<PAGE>
PROSPECTUS SUPPLEMENT
(TO PROSPECTUS DATED JUNE 6, 1996)
3,000,000 SHARES
[LOGO]
DUKE REALTY INVESTMENTS, INC.
DEPOSITARY SHARES
EACH REPRESENTING 1/10 OF A 7.99% SERIES B CUMULATIVE STEP-UP PREMIUM RATE-SM-
("SUPER-SM-") PREFERRED SHARE (PAR VALUE $0.01 PER SHARE)
(LIQUIDATION PREFERENCE EQUIVALENT TO $50.00 PER DEPOSITARY SHARE)
-----------------
Each of the 3,000,000 Depositary Shares (the "Depositary Shares") offered
hereby (the "Offering") represents a 1/10 fractional interest in a 7.99% Series
B Cumulative Step-Up Premium Rate-SM- Preferred Share, par value $0.01 per share
(collectively, the "Series B SUPeR Preferred Shares"), of Duke Realty
Investments, Inc. (the "Company"), deposited with American Stock Transfer &
Trust Company, as Depositary, and entitles the holder to all proportional rights
and preferences of the Series B SUPeR Preferred Shares (including distribution,
voting, redemption and liquidation rights and preferences). The liquidation
preference of each of the Series B SUPeR Preferred Shares is $500.00 (equivalent
to $50.00 per Depositary Share). See "Description of Series B SUPeR Preferred
Shares and Depositary Shares."
Distributions on the Series B SUPeR Preferred Shares represented by the
Depositary Shares offered hereby will be cumulative from the date of original
issue and will be payable quarterly on or about the last day of March, June,
September and December of each year, commencing on September 30, 1997, at the
rate of 7.99% of the liquidation preference per annum (equivalent to $3.995 per
annum per Depositary Share) through September 30, 2012 and at a rate of 9.99% of
the liquidation preference per annum (equivalent to $4.995 per Depositary Share)
thereafter. See "Description of Series B SUPeR Preferred Shares and Depositary
Shares--Distributions."
The Series B SUPeR Preferred Shares and the Depositary Shares representing
such Series B SUPeR Preferred Shares are not redeemable prior to September 30,
2007. On and after September 30, 2007, the Series B SUPeR Preferred Shares may
be redeemed at the option of the Company in whole or in part, at a redemption
price of $500.00 per share (equivalent to $50.00 per Depositary Share), plus
accrued and unpaid distributions, if any, thereon. The redemption price of the
Series B SUPeR Preferred Shares (other than any portion thereof consisting of
accrued and unpaid distributions) may only be paid from the sale proceeds of
other capital shares of the Company, which may include other classes or series
of preferred shares, and from no other source. The Series B SUPeR Preferred
Shares have no stated maturity and will not be subject to any sinking fund or
mandatory redemption provisions and will not be convertible into any other
securities of the Company. In order to maintain its qualification as a real
estate investment trust for federal income tax purposes, the Company's Amended
and Restated Articles of Incorporation impose limitations on the number of
shares of capital stock, including Series B SUPeR Preferred Shares, that may be
owned by any single person or affiliated group. See "Description of Series B
SUPeR Preferred Shares and Depositary Shares--Restrictions on Ownership."
Application has been made to list the Depositary Shares on the New York
Stock Exchange ("NYSE"), subject to official notice of issuance. If such
application is approved, trading of the Depositary Shares on the NYSE is
expected to commence within a 30-day period after the date of initial delivery
of the Depositary Shares. The Depositary Shares may be offered by Merrill Lynch,
Pierce, Fenner & Smith Incorporated (the "Underwriter") from time to time in one
or more transactions on the NYSE or otherwise, at market prices prevailing at
the time of sale, at prices related to such prevailing market prices, or at
negotiated prices. See "Underwriting."
---------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS SUPPLEMENT OR THE PROSPECTUS TO
WHICH IT RELATES. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
<TABLE>
<CAPTION>
PRICE TO UNDERWRITING PROCEEDS TO
PUBLIC(1) DISCOUNT(2) COMPANY(3)
<S> <C> <C> <C>
Per Depositary Share......................................... $50.00 $1.25 $48.75
Total........................................................ $150,000,000 $3,750,000 $146,250,000
</TABLE>
(1) Plus accrued distributions, if any, from the date of original issue.
(2) The Company has agreed to indemnify the Underwriter against certain
liabilities, including liabilities under the Securities Act of 1933, as
amended. See "Underwriting."
(3) Before deducting expenses payable by the Company estimated at $200,000.
---------------------
The Depositary Shares are offered by the Underwriter, subject to prior sale,
when, as and if delivered to and accepted by the Underwriter, subject to
approval of certain legal matters by counsel for the Underwriter and to certain
other conditions. The Underwriter reserves the right to withdraw, cancel or
modify such offer and to reject orders in whole or in part. It is expected that
delivery of the Depositary Receipts evidencing the Depositary Shares will be
made in New York, New York on or about July 11, 1997.
---------------------
MERRILL LYNCH & CO.
------------
The date of this Prospectus Supplement is July 8, 1997.
- ------------------------
"Step-Up Premium Rate-SM-" and "SUPeR-SM-" are service marks owned by Merrill
Lynch & Co., Inc.
<PAGE>
[LOGO]
PRINCIPAL MARKETS
[MAP]
CERTAIN PERSONS PARTICIPATING IN THE OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE DEPOSITARY SHARES
REPRESENTING A 1/10 FRACTIONAL INTEREST IN THE COMPANY'S SERIES B SUPER
PREFERRED SHARES, INCLUDING ENTERING STABILIZING BIDS AND EFFECTING SYNDICATE
COVERING TRANSACTIONS. FOR A DESCRIPTION OF THESE ACTIVITIES, SEE
"UNDERWRITING."
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<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, THE INFORMATION CONTAINED IN
THIS PROSPECTUS SUPPLEMENT IS PRESENTED AS OF MARCH 31, 1997. 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.
WHEN USED IN THIS PROSPECTUS SUPPLEMENT, THE WORDS "BELIEVES," "EXPECTS" AND
SIMILAR EXPRESSIONS ARE INTENDED TO IDENTIFY FORWARD-LOOKING STATEMENTS. SUCH
STATEMENTS ARE SUBJECT TO CERTAIN RISKS AND UNCERTAINTIES WHICH COULD CAUSE
ACTUAL RESULTS TO DIFFER MATERIALLY. READERS ARE CAUTIONED NOT TO PLACE UNDUE
RELIANCE ON THESE FORWARD-LOOKING STATEMENTS, WHICH SPEAK ONLY AS OF THE DATE
HEREOF. THE COMPANY UNDERTAKES NO OBLIGATION TO PUBLICLY RELEASE THE RESULTS OF
ANY REVISIONS TO THESE FORWARD-LOOKING STATEMENTS WHICH MAY BE MADE TO REFLECT
EVENTS OR CIRCUMSTANCES AFTER THE DATE HEREOF OR TO REFLECT THE OCCURRENCE OF
UNANTICIPATED EVENTS.
THE COMPANY
The Company is a self-administered and self-managed real estate investment
trust (a "REIT") that began operations through a related entity in 1972. The
Company owns a diversified portfolio of 250 in-service industrial, office and
retail properties (the "Properties"), encompassing approximately 27.7 million
square feet and located in eight states. The Properties have an aggregate cost
basis of $1.3 billion and were 95.5% leased as of March 31, 1997. 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
investment opportunity through its central location, established manufacturing
base, skilled work force and moderate labor costs.
The following tables provide an overview of the Properties.
SUMMARY OF PROPERTIES
(IN THOUSANDS, EXCEPT PERCENTAGES)
<TABLE>
<CAPTION>
PERCENT
ANNUAL OF TOTAL OCCUPANCY
PERCENT NET NET EFFECTIVE AT
SQUARE OF TOTAL EFFECTIVE ANNUAL MARCH 31,
TYPE OF PROPERTY FEET SQUARE FEET RENT(1) RENT 1997
- ----------------------------------------------- --------- --------------- ------------ --------------- ----------------
<S> <C> <C> <C> <C> <C>
Industrial..................................... 18,582 67% $ 67,793 41% 95.5%
Office......................................... 7,387 27 81,520 50 95.6%
Retail......................................... 1,690 6 15,104 9 94.5%
--------- --- ------------ ---
Total.......................................... 27,659 100% $ 164,417 100% 95.5%
--------- --- ------------ ---
--------- --- ------------ ---
</TABLE>
- ------------------------
(1) Represents annual net effective rent due from tenants in occupancy as of
March 31, 1997. Net effective rent ("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.
S-3
<PAGE>
SQUARE FOOTAGE AND ANNUAL NET EFFECTIVE RENT OF PROPERTIES
(IN THOUSANDS, EXCEPT PERCENTAGES)
<TABLE>
<CAPTION>
SQUARE FEET ANNUAL PERCENT OF
----------------------------------------------------------- NET ANNUAL
PERCENT OF EFFECTIVE NET EFFECTIVE
PRIMARY MARKET INDUSTRIAL OFFICE RETAIL TOTAL TOTAL RENT(1) RENT
- ----------------------------------- ----------- --------- --------- --------- ------------- ------------ ---------------
<S> <C> <C> <C> <C> <C> <C> <C>
Indianapolis....................... 11,887 1,341 194 13,422 48% $ 55,302 34%
Cincinnati......................... 3,686 2,961 779 7,426 27 53,291 32
Columbus........................... 960 1,325 219 2,504 9 21,700 13
Cleveland.......................... -- 1,052 -- 1,052 4 12,826 8
Nashville.......................... 563 -- -- 563 2 3,859 2
St. Louis.......................... 924 463 -- 1,387 5 8,745 5
Detroit............................ -- 245 -- 245 1 2,841 2
Other(2)........................... 562 -- 498 1,060 4 5,853 4
----------- --------- --------- --------- --- ------------ ---
Total............................ 18,582 7,387 1,690 27,659 100% $ 164,417 100%
----------- --------- --------- --------- --- ------------ ---
----------- --------- --------- --------- --- ------------ ---
Percent of Total Square Feet....... 67% 27% 6%
----------- --------- ---------
----------- --------- ---------
</TABLE>
- ------------------------
(1) Represents annual Net Effective Rent due from tenants in occupancy as of
March 31, 1997.
(2) Represents properties not located in the Company's primary markets. These
properties are located in other similar Midwestern markets.
S-4
<PAGE>
THE OFFERING
<TABLE>
<S> <C>
Securities Offered........... 3,000,000 Depositary Shares each representing a 1/10
fractional interest in a Series B SUPeR Preferred Share.
Distributions................ Distributions on the Series B SUPeR Preferred Shares
represented by the Depositary Shares offered hereby are
cumulative from the date of issue and are payable quarterly
on or about the last day of March, June, September and
December of each year, commencing on September 30, 1997, at
the rate of 7.99% of the liquidation preference per annum
(equivalent to $3.995 per annum per Depositary Share)
through September 30, 2012 and at the rate of 9.99% of the
liquidation preference per annum (equivalent to $4.995 per
annum per Depositary Share) thereafter. The first
distributions on the Series B SUPeR Preferred Shares
represented by the Depositary Shares offered hereby, which
will be paid on September 30, 1997, will be a prorated
portion of the full quarterly distribution. Distributions on
the Series B SUPeR Preferred Shares will accrue whether or
not the Company has earnings, whether or not there are funds
legally available for the payment of such distributions and
whether or not such distributions are declared. Accrued but
unpaid distributions on the Series B SUPeR Preferred Shares
will not bear interest and holders of the Series B SUPeR
Preferred Shares will not be entitled to any distributions
in excess of full cumulative distributions as described
above. If, for any taxable year, the Company elects to
designate as "capital gain dividends" (as defined in Section
857 of the Internal Revenue Code of 1986, as amended (the
"Code")) any portion (the "Capital Gains Amount") of the
dividends (within the meaning of the Code) paid or made
available for the year to holders of all classes of shares
of beneficial interest, including preferred shares (the
"Total Dividends"), then the portion of the Capital Gains
Amount that will be allocable to the holders of Series B
SUPeR Preferred Shares will be the Capital Gains Amount
multiplied by a fraction, the numerator of which will be the
total dividends (within the meaning of the Code) paid or
made available to the holders of the Series B SUPeR
Preferred Shares for the year and the denominator of which
shall be the Total Dividends. See "Description of Series B
SUPeR Preferred Shares and Depositary
Shares--Distributions."
Ranking...................... The Series B SUPeR Preferred Shares will rank senior to the
Common Shares and equivalent to the Company's 9.10% Series A
Cumulative Redeemable Preferred Stock (the "Series A
Preferred Shares") and any other preferred shares which are
not by their terms subordinated to the Series B SUPeR
Preferred Shares with respect to the payment of
distributions and amounts upon liquidation, dissolution or
winding-up. See "Description of Preferred Shares" included
in the accompanying Prospectus.
</TABLE>
S-5
<PAGE>
<TABLE>
<S> <C>
Liquidation Preference....... The Series B SUPeR Preferred Shares will have a liquidation
preference of $500.00 per Series B SUPeR Preferred Share
(equivalent to $50.00 per Depositary Share), plus an amount
equal to accrued and unpaid distributions. See "Description
of Series B SUPeR Preferred Shares--Liquidation Preference."
Redemption................... Except in certain circumstances relating to the Company's
maintenance of its ability to qualify as a REIT, the Series
B SUPeR Preferred Shares are not redeemable prior to
September 30, 2007. See "Description of Preferred
Shares--Restrictions on Ownership" and "Description of
Common Shares--Restrictions on Ownership" in the
accompanying Prospectus. At any time on or after September
30, 2007, the Series B SUPeR Preferred Shares will be
redeemable for cash at the option of the Company, in whole
or in part, at $500.00 per share (equivalent to $50.00 per
Depositary Share), plus distributions accrued and unpaid, if
any, to the redemption date. The redemption price (other
than the portion thereof consisting of accrued and unpaid
distributions, if any) is payable solely out of the sale
proceeds, of other capital stock of the Company, which may
include other classes or series of preferred shares and from
no other source. See "Description of Series B SUPeR
Preferred Shares and Depositary Shares-- Redemption."
Voting Rights................ Holders of Series B SUPeR Preferred Shares will not have any
voting rights except as set forth below or in the
accompanying Prospectus or as otherwise from time to time
required by law. If distributions on the Series B SUPeR
Preferred Shares are in arrears for six or more quarterly
periods, holders of the Depositary Shares representing the
Series B SUPeR Preferred Shares (voting separately as a
class with all other series of preferred shares upon which
like voting rights have been conferred and are exercisable)
will be entitled to vote for the election of two additional
Directors to serve on the Board of Directors of the Company
until all distribution arrearages are eliminated. See
"Description of Series B SUPeR Preferred Shares and
Depositary Shares--Voting Rights", and "Description of
Preferred Shares--Voting Rights" in the accompanying
Prospectus.
Conversion................... The Series B SUPeR Preferred Shares are not convertible into
or exchangeable for any other property or securities of the
Company.
NYSE Listing................. Application has been made to list the Depositary Shares on
the NYSE. Prior to the Offering, there has been no public
market for the Depositary Shares, and there can be no
assurance that an active trading market for the Depositary
Shares will develop following the Offering or, if developed,
that any such market will be sustained. In the absence of a
public trading market, an investor may be unable to
liquidate his investment.
Use of Proceeds.............. The net proceeds to the Company from the Offering
(approximately $146.1 million) will be used to reduce
amounts outstanding under the Company's Lines of Credit (as
defined herein) and to fund current acquisition and
development costs.
</TABLE>
S-6
<PAGE>
THE COMPANY
The Company is a self-administered and self-managed REIT that began
operations through a related entity in 1972. The Company owns a diversified
portfolio of 250 in-service industrial, office and retail Properties,
encompassing approximately 27.7 million square feet and located in eight states.
