business at Southern Methodist University from 1955 to 1981. Dr.
Reagan is also a Director of First American Savings Banc.
James E. Rogers 46 Director; Chairman, President and Chief Executive Officer of PSI Energy, Inc.
since 1988. Mr. Rogers also serves as Chairman and Chief Executive Officer of
PSI Resources, Inc. (holding company of PSI Energy, Inc.). Upon the completion
of the merger of PSI Resources, Inc. and Cincinnati Gas and Electric, Mr. Rogers
will become the Vice Chairman of the merged company (CIN Energy) which will be
the thirteenth largest electric generating system in the United States. Mr.
Rogers is a Director of NBD Indiana, Inc. and Bankers Life Holding Corporation.
</TABLE>
S-42
<PAGE>
<TABLE>
<CAPTION>
NAME AGE PRINCIPAL OCCUPATIONS AND OTHER DIRECTORSHIPS
- ------------------------- --- ---------------------------------------------------------------------------------
<S> <C> <C>
Lee Stanfield 87 Director; Currently an independent real estate developer, investor and
consultant. Formerly President of Eastern Shopping Centers, Inc., which
converted to Mortgage Growth Investors, a publicly traded REIT. Prior to that
time, Mr. Stanfield was Senior Vice President and Chief Financial Officer of
Winston-Muss Corp., a housing and shopping center developer.
Jay J. Strauss 58 Director; Chairman and Chief Executive Officer of Regent Realty Group, Inc., a
general real estate and mortgage banking firm. Mr. Strauss served from 1984 to
1988 as Chairman and Chief Executive Officer of Focus Financial Group, a
mortgage banking firm. From 1978 to 1984, Mr. Strauss served as President and
Chief Executive Officer of the Abacus Group, another mortgage banking firm, and
was Chairman of the real estate division of Walter E. Heller & Company
(presently known as Heller Financial, Inc.), a commercial finance company.
David R. Mennel (1) 40 General Manager of Services Operations. Mr. Mennel was with the accounting firm
of Peat Marwick Mitchell and Company and the property development firm of Melvin
Simon & Associates before joining the Company in 1978. He was previously the
Treasurer of the Company.
Gary A. Burk (1) 42 President of Construction Services. Mr. Burk joined the Company in 1979, and has
been responsible for the Company's construction management operations since
1986.
Michael Coletta (1) 43 Vice President of Asset and Property Management. Mr. Coletta joined the Company
in 1981 and was awarded the Certified Property Manager designation by the
Institute of Real Estate Management in 1989.
Dayle M. Eby 42 Vice President, General Counsel and Secretary. Ms. Eby joined the Company in
1989. Prior to that time, Ms. Eby was with the law firm of Bose McKinney &
Evans.
Dennis D. Oklak 40 Vice President and Treasurer. Mr. Oklak joined the Company in 1986 and has served
as the Tax Manager and Controller of Development. Prior to joining the Company,
Mr. Oklak was a Senior Manager with the public accounting firm of Deloitte
Haskins + Sells.
Steven R. Kennedy 37 Vice President of Construction Services. Mr. Kennedy joined the Company in 1986.
Prior to that time, Mr. Kennedy was a Project Manager for Charles Pankow
Builders, Inc.
Richard Horn 36 Vice President of Acquisitions. Mr. Horn joined the Company in 1984. He has
served in leasing and development for the Company and has overseen the Nashville
and Michigan operations of the Company since 1988 and 1990, respectively.
<FN>
- ------------------------
(1) One of the seven senior officers of the Company
</TABLE>
S-43
<PAGE>
<TABLE>
<CAPTION>
NAME AGE PRINCIPAL OCCUPATIONS AND OTHER DIRECTORSHIPS
- ------------------------- --- ---------------------------------------------------------------------------------
<S> <C> <C>
Robert Fessler 36 Vice President, Ohio Industrial Group. Mr. Fessler joined the Company in 1987. He
has been in his current position since 1989 and has overseen the development of
approximately 3,000,000 square feet of industrial property. Prior to joining the
Company, Mr. Fessler was a leasing representative with Trammel Crow.
Donald Hunter 35 Vice President, Columbus Group. Mr. Hunter joined the Company in 1989 and is
responsible for the Columbus development and management activities of the
Company. Prior to joining the Company, Mr. Hunter was with Cushman and
Wakefield, a national real estate firm.
Wayne Lingafelter 36 Vice President, Indiana Office Group. Mr. Lingafelter joined the Company in 1987
and assumed his current duties in 1992. Prior to that time, Mr. Lingafelter was
with the management consulting firm of DRI, Inc.
William E. Linville 39 Vice President, Indiana Industrial Group. Mr. Linville joined the Company in
1987. Prior to that time, Mr. Linville was Vice President and Regional Manager
of the CB Commercial Brokerage Office in Indianapolis.
Francis B. Quinn 40 Vice President, Retail Group. Mr. Quinn joined the Company in 1982. Prior to that
time, Mr. Quinn was with F.C. Tucker, an Indiana real estate firm.
</TABLE>
FEDERAL INCOME TAX CONSIDERATIONS
GENERAL
The following discussion summarizes certain Federal income tax consequences
to an investor in shares of Common Stock. Such discussion is based upon current
law. The discussion is focused on the classification of the Company as a REIT
and does not address all tax considerations applicable to prospective investors,
nor does the discussion give a detailed description of any state, local, or
foreign tax considerations. This discussion does not describe all of the aspects
of Federal income taxation that may be relevant to a prospective shareholder in
light of his or her particular circumstances or to certain types of shareholders
(including insurance companies, tax-exempt entities, financial institutions or
broker-dealers, foreign corporations and persons who are not citizens or
residents of the United States) subject to special treatment under the Federal
income tax laws. As used in this section, the term "Company" refers solely to
Duke Realty Investments, Inc.
EACH PROSPECTIVE PURCHASER IS ADVISED TO CONSULT WITH HIS OR HER OWN TAX
ADVISOR REGARDING THE SPECIFIC TAX CONSEQUENCES TO HIM OR HER OF THE PURCHASE,
OWNERSHIP AND SALE OF COMMON STOCK IN AN ENTITY ELECTING TO BE TAXED AS A REAL
ESTATE INVESTMENT TRUST, INCLUDING THE FEDERAL, STATE AND LOCAL TAX CONSEQUENCES
OF SUCH PURCHASE, OWNERSHIP, SALE AND ELECTION AND OF POTENTIAL CHANGES IN
APPLICABLE TAX LAWS.
TAXATION OF THE COMPANY
GENERAL. The Company expects to continue to be taxed as a REIT for Federal
income tax purposes. Management believes that the Company was organized and has
operated in such a manner as to meet the requirements for qualification and
taxation as a REIT under the Internal Revenue Code of 1986, as amended (the
"Code"), and that the Company intends to continue to operate in such a manner.
No assurance, however, can be given that the Company will continue to operate in
a manner so as to remain qualified as a REIT.
In the opinion of Rogers & Wells, which has acted as special tax counsel to
the Company ("Special Counsel"), assuming the Company was organized in
conformity with and has satisfied the requirements for qualification and
taxation as a REIT under the Code for each of its taxable years from and
including the first
S-44
<PAGE>
year for which the Company made the election to be taxed as a REIT, and the
assumptions and representations referred to below are true, the proposed methods
of operation of the Company, the Operating Partnership and Duke Realty Services
Limited Partnership (the "Services Partnership") will permit the Company to
continue to qualify to be taxed as a REIT for its current and subsequent taxable
years. This opinion is based upon certain assumptions relating to the
organization and operation of Duke Services, Inc. ("DSI"), the Operating
Partnership and the Services Partnership and is conditioned upon certain
representations made by Company personnel and affiliates as to certain factual
matters relating to the Company's past operations and the intended manner of
future operation of the Company, the Operating Partnership, and the Services
Partnership. The opinion is further conditioned upon either the Company's
receipt of a favorable ruling from the IRS as to the Operating Partnership's and
DSI's shares of gross income of the Services Partnership or the Operating
Partnership and DSI not otherwise being allocated more non-qualifying income
than is consistent with the 95% income test. See "Taxation of the Company --
Income Tests." Special Counsel is not aware of any facts or circumstances which
are inconsistent with these assumptions and representations other than as stated
in "Taxation of the Company -- Income Tests." Unlike a tax ruling, an opinion of
counsel is not binding upon the IRS, and no assurance can be given that the IRS
will not challenge the status of the Company as a REIT for Federal income tax
purposes. The Company's qualification and taxation as a REIT has depended and
will depend upon, among other things, the Company's ability to meet on a
continuing basis, through ownership of assets, actual annual operating results,
receipt of qualifying real estate income, distribution levels and diversity of
stock ownership, the various qualification tests imposed under the Code
discussed below. Special Counsel has not reviewed past compliance with these
tests and will not review compliance with these tests on a periodic or
continuing basis. Accordingly, no assurance can be given respecting the
satisfaction of such tests. See "Taxation of the Company -- Failure to Qualify."
The following is a general summary of the Code sections which govern the
Federal income tax treatment of a REIT and its shareholders. These sections of
the Code are highly technical and complex. This summary is qualified in its
entirety by the applicable Code provisions, Treasury Regulations, and
administrative and judicial interpretations thereof as currently in effect.
If the Company qualifies for taxation as a REIT and distributes to its
shareholders at least 95% of its REIT taxable income, it generally is not
subject to Federal corporate income taxes on net income that it currently
distributes to shareholders. This treatment substantially eliminates the "double
taxation" (at the corporate and shareholder levels) that generally results from
investment in a corporation. However, the Company will be subject to Federal
income tax as follows: (i) the Company will be taxed at regular corporate rates
on any undistributed REIT taxable income, including undistributed net capital
gains; (ii) under certain circumstances, the Company may be subject to the
"alternative minimum tax" on its items of tax preference, if any; (iii) if the
Company has net income from prohibited transactions (which are, in general,
certain sales or other dispositions of property other than foreclosure property
held primarily for sale to customers in the ordinary course of business), such
income will be subject to a 100% tax; (iv) if the Company should fail to satisfy
the 75% gross income test or the 95% gross income test (as discussed below), and
has nonetheless maintained its qualification as a REIT because certain other
requirements have been met, it will be subject to a 100% tax on the gross income
attributable to the greater of the amount by which the Company fails the 75% or
95% test, multiplied by a fraction intended to reflect the Company's
profitability; (v) if the Company should fail to distribute during each calendar
year at least the sum of (1) 85% of its REIT ordinary income for such year; (2)
95% of its REIT capital gain net income for such year; and (3) any undistributed
taxable income from prior years, it would be subject to a 4% excise tax on the
excess of such required distribution over the amounts actually distributed; (vi)
if the Company has (1) net income from the sale or other disposition of
"foreclosure property" (which is, in general, property acquired by the Company
by foreclosure or otherwise on default on a loan secured by the property) which
is held primarily for sale to customers in the ordinary course of business; or
(2) other non-qualifying income from foreclosure property, it will be subject to
tax on such income at the highest corporate level; and (vii) if the Company
acquires any asset from a C corporation (I.E., generally a corporation subject
to tax at the corporate level) in a transaction in which the
S-45
<PAGE>
basis of the asset in the Company's hands is determined by reference to the
basis of the asset (or any other property) in the hands of the C corporation,
and the Company recognizes gain on the disposition of such asset during the
10-year period (the "Restriction Period") beginning on the date on which such
asset was acquired by the Company, then, pursuant to guidelines issued by the
IRS, the excess of the fair market value of such property at the beginning of
the applicable Restriction Period over the Company's adjusted basis in such
asset as of the beginning of such Restriction Period will be subject to a tax at
the highest regular corporate rate. The results described above with respect to
the recognition of built-in gain assume that the Company will make an election
pursuant to IRS Notice 88-19 or applicable future administrative rules or
Treasury Regulations.
REQUIREMENTS FOR QUALIFICATION. The Code defines a REIT as a corporation,
trust or association: (1) which is managed by one or more trustees or directors;
(2) the beneficial ownership of which is evidenced by transferable shares or by
transferable certificates of beneficial interest; (3) which would be taxable as
a domestic corporation but for Sections 856 through 859 of the Code; (4) which
is neither a financial institution nor an insurance company subject to certain
provisions of the Code; (5) which has the calendar year as its taxable year; (6)
the beneficial ownership of which is held by 100 or more persons; (7) during the
last half of each taxable year not more than 50% in value of the outstanding
stock of which is owned, directly or indirectly, by five or fewer individuals
(as defined in the Code to include certain entities); and (8) which meets
certain income and assets tests, described below. The Company believes it
currently satisfies requirements (1) through (7).
INCOME TESTS. In order to qualify as a REIT, there are three gross income
tests that must be satisfied annually. First, at least 75% of the Company's
gross income (excluding gross income from prohibited transactions) for each
taxable year must be derived directly or indirectly from investments relating to
real property (including "rents from real property", gain from the sale of real
property and, in certain circumstances, interest) or from qualified types of
temporary investments. Second, at least 95% of the Company's gross income
(excluding gross income from prohibited transactions) for each taxable year must
be derived from the same items which qualify under the 75% income test or from
dividends, interest and gain from the sale or disposition of stock or
securities, or from any combination of the foregoing. Third, less than 30% of
the Company's gross income (including gross income from prohibited transactions)
must be derived from gain in connection with the sale or other disposition of
stock or securities held for less than one year, property in a prohibited
transaction, and real property held for less than four years (other than
involuntary conversions and foreclosure property).
Rents received by the Company will qualify as "rents from real property" in
satisfying the gross income tests for a REIT described above only if several
conditions (related to the relationship of the tenant to the Company, the method
of determining the rent payable and nature of the property leased) are met. The
Company does not anticipate receiving rents in excess of a de minimis amount
that fail to meet these conditions. 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" that is adequately compensated and from whom the
Company derives no income; provided, however, that the Company may perform
services "usually or customarily rendered" in connection with the rental of
space for occupancy only and not otherwise considered "rendered to the
occupant."
The Company provides certain management, development, construction and other
tenant-related services (collectively, "Real Estate Services") with respect to
the Properties through the Operating Partnership, which is not an independent
contractor. However, with the possible exception of certain services to one or
more relatively minor tenants, the services provided to tenants by the Operating
Partnership are believed to constitute services usually or customarily furnished
or rendered in the geographic market of the Properties in connection with rental
of space for occupancy. To the extent services to tenants do not constitute
services which are usually or customarily furnished, such services are performed
by an independent contractor.
S-46
<PAGE>
The Company derives a portion of its income from the Operating Partnership's
interest as a limited partner in the Services Partnership and its ownership of
DSI which is a general partner of the Services Partnership. The Services
Partnership receives fees for Real Estate Services with respect to properties
that are not owned directly by the Operating Partnership, which fees will not
qualify as rents from real property. In addition, the Services Partnership
receives fees in consideration for the performance of management and
administrative services with respect to Properties not entirely owned by the
Operating Partnership. All or a portion of such management and administrative
fees will also not qualify as "rents from real property" for purposes of the 75%
or 95% gross income tests. Although certain of the Real Estate Services fees
allocated from the Services Partnership do not qualify under the 75% or 95%
gross income tests as "rents from real property," the Company believes that, at
least presently and in the near term, the aggregate amount of such fees (and any
other non-qualifying income) allocated to the Company in any taxable year will
not cause the Company to exceed the limits on non-qualifying income under the
75% or 95% gross income tests described above.
Pursuant to Treasury Regulations, a partner's capital interest in a
partnership determines its proportionate interest in the partnership's gross
income from partnership assets for purposes of the 75% and 95% gross income
tests. The Operating Partnership's capital interest in the Services Partnership
is 9% and DSI's capital interest in the Services Partnership is 1%. The
partnership agreement of the Services Partnership provides, however, for varying
allocations of gross income which differ from capital interests, subject to
certain limitations on the aggregate amount of gross income which may be
allocated to the Operating Partnership and DSI. The Company has requested a
ruling from the IRS that allocations according to capital interests are proper
for applying the 75% and 95% gross income tests. Although the Company
anticipates a favorable ruling from the IRS, if the Company's ruling request is
denied, the Company may be required to return a portion of income and cash
distributions received from the Services Partnership to DMI Partnership.
Should the potential amount of non-qualifying income in the future create a
risk as to the qualification of the Company as a REIT, the Company intends to
take action to avoid non-qualification as a REIT. In lieu of the Services
Partnership, the Company may elect to have certain Real Estate Services
performed through a services corporation in which the Company holds nonvoting
stock interests. If this should occur, the Company would be entitled to receive
dividends as a shareholder of the services corporation which should be
qualifying income for the purposes of the 95% gross income test. However, the
Company would not have voting control of this services corporation and the
amount of dividends available for distribution to the Company would be reduced
below comparable distributions from the Services Partnership because such a
services corporation would be subject to a corporate level tax on its taxable
income, thereby reducing the amount of cash available for distribution.
Furthermore, the Company would need to monitor the value of its stock in a
services corporation to ensure that the various asset tests described below are
not violated.
If the Company fails to satisfy one or both of the 75% or 95% gross income
tests for any taxable year, it may nevertheless qualify as a REIT for such year
if it is entitled to relief under certain provisions of the Code. It is not
possible, however, to state whether in all circumstances the Company would be
entitled to the benefit of these relief provisions. Even if these relief
provisions apply, a tax would be imposed on certain excess net income.
ASSET TESTS. In order for the Company to maintain its qualification as a
REIT, at the close of each quarter of its taxable year, it must also satisfy
three tests relating to the nature of its assets. First, at least 75% of the
value of the Company's total assets must be represented by "real estate assets,"
cash, cash items, and government securities. Second, not more than 25% of the
Company's total assets may be represented by securities other than those in the
75% assets class. Third, of the assets held in securities other than those in
the 75% assets class, the value of any one issuer's securities owned by the
Company may not exceed 5% of the value of the Company's total assets, and the
Company may not own more than 10% of any one issuer's outstanding voting
securities (excluding securities of a qualified REIT subsidiary [as defined in
the Code] or another REIT).
S-47
<PAGE>
The Company is deemed to directly hold its proportionate share of all real
estate and other assets of the Operating Partnership and should be considered to
hold its proportionate share of all assets deemed owned by the Operating
Partnership and DSI through their ownership of partnership interests in the
Services Partnership and other partnerships. As a result, management believes
that more than 75% of the Company's assets are real estate assets. In addition,
management does not expect the Company to hold (1) any securities representing
more than 10% of any one issuer's voting securities other than DSI, which is a
qualified REIT subsidiary, nor (2) securities of any one issuer exceeding 5% of
the value of the Company's gross assets (determined in accordance with generally
accepted accounting principles). In the event that the Company decides, for the
reasons noted above, to conduct Real Estate Services through a services
corporation, the Company would expect to create a structure whereby the value of
its stock holdings in such services corporation (through the stock held by the
Operating Partnership and DSI) would represent less than 5% of the value of the
Company's total assets and would represent less than 10% of the services
corporation's outstanding voting securities.
ANNUAL DISTRIBUTION REQUIREMENTS. The Company, in order to qualify as a
REIT, generally must distribute dividends (other than capital gain dividends) to
its shareholders in an amount at least equal to (A) the sum of (i) 95% of the
Company's "REITs taxable income" (computed without regard to the dividends paid
deduction and the REIT's net capital gain), and (ii) 95% of the net income
(after tax), if any, from foreclosure property, minus (B) the sum of certain
items of non-cash income. In addition, if the Company disposes of any asset
during its Restriction Period, the Company will be required to distribute at
least 95% of the built-in gain (after tax), if any, recognized on the
disposition of such asset. Such distributions must be paid in the taxable year
to which they relate, or in the following taxable year if declared before the
Company timely files its tax return for such year and if paid on or before the
first regular dividend payment after such declaration. To the extent that the
Company does not distribute all of its net capital gain or distributes at least
95%, but less than 100%, of its "REIT taxable income," as adjusted, it will be
subject to tax on the undistributed amount at regular capital gains and ordinary
corporate tax rates. Furthermore, if the Company should fail to distribute
during each calendar year at least the sum of (i) 85% of its REIT ordinary
income for such year, (ii) 95% of its REIT net capital gain income for such
year, and (iii) any undistributed taxable income from prior periods, the Company
will be subject to regular capital gains and ordinary corporate tax rates on
undistributed income and also may be subject to a 4% excise tax on undistributed
income in certain events. The Company believes that it has made and intends to
continue to make timely distributions sufficient to satisfy the annual
distribution requirements. In this regard, the partnership agreement of the
Operating Partnership authorizes the Company, as general partner, to take such
steps as may be necessary to cause the Operating Partnership to distribute to
its partners an amount sufficient to permit the Company to meet these
distribution requirements. It is possible, however, that the Company, from time
to time, may not have sufficient cash or other liquid assets to meet the 95%
distribution requirement due primarily to the expenditure of cash for
nondeductible expenses such as principal amortization or capital expenditures.