The Properties have an aggregate cost basis of $1.3 billion and were 95.5%
leased as of March 31, 1997. 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 investment opportunity through its
central location, established manufacturing base, skilled work force and
moderate labor costs.
All of the Company's interests in the Properties are held directly or
indirectly by, and substantially all of its operations relating to the
Properties are conducted through, Duke Realty Limited Partnership (the
"Operating Partnership"). Partnership interests in the Operating Partnership
(the "Units") may be exchanged by the holders thereof, other than the Company,
for common stock of the Company (the "Common Stock") on a one for one basis.
Upon an exchange of Units for Common Stock, the Company's percentage interest in
the Operating Partnership will increase. The Company controls the Operating
Partnership as the sole general partner and owner, as of March 31, 1997, of
approximately 90.3% of the Units.
The Company has benefited, and expects to continue to benefit, from the
following elements:
EXPERIENCED MANAGEMENT
The Company's six senior executives collectively have over 127 years of
experience in the real estate industry and have been with the Company for an
average of 18 years. The Company is a fully integrated real estate company which
includes a Property Management Department which aggressively manages the
property portfolio through significant interaction with existing tenants, an
Acquisitions Department dedicated to locating strategic acquisitions in the
Company's primary markets, Development Managers in each of the Company's primary
markets who pursue select development opportunities meeting the Company's
investment criteria, a Construction Management Department which oversees the
construction of the Company's development to assure quality construction at the
lowest possible cost, an Accounting and Finance Department which monitors
property performance and evaluates the financial impact of development and
acquisition opportunities and an Investor Relations Department which coordinates
the dissemination of information about the Company to investors and analysts.
BUSINESS STRATEGY
The Company's business objective is to increase its Funds From Operations 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.
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 1,100 acres of unencumbered
land (the "Land") and its many business relationships with more than 2,800
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.
S-7
<PAGE>
The Company's policy is to seek to develop and acquire substantially
pre-leased Class A commercial properties located in markets with attractive
investment 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.
Development projects and property acquisitions with investment values
exceeding established guidelines are subject to the review and approval of the
Asset Committee, which is comprised of a majority of unaffiliated directors of
the Company. All other development projects and property acquisitions are
subject to the review and approval of the Credit Committee, which is comprised
of members of executive management of the Company.
FINANCING STRATEGY
The Company seeks to maintain a well-balanced, conservative and flexible
capital structure by: (i) currently targeting a ratio of long-term debt to total
market capitalization in the range of 25% to 40%; (ii) extending and sequencing
the maturity dates of its debt; (iii) borrowing primarily at fixed rates; (iv)
generally pursuing current and future long-term debt financings and refinancings
on an unsecured basis; (v) maintaining conservative debt service and fixed
charge coverage ratios; and (vi) maintaining a conservative dividend payout
ratio. Management believes that these strategies have enabled and should
continue to enable the Company to access the debt and equity capital markets for
their long-term requirements such as debt refinancings and financing for
development and acquisitions of additional rental Properties. The Company has
demonstrated its ability to access the equity and debt markets to finance the
activities of the Company through recent public offerings of Common Stock,
Preferred Stock and unsecured notes since October 1993 which generated aggregate
net proceeds of $992 million. It is the Company's policy that the Company shall
not incur indebtedness other than short-term trade, employee compensation,
dividends payable or similar indebtedness that will be paid in the ordinary
course of business, and that indebtedness shall instead be incurred by the
Operating Partnership to the extent necessary to fund the business activities
conducted by the Operating Partnership and its subsidiaries.
DIVERSIFIED PORTFOLIO
The Company owns a diversified portfolio of properties which includes (i)
the in-service Properties, consisting of 250 industrial, office and retail
properties located in Indiana, Ohio, Illinois, Michigan, Tennessee, Kentucky,
Wisconsin and Missouri; (ii) 23 buildings and one building expansion under
development; and (iii) the Land, consisting of approximately 1,100 acres of
unencumbered land for future development in Indiana, Ohio, Missouri, Illinois,
Kentucky, and Tennessee. The Company owns the entire equity interest in 207 of
the Properties, including property under development, and a partial interest in
the remainder of the Properties. 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. The Company believes that its Properties are of
the highest quality available to tenants in its markets. The total square
footage of the in-service Properties is approximately 27.7 million, consisting
of approximately 18.6 million square feet of industrial space, approximately 7.4
million square feet of office space and approximately 1.7 million square feet of
retail space. The total square footage of the 23 buildings and one building
expansion currently under development is approximately 5.1
S-8
<PAGE>
million square feet, consisting of approximately 3.7 million square feet of
industrial space, approximately 967,000 square feet of office space and
approximately 381,000 square feet of retail space. These development projects
are 75% leased as of March 31, 1997. The total annual Net Effective Rental
income of the Properties based upon tenants in occupancy as of March 31, 1997 is
approximately $164.4 million, with $67.8 million relating to the industrial
Properties, $81.5 million relating to the office Properties and $15.1 million
relating to the retail Properties. At March 31, 1997, the Properties were
approximately 95.5% leased.
MIDWESTERN FOCUS
The Company believes that the Midwest offers a relatively strong and stable
economy compared to other regions of the United States and provides attractive
new opportunities 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, markets in which
approximately 79% and 84% of the Properties, in terms of both dollar value of
Net Effective Rent and square footage, respectively, are located, help make
those cities prime industrial and office property locations.
Employment statistics are generally a useful measure of the viability of a
commercial real estate market because the demand for industrial and office space
in a geographic area is usually linked to the levels of business activity and
disposable income. According to the United States Department of Labor's Bureau
of Labor Statistics, the unemployment rate for April 30, 1997 was 2.6%, 3.7% and
2.8% in the Indianapolis, Cincinnati and Columbus metropolitan areas,
respectively, compared to 4.8% for the United States. Additionally, total
non-farm employment has increased 15.5%, 11.4% and 16.5% from December 1989 to
December 1996 for the Indianapolis, Cincinnati and Columbus metropolitan areas,
respectively, as compared to 11.8% for the United States.
Management believes that the Company's assets are located in strong real
estate markets with good investment potential. The Winter 1996 issue of
MarketScore, a National Real Estate Index and Ernst & Young Kenneth Leventhal
Real Estate Group publication ("MarketScore"), rated 63 metropolitan areas in
the United States in terms of their real estate investment potential for the
succeeding two years. The study segmented each metropolitan area by property
type and considered real estate, economic and demographic variables such as
vacancy rates, construction, rental trends, job growth, population and household
growth, and household income. Approximately 26.8 million square feet of the
Company's in-service and under-development Properties are in markets considered
by MarketScore to have good or excellent investment potential.
INDIANAPOLIS, INDIANA. With more than 1.5 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 work force and stable economic base. Indianapolis'
economic base includes distribution, government, manufacturing, retail trade,
service and tourism related industries. According to CB Commercial Real Estate
Group, Inc. ("CB Commercial"), the industrial vacancy rate was 9.5% as of
December 31, 1996. According to the Winter 1996 issue of MarketScore,
Indianapolis is rated as the fifth best warehouse and distribution market in the
United States. The Indianapolis suburban office market strengthened over the
24-month period ending March 31, 1997. According to CB Commercial, at March 31,
1997, Indianapolis had an 8.5% suburban office vacancy rate compared to a
national average of 10.6%.
CINCINNATI, OHIO. Cincinnati is the second largest metropolitan area in
Ohio with a population of 1.6 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 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
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<PAGE>
corporate relocations in Cincinnati. Indicative of the economic strength in
Cincinnati, the industrial vacancy rate as reported by CB Commercial declined by
0.7% over the 24 months ended December 31, 1996 to 3.0%, less than half the
national average of 7.3%. As reported by CB Commercial, the Cincinnati suburban
office market vacancy rate declined by 6.1% over the twenty-four month period
ended March 31, 1997 to 8.4%, compared to a national average of 10.6%, and the
Cincinnati downtown office vacancy rate declined 1.2% over the same period to
13.7%.
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 work force and high quality of life
have established Columbus as a major transportation and distribution center.
Columbus' economic base includes distribution, government, manufacturing, retail
trade and service-related industries. As reported by CB Commercial, as of
December 31, 1996, the industrial vacancy rate in Columbus was 6.1% compared to
the national average of 7.3%. As of March 31, 1997, the suburban office vacancy
rate in Columbus was 10.6%, equal to the national average.
CLEVELAND, OHIO. Cleveland is the largest metropolitan area in Ohio with a
population of 2.2 million. The city is a major center for industry, technology,
and service industries, including banking, health, research and development and
the legal and accounting professions. Twenty-eight Fortune 500 companies have
located their headquarters in Cleveland. As reported by CB Commercial, as of
December 31, 1996 the industrial vacancy rate in Cleveland was 7.3%, equal to
the national average and, as of March 31, 1997, the suburban office vacancy rate
was 8.4% compared to the national average of 10.6%.
ST. LOUIS, MISSOURI. St. Louis is Missouri's largest metropolitan area with
a population of 2.5 million. With its central location, St. Louis is within 500
miles of one-third of the U.S. population and businesses and it has the lowest
total mileage from the 24 largest metro areas in the mid-U.S. to the same 24
metro areas. Twenty-three Fortune 500 companies have located their headquarters
in St. Louis. As reported by CB Commercial, as of December 31, 1996 the
industrial vacancy rate in St. Louis was 2.5% compared to the national average
of 7.3% and, as of March 31, 1997, the suburban office vacancy rate was 6.2%
compared to the national average of 10.6%.
The following table summarizes important economic and performance statistics
for the Company's principal markets and for the United States.
<TABLE>
<CAPTION>
APRIL 1997 DECEMBER 1996 MARCH 1997
UNEMPLOYMENT JOB GROWTH INDUSTRIAL PROPERTY SUBURBAN OFFICE
RATE(1) SINCE 1989(1) VACANCY RATE(2) VACANCY RATE(2)
-------------- --------------- --------------------- -----------------
<S> <C> <C> <C> <C>
Cincinnati, Ohio.................................... 3.7% 11.4% 3.0% 8.4%
Cleveland, Ohio..................................... 5.0% 5.7% 7.3% 8.4%
Columbus, Ohio...................................... 2.8% 16.5% 6.1% 10.6%
Indianapolis, Indiana............................... 2.6% 15.5% 9.5% 8.5%
St. Louis, Missouri................................. 3.9% 7.2% 2.5% 6.2%
United States....................................... 4.8% 11.8% 7.3% 10.6%
</TABLE>
- ------------------------
(1) Source: United States Department of Labor's Bureau of Labor Statistics.
(2) Source: CB Commercial.
S-10
<PAGE>
MARKET POSITION
The Company manages over 41 million square feet of property, including over
8.7 million square feet owned by third parties. The Company manages
approximately 35% and 25% of all competitive suburban office, warehousing and
light manufacturing space in Indianapolis and Cincinnati, respectively. In
addition to providing services to approximately 1,800 tenants in the Properties,
the Company provides such services to over 1,000 tenants in approximately 109
properties owned by third parties. Based on market data maintained by the
Company, the Company believes that it was responsible in 1996 for approximately
58% and 27% of the net absorption (gross space leased minus lease terminations
and expirations) of competitive suburban office, warehousing and light
manufacturing space in Indianapolis and Cincinnati, respectively. The Company
believes that its dominant position in the primary markets in which it operates
gives it a competitive advantage in its real estate activities.
QUALITY TENANT BASE
The Company's Properties have a diverse and stable base of approximately
1,800 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. Approximately 75% 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 77% of the square feet of tenants up for renewal the
first three months of 1997 on approximately 701,000 square feet up for renewal.
No single tenant accounts for more than 2% of the Company's Total Gross
Effective Rent (computed using the average annual rental property revenue over
the terms of the respective leases including landlord operating expense
allowances but excluding additional rent due as operating expense
reimbursements).
RECENT DEVELOPMENTS
OPERATING PERFORMANCE AND DIVIDENDS. For the three months ended March 31,
1997, the Company reported net income of $16.7 million on revenues of $54.9
million as compared to $9.6 million and $40.9 million, respectively, for the
same period in 1996. Funds from Operations for the same period were $23.7
million as compared to $15.8 million in 1996. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations--Funds From
Operations."
On April 24, 1997, the Company's Board of Directors declared a regular
quarterly dividend of $.51 per common share, payable on May 30, 1997 to
shareholders of record on May 16, 1997. This dividend equals $2.04 on an
annualized basis. The Company has increased its dividend for three consecutive
years since its reorganization in October 1993.
FINANCING. In January of 1997, the Company issued 1.5 million shares of
Common Stock raising net proceeds of $56.7 million which was used to pay down
amounts outstanding on its unsecured line of credit and to fund ongoing
development activity.
In March 1997, the interest rate on the Company's $150.0 million dollar
unsecured line of credit was reduced from the 30-day London Interbank Offered
Rate ("LIBOR") plus 1.25% to LIBOR plus 1.00%. The Company also has a demand
$10.0 million secured revolving credit facility which bears interest at LIBOR
plus .75%. The current outstanding balance on the lines of credit is $120.0
million. The proceeds of the lines of credit have been used to fund acquisition
and development of additional rental properties.
DEVELOPMENT AND ACQUISITIONS. During the first six months of 1997, the
Company placed in-service 2.6 million square feet of newly developed properties
which are 85% leased. The total cost of these properties is $72.5 million and
the combined weighted average unleveraged stabilized return on cost for these
properties is expected to be 11.5%. Also during the first six months of 1997,
the Company acquired 1.8 million square feet of properties which are 90% leased.
The total cost of these properties is $117.4
S-11
<PAGE>
million and the combined weighted average unleveraged stabilized return on cost
for these properties is expected to be 10.7%. Approximately $60.4 million of
these 1997 acquisitions were completed through a joint venture in which the
Company has a 50% interest. The Company currently has 4.3 million square feet of
properties under development which are 52% pre-leased. These properties consist
of 64% industrial, 28% office and 8% retail properties (based on square footage)
and are expected to have a total cost upon completion of $211.4 million. The
combined weighted average unleveraged stabilized return on cost for these
properties is expected to be 11.4%. The cost of the properties under development
to be placed in-service in the third quarter of 1997 is $55.1 million, in the
fourth quarter of 1997 is $77.3 million and in 1998 is $79.0 million.
CHICAGO, ILLINOIS. In May of 1997, the Company entered the Chicago,
Illinois market. Through a joint venture with an institutional investor, the
Company purchased the six-story, 345,200 square foot Central Park of Lisle
office property in Lisle, Illinois, a western suburb of Chicago. The acquisition
also included a 17 acre site, located adjacent to the existing property, for
future office development. The Company is now in the process of establishing a
regional office in Chicago and is pursuing other acquisition and development
opportunities in this market.
USE OF PROCEEDS
The net proceeds to the Company from the sale of the Depositary Shares
offered hereby are expected to be approximately $146.1 million. The Company
intends to contribute or otherwise transfer the net proceeds of the sale of the
Depositary Shares to the Operating Partnership in exchange for 7.99% Series B
Cumulative Step-Up Premium Rate-SM- Preferred Units in the Operating
Partnership, the economic terms of which will be substantially identical to the
Series B SUPeR Preferred Shares. The Operating Partnership will be required to
make all required distributions on the 7.99% Series B Cumulative Step-Up Premium
Rate-SM- Preferred Units (which will mirror the payments of distributions,
including accrued and unpaid distributions upon redemption, of the liquidation
preference amount on the Series B SUPeR Preferred Shares) prior to any
distribution of cash or assets to the holders of the Operating Partnership's
non-preferred Units. See "Description of Series B SUPeR Preferred Shares and
Depositary Shares--Distributions." The Operating Partnership presently intends
to immediately use $120.0 million of the net proceeds to pay down the balance
outstanding on its lines of credit (the "Lines of Credit") which currently bear
interest at a weighted average interest rate of 6.66%. The remaining proceeds
will be used to fund acquisitions and development of additional rental
properties. 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>
CAPITALIZATION
The following table sets forth the capitalization of the Company and its
subsidiaries as of March 31, 1997 and as adjusted to give effect to issuance of
the 300,000 Series B SUPeR Preferred Shares offered hereby and the application
of the net proceeds thereof. The table should be read in conjunction with the
Company's consolidated financial statements incorporated herein by reference.