In such event, the Company may borrow or may cause the Operating Partnership to
arrange for short-term or other borrowing to permit the payment of required
dividends or pay dividends in the form of taxable stock dividends. If the amount
of nondeductible expenses exceeds non-cash deductions, the Operating Partnership
may refinance its indebtedness to reduce principal payments and borrow funds for
capital expenditures.
FAILURE TO QUALIFY. If the Company fails to qualify for taxation as a REIT
in any taxable year, the Company will be subject to tax (including any
applicable corporate alternative minimum tax) on its taxable income at regular
corporate rates. Unless entitled to relief under specific statutory provisions,
the Company also will be disqualified from taxation as a REIT for the four
taxable years following the year during which qualification was lost. It is not
possible to state whether in all circumstances the Company would be entitled to
such statutory relief.
S-48
<PAGE>
OTHER TAX CONSIDERATIONS
EFFECT OF TAX STATUS OF OPERATING PARTNERSHIP AND SERVICES PARTNERSHIP AND
OTHER PARTNERSHIPS ON REIT QUALIFICATION. All of the Company's investments are
through DSI and the Operating Partnership, which in turn hold interests in other
partnerships, including the Services Partnership. The Company believes that the
Operating Partnership, and each other partnership in which it holds an interest,
is properly treated as a partnership for tax purposes (and not as an association
taxable as a corporation). If, however, the Operating Partnership were treated
as an association taxable as a corporation, the Company would cease to qualify
as a REIT. If the Services Partnership or any of the other partnerships were
treated as an association taxable as a corporation and the Operating
Partnership's interest in such partnership exceeded 10% of the partnership's
voting interests or the value of such interest exceeded 5% of the value of the
Company's assets, the Company would cease to qualify as a REIT. Furthermore, in
such a situation, any partnerships treated as a corporation would be subject to
corporate income taxes, and distributions from any such partnership to the
Company would be treated as dividends, which are not taken into account in
satisfying the 75% gross income test described above and which therefore could
make it more difficult for the Company to meet the 75% asset test described
above.
TAX ALLOCATIONS WITH RESPECT TO THE PROPERTIES. The Operating Partnership
was formed by way of contributions of appreciated property (including certain of
the Properties) to the Operating Partnership. When property is contributed to a
partnership in exchange for an interest in the partnership, the partnership
generally takes a carryover basis in that property for tax purposes equal to the
adjusted basis of the contributing partner in the property, rather than a basis
equal to the fair market value of the property at the time of contribution (this
difference is referred to as "Book-Tax Difference"). The partnership agreement
of the Operating Partnership requires allocations of income, gain, loss and
deduction with respect to a contributed Property be made in a manner consistent
with the special rules of Section 704(c) of the Code and the regulations
thereunder, which will tend to eliminate the Book-Tax Differences with respect
to the contributed Properties over the life of the Operating Partnership.
However, because of certain technical limitations, the special allocation rules
of Section 704(c) may not always entirely eliminate the Book-Tax Differences on
an annual basis or with respect to a specific taxable transaction such as a
sale. Thus, the carryover basis of the contributed Properties in the hands of
the Operating Partnership could cause the Company (i) to be allocated lower
amounts of depreciation and other deductions for tax purposes than would be
allocated to the Company if all Properties were to have a tax basis equal to
their fair market value at the time of contribution, and (ii) possibly to be
allocated taxable gain in the event of a sale of such contributed Properties in
excess of the economic or book income allocated to the Company as a result of
such sale. The foregoing principles also apply in determining the earnings and
profits of the Company for purposes of determining the portion of distributions
taxable as dividend income. The application of these rules over time may result
in a higher portion of distributions being taxed as dividends than would have
occurred had the Company purchased its interests in the Properties at their
agreed values.
STATE AND LOCAL TAXES. The Company or its shareholders or both may be
subject to state, local or other taxation in various state, local or other
jurisdictions, including those in which they transact business or reside. The
tax treatment in such jurisdictions may differ from the Federal income tax
consequences discussed above.
S-49
<PAGE>
UNDERWRITING
Subject to the terms and conditions contained in the underwriting agreement
(the "Underwriting Agreement"), the Company has agreed to sell to each of the
Underwriters named below, and each of the Underwriters for whom Merrill Lynch,
Pierce, Fenner & Smith Incorporated, Alex. Brown & Sons Incorporated, Dean
Witter Reynolds Inc., A.G. Edwards & Sons, Inc. and Legg Mason Wood Walker,
Incorporated are acting as representatives (the "Representatives") has severally
agreed to purchase, the respective number of shares of Common Stock set forth
below opposite their respective names. The Underwriting Agreement provides that
the obligations of the Underwriters are subject to certain conditions precedent
and that the Underwriters will be obligated to purchase all of the shares of
Common Stock if any are purchased.
<TABLE>
<CAPTION>
NUMBER OF SHARES
UNDERWRITER OF COMMON STOCK
- --------------------------------------------------------------------------- -----------------
<S> <C>
Merrill Lynch, Pierce, Fenner & Smith
Incorporated.....................................................
Alex. Brown & Sons Incorporated............................................
Dean Witter Reynolds Inc...................................................
A.G. Edwards & Sons, Inc...................................................
Legg Mason Wood Walker, Incorporated.......................................
-----------------
Total.......................................................... 3,000,000
-----------------
-----------------
</TABLE>
John D. Peterson, a Director of the Company, is Chairman of the Board and
Chief Executive Officer of City Securities Corporation, which is acting as one
of the Underwriters in the Offering.
The Representatives have advised the Company that the Underwriters propose
initially to offer the Common Stock to the public at the public offering price
set forth on the cover page of this Prospectus Supplement, and to certain
dealers at such price less a concession not in excess of $ per share. The
Underwriters may allow, and such dealers may reallow, a discount not in excess
of $ per share on sales to certain other dealers. After the Offering, the
public offering price, concession and discounts may be changed.
The Company has granted an option to the Underwriters, exercisable during
the 30-day period after the date of this Prospectus Supplement, to purchase up
to an aggregate of 450,000 additional shares of Common Stock at the price to the
public set forth on the cover page to this Prospectus Supplement, less the
underwriting discount. The Underwriters may exercise this option only to cover
over-allotments, if any. To the extent that the Underwriters exercise this
option, each Underwriter will be obligated, subject to certain conditions, to
purchase the number of additional shares of Common Stock proportionate to such
Underwriter's initial amount reflected in the foregoing table.
The Company and the executive officers of the Company and the Directors have
agreed that for a period of 90 days from the date of this Prospectus Supplement
they will not, without prior and written consent of the Representatives, offer,
sell or otherwise dispose of any shares of Common Stock or any security
convertible into or exercisable for shares of Common Stock (except for issuances
by the Company pursuant to the Stock Option or Dividend Reinvestment Plans and
certain other agreements).
The Company has agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act of 1933, as amended,
or to contribute to payments the Underwriters may be required to make in respect
thereof.
LEGAL MATTERS
In addition to the matters discussed under "Legal Matters" in the
accompanying Prospectus, the description of Federal income tax matters contained
in this Prospectus Supplement entitled "Federal Income Tax Considerations" is
based upon the opinion of Rogers & Wells.
S-50
<PAGE>
PROSPECTUS
$320,000,000
DUKE REALTY INVESTMENTS, INC.
COMMON STOCK, PREFERRED STOCK AND DEBT SECURITIES
Duke Realty Investments, Inc. (the "Company") may from time to time offer in
one or more series (i) shares of Common Stock, $.01 par value ("Common Stock"),
(ii) shares of preferred stock, $.01 par value ("Preferred Stock") and (iii)
unsecured debt securities ("Debt Securities") with an aggregate public offering
price of up to $320,000,000 (or its equivalent based on the exchange rate at the
time of sale) in amounts, at prices and on terms to be determined at the time of
offering. The Common Stock, Preferred Stock and Debt Securities, (collectively,
the "Securities") may be offered, separately or together, in separate series in
amounts, at prices and on terms to be set forth in one or more supplements to
this Prospectus (each a "Prospectus Supplement").
The specific terms of the 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 Common Stock, any initial
public offering price or, if applicable, information regarding the exchange of
units of partnership interest ("Units") of Duke Realty Limited Partnership (the
"Operating Partnership") for Common Stock; (ii) in the case of Preferred Stock,
the specific title and stated value, any dividend, liquidation, redemption,
conversion, voting and other rights, and any initial public offering price; and
(iii) in the case of Debt Securities, the specific title, aggregate principal
amount, 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, terms for sinking fund
payments, terms for conversion into Preferred Stock or Common Stock of the
Company, covenants and any initial public offering price. In addition, such
specific terms may include limitations on direct or beneficial ownership and
restrictions on transfer of the 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 Securities covered
by such Prospectus Supplement.
The 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 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 an accompanying Prospectus Supplement. See "Plan of
Distribution." No Securities may be sold without delivery of a Prospectus
Supplement describing the method and terms of the offering of such series of
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 ATTORNEY GENERAL OF THE STATE OF NEW YORK HAS NOT PASSED ON OR ENDORSED THE
MERITS OF THIS OFFERING. ANY REPRESENTATION TO THE CONTRARY IS UNLAWFUL.
The date of this Prospectus is August 29, 1994.
<PAGE>
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and, in accordance
therewith, files reports and other information with the Securities and Exchange
Commission (the "Commission"). Such reports, proxy statements and other
information can be inspected and copied at the Public Reference Section
maintained by the Commission at Room 1024, 450 Fifth Street, N.W., Washington,
D.C. 20549; Chicago Regional Office, 500 West Madison Street, Suite 1400,
Chicago, Illinois 60661; and New York Regional Office, 7 World Trade Center, New
York, New York 10048. Such reports, proxy statements and other information
concerning the Company can also be inspected at the offices of the New York
Stock Exchange, 20 Broad Street, New York, New York 10005.