<TABLE>
<CAPTION>
MARCH 31, 1997
--------------------------
HISTORICAL AS ADJUSTED
------------ ------------
(IN THOUSANDS)
<S> <C> <C>
Debt:
Secured Debt (1).................................................................... $ 261,056 $ 251,056
Unsecured Debt...................................................................... 240,000 240,000
Unsecured Line of Credit (1)........................................................ 5,000 --
------------ ------------
Total Debt.......................................................................... $ 506,056 $ 491,056
------------ ------------
Minority Interest..................................................................... 15,407 15,407
------------ ------------
Shareholders' Equity:
Preferred Stock ($.01 par value), 5,000 shares authorized:
9.10% Series A Cumulative Redeemable Preferred Shares, liquidation preference $250
per share, 300 shares issued and outstanding...................................... 72,288 72,288
7.99% Series B Cumulative Step-Up Premium Rate-SM- Preferred Shares, liquidation
preference $500 per share, no shares issued and outstanding (300 as adjusted)..... -- 146,050
Common Stock and Paid-in Capital ($.01 par value), 45,000 shares authorized; 31,442
outstanding (2)................................................................... 806,056 806,056
Distributions in excess of net income............................................... (49,284) (49,284)
------------ ------------
Total Shareholders' Equity.......................................................... $ 829,060 $ 975,110
------------ ------------
Total Capitalization.................................................................. $ 1,350,523 $ 1,481,573
------------ ------------
------------ ------------
</TABLE>
- ------------------------
(1) The Company has drawn an additional $105 million on its unsecured line of
credit since March 31, 1997 to fund its current development and
acquisitions. The Company also has the full amount outstanding on its $10
million secured line of credit at March 31, 1997.
(2) Does not include 3,378 shares reserved for issuance upon exchange of issued
and outstanding Units.
S-13
<PAGE>
SELECTED CONSOLIDATED FINANCIAL DATA
The following table sets forth selected financial and operating information
for the Company on a historical basis. The information was 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>
THREE MONTHS ENDED
MARCH 31, YEAR ENDED DECEMBER 31,
-------------------- -------------------------------
1997 1996 1996 1995 1994
--------- --------- --------- --------- ---------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
OPERATING DATA:
RENTAL OPERATIONS:
Revenues:
Rental income............................................ $ 49,058 $ 35,335 $ 156,392 $ 112,931 $ 88,243
Equity in earnings of unconsolidated companies........... 1,860 1,202 5,768 710 1,056
--------- --------- --------- --------- ---------
50,918 36,537 162,160 113,641 89,299
--------- --------- --------- --------- ---------
Operating expenses:
Rental expenses.......................................... 9,272 7,144 29,843 20,953 17,158
Real estate taxes........................................ 4,442 3,208 14,244 9,683 8,256
Interest expense......................................... 8,602 7,967 31,344 21,424 18,920
Depreciation and amortization............................ 9,843 7,046 32,571 24,337 18,036
--------- --------- --------- --------- ---------
32,159 25,365 108,002 76,397 62,370
--------- --------- --------- --------- ---------
Earnings from rental operations.......................... 18,759 11,172 54,158 37,244 26,929
--------- --------- --------- --------- ---------
SERVICE OPERATIONS:
Revenues:
Property management, maintenance and leasing fees........ 2,641 2,714 11,496 11,138 11,084
Construction management and development fees............. 1,066 1,317 6,895 5,582 6,107
Other income............................................. 232 315 1,538 1,057 1,282
--------- --------- --------- --------- ---------
3,939 4,346 19,929 17,777 18,473
--------- --------- --------- --------- ---------
Operating expenses:
Payroll.................................................. 2,340 2,235 9,176 7,606 8,141
Maintenance.............................................. 388 296 1,526 1,344 1,069
Office and other......................................... 749 632 2,791 2,258 2,188
--------- --------- --------- --------- ---------
3,477 3,163 13,493 11,208 11,398
--------- --------- --------- --------- ---------
Earnings from service operations......................... 462 1,183 6,436 6,569 7,075
--------- --------- --------- --------- ---------
General and administrative expense......................... (1,316) (1,067) (4,719) (3,536) (3,261)
--------- --------- --------- --------- ---------
Operating income........................................... 17,905 11,288 55,875 40,277 30,743
OTHER INCOME (EXPENSE):
Interest income............................................ 250 346 1,194 1,900 1,115
Earnings (loss)from property sales......................... 280 (14) 4,532 283 2,198
Minority interest in earnings of unitholders............... (1,758) (1,785) (7,184) (6,530) (6,752)
Other minority interest in earnings of subsidiaries........ 15 (187) (986) (911) (1,088)
--------- --------- --------- --------- ---------
Net income................................................... 16,692 9,648 53,431 35,019 26,216
Dividends on preferred shares................................ (1,706) -- (2,559) -- --
--------- --------- --------- --------- ---------
Net income available for common shares....................... $ 14,986 $ 9,648 $ 50,872 $ 35,019 $ 26,216
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
</TABLE>
S-14
<PAGE>
<TABLE>
<CAPTION>
AS OF MARCH 31, AS OF DECEMBER 31,
-------------------------- ---------------------------------------
1997 1996 1996 1995 1994
------------ ------------ ------------ ------------ -----------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Real estate investments..................... $ 1,344,560 $ 1,080,961 $ 1,290,676 $ 963,499 $ 723,713
Accumulated depreciation.................... (90,075) (61,766) (82,207) (56,335) (38,058)
------------ ------------ ------------ ------------ -----------
Net real estate investments............... 1,254,485 1,019,195 1,208,469 907,164 685,655
Cash........................................ 12,997 12,090 5,334 5,727 40,433
Investments in unconsolidated companies..... 79,294 68,157 79,362 67,771 8,418
Other assets................................ 70,802 63,459 67,977 64,926 40,395
------------ ------------ ------------ ------------ -----------
Total assets............................ 1,417,578 1,162,901 1,361,142 1,045,588 774,901
------------ ------------ ------------ ------------ -----------
------------ ------------ ------------ ------------ -----------
Secured debt................................ $ 261,056 $ 289,354 $ 261,815 $ 259,820 $ 298,640
Unsecured debt.............................. 240,000 150,000 240,000 150,000 --
Unsecured line of credit.................... 5,000 11,000 24,000 45,000 --
------------ ------------ ------------ ------------ -----------
Total debt.............................. 506,056 450,354 525,815 454,820 298,640
Other liabilities........................... 67,055 49,709 67,312 51,243 29,543
------------ ------------ ------------ ------------ -----------
Total liabilities....................... 573,111 500,063 593,127 506,063 328,183
------------ ------------ ------------ ------------ -----------
Minority interest........................... 15,407 16,362 13,083 4,736 1,334
------------ ------------ ------------ ------------ -----------
Shareholders' equity........................ 829,060 646,476 754,932 534,789 445,384
------------ ------------ ------------ ------------ -----------
Total liabilities and shareholders'
equity................................ $ 1,417,578 $ 1,162,901 $ 1,361,142 $ 1,045,588 $ 774,901
------------ ------------ ------------ ------------ -----------
------------ ------------ ------------ ------------ -----------
</TABLE>
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH
31, YEAR ENDED DECEMBER 31,
------------------------ --------------------------------------
1997 1996 1996 1995 1994
---------- ------------ ------------ ----------- -----------
(IN THOUSANDS, EXCEPT PROPERTIES AND RATIO DATA)
<S> <C> <C> <C> <C> <C>
OTHER DATA:
Funds from Operations(1)..................... $ 23,717 $ 15,823 $ 76,079 $ 54,746 $ 38,198
Cash flow provided by (used in):
Operating activities....................... 28,973 14,469 95,135 78,620 51,873
Investing activities....................... (41,163) (79,865) (276,748) (289,569) (116,238)
Financing activities....................... 19,853 71,759 181,220 176,243 94,733
Ratio of earnings to debt service(2)(4)...... 2.76 2.35 2.60 2.79 2.51
Ratio of earnings to fixed charges(3)(4)..... 2.15 1.96 2.12 2.38 2.33
Ratio of Funds from Operations before debt
service to debt service(1)(4).............. 3.53 2.86 3.27 3.37 2.87
Ratio of Funds from Operations before fixed
charges to fixed charges(1)(5)............. 3.01 2.58 2.87 3.04 2.75
Weighted average common shares outstanding... 30,812 24,284 28,067 22,679 17,139
Number of in-service Properties at end of
period..................................... 250 214 249 202 128
Square feet available at end of period....... 27,659 22,297 27,402 20,073 12,896
</TABLE>
- ------------------------
(1) Funds from Operations ("FFO"), is defined by the National Association of
Real Estate Investment Trusts ("NAREIT") as net income or loss excluding
gains or losses from debt restructuring and sales of property plus
depreciation and amortization, and after adjustments for minority interest,
unconsolidated partnerships and joint ventures (adjustments for minority
interests, unconsolidated partnerships
S-15
<PAGE>
and joint ventures are calculated to reflect FFO on the same basis). FFO
does 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 is
not indicative of cash available to fund all cash flow needs.
(2) In computing the ratios of earnings to debt service, earnings have been
calculated by adding debt service to income before gains or losses on
property sales and minority interest in earnings of the Operating
Partnership. Debt service consists of interest and recurring principal
amortization (excluding maturities) and excludes amortization of debt
issuance costs.
(3) In computing the ratios of earnings to fixed charges, earnings have been
calculated by adding fixed charges, excluding capitalized interest, to
income before gains or losses on property sales and minority interest in
earnings of the Operating Partnership. Fixed charges consist (if applicable)
of interest costs, whether expensed or capitalized, the interest component
of rental expense, amortization of debt issuance costs and preferred stock
distributions.
(4) The ratios of FFO before debt service to debt service represent the sum of
FFO before minority interest in earnings of the Operating Partnership and
minority interest share of FFO adjustments and debt service compared to debt
service.
(5) The ratios of FFO before fixed charges to fixed charges represent the sum of
FFO before minority interest in earnings of the Operating Partnership and
minority interest share of FFO adjustments and fixed charges compared to
fixed charges.
S-16
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
OVERVIEW
The Company's operating results depend primarily upon income from the rental
operations of its industrial, office and retail properties located in its
primary markets. This income from rental operations is substantially influenced
by the supply and demand for the Company's rental space in its primary markets.
In addition, the Company's continued growth is dependent upon its ability to
maintain occupancy rates and increase rental rates of its in-service portfolio
and to continue development and acquisition of additional rental properties.
The Company's primary markets in the Midwest have continued to offer strong
and stable local economies and have provided attractive new development
opportunities because of their central location, established manufacturing base,
skilled work force and moderate labor costs. Consequently, the Company's
occupancy rate of its in-service portfolio has exceeded 92% the last two years
and was at 95.5% at March 31, 1997. The Company expects to continue to maintain
its overall occupancy levels at comparable levels and also expects to be able to
increase rental rates as leases are renewed or new leases are executed. This
stable occupancy as well as increasing rental rates should improve the Company's
results of operations from its in-service properties. The Company's strategy for
continued growth also includes developing and acquiring additional rental
properties in its primary markets and expanding into other attractive Midwestern
markets.
The following table sets forth information regarding the Company's
in-service portfolio of rental properties as of March 31, 1997 and 1996 (in
thousands, except percentages):
<TABLE>
<CAPTION>
PERCENT OF TOTAL PERCENT OCCUPIED
TOTAL SQUARE FEET SQUARE FEET
-------------------- -------------------- --------------------
TYPE 1997 1996 1997 1996 1997 1996
- ---------------------------------- --------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
INDUSTRIAL
Service Centers................. 3,051 2,970 11.03% 13.32% 93.04% 94.60%
Bulk............................ 15,531 12,155 56.15 54.51 95.95% 92.33%
OFFICE
Suburban........................ 6,319 4,684 22.84 21.01 96.53% 96.26%
CBD............................. 699 699 2.53 3.14 87.55% 93.62%
Medical......................... 369 333 1.34 1.49 95.18% 89.64%
RETAIL............................ 1,690 1,456 6.11 6.53 94.52% 93.73%
--------- --------- --------- ---------
Total........................... 27,659 22,297 100.00% 100.00% 95.45% 93.55%
--------- --------- --------- ---------
--------- --------- --------- ---------
</TABLE>
Management expects occupancy of the in-service property portfolio to remain
stable because (i) only 8.1% and 12.1% of the Company's occupied square footage
is subject to leases expiring in the remainder of 1997 and in 1998,
respectively, and (ii) the Company's renewal percentage averaged 80%, 65% and
73% in 1996, 1995 and 1994, respectively.