The Company will provide without charge to each person to whom a copy of
this Prospectus is delivered, upon their written or oral request, a copy of any
or all of the documents incorporated herein by reference (other than exhibits to
such documents). Written requests for such copies should be addressed to 8888
Keystone Crossing, Suite 1200, Indianapolis, Indiana 46240, Attn: Investor
Relations, telephone number (317) 574-3531.
The Company has filed with the Commission a registration statement on Form
S-3 (the "Registration Statement") under the Securities Act of 1933 as amended
(the "Securities Act"), with respect to the Securities offered hereby. For
further information with respect to the Company and the Securities offered
hereby, reference is made to the Registration Statement and exhibits thereto.
Statements contained in this Prospectus as to the contents of any contract or
other documents are not necessarily complete, and in each instance, reference is
made to the copy of such contract or documents filed as an exhibit to the
Registration Statement, each such statement being qualified in all respects by
such reference.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed by the Company under the Exchange Act with the
Commission are incorporated in this Prospectus by reference and are made a part
hereof:
1. The Company's Annual Report on Form 10-K for the year ended December 31,
1993.
2. The Company's Quarterly Reports on Form 10-Q for the quarters ended
March 31, 1994 and June 30, 1994.
3. The Company's Current Report on Form 8-K dated August 26, 1994.
4. The financial statements of Duke Associates contained on pages F-22
through F-35 of the Prospectus included in the Company's Registration
Statement on Form S-2, as amended, File No. 33-64038.
Each document filed subsequent to the date of this Prospectus pursuant to
Section 13(a), 13(c), 14 or 15(d) of the Exchange Act and prior to termination
of the offering of all Securities to which this Prospectus relates shall be
deemed to be incorporated by reference in this Prospectus and shall be part
hereof from the date of filing of such document. Any statement contained herein
or in a document incorporated or deemed to be incorporated by reference herein
shall be deemed to be modified or superseded for purposes of this Prospectus to
the extent that a statement contained in this Prospectus (in the case of a
statement in a previously-filed document incorporated or deemed to be
incorporated by reference herein), in any accompanying Prospectus Supplement
relating to a specific offering of Securities or in any other subsequently filed
document that is also incorporated or deemed to be incorporated by reference
herein, modifies or supersedes such statement. Any such statement so modified or
superseded shall not be deemed, except as so modified or superseded, to
constitute a part of this Prospectus or any accompanying Prospectus Supplement.
Subject to the foregoing, all information appearing in this Prospectus and each
accompanying Prospectus Supplement is qualified in its entirety by the
information appearing in the documents incorporated by reference.
2
<PAGE>
THE COMPANY
The Company is a fully integrated commercial real estate firm which, at June
30, 1994, owned direct or indirect interests in a portfolio of 120
income-producing industrial, office and retail properties (the "Properties"),
together with approximately 1,000 acres of land (the "Land") for future
development. The Properties consist of industrial, office and retail properties,
located in Indiana, Ohio, Illinois, Kentucky, Michigan, Missouri, Tennessee and
Wisconsin. As of June 30, 1994, the Properties consisted of 11.9 million square
feet, which were approximately 95% leased to approximately 1,000 tenants.
All of the Company's interests in the Properties and Land are held by, and
substantially all of its operations relating to the Properties and Land are
conducted through the Operating Partnership. The Operating Partnership holds a
100% interest in all but 22 of the Properties and substantially all of the Land.
The Company controls the Operating Partnership as the sole general partner and
owner, as of June 30, 1994, of approximately 78% of the outstanding Units.
Beginning October 4, 1994 (or earlier upon the occurrence of certain change of
control events), each Unit may be exchanged by the holder thereof for one share
(subject to certain adjustments) of the Common Stock. With each such exchange,
the number of Units owned by the Company and, therefore, the Company's
percentage interest in the Operating Partnership, will increase.
In addition to owning the Properties and the Land, the Operating Partnership
also provides services associated with leasing, property management, real estate
development, construction and miscellaneous tenant services (the "Related
Businesses") for the Properties. The Company also provides services associated
with the Related Businesses to third parties and owners of indirectly owned
Properties through Duke Realty Services Limited Partnership on a fee basis.
The Company's experienced staff of approximately 350 employees at June 30,
1994 provides a full range of real estate services from executive offices
headquartered in Indianapolis, and from five regional offices located in the
Cincinnati, Columbus, Decatur, Detroit and Nashville metropolitan areas.
The Company is an Indiana corporation that was originally incorporated in
the State of Delaware in 1985, and reincorporated in the State of Indiana in
1992. The Company's executive offices are located at 8888 Keystone Crossing,
Suite 1200, Indianapolis, Indiana 46240, and its telephone number is (317)
574-3531.
USE OF PROCEEDS
The Company is required by the terms of the partnership agreement for the
Operating Partnership to invest the net proceeds of any sale of Common Stock or
Preferred Stock in the Operating Partnership in exchange for additional Units.
Unless otherwise specified in the applicable Prospectus Supplement, the Company
and the Operating Partnership intend to use the net proceeds from the sale of
Securities for general corporate purposes, including the development and
acquisition of additional properties and other acquisition transactions, the
payment of certain outstanding debt, and improvements to certain properties in
the Company's portfolio.
RATIOS OF EARNINGS TO FIXED CHARGES
The following table sets forth the Company's consolidated ratios of earnings
to fixed charges for the periods shown:
<TABLE>
<CAPTION>
SIX MONTHS YEAR ENDED DECEMBER 31,
ENDED JUNE -----------------------------------------------------------------
30, 1994 1993 1992 1991 1990 1989
- ------------- --------- ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
2.46x 1.56x .88x(1) .75x(1) .75x(1) .92x(1)
<FN>
- ------------
(1) Earnings were inadequate to cover fixed charges by $637,000 in 1989,
$1,886,000 in 1990, $2,006,000 in 1991 and $903,000 in 1992. These
deficiencies occurred prior to the Company's reorganization in October,
1993.
</TABLE>
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The ratios of earnings to fixed charges were computed by dividing earnings
by fixed charges. For this purpose, earnings consist of income from continued
operations and fixed charges. Fixed charges consist of interest expense
(including interest costs capitalized) and the amortization of debt issuance
costs. To date, the Company has not issued any Preferred Stock; therefore, the
ratios of earnings to combined fixed charges and preferred share dividends are
unchanged from the ratios presented in this section.
DESCRIPTION OF DEBT SECURITIES
GENERAL
The Debt Securities will be direct unsecured obligations of the Company and
may be either senior Debt Securities ("Senior Securities") or subordinated Debt
Securities ("Subordinated Securities"). The Debt Securities will be issued under
one or more indentures. Senior Securities and Subordinated Securities may be
issued pursuant to separate indentures (respectively, a "Senior Indenture" and a
"Subordinated Indenture"), in each case between the Company and a trustee (a
"Trustee"). The Indentures will be subject to and governed by the Trust
Indenture Act of 1939, as amended (the "TIA"). The statements made under this
heading relating to the Debt Securities and the Indentures are summaries of the
anticipated provisions thereof and do not purport to be complete and are
qualified in their entirety by reference to the Indentures and such Debt
Securities.
TERMS
The indebtedness represented by Subordinated Securities will be subordinated
in right of payment to the prior payment in full of the Senior Debt of the
Company as described under "-- Subordination."
Except as set forth in any Prospectus Supplement, the Debt Securities may be
issued without limit as to aggregate principal amount, in one or more series, in
each case as established from time to time by the Company or as established in
the applicable Indenture or in one or more indentures supplemental to such
Indenture. All Debt Securities of one series need not be issued at the same time
and, unless otherwise provided, a series may be reopened, without the consent of
the holders of the Debt Securities of such series, for issuances of additional
Debt Securities of such series.
It is anticipated that any Indenture will provide that there may be 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. In the event that two or more
persons are acting as Trustee with respect to different series of Debt
Securities, each such Trustee shall be a Trustee of a trust under the applicable
Indenture separate and apart from the trust administered by any other Trustee,
and, except as otherwise indicated herein, any action described herein to be
taken by each 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 Prospectus Supplement relating to the series of Debt Securities being
offered will contain the specific terms thereof, including:
(1) The title of such Debt Securities and whether such Debt Securities are
Senior Securities or Subordinated Securities;
(2) The aggregate principal amount of such Debt Securities and any limit on
such 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 that is convertible into
Common Stock or Preferred Stock, or the method by which any such portion
shall be determined;
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<PAGE>
(4) If convertible, the terms on which such Debt Securities are convertible,
including the initial conversion price or rate and the conversion period
and any applicable limitations on the ownership or transferability of
the Common Stock or Preferred Stock receivable on conversion;
(5) The date or dates, or the method for determining such 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 such date or dates,
from which any such interest will accrue, the dates on which any such
interest will be payable, the record dates for such interest payment
dates, or the method by which 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) and
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 of 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
other 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 other 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 of (and premium, if any) or
interest, if any, on such Debt Securities may be determined with
reference to an index, formula or other method (which index, formula or
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;
(13) The events of default or covenants of such Debt Securities, to the
extent different from those described herein;
(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 and,
if in registered form, the denominations thereof if other than $1,000
and any integral multiple thereof and, if in bearer form, the
denominations thereof and terms and conditions relating thereto;
(16) The applicability, if any, of the defeasance and covenant defeasance
provisions described herein, or any modification thereof;
(17) Whether and under what circumstances the Company will pay any 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; and
(18) Any other terms of such Debt Securities.
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<PAGE>
The Debt Securities may provide for less than the entire principal amount
thereof to be payable upon declaration of acceleration of the maturity thereof
("Original Issue Discount Securities"). Special U.S. federal income tax,
accounting and other considerations applicable to Original Issue Discount
Securities will be described in the applicable Prospectus Supplement.
Except as may be set forth in any 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
the event of a highly leveraged or similar transaction involving the Company or
in the event of a change of control. Restrictions on ownership and transfers of
the Company's Common Stock and Preferred Stock are designed to preserve its
status as a REIT and, therefore, may act to prevent or hinder a change of
control. See "Description of Common Stock -- Certain Provisions Affecting Change
of Control" and "Description of Preferred Stock -- Restrictions on Ownership."
Reference is made to the applicable Prospectus Supplement for information with
respect to any deletions from, modifications of, or additions to, the events of
default or covenants of the Company that are described below, including any
addition of a covenant or other provision providing event risk or similar
protection.
DENOMINATION, 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 applicable premium, if any) and interest on any series of Debt
Securities will be payable at the corporate trust office of the Trustee, the
address of which will be stated in the applicable Prospectus Supplement;
provided that, at the option of the Company, 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.