S-17
<PAGE>
The following table reflects the Company's in-service portfolio lease
expiration schedule as of March 31, 1997 by product type indicating square
footage and annualized net effective rents under expiring leases (in thousands,
except per square foot amounts):
<TABLE>
<CAPTION>
INDUSTRIAL OFFICE RETAIL TOTAL PORTFOLIO
---------------------- ---------------------- ---------------------- ----------------------
SQUARE CONTRACTUAL SQUARE CONTRACTUAL SQUARE CONTRACTUAL SQUARE CONTRACTUAL
YEAR OF EXPIRATION FEET RENT FEET RENT FEET RENT FEET RENT
- --------------------- --------- ----------- --------- ----------- --------- ----------- --------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1997................. 1,605 $ 6,435 495 $ 5,003 48 $ 528 2,148 $ 11,966
1998................. 2,332 8,740 750 8,123 107 1,115 3,189 17,978
1999................. 2,218 9,619 908 9,798 120 1,233 3,246 20,650
2000................. 2,165 8,841 840 10,200 103 1,244 3,108 20,285
2001................. 2,512 9,891 865 9,546 88 1,062 3,465 20,499
2002................. 1,023 4,032 848 9,071 134 1,401 2,005 14,504
2003................. 292 1,766 217 2,489 35 317 544 4,572
2004................. 865 3,221 195 2,386 13 126 1,073 5,733
2005................. 1,256 4,069 535 6,770 177 1,505 1,968 12,344
2006................. 2,038 6,457 352 4,359 5 67 2,395 10,883
2007 and
Thereafter......... 1,435 4,722 1,058 13,775 767 6,506 3,260 25,003
--------- ----------- --------- ----------- --------- ----------- --------- -----------
Total Leased......... 17,741 $ 67,793 7,063 $ 81,520 1,597 $ 15,104 26,401 $ 164,417
--------- ----------- --------- ----------- --------- ----------- --------- -----------
--------- ----------- --------- ----------- --------- ----------- --------- -----------
Total Portfolio
Square Feet........ 18,582 7,387 1,690 27,659
--------- --------- --------- ---------
--------- --------- --------- ---------
Annualized net
effective rent per
square foot........ $ 3.82 $ 11.54 $ 9.46 $ 6.23
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
</TABLE>
This stable occupancy, along with stable rental rates in each of the
Company's markets, will allow the in-service portfolio to continue to provide a
comparable or increasing level of earnings from rental operations. The Company
also expects to realize growth in earnings from rental operations through (i)
the development and acquisition of additional rental properties in its primary
markets; (ii) the expansion into other attractive Midwestern markets; and (iii)
the completion of the 5.1 million square feet of properties under development at
March 31, 1997 over the next four quarters. The 5.1 million square feet of
properties under development should provide future earnings from rental
operations growth for the Company as they are placed in service as follows (in
thousands, except percent leased and stabilized returns):
<TABLE>
<CAPTION>
PERCENT PROJECT STABILIZED
ANTICIPATED IN-SERVICE DATE SQUARE FEET LEASED COSTS RETURN
- ---------------------------------------------------- ----------- ------------- ---------- -------------
<S> <C> <C> <C> <C>
2nd Quarter 1997.................................... 1,650 81% $ 50,332 11.9%
3rd Quarter 1997.................................... 1,931 69% 65,067 11.1%
4th Quarter 1997.................................... 668 72% 44,004 11.7%
1st Quarter 1998.................................... 830 79% 37,833 11.5%
----- ----------
5,079 75% $ 197,236 11.5%
----- ----------
----- ----------
</TABLE>
S-18
<PAGE>
RESULTS OF OPERATIONS
Following is a summary of the Company's operating results and property
statistics for the three months ended March 31, 1997 and 1996 (in thousands,
except number of properties and per share amounts):
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
--------------------
1997 1996
--------- ---------
<S> <C> <C>
Rental Operations revenue............................................... $ 50,918 $ 36,537
Service Operations revenue.............................................. 3,939 4,346
Earnings from Rental Operations......................................... 18,759 11,172
Earnings from Service Operations........................................ 462 1,183
Operating income........................................................ 17,905 11,288
Net income available for common shares.................................. $ 14,986 $ 9,648
Weighted average common shares outstanding.............................. 30,812 24,284
Net income per common share............................................. $ .49 $ .40
Number of in-service properties at end of period........................ 250 214
In-service square footage at end of period.............................. 27,659 22,297
Under development square footage at end of period....................... 5,079 2,891
</TABLE>
COMPARISON OF THREE MONTHS ENDED MARCH 31, 1997 TO THREE MONTHS ENDED MARCH 31,
1996
RENTAL OPERATIONS
The Company increased its in-service portfolio of rental properties from 214
properties comprising 23.0 million square feet at March 31, 1996 to 250
properties comprising 27.7 million square feet at March 31, 1997 through the
acquisition of 23 properties totaling 2.1 million square feet and the completion
of 15 properties and three building expansions totaling 3.5 million square feet
developed by the Company. The Company also disposed of two properties totaling
226,000 square feet. These 36 net additional rental properties primarily account
for the $14.4 million increase in revenues from Rental Operations from 1996 to
1997. The Company also received a $1.2 million net lease termination payment
made by a tenant in one of the Company's office properties which is included in
rental income for the three months ended March 31, 1997. The increase from 1996
to 1997 in rental expenses, real estate taxes and depreciation and amortization
expense is also a result of the additional 36 in-service rental properties.
Interest expense increased by approximately $600,000 from $8.0 million for
the three months ended March 31, 1996 to $8.6 million for the three months ended
March 31, 1997 due to additional unsecured debt issued in its medium-term note
program in the last two quarters of 1996 to fund the development and acquisition
of additional rental properties.
As a result of the above-mentioned items, earnings from rental operations
increased $7.6 million from $11.2 million for the three months ended March 31,
1996 to $18.8 million for the three months ended March 31, 1997.
SERVICE OPERATIONS
Service Operation revenues decreased to $3.9 million for the three months
ended March 31, 1997 as compared to $4.3 million for the three months ended
March 31, 1996. This decrease was primarily the result of a decrease in
construction management fees caused by unfavorable weather conditions during the
three months ended March 31, 1997. Service Operation operating expenses
increased from $3.2 million to $3.5 million for the three months ended March 31,
1997 as compared to the three months ended March 31, 1996 primarily as a result
of an increase in operating expenses resulting from the overall growth of the
Company.
S-19
<PAGE>
As a result of the above-mentioned items, earnings from Service Operations
decreased from $1.2 million for the three months ended March 31, 1996 to
$462,000 for the three months ended March 31, 1997.
GENERAL AND ADMINISTRATIVE EXPENSE
General and administrative expense increased from $1.1 million for the three
months ended March 31, 1996 to $1.3 million for the three months ended March 31,
1997 primarily as a result of increased state and local taxes due to the growth
in revenues and net income of the Company.
OTHER INCOME (EXPENSE)
Interest income decreased from $346,000 for the three months ended March 31,
1996 to $250,000 for the three months ended March 31, 1997 primarily as a result
of interest income which was earned on certain escrows during the three months
ended March 31, 1996 which were refunded later in 1996.
NET INCOME AVAILABLE FOR COMMON SHARES
Net income available for common shares for the three months ended March 31,
1997 was $15.0 million compared to net income available for common shares of
$9.6 million for the three months ended March 31, 1996. This increase results
primarily from the operating result fluctuations in rental and service
operations explained above.
LIQUIDITY AND CAPITAL RESOURCES
Net cash provided by operating activities totaling $29.0 million and $14.5
million for the three months ended March 31, 1997 and 1996, respectively,
represents the primary source of liquidity to fund distributions to
shareholders, unitholders and the other minority interests and to fund recurring
costs associated with the renovation and re-letting of the Company's properties.
This increase is primarily a result of, as discussed above under "Results of
Operations," the increase in net income resulting from the expansion of the
in-service portfolio through development and acquisitions of additional rental
properties.
Net cash used by investing activities totaling $41.2 million and $79.9
million for the three months ended March 31, 1997 and 1996, respectively,
represents the investment of funds by the Company to expand its portfolio of
rental properties through the development and acquisition of additional rental
properties net of proceeds received from property sales. In 1997, $34.8 million
was invested in the development of additional rental properties and the
acquisition of land held for development. In 1996, the investment in the
development and acquisition of additional rental properties and land held for
development was $84.2 million. Included in the $84.2 million of net cash used by
investing activities for the development and acquisition of rental properties
for the three months ended March 31, 1996 is $44.5 million related to the
acquisition of eight suburban office buildings totaling 782,000 gross square
feet in Cleveland, Ohio. The purchase price of these eight buildings was
approximately $76.0 million which included the assumption of $23.1 million of
mortgage debt and the issuance of $8.4 million of units of partnership interest
in the Company's operating partnership. In March 1996, the Company received
$113.8 million of net proceeds from a common equity offering which was used to
pay down amounts outstanding on the unsecured line of credit and to fund current
development and acquisition activity. In January 1997, the Company received
$56.7 million of net proceeds from a common equity offering which was used to
pay down amounts outstanding on the unsecured line of credit and to fund current
development activity. During the three months ended March 31, 1997, the Company
also received $2.7 million of net proceeds from the issuance of common stock
under its Direct Stock Purchase and Dividend Reinvestment Plan.
The Company has a $150 million unsecured line of credit which matures in
April 1998. In January 1996, the borrowing rate was LIBOR plus 1.625%. In
September 1996, the borrowing rate was reduced to LIBOR plus 1.25%. On March 27,
1997 the borrowing rate was further reduced to LIBOR plus 1.00%.
S-20
<PAGE>
The Company also has a demand $10 million secured revolving credit facility
which is available to provide working capital. This facility bears interest
payable at the 30-day LIBOR rate plus .75%.
The Company currently has on file Form S-3 Registration Statements with the
Securities and Exchange Commission ("Shelf Registrations") which, after
completion of this offering will have remaining availability of approximately
$760 million to issue common stock, preferred stock or unsecured debt
securities. The Company intends to issue additional equity or debt under these
Shelf Registrations as capital needs arise to fund the development and
acquisition of additional rental properties. It is the Company's policy to incur
indebtedness only at the Operation Partnership level. See "The
Company--Financing Strategy."
The Company intends to maintain a conservative capital structure. The
Company's debt to total market capitalization ratio at March 31, 1997 was 25.3%,
compared to 31.4% at March 31, 1996. Following the Offering, the Company's debt
to total market capitalization ratio will be 22.9% based on a market price of
the Company's Common Stock of $40.50 per share and a market price of the Series
A Preferred Shares of $26.50 per Depository Share and a market price of the
Series B SUPeR Preferred Shares of $50.00 per Depository Share. Assuming
completion of the Offering and the repayment of the balances outstanding on the
lines of credit, the pro forma ratio of earnings to combined fixes charges and
preferred stock dividends for the three months ended March 31, 1997 would have
been 1.76 to one and the pro forma ratio of EBIDA to combined fixed charges and
preferred stock dividends would have been 2.50 to one for the three months ended
March 31, 1997.
The total debt outstanding at March 31, 1997 consists of notes totaling
$506.1 million with a weighted average interest rate of 7.58% maturing at
various dates through 2017. The Company has $245.0 million of unsecured debt and
$261.1 million of secured debt outstanding at March 31, 1997. Scheduled
principal amortization of such debt totaled $759,000 for the three months ended
March 31, 1997.
Following is a summary of the scheduled future amortization and maturities
of the Company's indebtedness at March 31, 1997 (in thousands):
<TABLE>
<CAPTION>
REPAYMENTS
------------------------------------ WEIGHTED AVERAGE
SCHEDULED INTEREST RATE OF
YEAR AMORTIZATION MATURITIES TOTAL FUTURE REPAYMENTS
- ----------------------------------- ------------ ---------- ---------- ---------------------
<S> <C> <C> <C> <C>
1997............................... $ 2,629 $ 10,000 $ 12,629 6.66%
1998............................... 4,410 51,590 56,000 7.26%
1999............................... 5,146 28,470 33,616 6.15%
2000............................... 3,227 44,853 48,080 7.38%
2001............................... 2,930 59,954 62,884 8.72%
2002............................... 3,189 50,000 53,189 7.36%
2003............................... 902 68,216 69,118 8.48%
2004............................... 978 50,000 50,978 7.14%
2005............................... 1,064 100,000 101,064 7.48%
2006............................... 1,160 -- 1,160 7.38%
Thereafter......................... 17,338 -- 17,338 7.54%
------------ ---------- ----------
Total.............................. $ 42,973 $ 463,083 $ 506,056 7.58%
------------ ---------- ----------
------------ ---------- ----------
</TABLE>
The 1997 maturities consist of the outstanding balance on the Company's $10
million demand secured line of credit.
The Company intends to pay regular quarterly dividends from net cash
provided by operating activities. A quarterly dividend of $.51 per Common Share
was declared on April 24, 1997 payable on May 30, 1997 to shareholders of record
on May 16, 1997, which represents an annualized dividend of $2.04 per share. A
quarterly dividend of $.56875 per depositary share of Series A Preferred Stock
was declared on April 24, 1997 which is payable on May 30, 1997 to preferred
shareholders of record on May 16, 1997.
S-21
<PAGE>
FUNDS FROM OPERATIONS
Management believes that Funds From Operations ("FFO"), which is defined by
the National Association of Real Estate Investment Trusts as net income or loss
excluding gains or losses from debt restructuring and sales of property plus
depreciation and amortization, and after adjustments for minority interest,
unconsolidated partnerships and joint ventures (adjustments for minority
interest, unconsolidated partnerships and joint ventures are calculated to
reflect FFO on the same basis), is the industry standard for reporting the
operations of real estate investment trusts.
The following table reflects the calculation of the Company's FFO for the
three months ended March 31 as follows (in thousands):
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
----------------------
1997 1996
---------- ----------
<S> <C> <C>
Net income available for common shares................................ $ 14,986 $ 9,648
Add back:
Depreciation and amortization....................................... 9,499 6,761
Share of joint venture depreciation and amortization................ 523 440
(Earnings) loss from property sales................................. (280) 14
Minority interest share of add-backs................................ (1,011) (1,040)
---------- ----------
FUNDS FROM OPERATIONS................................................. $ 23,717 $ 15,823
---------- ----------
---------- ----------
CASH FLOW PROVIDED BY (USED BY):
Operating activities................................................ $ 28,973 $ 14,469
Investing activities................................................ (41,163) (79,865)
Financing activities................................................ 19,853 71,759
</TABLE>
The increase in FFO for the three months ended March 31, 1997 compared to
the three months ended March 31, 1996 results primarily from the increased
in-service rental property portfolio as discussed above under "Results of
Operations."
While management believes that FFO is the most relevant and widely used
measure of the Company's operating performance, such amount does 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 is not indicative of cash
available to fund all cash flow needs.
S-22
<PAGE>
PROPERTIES
GENERAL
The Company owns a diversified portfolio of properties which includes (i)
the in-service Properties, consisting of 250 industrial, office and retail
properties located in Indiana, Ohio, Illinois, Michigan, Tennessee, Kentucky,
Wisconsin and Missouri; (ii) 23 buildings and one building expansion currently
under development; and (iii) the Land, consisting of approximately 1,100 acres
of unencumbered land for future development in Indiana, Ohio, Missouri,
Illinois, Kentucky, and Tennessee. The Company owns the entire equity interest
in 207 of the Properties, including property under development, and a partial
interest in the remainder of the Properties. 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. The Company believes that
its Properties are of the highest quality available to tenants in its markets.
The total square footage of the in-service Properties is approximately 27.7
million, consisting of approximately 18.6 million square feet of industrial
space, approximately 7.4 million square feet of office space and approximately
1.7 million square feet of retail space. The total square footage of the 23
buildings and one building expansion currently under development is
approximately 5.1 million square feet, consisting of approximately 3.7 million
square feet of industrial space, approximately 967,000 square feet of office
space and approximately 381,000 square feet of retail space. The current
development projects are 75% leased as of March 31, 1997. The total annual Net
Effective Rental income of the Properties based upon tenants in occupancy as of
March 31, 1997 is approximately $164.4 million, with $67.8 million relating to
the industrial Properties, $81.5 million relating to the office Properties and
$15.1 million relating to the retail Properties. At March 31, 1997, the
Properties were approximately 95.5% leased.
The following tables provide an overview of the Properties.
SQUARE FOOTAGE AND ANNUAL NET EFFECTIVE RENT OF PROPERTIES
(IN THOUSANDS, EXCEPT PERCENTAGES)
<TABLE>
<CAPTION>
SQUARE FEET
----------------------------------------------------------- ANNUAL NET PERCENT OF
PERCENT OF EFFECTIVE ANNUAL NET
PRIMARY MARKET INDUSTRIAL OFFICE RETAIL TOTAL TOTAL RENT(1) EFFECTIVE RENT
- ----------------------------------- ----------- --------- --------- --------- ------------- ------------ ---------------
<S> <C> <C> <C> <C> <C> <C> <C>
Indianapolis....................... 11,887 1,341 194 13,422 48% $ 55,302 34%
Cincinnati......................... 3,686 2,961 779 7,426 27 53,291 32
Columbus........................... 960 1,325 219 2,504 9 21,700 13
Cleveland.......................... -- 1,052 -- 1,052 4 12,826 8
Nashville.......................... 563 -- -- 563 2 3,859 2
St Louis........................... 924 463 -- 1,387 5 8,745 5
Detroit............................ -- 245 -- 245 1 2,841 2
Other(2)........................... 562 -- 498 1,060 4 5,853 4
----------- --------- --------- --------- --- ------------ ---
Total............................ 18,582 7,387 1,690 27,659 100% $ 164,417 100%
----------- --------- --------- --------- --- ------------ ---
----------- --------- --------- --------- --- ------------ ---
</TABLE>
- ------------------------
(1) Represents annual Net Effective Rent due from tenants in occupancy as of
March 31, 1997, excluding additional rent due as a result of operating
expense reimbursements, landlord allowances for operating expenses and
percentage rents.
(2) Represents properties not located in the Company's primary markets. These
properties are located in other similar Midwestern markets.