Subject to certain limitations imposed upon Debt Securities issued in
book-entry form, the Debt Securities of any series will be exchangeable for
other Debt Securities of the same series and of a like aggregate principal
amount and tenor of different authorized denominations upon surrender of such
Debt Securities at the corporate trust office of the applicable Trustee referred
to above. In addition, subject to certain limitations imposed upon Debt
Securities issued in book-entry form, the Debt Securities of any series may be
surrendered for conversion or registration of transfer or exchange 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 applicable 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 through 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 shall be required to (i) issue, register
the transfer of or exchange Debt Securities of any series during a period
beginning at the opening of business 15 days before any selection of Debt
Securities of that series to be redeemed and ending at the close of business on
the day of mailing of the relevant notice of redemption; (ii) register the
transfer of or exchange any Debt Security, or portion thereof, called for
redemption, except the unredeemed portion of any Debt Security being redeemed in
part; or (iii) issue, register the transfer of or exchange any Debt Security
that 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.
6
<PAGE>
MERGER, CONSOLIDATION OR SALE
The Company will be permitted to consolidate with, or sell, lease or convey
all or substantially all of its assets to, or merge with or into, any other
entity provided that (a) either the Company shall be the continuing entity, or
the successor entity (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 shall expressly assume payment of the principal of (and premium, if any)
and interest on all of the Debt Securities and the due and punctual performance
and observance of all of the covenants and conditions contained in each
Indenture; (b) immediately after giving effect to such transaction and treating
any indebtedness that 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 Indentures, and no
event which, after notice or the lapse of time, or both, would become such an
event of default, shall have occurred and be continuing; and (c) an officers'
certificate and legal opinion covering such conditions shall be delivered to
each Trustee.
CERTAIN COVENANTS
EXISTENCE. Except as permitted under "-- Merger, Consolidation or Sale,"
the Company will be required 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, by-laws and statute) and franchises; PROVIDED,
HOWEVER, that the Company shall not be required to preserve any right or
franchise if it determines that the preservation thereof is no longer desirable
in the conduct of its business.
MAINTENANCE OF PROPERTIES. The Company will be required to cause all of its
material properties used or useful in the conduct of its business or the
business of any subsidiary to be maintained and kept in good condition, repair
and working order and supplied with all necessary equipment and will cause to be
made all necessary repairs, renewals, replacements, betterments and improvements
thereof, all as in the judgment of the Company may be necessary so that the
business carried on in connection therewith may be properly and advantageously
conducted at all times.
INSURANCE. The Company will be required to, and will be required to cause
each of its subsidiaries to, keep all of its insurable properties insured
against loss or damage at least equal to their then full insurable value with
insurers of recognized responsibility and, if described in the applicable
Prospectus Supplement, having a specified rating from a recognized insurance
rating service.
PAYMENT OF TAXES AND OTHER CLAIMS. The Company will be required to pay or
discharge or cause to be paid or discharged, before the same shall become
delinquent, (i) all taxes, assessments and governmental charges levied or
imposed upon it or any subsidiary or upon the income, profits or property of the
Company or any subsidiary, and (ii) all lawful claims for labor, materials and
supplies which, if unpaid, might by law become a lien upon the property of the
Company or any subsidiary; PROVIDED, HOWEVER, that the Company shall not be
required to pay or discharge or cause to be paid or discharged any such tax,
assessment, charge or claim whose amount, applicability or validity is being
contested in good faith.
PROVISION OF FINANCIAL INFORMATION. Whether or not the Company is subject
to Section 13 or 15(d) of the Exchange Act, the Company will be required within
15 days of 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 to (i) 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, (ii) file with
the applicable Trustee 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, and (iii) promptly upon written request and payment of the
reasonable cost of duplication and delivery, supply copies of such documents to
any prospective holder.
7
<PAGE>
ADDITIONAL COVENANTS. Any additional covenants of the Company with respect
to any series of Debt Securities will be set forth in the Prospectus Supplement
relating thereto.
EVENTS OF DEFAULT, NOTICE AND WAIVER
Each 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 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 or breach of any other covenant or
warranty of the Company contained in the Indenture (other than a covenant added
to the Indenture solely for the benefit of a series of Debt Securities issued
thereunder other than such series), continued for 60 days after written notice
as provided in the applicable Indenture; (e) a default under any bond,
debenture, note or other evidence of indebtedness for money borrowed by the
Company or the Operating Partnership (including obligations under leases
required to be capitalized on the balance sheet of the lessee under generally
accepted accounting principles but not including any indebtedness or obligations
for which recourse is limited to property purchased) in an aggregate principal
amount in excess of $5,000,000 or under any mortgage, indenture or instrument
under which there may be issued or by which there may be secured or evidenced
any indebtedness for money borrowed by the Company or the Operating Partnership
(including such leases, but not including such indebtedness or obligations for
which recourse is limited to property purchased) in an aggregate principal
amount in excess of $5,000,000, whether such indebtedness now exists or shall
hereafter be created which default shall have resulted in such indebtedness
becoming or being declared due and payable prior to the date on which it would
otherwise have become due and payable or such obligations being accelerated,
without such acceleration having been rescinded or annulled; (f) certain events
of bankruptcy, insolvency or reorganization, or court appointment of a receiver,
liquidator or trustee of the Company or any Significant Subsidiary of the
Company; and (g) any other event of default provided with respect to a
particular 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 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 will have the
right to 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 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
any Indenture, as the case may be) has been made, but before a judgment or
decree for payment of the money due has been obtained by the applicable Trustee,
the holders of not less than a majority in principal amount of outstanding Debt
Securities of such series (or of all Debt Securities then outstanding under the
applicable Indenture, as the case may be) may rescind and annul such declaration
and its consequences if (a) the Company shall have deposited with the applicable
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 the applicable 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 non-payment of accelerated principal (or
specified portion thereof), with respect to Debt Securities of such series (or
of all Debt Securities then outstanding under the applicable Indenture, as the
case may be) have been cured or waived as provided in such Indenture. Any
Indenture will also provide that the holders of not less than a majority in
principal amount of the outstanding Debt Securities of any series (or of all
Debt Securities then outstanding under the applicable Indenture, as the case may
be) may waive any past default with respect to such series and its consequences,
except a default (x) in the payment of the principal of (or premium, if any)
8
<PAGE>
or interest on any Debt Security of such series or (y) in respect of a covenant
or provision contained in the applicable Indenture that cannot be modified or
amended without the consent of the holder of each outstanding Debt Security
affected thereby.
Each Trustee will be required to give notice to the holders of Debt
Securities within 90 days of a default under the applicable Indenture unless
such default shall have been cured or waived; PROVIDED, HOWEVER, that such
Trustee may withhold notice to the holders of any series of Debt Securities of
any default with respect to such series (except a default in the payment of the
principal of (or premium, 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 such Trustee
consider such withholding to be in the interest of such holders.
Each Indenture will provide that no holders of Debt Securities of any series
may institute any proceedings, judicial or otherwise, with respect to such
Indenture or for any remedy thereunder, except in the cases of 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 indemnity reasonably satisfactory to it. 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 such Debt Securities at the respective due
dates thereof.
Subject to provisions in each Indenture relating to its duties in case of
default, no Trustee will be under any obligation to exercise any of its rights
or powers under an 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 the Trustee thereunder 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 all Debt Securities then
outstanding under an Indenture, as the case may be) shall have the right to
direct the time, method and place of conducting any proceeding for any remedy
available to the applicable Trustee, or of exercising any trust or power
conferred upon such Trustee. However, a Trustee may refuse to follow any
direction which is in conflict with any law or the applicable 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 will be
required to deliver to each Trustee a certificate, signed by one of several
specified officers of the Company, stating whether or not such officer has
knowledge of any default under the applicable Indenture and, if so, specifying
each such default and the nature and status thereof.
MODIFICATION OF THE INDENTURES
Modifications and amendments of an Indenture will be permitted to be made
only with the consent of the holders of not less than a majority in principal
amount of all outstanding Debt Securities issued under such Indenture which are
affected by such modification or amendment; PROVIDED, HOWEVER, that no such
modification or amendment may, without the consent of the holder of each such
Debt Security affected thereby, (a) change the stated maturity of the principal
of, or any installment of interest (or premium, if any) on, any such Debt
Security; (b) reduce the principal amount of, or the rate or 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 coin or
currency, for payment of principal of, 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
above-stated percentage of outstanding Debt Securities of any series necessary
to modify or amend the applicable Indenture, to waive compliance with certain
provisions thereof or certain defaults and consequences thereunder or to reduce
the quorum or voting requirements set forth in the applicable Indenture; or
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<PAGE>
(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 not less than a majority in principal amount of outstanding
Debt Securities issued under an Indenture will have the right to waive
compliance by the Company with certain covenants in such Indenture.
Modifications and amendments of an Indenture will be permitted to be made by
the Company and the respective Trustee thereunder without the consent of any
holder of Debt Securities for any of the following purposes: (i) to evidence the
succession of another person to the Company as obligor under such Indenture;
(ii) to add to the covenants of the Company for the benefit of the holders of
all or any series of Debt Securities or to surrender any right or power
conferred upon the Company in such Indenture; (iii) to add events of default for
the benefit of the holders of all or any series of Debt Securities; (iv) to add
or change any provisions of an Indenture to facilitate the issuance of, or to
liberalize certain terms of, Debt Securities in bearer form, or to permit or
facilitate the issuance of Debt Securities in uncertificated form, PROVIDED that
such action shall not adversely affect the interests of the holders of the Debt
Securities of any series in any material aspect; (v) to change or eliminate any
provisions of an Indenture, PROVIDED that any such change of elimination shall
become effective only when there are no Debt Securities outstanding of any
series created prior thereto which are entitled to the benefit of such
provision; (vi) to secure the Debt Securities; (vii) to establish the form or
terms of Debt Securities of any series, including the provisions and procedures,
if applicable, for the conversion of such Debt Securities into Common Stock or
Preferred Stock of the Company; (viii) to provide for the acceptance of
appointment by a successor Trustee or facilitate the administration of the
trusts under an Indenture by more than one Trustee; (ix) to cure any ambiguity,
defect or inconsistency in an Indenture, PROVIDED that such action shall not
adversely affect the interests of holders of Debt Securities of any series
issued under such Indenture; or (x) to supplement any of the provisions of an
Indenture to the extent necessary to permit or facilitate defeasance and
discharge of any series of such Debt Securities, PROVIDED that such action shall
not adversely affect the interests of the holders of the Debt Securities of any
series.