S-23
<PAGE>
SUMMARY OF PROPERTIES
(IN THOUSANDS, EXCEPT PERCENTAGES)
<TABLE>
<CAPTION>
PERCENT OF
PERCENT OF ANNUAL NET TOTAL NET
SQUARE TOTAL SQUARE EFFECTIVE EFFECTIVE OCCUPANCY AT
TYPE OF PROPERTY FEET FEET RENT(1) ANNUAL RENT MARCH 31, 1997
- ---------------------------- --------- --------------- ------------ --------------- ---------------
<S> <C> <C> <C> <C> <C>
Industrial.................. 18,582 67% $ 67,793 41% 95.5%
Office...................... 7,387 27 81,520 50 95.6%
Retail...................... 1,690 6 15,104 9 94.5%
--------- --- ------------ ---
Total....................... 27,659 100% $ 164,417 100% 95.5%
--------- --- ------------ ---
--------- --- ------------ ---
</TABLE>
- ------------------------
(1) Represents annual Net Effective Rent due from tenants in occupancy as of
March 31, 1997.
The following table sets forth the aggregate average percent earned for all
of the Properties during the indicated periods
AVERAGE OCCUPANCY
<TABLE>
<CAPTION>
SQUARE FEET AVERAGE
YEAR AVAILABLE OCCUPANCY
- -------------------------------------------------------------------- ------------ -------------
<S> <C> <C>
Through March 31, 1997.............................................. 27,659,343 95.2%
1996................................................................ 27,402,150 95.2%
1995................................................................ 20,072,666 95.1%
1994................................................................ 12,894,603 93.8%
</TABLE>
S-24
<PAGE>
The following table shows lease expirations for leases in place as of March
31, 1997 for each of the ten years beginning with 1997 for the Properties,
assuming none of the tenants exercises early termination or renewal options.
LEASE EXPIRATIONS
<TABLE>
<CAPTION>
PERCENT OF PERCENT OF
ANNUAL NET ANNUAL NET TOTAL
EFFECTIVE EFFECTIVE LEASED SQ.
RENT PER SQ. RENT FT.
NUMBER OF FT. UNDER REPRESENTED REPRESENTED
LEASES EXPIRING BY EXPIRING BY EXPIRING
YEAR OF LEASE EXPIRATION EXPIRING LEASES(1) LEASES LEASES
- ------------------------------- ----------- NET RENTABLE ANNUAL NET ------------- ----------- -----------
AREA (IN SQ. EFFECTIVE RENT
FT.) SUBJECT TO UNDER EXPIRING
EXPIRING LEASES LEASES(1)
--------------- --------------
(IN THOUSANDS) (IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
1997........................... 276 2,148 $ 11,966 $ 5.57 7.28% 8.14%
1998........................... 323 3,189 17,978 5.64 10.93 12.08
1999........................... 331 3,246 20,650 6.36 12.56 12.29
2000........................... 278 3,108 20,285 6.53 12.34 11.77
2001........................... 291 3,465 20,499 5.92 12.47 13.12
2002........................... 135 2,005 14,504 7.23 8.82 7.59
2003........................... 30 544 4,572 8.40 2.78 2.06
2004........................... 26 1,073 5,733 5.34 3.49 4.06
2005........................... 45 1,968 12,344 6.27 7.51 7.45
2006........................... 39 2,395 10,883 4.54 6.62 9.07
2007 and thereafter............ 53 3,260 25,003 7.67 15.20 12.37
----- ------ -------------- ----------- -----------
Total.......................... 1,827 26,401 $ 164,417 6.23 100.00% 100.00%
----- ------ -------------- ----------- -----------
----- ------ -------------- ----------- -----------
</TABLE>
- ------------------------
(1) Represents annual Net Effective Rent due from tenants in occupancy as of
March 31, 1997.
INDUSTRIAL PROPERTIES
The 149 industrial Properties are primarily located in industrial or
business parks that have been developed by the Company and consist of 101 bulk
distribution facilities and 48 service center facilities. Approximately 84% of
the square footage of the industrial Properties is contained in bulk
distribution facilities. The bulk distribution facilities accommodate the needs
of large warehouse and distribution users with ceiling clear heights of 20 feet
and more while providing leased space to many large tenants including users of
more than 500,000 square feet. The service center facilities are also known as
flex buildings or light industrial properties which generally have 12 to 18 foot
ceiling heights and a combination of drive-up and dock loading access. These
service center facilities accommodate users of 1,200 square feet and up. The
diversity of the 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. Approximately 89% of the industrial Properties are
in the Company's primary markets of Indianapolis, Cincinnati and Columbus.
OFFICE PROPERTIES
The Company owns a portfolio of 78 office Properties, including 75 suburban
office buildings which range from single-story to mid-rise and are located in
developed business parks and mixed use developments with excellent interstate
access and visibility. Six of the suburban office buildings are medical
buildings, including a single tenant facility with a 20 year lease and three
multi-tenant properties attached to hospitals. In addition, the Company owns
three downtown office buildings consisting of two new high-rise buildings and
one rehabilitated building. The Company believes that these primarily Class A
office Properties are among the highest quality available to tenants in its
markets. This diverse mix of office buildings is occupied by tenants spanning
all segments of the office market.
S-25
<PAGE>
RETAIL PROPERTIES
The retail Properties, which cater to a variety of retail markets, include
one regional shopping center, 12 neighborhood shopping centers, three shopping
centers designed primarily to serve the business parks in which they are located
and seven free-standing single-tenant buildings. The regional and neighborhood
shopping centers either have well known anchor tenants such as Wal-Mart and Pet
Food Supermarket, or are located adjacent to major retailers such as Kroger or
in areas where other large commercial facilities draw consumers. The retail
Properties are generally located in upscale suburban and high growth areas.
LAND
Substantially all of the approximately 1,100 acres of unencumbered 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 13 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.
S-26
<PAGE>
MANAGEMENT
The directors and senior officers of the Company are as follows:
<TABLE>
<CAPTION>
NAME AGE PRINCIPAL OCCUPATIONS AND POSITIONS
- ------------------------- --- --------------------------------------------------------------------------------
<S> <C> <C>
John W. Wynne 64 Director and Chairman of the Board.
Thomas L. Hefner 50 Director and President and Chief Executive Officer.
Darell E. Zink, Jr. 50 Director and Executive Vice President and Chief Financial Officer.
Geoffrey Button 48 Director; Independent real estate and financing consultant
Ngaire E. Cuneo 46 Director; Executive Vice President, Corporate Development, Conseco, Inc.
Howard L. Feinsand 49 Director; Principal, Choir Capital LTD.
L. Ben Lytle 50 Director; President and Chief Executive Officer of Anthem, Inc.
John D. Peterson 64 Director; Chairman of City Securities Corporation.
James E. Rogers 49 Director; Vice Chairman, President and Chief Executive Officer of CINergy.
Daniel C. Staton 44 Director; Principal, Walnut Capital Partners.
Jay J. Strauss 61 Director; Chairman and Chief Executive Officer of Regent Realty Group, Inc.
Gary A. Burk 45 President of Construction Services and Executive Vice President of Duke
Services, Inc.
Richard W. Horn 39 Executive Vice President, Office.
William E. Linville, III 42 Executive Vice President, Industrial
David R. Mennel 43 General Manager of Services Operations and President of Duke Services, Inc.
Dennis D. Oklak 43 Vice President and Treasurer
</TABLE>
S-27
<PAGE>
DESCRIPTION OF SERIES B SUPER PREFERRED SHARES AND DEPOSITARY SHARES
The description of the particular terms of the Series B SUPeR Preferred
Shares and the Depositary Shares set forth in this Prospectus Supplement
supplements, and to the extent inconsistent therewith replaces, the description
of the general terms and provisions of the Preferred Shares and Depositary
Shares set forth in the accompanying Prospectus, to which description reference
is hereby made.
GENERAL
The Company is authorized to issue up to 5,000,000 preferred shares, $.01
par value per share ("Preferred Shares"), in one or more series, with such
designations, powers, preferences and rights of the shares of such series and
the qualifications, limitations or restrictions thereon, including, but not
limited to, the fixing of the distribution rights, distribution rate or rates,
conversion rights, voting rights and terms of redemption (including sinking fund
provisions), the redemption price or prices, and the liquidation preferences, in
each case, if any, as the Board of Directors of the Company may determine by
adoption of an applicable amendment (a "Designating Amendment") to the Company's
Amended and Restated Articles of Incorporation (the "Articles of
Incorporation"), without any further vote or action by the shareholders. See
"Description of Preferred Stock--Terms" in the accompanying Prospectus. Unless
redeemed by the Company, the Depositary Shares representing the Series B SUPeR
Preferred Shares have a perpetual term with no stated maturity date.
On July 7, 1997, a form of Designating Amendment was adopted determining the
terms of a series of preferred shares consisting of up to 300,000 shares,
designated 7.99% Series B Cumulative Step-Up Premium Rate-SM- Preferred Shares.
As of such date, the only Preferred Shares of the Company issued or outstanding
were 300,000 shares of the Company's Series A Cumulative Redeemable Preferred
Shares. The following summary of the terms and provisions of the Series B SUPeR
Preferred Shares does not purport to be complete and is qualified in its
entirety by reference to the pertinent sections of the Articles of Incorporation
and the Designating Amendment designating the Series B SUPeR Preferred Shares,
each of which is available from the Company.
The registrar, transfer agent and distribution disbursing agent for the
Series B SUPeR Preferred Shares will be American Stock Transfer & Trust Company.
Each Depositary Share represents a 1/10 fractional interest in a Series B
SUPeR Preferred Share. The Series B SUPeR Preferred Shares will be deposited
with American Stock Transfer & Trust Company, as Depositary (the "Preferred
Share Depositary"), under a Deposit Agreement among the Company, the Preferred
Share Depositary and the holders from time to time of the depositary receipts
(the "Depositary Receipts") issued by the Preferred Share Depositary thereunder.
The Depositary Receipts will evidence the Depositary Shares. Subject to the
terms of the Deposit Agreement, each holder of a Depositary Receipt evidencing a
Depositary Share will be entitled to all the rights and preferences of a 1/10
fractional interest in a Series B SUPeR Preferred Share (including, if any,
distribution, voting, redemption and liquidation rights and preferences). See
"Description of Depositary Shares" in the accompanying Prospectus.
Application has been made to list the Depositary Shares on the NYSE, subject
to official notice of issuance. If such application is approved, trading of the
Depositary Shares on the NYSE is expected to commence within a 30-day period
after the initial delivery of the Depositary Shares. The Series B SUPeR
Preferred Shares will not be so listed, and the Company does not expect that
there will be any trading market for the Series B SUPeR Preferred Shares, except
as represented by Depositary Shares.
DISTRIBUTIONS
Holders of the Series B SUPeR Preferred Shares shall be entitled to receive,
when, as and if authorized by the Board of Directors, out of funds legally
available for the payment of distributions,
S-28
<PAGE>
cumulative cash distributions at the rate of 7.99% of the liquidation preference
per annum (equivalent to $3.995 per annum per Depositary Share) through
September 30, 2012 and at the rate of 9.99% of the liquidation preference per
annum (equivalent to $4.995 per annum per Depositary Share) thereafter.
Distributions on the Series B SUPeR Preferred Shares represented by the
Depositary Shares offered hereby shall accrue and be cumulative from the date of
original issue and shall be payable quarterly in arrears on the last day of each
March, June, September and December or, if not a business day, the next
succeeding business day (each, a "Distribution Payment Date"). The first
distribution on the Series B SUPeR Preferred Shares represented by the
Depositary Shares offered hereby, which will be paid on September 30, 1997, will
be a pro rated portion of the full quarterly distribution. Such distribution and
any distribution payable on the Series B SUPeR Preferred Shares for any partial
distribution period will be computed on the basis of a 360-day year consisting
of twelve 30-day months. Distributions will be payable to holders of record as
they appear in the share records of the Company at the close of business on the
applicable record date, which shall be the first day of the calendar month in
which the applicable Distribution Payment Date falls or such other date
designated by the Board of Directors of the Company for the payment of
distributions that is not more than 30 nor less than 10 days prior to such
Distribution Payment Date (each, a "Distribution Record Date").
No distributions on the Series B SUPeR Preferred Shares shall be authorized
by the Board of Directors of the Company or be paid or set apart for payment by
the Company at such time as the terms and provisions of any agreement of the
Company, including any agreement relating to its indebtedness, prohibits such
authorization, payment or setting apart for payment or provides that such
authorization, payment or setting apart for payment would constitute a breach
thereof or a default thereunder, or if such authorization or payment shall be
restricted or prohibited by law. Covenants in its revolving credit agreement
provide generally that the Company may not pay distributions in excess of 90% of
Funds From Operations in any Fiscal Year, all as defined in the particular
agreement, but such covenant permits the Company, upon certain circumstances, to
pay distributions in an amount necessary to maintain its qualification as a
REIT. The Company does not believe that this provision has had or will have any
adverse impact on the Company's ability to pay distributions in respect of the
Series B SUPeR Preferred Shares or in the normal course of business to its
shareholders in amounts necessary to maintain its qualification as a REIT.
Notwithstanding the foregoing, distributions on the Series B SUPeR Preferred
Shares will accrue whether or not the Company has earnings, whether or not there
are funds legally available for the payment of such distributions and whether or
not such distributions are authorized. Accrued but unpaid distributions on the
Series B SUPeR Preferred Shares will not bear interest and holders of the Series
B SUPeR Preferred Shares will not be entitled to any distributions in excess of
full cumulative distributions as described above. See "Description of Preferred
Shares--Dividends" in the accompanying Prospectus.
The Operating Partnership will be required to make all required
distributions on the 7.99% Series B Preferred Units (which will mirror the
payments of distributions, including accrued and unpaid distributions upon
redemption, and of the liquidation preference amount on the Series B SUPeR
Preferred Shares) prior to any distribution of cash or assets to the holders of
the Units or to the holders of any other interests in the Operating Partnership,
except for any other series of preference units ranking on a parity with the
7.99% Series B Preferred Units as to dividends and/or liquidation rights
(including the Series A Preferred Units outstanding in connection with the
Company's 9.10% Series A Cumulative Redeemable Preferred Stock) and except for
distributions required to enable the Company to maintain its qualification as a
REIT.
Any distribution payment made on the Series B SUPeR Preferred Shares shall
first be credited against the earliest accrued but unpaid distribution due with
respect to such shares which remains payable.
If, for any taxable year, the Company elects to designate as "capital gain
dividends" (as defined in Section 857 of the Code) any portion (the "Capital
Gains Amount") of the dividends (within the meaning
S-29
<PAGE>
of the Code) paid or made available for the year to holders of all classes of
shares of beneficial interest (the "Total Dividends"), then the portion of the
Capital Gains Amount that will be allocable to the holders of Series B SUPeR
Preferred Shares will be the Capital Gains Amount multiplied by a fraction, the
numerator of which will be the total dividends (within the meaning of the Code)
paid or made available to the holders of the Series B SUPeR Preferred Shares for
the year and the denominator of which shall be the Total Dividends.
LIQUIDATION PREFERENCE
In the event of any liquidation, dissolution or winding-up of the affairs of
the Company, the holders of the Series B SUPeR Preferred Shares are entitled to
be paid out of the assets of the Company legally available for distribution to
its shareholders liquidating distributions in cash or property at its fair
market value as determined by the Company's Board of Directors in the amount of
a liquidation preference of $500.00 per share (equivalent to $50.00 per
Depositary Share), plus an amount equal to any accrued and unpaid distributions
to the date of such liquidation, dissolution or winding-up, before any
distribution of assets is made to holders of Common Shares or any other capital
shares that rank junior to the Series B SUPeR Preferred Shares as to liquidation
preference. After payment of the full amount of the liquidating distributions to
which they are entitled, the holders of Series B SUPeR Preferred Shares will
have no right or claim to any of the remaining assets of the Company. The
consolidation or merger of the Company with or into any other entity or the
sale, lease, transfer or conveyance of all or substantially all of the property
or business of the Company shall not be deemed to constitute a liquidation,
dissolution or winding-up of the Company. For further information regarding the
rights of the holders of the Series B SUPeR Preferred Shares and related
Depositary Shares upon the liquidation, dissolution or winding up of the
Company, see "Description of Preferred Stock--Liquidation Preference" and
"Description of Depositary Shares-- Liquidation Preference" in the accompanying
Prospectus.