Each Indenture will provide that in determining whether the holders of the
requisite principal amount of outstanding Debt Securities of a series have given
any request, demand, authorization, direction, notice, consent or waiver
thereunder or whether a quorum is present at a meeting of holders of Debt
Securities, (i) the principal amount of an Original Issue Discount Security that
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, (ii) the principal amount
of any Debt 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 Original
Issue Discount Security, the U.S. dollar equivalent on the issue date of such
Debt Security of the amount determined as provided in (i) above), (iii) the
principal amount of an indexed security that 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 pursuant such
Indenture, and (iv) 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.
Each Indenture will contain provisions for convening meetings of the holders
of Debt Securities of a series. A meeting will be permitted to be called at any
time by the applicable Trustee, and also, upon request, by the Company or the
holders of at least 10% in principal amount of the outstanding Debt Securities
of such series, in any such case upon notice given as provided in the Indenture.
Except for any consent that must be given by the holder of each Debt Security
affected by certain modifications and amendments of an 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
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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 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
an 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 foregoing provisions, any Indenture will provide that 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 and other action that such 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: (i) there shall be no minimum
quorum requirement for such meeting, and (ii) the principal amount of the
outstanding Debt Securities of such series that vote in favor of such request,
demand, authorization, direction, notice, consent, waiver or other action shall
be taken into account in determining whether such request, demand,
authorization, direction, notice, consent, waiver or other action has been made,
given or taken under such Indenture.
SUBORDINATION
Upon any distribution to creditors of the Company in a liquidation,
dissolution or reorganization, the payment of the principal of and interest on
any Subordinated Securities will be subordinated to the extent provided in the
applicable Indenture in right of payment to the prior payment in full of all
Senior Debt (as defined below), but the obligation of the Company to make
payment of the principal and interest on such Subordinated Securities will not
otherwise be affected. No payment of principal or interest will be permitted to
be made on Subordinated Securities at any time if a default on Senior Debt
exists that permits the holders of such Senior Debt to accelerate its maturity
and the default is the subject of judicial proceedings or the Company receives
notice of the default. After all Senior Debt is paid in full and until the
Subordinated Securities are paid in full, holders will be subrogated to the
rights of holders of Senior Debt to the extent that distributions otherwise
payable to holders have been applied to the payment of Senior Debt. By reason of
such subordination, in the event of a distribution of assets upon insolvency,
certain general creditors of the Company may recover more, ratably, than holders
of Subordinated Securities.
Senior Debt will be defined in the applicable Indenture as the principal of
and interest on, or substantially similar payments to be made by the Company in
respect of, the following, whether outstanding at the date of execution of the
applicable Indenture or thereafter incurred, created or assumed: (a)
indebtedness of the Company for money borrowed or represented by purchase-money
obligations, (b) indebtedness of the Company evidenced by notes, debentures, or
bonds, or other securities issued under the provisions of an indenture, fiscal
agency agreement or other agreement, (c) obligations of the Company as lessee
under leases of property either made as part of any sale and leaseback
transaction to which the Company is a party or otherwise, (d) indebtedness of
partnerships and joint ventures which is included in the consolidated financial
statements of the Company, (e) indebtedness, obligations and liabilities of
others in respect of which the Company is liable contingently or otherwise to
pay or advance money or property or as guarantor, endorser or otherwise or which
the Company has agreed to purchase or otherwise acquire, and (f) any binding
commitment of the Company to fund any real estate investment or to fund any
investment in any entity making such real estate investment, in each case other
than (1) any such indebtedness, obligation or
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liability referred to in clauses (a) through (f) above as to which, in the
instrument creating or evidencing the same pursuant to which the same is
outstanding, it is provided that such indebtedness, obligation or liability is
not superior in right of payment to the Subordinated Securities or ranks PARI
PASSU with the Subordinated Securities, (2) any such indebtedness, obligation or
liability which is subordinated to indebtedness of the Company to substantially
the same extent as or to a greater extent than the Subordinated Securities are
subordinated, and (3) the Subordinated Securities. There will not be any
restrictions in an Indenture relating to Subordinated Securities upon the
creation of additional Senior Debt.
If this Prospectus is being delivered in connection with a series of
Subordinated Securities, the accompanying Prospectus Supplement or the
information incorporated herein by reference will set forth the approximate
amount of Senior Debt outstanding as of the end of the Company's most recent
fiscal quarter.
DISCHARGE, DEFEASANCE AND COVENANT DEFEASANCE
The Company may be permitted under the applicable Indenture to discharge
certain obligations to holders of any series of Debt Securities issued
thereunder that have not already been delivered to the applicable Trustee for
cancellation and that either have become due and payable or will become due and
payable within one year (or scheduled for redemption within one year) by
irrevocably depositing with the applicable Trustee, in trust, funds in such
currency or currencies, currency unit or units or composite currency or
currencies in which such Debt Securities are payable in an amount sufficient to
pay the entire indebtedness on such Debt Securities in respect of principal (and
premium, 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.
An Indenture may provide that, if certain provisions thereof are made
applicable to the Debt Securities of or within any series pursuant to such
Indenture, the Company may elect either (a) to defease and be discharged from
any and all obligations with respect to such Debt Securities (except for the
obligation to pay additional amounts, if any, upon the occurrence of certain
events of tax, assessment or governmental charge with respect to payments on
such Debt Securities and the obligations to register the transfer or exchange of
such Debt Securities, to replace temporary or mutilated, destroyed, lost or
stolen Debt Securities, to maintain an office or agency in respect of such Debt
Securities and to hold moneys for payment in trust) ("defeasance") or (b) to be
released from its obligations with respect to such Debt Securities under an
Indenture (being the restrictions described under "-- Certain Covenants") or, if
provided pursuant to an Indenture, its obligations with respect to any other
covenant, and any omission to comply with such obligations shall not constitute
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 will only be permitted to 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, will be required to 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 the Indenture.
"Government Obligations" means securities which are (i) direct obligations
of the United States of America or the government which issued the foreign
currency in which the Debt Securities of a particular
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series are payable, for the payment of which its full faith and credit is
pledged or (ii) obligations of a person controlled or supervised by and acting
as an agency or instrumentality of the United States of America or such
government which issued the foreign currency in which the Debt Securities of
such series are payable, the payment of which is unconditionally guaranteed as a
full faith and credit obligation by the United States of America or such other
government, which, in either case, are not callable or redeemable at the option
of the issuer thereof, and 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 receiving 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 will 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 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 transactions by a central bank or other public
institutions of or within the international banking community, (ii) the ECU both
within the European Monetary System and for the settlement of transactions by
public institutions of or within the European Communities or (iii) any currency
unit or composite currency other than the ECU for the purposes for which it was
established. Unless otherwise provided in the applicable Prospectus Supplement,
all payments of principal of (and premium, 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
specified sections of an Indenture (which sections would no longer be applicable
to such Debt Securities) or described in clause (g) under "Events of Default,
Notice and Waiver" with respect to any other covenant as to which there has been
covenant defeasance, the amount in such currency, currency unit or composite
currency in which such Debt Securities are payable, and Government Obligations
on deposit with the applicable Trustee, will be sufficient to pay amounts due on
such Debt Securities at the time of their stated maturity but may not be
sufficient to pay amounts due on such Debt Securities at the time of the
acceleration resulting from such event of default. However, the Company would
remain liable to make payment of such amounts due at the time of acceleration.
The applicable Prospectus Supplement may further describe the provisions, if
any, permitting such defeasance or covenant defeasance, including any
modifications to the provisions described above, with respect to the Debt
Securities of or within a particular series.
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CONVERSION RIGHTS
The terms and conditions, if any, upon which the Debt Securities are
convertible into Common Stock or Preferred Stock will be set forth in the
applicable Prospectus Supplement relating thereto. Such terms will include
whether such Debt Securities are convertible into shares of Common Stock or
Preferred 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.
GLOBAL 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
GENERAL
The Company is authorized to issue 5,000,000 shares of preferred stock, $.01
par value per share, of which no Preferred Stock was outstanding at June 30,
1994.
The following description of the Preferred Stock sets forth certain general
terms and provisions of the Preferred Stock to which any Prospectus Supplement
may relate. The statements below describing the Preferred Stock are in all
respects subject to and qualified in their entirety by reference to the
applicable provisions of the Company's Amended and Restated Articles of
Incorporation (the "Articles of Incorporation") and Bylaws and any applicable
amendment to the Articles of Incorporation designating terms of a series of
Preferred Stock (a "Designating Amendment").
TERMS
Subject to the limitations prescribed by the Articles of Incorporation, the
board of directors is authorized to fix the number of shares constituting each
series of Preferred Stock and the designations and powers, preferences and
relative, participating, optional or other special rights and qualifications,
limitations or restrictions thereof, including such provisions as may be desired
concerning voting, redemption, dividends, dissolution or the distribution of
assets, conversion or exchange, and such other subjects or matters as may be
fixed by resolution of the board of directors. The Preferred Stock will, when
issued, be fully paid and nonassessable by the Company (except as described
under "-- Shareholder Liability" below) and will have no preemptive rights.
Reference is made to the Prospectus Supplement relating to the Preferred
Stock offered thereby for specific terms, including:
(1) The title and stated value of such Preferred Stock;
(2) The number of shares of such Preferred Stock offered, the liquidation
preference per share and the offering price of such Preferred Stock;
(3) The dividend rate(s), period(s) and/or payment date(s) or method(s) of
calculation thereof applicable to such Preferred Stock;
(4) The date from which dividends on such Preferred Stock shall accumulate,
if applicable;
(5) The procedures for any auction and remarketing, if any, for such
Preferred Stock;
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(6) The provision for a sinking fund, if any, for such Preferred Stock;
(7) The provision for redemption, if applicable, of such Preferred Stock;
(8) Any listing of such Preferred Stock on any securities exchange;
(9) The terms and conditions, if applicable, upon which such Preferred Stock
will be convertible into Common Stock of the Company, including the
conversion price (or manner of calculation thereof);
(10) Any other specific terms, preferences, rights, limitations or
restrictions of such Preferred Stock;
(11) A discussion of federal income tax considerations applicable to such
Preferred Stock;
(12) The relative ranking and preferences of such Preferred Stock as to
dividend rights and rights upon liquidation, dissolution or winding up
of the affairs of the Company;
(13) Any limitations on issuance of any series of Preferred Stock ranking
senior to or on a parity with such series of Preferred Stock as to
dividend rights and rights upon liquidation, dissolution or winding up
of the affairs of the Company; and
(14) Any limitations on direct or beneficial ownership and restrictions on
transfer, in each case as may be appropriate to preserve the status of
the Company as a REIT.