REDEMPTION
The Series B SUPeR Preferred Shares are not redeemable prior to September
30, 2007. At any time on or after September 30, 2007, the Company, at its option
upon not less than 30 or more than 60 days' written notice, may redeem the
Series B SUPeR Preferred Shares (and the Preferred Share Depositary will redeem
the number of Depositary Shares representing the Series B SUPeR Preferred Shares
so redeemed upon not less than 30 days' written notice to the holders thereof),
in whole or in part, at any time or from time to time, at a redemption price of
$500.00 per share (equivalent to $50.00 per Depositary Share), plus all accrued
and unpaid dividends thereon, if any, to the date fixed for redemption, without
interest, to the extent the Company will have funds legally available therefor.
The redemption price of the Series B SUPeR Preferred Shares (other than any
portion thereof consisting of accrued and unpaid distributions, if any) shall be
paid solely from the sale proceeds of other capital stock of the Company, and
not from any other source. For purposes of the preceding sentence, "capital
stock" means any common stock, preferred stock, depositary shares, interests,
participations, or other ownership interests (however designated) and any rights
(other than debt securities convertible into or exchangeable for equity
securities) or options to purchase any of the foregoing. Holders of Depositary
Receipts evidencing Depositary Shares to be redeemed shall surrender such
Depositary Receipts at the place designated in such notice and shall be entitled
to the redemption price and any accrued and unpaid distributions, if any,
payable upon such redemption following such surrender. If notice of redemption
of any Depositary Shares has been given and if the funds necessary for such
redemption have been set aside by the Company in trust for the benefit of the
holders of any Depositary Shares so called for redemption, then from and after
the redemption date distributions will cease to accrue on such Depositary
Shares, such Depositary Shares shall no longer be deemed outstanding and all
rights of the holders of such shares will terminate, except the right to receive
the redemption price. If fewer than all of the outstanding Depositary Shares are
to be redeemed, the Depositary Shares to be redeemed shall be selected pro rata
(as nearly as may be practicable without
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<PAGE>
creating fractional Depositary Shares) or by any other equitable method
determined by the Company. See "Description of Preferred Stock--Redemption" in
the accompanying Prospectus.
Notice of redemption will be given by publication in a newspaper of general
circulation in The City of New York, such publication to be made once a week for
two successive weeks commencing not less than 30 nor more than 60 days' prior to
the redemption date. A similar notice furnished by the Company will be mailed by
the Preferred Share Depositary, postage prepaid, not less than 30 nor more than
60 days' prior to the redemption date, addressed to the respective holders of
record of the Depositary Receipts evidencing the Depositary Shares to be
redeemed at their respective addresses as they appear on the share transfer
records of the Preferred Share Depositary. No failure to give such notice or any
defect thereto or in the mailing thereof shall affect the validity of the
proceedings for the redemption of any Series B SUPeR Preferred Shares or
Depositary Shares except as to the holder to whom notice was defective or not
given. Each notice shall state: (i) the redemption date; (ii) the redemption
price; (iii) the number of Series B SUPeR Preferred Shares to be redeemed (and
the equivalent number of Depositary Shares); (iv) the place or places where the
Depositary Receipts evidencing the Depositary Shares are to be surrendered for
payment of the redemption price; and (v) that distributions on the shares to be
redeemed will cease to accrue on such redemption date. If fewer than all the
Depositary Shares held by any holder are to be redeemed, the notice mailed to
such holder shall also specify the number of Depositary Shares to be redeemed
from such holder.
The holders of Depositary Receipts at the close of business on a
Distribution Record Date will be entitled to receive the distribution payable
with respect to the Depositary Shares evidenced by such Depositary Receipts on
the corresponding Distribution Payment Date notwithstanding the redemption
thereof between such Distribution Record Date and the corresponding Distribution
Payment Date or the Company's default in the payment of the distribution due.
Except as provided above, the Company will make no payment or allowance for
unpaid distributions, whether or not in arrears, on Series B SUPeR Preferred
Shares or Depositary Shares to be redeemed.
The Series B SUPeR Preferred Shares have no stated maturity and will not be
subject to any sinking fund or mandatory redemption provisions (except as
provided under "Restrictions on Ownership" below).
VOTING RIGHTS
Holders of Series B SUPeR Preferred Shares will not have any voting rights
except as set forth below or in the accompanying Prospectus or as otherwise from
time to time required by law. In any matter in which the Series B SUPeR
Preferred Shares are entitled to vote (as expressly provided herein or as may be
required by law), including any action by written consent, each Series B SUPeR
Preferred Share shall be entitled to 10 votes, each of which 10 votes may be
directed separately by the holder thereof (or by any proxy or proxies of such
holder). With respect to each Series B SUPeR Preferred Share, the holder thereof
may designate up to 10 proxies, with each such proxy having the right to vote a
whole number of votes (totaling 10 votes per Series B SUPeR Preferred Share). As
a result, each Depositary Share will be entitled to one vote.
If distributions on the Series B SUPeR Preferred Shares are in arrears for
six or more quarterly periods, holders of the Depositary Shares representing the
Series B SUPeR Preferred Shares (voting separately as a class with all other
series of preferred shares upon which like voting rights have been confirmed and
are exercisable, including the Series A Preferred Shares) will be entitled to
vote for the election of two additional Directors to serve on the Board of
Directors of the Company at a special meeting called by the holders of record of
at least ten percent (10%) of the Series B SUPeR Preferred Shares or of any
series of preferred shares so in arrears (unless such request is received less
than 90 days before the date fixed for the next annual or special meeting of the
shareholders) or at the next annual meeting of shareholders, and at each
subsequent annual meeting until all distributions accumulated on the Series B
SUPeR Preferred Shares for the past distribution periods and the then current
distribution period
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<PAGE>
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.
For further information regarding the voting rights of the holders of the
Series B SUPeR Preferred Shares and related Depositary Receipts, see
"Description of Preferred Stock--Voting Rights" and "Description of Depositary
Shares--Voting of the Preferred Stock" in the accompanying Prospectus.
CONVERSION RIGHTS
The Series B SUPeR Preferred Shares are not convertible into or exchangeable
for any other property or securities of the Company.
RESTRICTIONS ON OWNERSHIP
For information regarding restrictions on ownership of the Series B SUPeR
Preferred Shares and related Depositary Shares, see "Description of Preferred
Stock--Restrictions on Ownership" in the accompanying Prospectus.
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<PAGE>
CERTAIN FEDERAL INCOME TAX CONSIDERATIONS
GENERAL
The provisions of the Internal Revenue Code of 1986, as amended (the
"Code"), pertaining to REITs are highly technical and complex. The following is
a brief and general summary of certain provisions that currently govern the
federal income tax treatment of the Company and its shareholders and investors
in Depository Shares. For the particular provisions that govern the federal
income tax treatment of the Company and its shareholders, reference is made to
Sections 856 through 860 of the Code and the regulations thereunder. The
following summary is qualified in its entirety by such reference.
Investors are urged to consult their own tax advisors with respect to the
appropriateness of an investment in the securities offered hereby and with
respect to the tax consequences arising under federal law and the laws of any
state, municipality or other taxing jurisdiction, including tax consequences
resulting from such investor's own tax characteristics. As used in this section,
the term "Company" refers solely to Duke Realty Investments, Inc.
TAXATION OF THE COMPANY
Management believes the Company was organized and has operated, and intends
to continue to operate, in such a manner as to meet the requirements for
qualification and taxation as a REIT under the Code, but no assurance can be
given that the Company has so qualified or will at all times so qualify. In the
opinion of Bose McKinney & Evans, counsel to the Company, 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 year for which the Company made the election
to be taxed as a REIT, the proposed method of operation of the Company 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 the Company, the Operating
Partnership and their subsidiaries 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 operations of the Company, the Operating Partnership and their
subsidiaries.
To qualify as a REIT under the Code for a taxable year, the Company must
meet certain organizational and operational requirements, which generally
require it to be a passive investor in operating real estate and to avoid
excessive concentration of ownership of its capital stock. So long as the
Company qualifies for taxation as a REIT and distributes at least 95% of its
REIT taxable income (computed without regard to net capital gain and the
dividends paid deduction) for its taxable year to its shareholders it will not
be subject to federal income tax with respect to such income that it distributes
to its shareholders. The Company will be taxed at regular corporate rates on all
income not distributed to shareholders. REITs also may incur taxes for certain
other activities or to the extent distributions do not satisfy certain other
requirements.
If the Company fails to qualify during any taxable year as a REIT, unless
certain relief provisions are available, it will be subject to tax (including
any applicable alternative minimum tax) on its taxable income at regular
corporate rates, which could result in a discontinuation of or substantial
reduction in dividends to shareholders and therefore have a material adverse
effect upon its shareholders. If disqualified for taxation as a REIT for a
taxable year, the Company would also be disqualified for taxation as a REIT for
the four taxable years thereafter, unless such failure were considered to be due
to reasonable and not willful neglect.
S-33
<PAGE>
TAX CONSIDERATIONS RELATING TO SERIES B SUPER PREFERRED AND DEPOSITORY SHARES
GENERAL. So long as the Company qualifies for taxation as a REIT,
distributions with respect to the Company's preferred shares made out of current
or accumulated earning and profits (and not designated as capital gain
dividends) will be includible by the shareholders as ordinary income for Federal
income tax purposes. None of these distributions will be eligible for the
dividends received deduction for corporate shareholders. For purposes of
determining whether distributions on the Company's preferred shares are out of
current or accumulated earnings and profits, the earnings and profits of the
Company will be allocated first to distributions on the Company's preferred
shares and then allocated to distributions on the Company's Common Stock.
Distributions that are designated as capital gain dividends will be taxed as
long-term capital gains (to the extent they do not exceed the Company's actual
net capital gain for the taxable year) without regard to the period for which
the shareholder has held his preferred shares. Corporate shareholders, however,
may be required to treat up to 20% of certain capital gain dividends as ordinary
income. Distributions in excess of current or accumulated earnings and profits
will not be taxable to a shareholder to the extent that they do not exceed the
adjusted basis of the shareholder's preferred shares. Shareholders will be
required to reduce the tax basis of their preferred shares by the amount of such
distributions until such basis has been reduced to zero, after which such
distributions will be taxable as long-term capital gain (or short-term capital
gain if the preferred shares have been held for one year or less) assuming the
preferred shares are held as a capital asset.
Shareholders may not include in their individual Federal income tax returns
any net operating losses or capital losses of the Company. In addition, any
dividend declared by the Company in October, November or December of any year
payable to a shareholder of record on a specified date in any such month shall
be treated as both paid by the Company and received by the shareholder on
December 31 of such year, provided that the dividend is actually paid by the
Company no later than January 31 of the following year.
SALE OR EXCHANGE OF SERIES B SUPER PREFERRED SHARES. Upon the sale or
exchange of Series B SUPeR Preferred Shares to or with a person other than the
Company, a holder will generally recognize gain or loss equal to the difference
between (i) the amount of cash and the fair market value of any property
received and (ii) the holder's adjusted tax basis in such shares. Such gain or
loss will be a capital gain or loss if the Series B SUPeR Preferred Shares have
been held as a capital asset, and will be long-term gain or loss if such shares
have been held for more than one year. Any loss upon a sale or exchange of
Series B SUPeR Preferred Shares by a holder who held such Series B SUPeR
Preferred Shares for six months or less (after applying certain holding period
rules) will generally be treated as a long-term capital loss to the extent such
holder previously received capital gain distributions with respect to such
Series B SUPeR Preferred Shares.
REDEMPTION OF SERIES B SUPER PREFERRED SHARES. A redemption of Series B
SUPeR Preferred Shares will be treated as a distribution taxable as a dividend
(to the extent of the Company's current and accumulated earnings and profits) at
ordinary income rates unless the redemption satisfies one of the tests set forth
in Section 302(b) of the Code and is therefore treated as a sale or exchange of
the redeemed shares. The redemption will be treated as a sale or exchange if it
(i) results in a "complete termination" of the holder's share interest in the
Company, or (ii) is "not essentially equivalent to a dividend" with respect to
the holder, within the meaning of Section 302(b) of the Code. In determining
whether either of these tests have been met, Series B SUPeR Preferred Shares
considered to be owned by a holder by reason of certain constructive ownership
rules set forth in the Code, as well as Series B SUPeR Preferred Shares actually
owned by such holder, must generally be taken into account. If a particular
holder of Series B SUPeR Preferred Shares owns (actually or constructively) no
shares of Common Stock of the Company, or an insubstantial percentage of the
outstanding shares of Common Stock of the Company, a redemption of Series B
SUPeR Preferred Shares of such holder is likely to qualify for sale or exchange
treatment because redemption would not be "essentially equivalent to a
dividend." However, because the determination as to whether any of the
alternative tests of Section 302(b) of the Code will be satisfied with respect
to any particular holder of Series B SUPeR Preferred Shares depends upon the
facts and circumstances at the
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<PAGE>
time that the determination must be made, prospective holders of Series B SUPeR
Preferred Shares are encouraged to consult their own tax advisors to determine
such tax treatment.
If a redemption of Series B SUPeR Preferred Shares is not treated as a
distribution taxable as a dividend to a particular holder, it will be treated as
to that holder as a taxable sale or exchange. (See "Sale or Exchange of the
Series B SUPeR Preferred Shares" above.)
If a redemption of Series B SUPeR Preferred Shares is treated as a
distribution taxable as a dividend, the amount of the distribution will be
measured by the amount of cash and the fair market value of any property
received by such holder. The holder's adjusted basis in the redeemed Series B
SUPeR Preferred Shares for tax purposes will be transferred to such holder's
remaining shares of the Company. If the holder owns no other shares of the
Company, such basis may, under certain circumstances, be transferred to a
related person or it may be lost entirely.
REDEMPTION PREMIUM. Section 305(c) of the Code and the regulations
thereunder provide in certain cases for the continuing economic accrual of a
"redemption premium" on preferred stock on a constant yield-to-maturity basis,
and for the treatment of such accrual as a distribution with respect to such
preferred stock. The term "redemption premium" is not defined in the Code or
regulations. A "Redemption Premium" may include distributions payable at other
than a constant rate, although the law is not clear. If such distributions are
treated as "redemption premiums," the annual taxable distributions to holders of
an increasing rate preferred stock may in the early years be greater than the
distributions actually received, due to the accrual on a constant-yield basis to
amounts payable in later years. For such treatment to apply, a determination of
a "maturity date" would be required, I.E., a date (occurring on or after
September 30, 2012) at which it is considered, as of the issuance of the Series
B SUPeR Preferred Shares, to be more likely than not that the Company will
exercise its redemption option. Based upon certain representations of the
Company, it cannot be determined at this time that any such date exists.
Further, there appears to be an indication in the regulations that, all other
things being equal, a redemption would more likely occur before rather than
after an increase in the distribution rate. Based on the foregoing, the
above-described treatment of increasing rate distributions as being taxable
before received on an economic accrual basis should not apply to distributions
made on the Series B SUPeR Preferred Shares. In addition, since the amount
payable for a Series B SUPeR Preferred Share on redemption is equal to the
amount for which such share will be issued, no "redemption premium" should arise
by reason of the amount of the redemption price.