RANK
Unless otherwise specified in the Prospectus Supplement, the 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 such
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 the 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 the Preferred Stock. The term "equity securities" does
not include convertible debt securities.
DIVIDENDS
Holders of the Preferred Stock of each series will be entitled to receive,
when, as and if declared by the board of directors of the Company, out of assets
of the Company legally available for payment, cash dividends 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.
Dividends on any series of the 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 of the Company fails
to declare a dividend payable on a dividend payment date on any series of the
Preferred Stock for which dividends are non-cumulative, then the holders of such
series of the 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.
If Preferred Stock of any series is outstanding, no dividends will be
declared or paid or set apart for payment on any capital stock of the Company of
any other 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
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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 Preferred Stock does 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 shares of Common Stock or other capital
shares 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 shall be declared or made upon the Common Stock, or any other
capital shares 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 shares of Common Stock, or any other capital shares 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 shares 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, the Preferred Stock
will be subject to mandatory redemption or redemption at the option of the
Company, as a whole or in part, in each case upon the terms, at the times and at
the redemption prices set forth in such Prospectus Supplement.
The Prospectus Supplement relating to a series of Preferred Stock that is
subject to mandatory redemption will specify the number of shares of such
Preferred Stock that shall be redeemed by the Company 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 shares of the Company, the terms of such
Preferred Stock may provide that, if no such capital shares 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 capital shares 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 shares of any series
of Preferred Stock shall have been or contemporaneously are declared and paid or
declared and a sum sufficient for the payment thereof set apart for payment
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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 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 shares of any
series of Preferred Stock shall be redeemed unless all outstanding Preferred
Stock of such series is 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 shares
of any series of Preferred Stock have been or contemporaneously are declared and
paid or declared and a sum sufficient for the payment thereof set apart for
payment for all past 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 shares of Preferred
Stock of such series (except by conversion into or exchange for capital shares
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 shares of 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 series of the Preferred Stock to be redeemed; (iii) the redemption
price; (iv) the place or places where certificates for such Preferred Stock are
to be surrendered for payment of the redemption price; (v) that dividends on the
shares to be redeemed will cease to accrue on such redemption date; and (vi) the
date upon which the holder's conversion rights, if any, as to such shares shall
terminate. If fewer than all the shares of 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.
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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
shares 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 shares 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 shares 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 shares 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 the 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.
Whenever dividends on any shares of Preferred Stock shall be in arrears for
six or more consecutive quarterly periods, the holders of such shares of
Preferred Stock (voting separately as a class with all other series of preferred
stock upon which like voting rights have been conferred and are exercisable)
will be entitled to vote for the election of two additional directors of the
Company at a special meeting called by the holders of record of at least ten
percent (10%) of any series of Preferred stock so in arrears (unless such
request is received less than 90 days before the date fixed for the next annual
or special meeting of the stockholders) or at the next annual meeting of
stockholders, and at each subsequent annual meeting until (i) if such series of
Preferred Stock has a cumulative dividend, all dividends accumulated on such
shares of Preferred Stock for the past dividend periods and the then current
dividend period shall have been fully paid or declared and a sum sufficient for
the payment thereof set aside for payment or (ii) if such series of Preferred
Stock does not have a cumulative dividend, four consecutive quarterly dividends
shall have been fully paid or declared and a sum sufficient for the payment
thereof set aside for payment. In such case, the entire board of directors of
the Company will be increased by two directors.
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 the shares
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 prior to such series of Preferred
Stock with respect to payment of dividends or the distribution of assets upon
liquidation, dissolution or winding up or reclassify any authorized capital
stock of the Company into such shares, or create, authorize or issue any
obligation or security convertible into or evidencing the right to purchase any
such
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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 remains 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.
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 such series of Preferred Stock shall have
been redeemed or called for redemption and sufficient funds shall have been
deposited in trust to effect such redemption.
Under Indiana law, notwithstanding anything to the contrary set forth above,
holders of each series of Preferred Stock will be entitled to vote as a class
upon any proposed amendment to the Articles of Incorporation, whether or not
entitled to vote thereon by the Articles of Incorporation, if the amendment
would (i) increase or decrease the aggregate number of authorized shares of such
series; (ii) effect an exchange or reclassification of all or part of the shares
of the series into shares of another series; (iii) effect an exchange or
reclassification, or create the right of exchange, of all or part of the shares
of another class or series into shares of the series; (iv) change the
designation, rights, preferences or limitations of all or a part of the shares
of the series; (v) change the shares of all or part of the series into a
different number of shares of the same series; (vi) create a new series having
rights or preferences with respect to distributions or dissolution that are
prior, superior or substantially equal to the shares of the series; (vii)
increase the rights, preferences or number of authorized shares of any class or
series that, after giving effect to the amendment, have rights or preferences
with respect to distributions or to dissolution that are prior, superior or
substantially equal to the shares of the series; (viii) limit or deny an
existing preemptive right of all or part of the shares of the series; or (ix)
cancel or otherwise affect rights to distributions or dividends that have
accumulated but have not yet been declared on all or part of the shares of the
series.
CONVERSION RIGHTS
The terms and conditions, if any, upon which any series of Preferred Stock
is convertible into shares of 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 the
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.
SHAREHOLDER LIABILITY
As discussed below under "Description of Common Stock -- General,"
applicable Indiana law provides that no shareholder, including holders of
Preferred Stock, shall be personally liable for the acts and obligations of the
Company and that the funds and property of the Company shall be the only
recourse for such acts or obligations.
RESTRICTIONS ON OWNERSHIP
As discussed below under "Description of Common Stock -- Certain Provisions
Affecting Change of Control," for the Company to qualify as a REIT under the
Internal Revenue Code of 1986, as amended (the
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"Code"), not more than 50% in value of its outstanding capital shares 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
the Preferred Stock. The applicable Prospectus Supplement will specify any
additional ownership limitation relating to a series of Preferred Stock.
REGISTRAR AND TRANSFER AGENT
The Registrar and Transfer Agent for the Preferred Stock will be set forth
in the applicable Prospectus Supplement.
DESCRIPTION OF COMMON STOCK
GENERAL
The authorized capital stock of the Company includes 45,000,000 shares of
Common Stock, $.01 par value per share. Each outstanding share of Common Stock
entitles the holder to one vote on all matters presented to shareholders for a
vote. Holders of Common Stock have no preemptive rights. At June 30, 1994, there
were 16,046,144 shares of Common Stock outstanding.
Shares of Common Stock currently outstanding are listed for trading on the
New York Stock Exchange (the "NYSE"). The Company will apply to the NYSE to list
the additional shares of Common Stock to be sold pursuant to any Prospectus
Supplement, and the Company anticipates that such shares will be so listed.
The Articles of Incorporation of the Company provide for the board of
directors to be divided into three classes of directors, each class to consist
as nearly as possible of one-third of the directors. At each annual meeting of
shareholders, the class of directors to be elected at such meeting will be
elected for a three-year term and the directors in the other two classes will
continue in office. The overall effect of the provisions in the Articles of
Incorporation with respect to the classified board may be to render more
difficult a change of control of the Company or removal of incumbent management.
Holders of Common Stock have no right to cumulative voting for the election of
directors. Consequently, at each annual meeting of shareholders, the holders of
a plurality of the shares of Common Stock are able to elect all of the
successors of the class of directors whose term expires at that meeting.
Directors may be removed only for cause and only with the affirmative vote of
the holders of a majority of the shares of Common Stock entitled to vote in the
election of directors.
All shares of Common Stock issued will be duly authorized, fully paid, and
non-assessable. Distributions may be paid to the holders of Common Stock if and
when declared by the board of directors of the Company out of funds legally
available therefor. The Company intends to continue to pay quarterly dividends.
Under Indiana law, shareholders are generally not liable for the Company's
debts or obligations. If the Company is liquidated, subject to the right of any
holders of preferred stock, if any, to receive preferential distributions, each
outstanding share of Common Stock will be entitled to participate pro rata in
the assets remaining after payment of, or adequate provision for, all known
debts and liabilities of the Company.
CERTAIN PROVISIONS AFFECTING CHANGE OF CONTROL
GENERAL. Pursuant to Indiana law, the Company cannot merge with or sell all
or substantially all of the assets of the Company, except pursuant to a
resolution approved by shareholders holding a majority of the shares voting on
the resolution. The Company's Articles of Incorporation also contain provisions
which may discourage certain types of transactions involving an actual or
threatened change of control of the Company, including: (i) a requirement that,
in the case of certain mergers, sales of assets, liquidations or dissolutions,
or reclassifications or recapitalizations involving persons owning 10% or more
of the capital stock of the Company, such transactions be approved by a vote of
the holders of 80% of the issued and outstanding
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shares of capital stock of the Company or three-fourths of the continuing
directors, or provide for payment of a price to affected shareholders for their
shares not less than as specified in the Articles of Incorporation; (ii) a
requirement that any amendment or alteration of certain provisions of the
Articles of Incorporation affecting change of control be approved by the holders
of 80% of the issued and outstanding capital stock of the Company; and (iii) a
staggered board of directors and a limitation on removal of directors to removal
for cause as described above.
The partnership agreement for the Operating Partnership also contains
provisions which could discourage transactions involving an actual or threatened
change of control of the Company, including (i) a requirement that holders of at
least 90% of the outstanding Units held by the Company and other Unit holders
approve any voluntary sale, exchange or other disposition, including merger or
consolidation (other than a disposition occurring upon a financing or
refinancing of the Operating Partnership), of all or substantially all of the
assets of the Operating Partnership in a single transaction or a series of
related transactions; (ii) a restriction against any assignment or transfer by
the Company of its interest in the Operating Partnership; and (iii) a
requirement that holders of more than 90% of the Units approve any merger,
consolidation or other combination of the Company with or into another entity,
or sale of all or substantially all of the Company's assets, or any
reclassification or recapitalization or change of outstanding shares of Common
Stock (other than certain changes in par value, stock splits, stock dividends or
combinations) unless after the transaction substantially all of the assets of
the surviving entity are contributed to the Operating Partnership in exchange
for Units. On these matters, the Company's Units will be voted at the discretion
of the directors of the Company who are not officers or employees of the Company
and do not hold Units.
OWNERSHIP LIMITS. For the Company to qualify as a REIT under the Code, no
more than 50% in value of its outstanding capital shares 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 or during a
proportionate part of a shorter taxable year. The Common Stock must also be
beneficially owned by 100 or more persons during at least 335 days of a taxable
year or during a proportionate part of a shorter taxable year. Because the
Company expects to continue to qualify as a REIT, the Articles of Incorporation
of the Company contain restrictions on the acquisition of Common Stock intended
to ensure compliance with these requirements.
The Articles of Incorporation contain a restriction which authorizes, but
does not require, the board of directors to refuse to give effect to a transfer
of Common Stock which, in its opinion, might jeopardize the status of the
Company as a REIT. This provision also renders null and void any purported
acquisition of shares which would result in the disqualification of the Company
as a REIT. The provision also gives the board of directors the authority to take
such actions as it deems advisable to enforce the provision. Such actions might
include, but are not limited to, refusing to give effect to, or seeking to
enjoin, a transfer which might jeopardize the Company's status as a REIT. The
provision also requires any shareholder to provide the Company such information
regarding his direct and indirect ownership of Common Stock as the Company may
reasonably require.
REGISTRAR AND TRANSFER AGENT
The Registrar and Transfer Agent for the Common Stock is Bank One,
Indianapolis, N.A., Indianapolis, Indiana.
PLAN OF DISTRIBUTION
The Company may sell Securities in or through underwriters, and also may
sell Securities directly to other purchasers or through agents.
The distribution of the Securities may be effected from time to time in one
or more transaction at a fixed price or prices, which may be changed, or at
market prices prevailing at the time of sale, at prices related to such
prevailing market prices or at negotiated prices. The Common Stock may also be
issued to certain holders of Units in exchange for their Units pursuant to the
partnership agreement of the Operating Partnership.
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In connection with the sale of Securities, underwriters may receive
compensation from the Company or from purchasers of Securities, for whom they
may act as agents, in the form of discounts, concessions, or commissions.
Underwriters may sell Securities to or through dealers, and such dealers may
receive compensation in the form of discounts, concessions, or commissions from
the underwriters and/or commissions from the purchasers for whom they may act as
agents. Underwriters, dealers, and agents that participate in the distribution
of Securities may be deemed to be underwriters, and any discounts or commissions
they receive from the Company, and any profit on the resale of Securities they
realize may be deemed to be underwriting discounts and commissions, under the
Securities Act. Any such underwriter or agent will be identified, and any such
compensation received from the Company will be described, in the Prospectus
Supplement.
Unless otherwise specified in the related Prospectus Supplement, each series
of Securities will be a new issue with no established trading market, other than
the Common Stock which is listed on the NYSE. Any shares of Common Stock sold
pursuant to a Prospectus Supplement will be listed on such exchange, subject to
official notice of issuance. The Company may elect to list any series of Debt
Securities or Preferred Shares on an exchange, but is not obligated to do so. It
is possible that one or more underwriters may make a market in a series of
Securities, but will not be obligated to do so and may discontinue any market
making at any time without notice. Therefore, no assurance can be given as to
the liquidity of the trading market for the Securities.
Under agreements the Company may enter into, underwriters, dealers, and
agents who participate in the distribution of Securities may be entitled to
indemnification by the Company against certain liabilities, including
liabilities under the Securities Act.
Underwriters, dealers and agents may engage in transactions with, or perform
services for, or be customers of, the Company in the ordinary course of
business.
If so indicated in the applicable Prospectus Supplement, the Company will
authorize underwriters or other persons acting as the Company's agents to
solicit offers by certain institutions to purchase Securities from the Company
pursuant to contracts providing for payment and delivery on a future date.
Institutions with which such contracts may be made include commercial and
savings banks, insurance companies, pension funds, investment companies,
educational and charitable institutions and others, but in all cases such
institutions must be approved by the Company. The obligations of any purchaser
under any such contract will be subject to the condition that the purchase of
the Securities shall not at the time of delivery be prohibited under the laws of
the jurisdiction to which such purchaser is subject. The underwriters and such
other agents will not have any responsibility in respect of the validity or
performance of such contracts.
LEGAL OPINIONS
The legality of the Securities offered hereby is being passed upon for the
Company by Bose McKinney & Evans, Indianapolis, Indiana. John W. Wynne and
Darell E. Zink, Jr., officers and directors of the Company, were partners in
Bose McKinney & Evans through 1987 and 1982, respectively, and were of counsel
to that firm until December, 1990. The spouses of Michael Coletta and Dayle M.
Eby, both officers and shareholders of the Company, are partners in Bose
McKinney & Evans. Rogers & Wells, New York, New York will act as counsel to any
underwriters, dealers or agents.
EXPERTS
The Consolidated Financial Statements and Schedules of the Company as of
December 31, 1993, and 1992, and for each of the years in the three-year period
ended December 31, 1993, and the Combined Financial Statements of Duke
Associates as of December 31, 1992 and 1991, and for each of the years in the
three-year period ended December 31, 1992, each incorporated herein by reference
have been incorporated herein in reliance on the reports of KPMG Peat Marwick
LLP, independent certified public accountants, also incorporated by reference
herein, and upon the authority of said firm as experts in accounting and
auditing.
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NO DEALER, SALESMAN OR OTHER INDIVIDUAL HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED OR
INCORPORATED BY REFERENCE IN THIS PROSPECTUS SUPPLEMENT OR THE PROSPECTUS IN
CONNECTION WITH THE OFFERING MADE BY THIS PROSPECTUS SUPPLEMENT AND THE
PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT
BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY OR THE UNDERWRITERS.
NEITHER THE DELIVERY OF THIS PROSPECTUS SUPPLEMENT OR THE PROSPECTUS NOR ANY
SALE MADE HEREUNDER AND THEREUNDER SHALL, UNDER ANY CIRCUMSTANCE, CREATE AN
IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE FACTS SET FORTH IN THIS
PROSPECTUS SUPPLEMENT OR IN THE PROSPECTUS OR IN THE AFFAIRS OF THE COMPANY
SINCE THE DATE HEREOF. THIS PROSPECTUS SUPPLEMENT AND THE PROSPECTUS DO NOT
CONSTITUTE AN OFFER OR SOLICITATION BY ANYONE IN ANY STATE IN WHICH SUCH OFFER
OR SOLICITATION IS NOT AUTHORIZED OR IN WHICH THE PERSON MAKING SUCH OFFER OR
SOLICITATION IS NOT QUALIFIED TO DO SO OR TO ANYONE TO WHOM IT IS UNLAWFUL TO
MAKE SUCH OFFER OR SOLICITATION.
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TABLE OF CONTENTS
PROSPECTUS SUPPLEMENT
<TABLE>
<CAPTION>
PAGE
---------
<S> <C>
Prospectus Supplement Summary..................... S-3
The Company....................................... S-8
Recent Developments............................... S-10
Use of Proceeds................................... S-12
Price Range of Common Stock and Dividend
History.......................................... S-13
Capitalization.................................... S-14
Selected Consolidated Financial Data.............. S-15
Management's Discussion and Analysis of Financial
Condition and Results of Operations.............. S-16
Properties........................................ S-18
Management........................................ S-42
Federal Income Tax Considerations................. S-44
Underwriting...................................... S-50
Legal Matters..................................... S-50
PROSPECTUS
Available Information............................. 2
Incorporation of Certain Documents by Reference... 2
The Company....................................... 3
Use of Proceeds................................... 3
Ratios of Earnings to Fixed Charges............... 3
Description of Debt Securities.................... 4
Description of Preferred Stock.................... 14
Description of Common Stock....................... 20
Plan of Distribution.............................. 21
Legal Opinions.................................... 22
Experts........................................... 22
</TABLE>
3,000,000 SHARES
[LOGO]
COMMON STOCK
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PROSPECTUS SUPPLEMENT
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MERRILL LYNCH & CO.
ALEX. BROWN & SONS
INCORPORATED
DEAN WITTER REYNOLDS INC.
A.G. EDWARDS & SONS, INC.
LEGG MASON WOOD WALKER
INCORPORATED
SEPTEMBER , 1994
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<PAGE>
APPENDIX
Inside front cover page of Prospectus Supplement:
On the inside front cover page of the Prospectus Supplement is graphic
material entitled "Duke Realty Investments Portfolio Location Map" consisting of
(1) a map of the continental United States on which the states of Missouri,
Wisconsin, Illinois, Michigan, Indiana, Kentucky, Tennessee and Ohio are shaded
and (2) a larger map of such states on which the city of Indianapolis, Indiana
is shown as the Corporate Headquarters; the cities of Decatur, Illinois,
Detroit, Michigan, Columbus, Ohio, Cincinnati, Ohio and Nashville, Tennessee are
shown as Regional Office locations; and the cities of Milwaukee, Wisconsin,
St. Louis, Missouri, Bloomington, Illinois, Champaign, Illinois, Decatur,
Illinois, Indianapolis, Indiana, Nashville, Tennessee, Detroit, Michigan,
Fort Wayne, Indiana, Columbus, Ohio, Dayton, Ohio, Cincinnati, Ohio and
Covington, Kentucky are shown as Duke Markets.
Inside back cover page of Prospectus Supplement:
On the inside back cover page of the Prospectus Supplement are five
photographs, as follows:
(1) An aerial photograph of a business park, captioned "Park 100
Business Park - Indianapolis IN."
(2) A photograph of a building captioned "The Corporate Park at
Tuttle Crossing, Xerox (5555 Parkcenter) (Acquired April 1994) -
Columbus, OH."
(3) A photograph of a building captioned "Park 100 Business Park,
Caterpillar Logistics (Building 95) (Completed January 1994) -
Indianapolis, IN."
(4) A photograph of a building captioned "Southpark Business Center,
Redken Laboratories (Completed May 1994) - Covington, KY (Greater
Cincinnati Airport Area)."
(5) A photograph of a building captioned "Sports Unlimited (Partially
Completed July 1994) - Cincinnati, OH."