FOREIGN SHAREHOLDERS. The rules governing United States income taxation of
nonresident alien individuals, foreign corporations, foreign partnerships, and
foreign trusts and estates (collectively, "Non-U.S. Shareholders") are quite
complex. Certain distributions paid by the Company to Non-U.S. Shareholders will
be subject to U.S. tax withholding. Prospective Non-U.S. Shareholders should
consult with their own tax advisors to determine the impact of Federal, state
and local income tax laws on an investment in the Company, and to determine
their reporting requirements, if any.
BACKUP WITHHOLDING. The Company will report to its domestic shareholders
and the IRS the amount of dividend paid during each calendar year, and the
amount of tax withheld, if any. Under the backup withholding rules, a
shareholder may be subject to backup withholding at the rate of 31% with respect
to dividends paid unless such shareholder (a) is a corporation or comes within
certain other exempt categories and, when required, demonstrates this fact, or
(b) provides a taxpayer identification number, certifies as to the loss of
exemption from backup withholding, and otherwise complies with applicable
requirements of the backup withholding rules. A shareholder that does not
provide the Company with his correct taxpayer identification number may also be
subject to penalties imposed by the IRS. Any amount paid as backup withholding
will be creditable against such shareholder's income tax liability. In addition,
the Company may be required to withhold a portion of capital gain distributions
to any shareholders who fail to certify their non-foreign status to the Company.
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<PAGE>
UNDERWRITING
Subject to the terms and conditions contained in the terms agreement and the
related underwriting agreement (collectively, the "Underwriting Agreement"), the
Company has agreed to sell to Merrill Lynch, Pierce, Fenner & Smith Incorporated
(the "Underwriter"), and the Underwriter has agreed to purchase from the
Company, the Depositary Shares. The Underwriting Agreement provides that the
obligation of the Underwriter is subject to the satisfaction of certain
conditions, including the receipt of certain legal opinions, and that the
Underwriter will be obligated to purchase all of the Depositary Shares if any
are purchased.
The Company has agreed to indemnify the Underwriter against certain
liabilities, including liabilities under the Securities Act of 1933, as amended,
or to contribute to payments the Underwriter may be required to make in respect
thereof.
The Underwriter has advised the Company that it proposes to offer the
Depositary Shares offered hereby for sale, from time to time, to purchasers,
directly or through agents, or through brokers in brokerage transactions on the
NYSE, or to brokers or dealers in negotiated transactions or in a combination of
such methods of sale, at fixed prices which may be changed, at market prices
prevailing at the time of sale, at prices related to such prevailing market
prices or at negotiated prices; provided that any offering price set in any
calendar day will not be increased more than once during such day.
Brokers, dealers, agent and underwriters that participate in the
distribution of the Depositary Shares offered hereby may be deemed to be
underwriters under the Securities Act of 1933. Those who act as underwriter,
broker, dealer or agent in connection with the sale of the Depositary Shares
offered hereby will be selected by the Underwriter and may have other business
relationships with the Company and its subsidiaries or affiliates int eh
ordinary course of business.
In connection with the Offering, the rules of the Securities and Exchange
Commission permit the Underwriter to engage in certain transactions that
stabilize the price of the Depositary Shares. Such transactions may consist of
bids or purchases for the purpose of pegging, fixing or maintaining the price of
the Depositary Shares.
If the Underwriter creates a short position in the Depositary Shares in
connection with the Offering (I.E., if it sells more Depositary Shares than are
set forth on the cover page of this Prospectus Supplement), the Underwriter may
reduce that short position by purchasing Depositary Shares in the open market.
In general, purchases of a security for the purpose of stabilization or to
reduce a short position could cause the price of the security to be higher than
it might otherwise be in the absence of such purchases.
Neither the Company nor the Underwriter makes any representation or
prediction as to the direction or magnitude of any effect that the transactions
described above may have on the price of the Depositary Shares. In addition,
neither the Company nor the Underwriter makes any representations that the
Underwriter will engage in such transactions or that such transactions, once
commenced, will not be discontinued without notice.
Application has been made to list the Depositary Shares on the NYSE, subject
to official notice of issuance. If such application is approved, trading of the
Depositary Shares on the NYSE is expected to commence within a 30-day period
after the date of initial delivery of the Depositary Shares. The Depositary
Shares may be offered by the Underwriter from time to time in one or more
transactions on the NYSE or otherwise, at market prices prevailing at the time
of sale, at prices related to such prevailing market prices, or at negotiated
prices.
The Underwriter from time to time provides investment banking and financial
advisory services to the Company. The Underwriter also acted as representative
of various underwriters in connection with public offerings of the Company's
equity and debt securities from 1993 through 1997.
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<PAGE>
LEGAL MATTERS
In addition to the legal opinions referred to under "Legal Opinions" in the
accompanying Prospectus, the description of Federal income tax matters contained
in this Prospectus Supplement entitled "Certain Federal Income Tax
Considerations" is based upon the opinion of Bose McKinney & Evans.
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<PAGE>
PROSPECTUS
$425,000,000
DUKE REALTY INVESTMENTS, INC.
COMMON STOCK, PREFERRED STOCK AND DEPOSITARY SHARES
DUKE REALTY LIMITED PARTNERSHIP
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)
shares of Preferred Stock represented by depositary shares (the "Depositary
Shares"), with an aggregate public offering price of up to $250,000,000 (or its
equivalent in another currency 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.
Duke Realty Limited Partnership (the "Operating Partnership") may from time to
time offer in one or more series unsecured non-convertible investment grade debt
securities ("Debt Securities"), with an aggregate public offering price of up to
$175,000,000 (or its equivalent in another currency 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, Depositary Shares 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; (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; (iii) in the case of
Depositary Shares, the fractional share of Preferred Stock represented by each
such Depositary Share; and (iv) 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 Operating Partnership or repayment at the option
of the holder, terms for sinking fund payments, 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 the Operating Partnership, 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 June 6, 1996.
<PAGE>
AVAILABLE INFORMATION
The Company and the Operating Partnership are subject to the informational
requirements of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), and, in accordance therewith, the Company files reports, proxy statements
and other information with the Securities and Exchange Commission (the
"Commission"), and the Operating Partnership files reports with 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 Commission maintains a Web site (http://www.sec.gov) that contains
reports, proxy and information statements and other information regarding the
Company and the Operating Partnership.
The Company and the Operating Partnership 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 and the Operating Partnership have 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,
the Operating Partnership 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 (file no. 1-9044), for the year
ended December 31, 1995, as amended on March 22, 1996 by Form 10-K/A.
2. The Company's Quarterly Report on Form 10-Q (file no. 1-9044) for the
quarter ended March 31, 1996.
3. The Company's Current Reports on Form 8-K (file no. 1-9044) dated
January 12, 1996 and March 5, 1996, as amended on March 22, 1996 by
Forms 8-K/A, and the Company's Current Reports on Form 8-K filed March
28, 1996 and March 29, 1996.
4. The Operating Partnership's Annual Report on Form 10-K (file no.
0-20625) for the year ended December 31, 1995, as amended on March 22,
1996 by Form 10-K/A.
5. The Operating Partnership's Quarterly Report on Form 10-Q (file no.
0-20625) for the quarter ended March 31, 1996.
6. The Operating Partnership's Current Reports on Form 8-K (file no.
0-20625) dated January 12, 1996 and March 5, 1996, as amended on March
22, 1996 by Forms 8-K/A.
Each document filed by the Company or the Operating Partnership 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.
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THE COMPANY AND THE OPERATING PARTNERSHIP
The Company is a self-administered and self-managed real estate investment
trust that began operations through a related entity in 1972. At March 31, 1996,
the Company owned direct or indirect interests in a portfolio of 215 in-service
industrial, office and retail properties (the "Properties"), together with over
1,100 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 March 31, 1996, the
Properties consisted of approximately 22.3 million square feet, which were
approximately 93.5% leased to approximately 1,600 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 63 of the Properties and substantially all of the Land.
The Company controls the Operating Partnership as the sole general partner and
owner, as of March 31, 1996, of approximately 86.06% of the outstanding units of
partnership interest of the Operating Partnership ("Units"). Each Unit, other
than those held by the Company, may be exchanged by the holder thereof, subject
to certain holding periods, 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 provides a full range of real estate
services from executive offices headquartered in Indianapolis, and from seven
regional offices located in the Cincinnati, Cleveland, Columbus, Decatur,
Detroit, Nashville and St. Louis 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 Operating Partnership is an Indiana limited partnership that was
formed in 1993. The Company's and the Operating Partnership's executive offices
are located at 8888 Keystone Crossing, Suite 1200, Indianapolis, Indiana 46240,
and their telephone number is (317) 574-3531.
USE OF PROCEEDS
The Company is required, by the terms of the partnership agreement of the
Operating Partnership, to invest the net proceeds of any sale of Common Stock,
Preferred Stock or Depositary Shares in the Operating Partnership in exchange
for additional Units or preferred Units, as the case may be. 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 rental 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 Company's and the Operating Partnership's ratios of earnings to fixed
charges for the three months ended March 31, 1996 were 1.96 and 1.98,
respectively, for the year ended December 31, 1995 were 2.38 and for the year
ended December 31, 1994 were 2.33. The ratio of earnings to fixed charges for
the Company for the year ended December 31, 1993 was 1.58, and for the Operating
Partnership from its formation on October 4, 1993 to December 31, 1993 was 2.51.
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For purposes of computing these ratios, earnings have been calculated by
adding fixed charges, excluding capitalized interest, to income (loss) before
gains or losses on property sales and (if applicable) minority interest in the
Operating Partnership. Fixed charges consist (if applicable) of interest costs,
whether expensed or capitalized, the interest component of rental expense and
amortization of debt issuance costs.
Prior to completion of the Company's reorganization in October, 1993, the
Company maintained a different capital structure. As a result, although the
original properties have historically generated positive net cash flow, the
financial statements of the Company show net losses for the fiscal years ended
December 31, 1992 and 1991. Consequently, the computation of the ratio of
earnings to fixed charges for such periods indicates that earnings were
inadequate to cover fixed charges by approximately $0.7 million and $1.8 million
for the fiscal years ended December 31, 1992 and 1991, respectively.
The recapitalization of the Company effected in connection with the
reorganization permitted the Company to significantly deleverage, resulting in
an improved ratio of earnings to fixed charges for periods subsequent to the
reorganization.
DESCRIPTION OF DEBT SECURITIES
The Debt Securities will be issued under an Indenture (the "Indenture"),
between the Operating Partnership and The First National Bank of Chicago, as
trustee. The Indenture is an exhibit to the Registration Statement of which this
Prospectus is a part and is available for inspection at the corporate trust
office of the trustee at 14 Wall Street, Eighth Floor, New York, New York 10005
or as described above under "Available Information." The Indenture is subject
to, and governed by, the Trust Indenture Act of 1939, as amended (the "TIA").
The statements made hereunder relating to the Indenture and the Debt Securities
to be issued thereunder are summaries of certain provisions thereof and do not
purport to be complete and are subject to, and are qualified in their entirety
by reference to, all provisions of the Indenture and such Debt Securities. All
section references appearing herein are to sections of the Indenture, and
capitalized terms used but not defined herein shall have the respective meanings
set forth in the Indenture.
GENERAL
The Debt Securities will be direct, unsecured obligations of the Operating
Partnership and will rank equally with all other unsecured and unsubordinated
indebtedness of the Operating Partnership. At March 31, 1996, the total
outstanding debt of the Operating Partnership was $450.4 million, of which
$289.4 million was secured debt and $161.0 million was unsecured debt. The Debt
Securities may be issued without limit as to aggregate principal amount, in one
or more series, in each case as established from time to time in or pursuant to
authority granted by a resolution of the Board of Directors of the Company as
sole general partner of the Operating Partnership or as established in one or
more indentures supplemental to the Indenture. All Debt Securities of one series
need not be issued at the same time and, unless otherwise provided, a series may
be reopened, without the consent of the holders of the Debt Securities of such
series, for issuances of additional Debt Securities of such series (Section
301).
The Indenture provides that there may be more than one trustee (the
"Trustee") thereunder, each with respect to one or more series of Debt
Securities. Any Trustee under the Indenture may resign or be removed with
respect to one or more series of Debt Securities, and a successor Trustee may be
appointed to act with respect to such series (Section 608). 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
Indenture separate and apart from the trust administered by any other Trustee
(Section 609), and, except as otherwise indicated herein, any action described
herein to be taken by a Trustee may be taken by each such Trustee with respect
to, and only with respect to, the one or more series of Debt Securities for
which it is Trustee under the Indenture.
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Reference is made to the Prospectus Supplement relating to the series of
Debt Securities being offered for the specific terms thereof, including:
(1) the title of such Debt Securities;
(2) the 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;
(4) the date or dates, or the method for determining such date or dates, on
which the principal of such Debt Securities will be payable;
(5) 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;
(6) the date or dates, or the method for determining such date or dates,
from which any 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 any such date shall be determined, the
person to whom such interest shall be payable, and the basis upon which
interest shall be calculated if other than that of a 360-day year of
twelve 30-day months;
(7) the place or places where the principal of (and premium, if any) and
interest, if any, on such Debt Securities will be payable, such Debt
Securities may be surrendered for registration of transfer or exchange
and notices or demands to or upon the Operating Partnership in respect
of such Debt Securities and the Indenture may be served;
(8) the period or periods within which, the price or prices at which and the
terms and conditions upon which such Debt Securities may be redeemed, as
a whole or in part, at the option of the Operating Partnership, if the
Operating Partnership is to have such an option;
(9) the obligation, if any, of the Operating Partnership to redeem, repay or
purchase such Debt Securities pursuant to any sinking fund or analogous
provision or at the option of a holder thereof, and the period or
periods within which, the price or prices at which and the terms and
conditions upon which such Debt Securities will be redeemed, repaid or
purchased, as a whole or in part, pursuant to such obligation;
(10) 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;
(11) 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;
(12) the events of default or covenants of such Debt Securities, to the
extent different from or in addition to those described herein;
(13) whether such Debt Securities will be issued in certificated and/or
book-entry form;
(14) 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 if other than $5,000 and terms and conditions
relating thereto;
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(15) the applicability, if any, of the defeasance and covenant defeasance
provisions described herein, or any modification thereof;
(16) if such Debt Securities are to be issued upon the exercise of debt
warrants, the time, manner and place for such Debt Securities to be
authenticated and delivered;
(17) whether and under what circumstances the Operating Partnership will pay
additional amounts on such Debt Securities in respect of any tax,
assessment or governmental charge and, if so, whether the Operating
Partnership will have the option to redeem such Debt Securities in lieu
of making such payment;
(18) with respect to any Debt Securities that provide for optional redemption
or prepayment upon the occurrence of certain events (such as a change of
control of the Operating Partnership), (i) the possible effects of such
provisions on the market price of the Operating Partnership's or the
Company's securities or in deterring certain mergers, tender offers or
other takeover attempts, and the intention of the Operating Partnership
to comply with the requirements of Rule 14e-1 under the Exchange Act and
any other applicable securities laws in connection with such provisions;
(ii) whether the occurrence of the specified events may give rise to
cross-defaults on other indebtedness such that payment on such Debt
Securities may be effectively subordinated; and (iii) the existence of
any limitation on the Operating Partnership's financial or legal ability
to repurchase such Debt Securities upon the occurrence of such an event
(including, if true, the lack of assurance that such a repurchase can be
effected) and the impact, if any, under the Indenture of such a failure,
including whether and under what circumstances such a failure may
constitute an Event of Default; and
(19) any other terms of such Debt Securities.
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"). If material or applicable, 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 described under "Merger, Consolidation or Sale" or as may be set
forth in any Prospectus Supplement, the Indenture does not contain any other
provisions that would limit the ability of the Operating Partnership to incur
indebtedness or that would afford holders of the Debt Securities protection in
the event of (i) a highly leveraged or similar transaction involving the
Operating Partnership, the management of the Operating Partnership or the
Company, or any affiliate of any such party, (ii) a change of control, or (iii)
a reorganization, restructuring, merger or similar transaction involving the
Operating Partnership that may adversely affect the holders of the Debt
Securities. In addition, subject to the limitations set forth under "Merger,
Consolidation or Sale," the Operating Partnership may, in the future, enter into
certain transactions, such as the sale of all or substantially all of its assets
or the merger or consolidation of the Operating Partnership, that would increase
the amount of the Operating Partnership's indebtedness or substantially reduce
or eliminate the Operating Partnership's assets, which may have an adverse
effect on the Operating Partnership's ability to service its indebtedness,
including the Debt Securities. In addition, 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 that are described below, including any
addition of a covenant or other provision providing event risk or similar
protection.
Reference is made to "-- Certain Covenants" below and to the description of
any additional covenants with respect to a series of Debt Securities in the
applicable Prospectus Supplement. Except as otherwise
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described in the applicable Prospectus Supplement, compliance with such
covenants generally may not be waived with respect to a series of Debt
Securities by the Board of Directors of the Company as sole general partner of
the Operating Partnership or by the Trustee unless the Holders of at least a
majority in principal amount of all outstanding Debt Securities of such series
consent to such waiver, except to the extent that the defeasance and covenant
defeasance provisions of the Indenture described under "-- Discharge, Defeasance
and Covenant Defeasance" below apply to such series of Debt Securities. See "--
Modification of the Indenture."
DENOMINATIONS, INTEREST, REGISTRATION AND TRANSFER
Unless otherwise described in the applicable Prospectus Supplement, the Debt
Securities of any series which are registered securities, other than registered
securities issued in global form (which may be of any denomination), shall be
issuable in denominations of $1,000 and any integral multiple thereof and the
Debt Securities which are bearer securities, other than bearer securities issued
in global form (which may be of any denomination), shall be issuable in
denominations of $5,000 (Section 302).
Unless otherwise specified in the applicable Prospectus Supplement, the
principal of (and premium, if any) and interest on any series of Debt Securities
will be payable at the corporate trust office of the Trustee, initially located
at 14 Wall Street, Eighth Floor, New York, New York, 10005, provided that, at
the option of the Operating Partnership, payment of interest may be made by
check mailed to the address of the Person entitled thereto as it appears in the
applicable Security Register or by wire transfer of funds to such Person at an
account maintained within the United States (Sections 301, 307 and 1002).
Any interest not punctually paid or duly provided for on any Interest
Payment Date with respect to a Debt Security ("Defaulted Interest") will
forthwith cease to be payable to the Holder on the applicable Regular Record
Date and may either be paid to the Person in whose name such Debt Security is
registered at the close of business on a special record date (the "Special
Record Date") for the payment of such Defaulted Interest to be fixed by the
Trustee, notice whereof shall be given to the Holder of such Debt Security not
less than 10 days prior to such Special Record Date, or may be paid at any time
in any other lawful manner, all as more completely described in the Indenture.
Subject to certain limitations imposed upon Debt Securities issued in
book-entry form, the Debt Securities of any series will be exchangeable for
other Debt Securities of the same series and of a like aggregate principal
amount and tenor of different authorized denominations upon surrender of such
Debt Securities at the corporate trust office of the 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
registration of transfer thereof at the corporate trust office of the Trustee
referred to above. Every Debt Security surrendered for registration of transfer
or exchange shall be duly endorsed or accompanied by a written instrument of
transfer. No service charge will be made for any registration of transfer or
exchange of any Debt Securities, but the Trustee or the Operating Partnership
may require payment of a sum sufficient to cover any tax or other governmental
charge payable in connection therewith (Section 305). If the applicable
Prospectus Supplement refers to any transfer agent (in addition to the Trustee)
initially designated by the Operating Partnership with respect to any series of
Debt Securities, the Operating Partnership 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 Operating Partnership
will be required to maintain a transfer agent in each place of payment for such
series. The Operating Partnership may at any time designate additional transfer
agents with respect to any series of Debt Securities (Section 1002).
Neither the Operating Partnership nor the Trustee shall be required (i) to
issue, register the transfer of or exchange any Debt Security if such Debt
Security may be among those selected for redemption during a period beginning at
the opening of business 15 days before selection of the Debt Securities to be
redeemed and ending at the close of business on (A) if such Debt Securities are
issuable only as Registered Securities, the day of the mailing of the relevant
notice of redemption and (B) if such Debt Securities are issuable as Bearer
Securities, the day of the first publication of the relevant notice of
redemption or, if such Debt
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Securities are also issuable as Registered Securities and there is no
publication, the mailing of the relevant notice of redemption, or (ii) to
register the transfer of or exchange any Registered Security so selected for
redemption in whole or in part, except, in the case of any Registered Security
to be redeemed in part, the portion thereof not to be redeemed, or (iii) to
exchange any Bearer Security so selected for redemption except that such a
Bearer Security may be exchanged for a Registered Security of that series and
like tenor, PROVIDED that such Registered Security shall be simultaneously
surrendered for redemption, or (iv) to issue, register the transfer of or
exchange any Security which has been surrendered for repayment at the option of
the Holder, except the portion, if any, of such Debt Security not to be so
repaid (Section 305).
MERGER, CONSOLIDATION OR SALE
The Operating Partnership may consolidate with, or sell, lease or convey all
or substantially all of its assets to, or merge with or into, any other entity,
provided that (a) the Operating Partnership shall be the continuing entity, or
the successor entity (if other than the Operating Partnership) 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 the Debt Securities and the due and
punctual performance and observance of all of the covenants and conditions
contained in the Indenture; (b) immediately after giving effect to such
transaction and treating any indebtedness which becomes an obligation of the
Operating Partnership or any Subsidiary as a result thereof as having been
incurred by the Operating Partnership or such Subsidiary at the time of such
transaction, no Event of Default under the Indenture, and no event which, after
notice or the lapse of time, or both, would become such an Event of Default,
shall have occurred and be continuing; and (c) an officer's certificate and
legal opinion covering such conditions shall be delivered to the Trustee
(Sections 801 and 803).
CERTAIN COVENANTS
EXISTENCE. Except as permitted under "Merger, Consolidation or Sale," the
Operating Partnership is required to do or cause to be done all things necessary
to preserve and keep in full force and effect its existence, rights and
franchises; PROVIDED, HOWEVER, that the Operating Partnership 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 and
that the loss thereof is not disadvantageous in any material respect to the
Holders of the Debt Securities (Section 1007).
MAINTENANCE OF PROPERTIES. The Operating Partnership is 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 to cause
to be made all necessary repairs, renewals, replacements, betterments and
improvements thereof, all as in the judgment of the Operating Partnership may be
necessary so that the business carried on in connection therewith may be
properly and advantageously conducted at all times; PROVIDED, HOWEVER, that the
Operating Partnership and its Subsidiaries shall not be prevented from selling
or otherwise disposing for value their respective properties in the ordinary
course of business (Section 1008).
INSURANCE. The Operating Partnership is required to, and is 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
financially sound and reputable insurance companies (Section 1009).
PAYMENT OF TAXES AND OTHER CLAIMS. The Operating Partnership is 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 its income, profits or property or
that of 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
Operating Partnership or any Subsidiary; PROVIDED, HOWEVER, that the Operating
Partnership shall not be required to pay or discharge or cause to be paid or
discharged any such tax, assessment, charge or claim whose amount, applicability
or validity is being contested in good faith by appropriate proceedings (Section
1010).
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PROVISION OF FINANCIAL INFORMATION. The Holders of Debt Securities will be
provided with copies of the annual reports and quarterly reports of the
Operating Partnership. Whether or not the Operating Partnership is subject to
Section 13 or 15(d) of the Exchange Act and for so long as any Debt Securities
are outstanding, the Operating Partnership will, to the extent permitted under
the Exchange Act, be required to file with the Commission the annual reports,
quarterly reports and other documents which the Operating Partnership would have
been required to file with the Commission pursuant to such Section 13 or 15(d)
(the "Financial Statements") if the Operating Partnership were so subject, such
documents to be filed with the Commission on or prior to the respective dates
(the "Required Filing Dates") by which the Operating Partnership would have been
required so to file such documents if the Operating Partnership were so subject.
The Operating Partnership will also in any event (x) within 15 days of each
Required Filing Date (i) transmit by mail to all Holders of Debt Securities, as
their names and addresses appear in the Security Register, without cost to such
Holders, copies of the annual reports and quarterly reports which the Operating
Partnership would have been required to file with the Commission pursuant to
Section 13 or 15(d) of the Exchange Act if the Operating Partnership were
subject to such Sections and (ii) file with the Trustee copies of the annual
reports, quarterly reports and other documents which the Operating Partnership
would have been required to file with the Commission pursuant to Section 13 or
15(d) of the Exchange Act if the Operating Partnership were subject to such
Sections and (y) if filing such documents by the Operating Partnership with the
Commission is not permitted under the Exchange Act, promptly upon written
request and payment of the reasonable cost of duplication and delivery, supply
copies of such documents to any prospective Holder (Section 1011).
ADDITIONAL COVENANTS. Any additional or different covenants of the
Operating Partnership with respect to any series of Debt Securities will be set
forth in the Prospectus Supplement relating thereto.
EVENTS OF DEFAULT, NOTICE AND WAIVER
The Indenture provides that the following events are "Events of Default"
with respect to any series of Debt Securities issued thereunder: (a) default for
30 days in the payment of any installment of interest on any Debt Security of
such series; (b) default in the payment of the principal of (or premium, if any,
on) any Debt Security of such series at its maturity; (c) default in making any
sinking fund payment as required for any Debt Security of such series; (d)
default in the performance of any other covenant of the Operating Partnership
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), such default having continued for 60 days after written notice as
provided in the Indenture; (e) default in the payment of an aggregate principal
amount exceeding $5,000,000 of any evidence of recourse indebtedness of the
Operating Partnership or any mortgage, indenture or other instrument under which
such indebtedness is issued or by which such indebtedness is secured, such
default having occurred after the expiration of any applicable grace period and
having resulted in the acceleration of the maturity of such indebtedness, but
only if such indebtedness is not discharged or such acceleration is not
rescinded or annulled; (f) certain events of bankruptcy, insolvency or
reorganization, or court appointment of a receiver, liquidator or trustee of the
Operating Partnership or any Significant Subsidiary or any of their respective
property; 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 Operating Partnership.
If an Event of Default under the Indenture with respect to Debt Securities
of any series at the time Outstanding occurs and is continuing, then in every
such case the Trustee or the Holders of not less than 25% in principal amount of
the Outstanding Debt Securities of that series may declare the principal amount
(or, if the Debt Securities of that series are Original Issue Discount
Securities or Indexed Securities, such portion of the principal amount as may be
specified in the terms thereof) of all of the Debt Securities of that series to
be due and payable immediately by written notice thereof to the Operating
Partnership (and to the Trustee if given by the Holders). However, at any time
after such a declaration of acceleration with respect to Debt Securities of such
series (or of all Debt Securities then Outstanding under the Indenture, as the
case may be)
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has been made, but before a judgment or decree for payment of the money due has
been obtained by the Trustee, the Holders of not less than a majority in
principal amount of Outstanding Debt Securities of such series (or of all Debt
Securities then Outstanding under the Indenture, as the case may be) may rescind
and annul such declaration and its consequences if (a) the Operating Partnership
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 Indenture, as the
case may be), plus certain fees, expenses, disbursements and advances of the
Trustee and (b) all Events of Default, other than the non-payment of accelerated
principal of (or specified portion thereof), or premium (if any) or interest on
the Debt Securities of such series (or of all Debt Securities then Outstanding
under the Indenture, as the case may be) have been cured or waived as provided
in the Indenture (Section 502). The Indenture also provides that the Holders of
not less than a majority in principal amount of the Outstanding Debt Securities
of any series (or of all Debt Securities then Outstanding under the Indenture,
as the case may be) may waive any past default with respect to such series and
its consequences, except a default (x) in the payment of the principal of (or
premium, if any) or interest on any Debt Security or such series or (y) in
respect of a covenant or provision contained in the Indenture that cannot be
modified or amended without the consent of the Holder of each Outstanding Debt
Security affected thereby (Section 513).
The Trustee will be required to give notice to the Holders of Debt
Securities within 90 days of a default under the Indenture unless such default
has been cured or waived; PROVIDED, HOWEVER, that the Trustee may withhold
notice to the Holders of any series of Debt Securities of any default with
respect to such series (except a default in the payment of the principal of (or
premium, if any) or interest on any Debt Security of such series or in the
payment of any sinking fund installment in respect of any Debt Security of such
series) if specified Responsible Officers of the Trustee consider such
withholding to be in the interest of such Holders (Section 601).
The Indenture provides that no Holders of Debt Securities of any series may
institute any proceedings, judicial or otherwise, with respect to the Indenture
or for any remedy thereunder, except in the case of failure of the Trustee, for
60 days, to act after it has received a written request to institute proceedings
in respect of an Event of Default from the Holders of not less than 25% in
principal amount of the Outstanding Debt Securities of such series, as well as
an offer of indemnity reasonably satisfactory to it (Section 507). 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 (Section 508).
Subject to provisions in the Indenture relating to its duties in case of
default, the Trustee is under no obligation to exercise any of its rights or
powers under the Indenture at the request or direction of any Holders of any
series of Debt Securities then Outstanding under the Indenture, unless such
Holders shall have offered to the Trustee thereunder reasonable security or
indemnity (Section 602). 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 Indenture, as the case may be) shall have
the right to direct the time, method and place of conducting any proceeding for
any remedy available to the Trustee, or of exercising any trust or power
conferred upon the Trustee. However, the Trustee may refuse to follow any
direction which is in conflict with any law or the Indenture, which may involve
the Trustee in personal liability or which may be unduly prejudicial to the
holders of Debt Securities of such series not joining therein (Section 512).
Within 120 days after the close of each fiscal year, the Operating
Partnership must deliver to the 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 Indenture and, if so, specifying each such
default and the nature and status thereof.
MODIFICATION OF THE INDENTURE
Modifications and amendments of the 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 or series of
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Outstanding Debt Securities which are affected by such modification or
amendment; PROVIDED, HOWEVER, that no such modification or amendment may,
without the consent of the Holder of each such Debt Security affected thereby,
(a) change the Stated Maturity of the principal of, or premium (if any) or any
installment of interest 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
Indenture, to waive compliance with certain provisions thereof or certain
defaults and consequences thereunder or to reduce the quorum or voting
requirements set forth in the Indenture; or (f) modify any of the foregoing
provisions or any of the provisions relating to the waiver of certain past
defaults or certain covenants, except to increase the required percentage to
effect such action or to provide that certain other provisions may not be
modified or waived without the consent of the Holder of such Debt Security
(Section 902).
The Indenture provides that the Holders of not less than a majority in
principal amount of a series of Outstanding Debt Securities have the right to
waive compliance by the Operating Partnership with certain covenants relating to
such series of Debt Securities in the Indenture (Section 1014).
Modifications and amendments of the Indenture will be permitted to be made
by the Operating Partnership and the Trustee 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 Operating Partnership as obligor under the
Indenture; (ii) to add to the covenants of the Operating Partnership for the
benefit of the Holders of all or any series of Debt Securities or to surrender
any right or power conferred upon the Operating Partnership in the Indenture;
(iii) to add Events of Default for the benefit of the Holders of all or any
series of Debt Securities; (iv) to add or change any provisions of the Indenture
to facilitate the issuance of, or to liberalize certain terms of, Debt
Securities in bearer form, or to permit or facilitate the issuance of Debt
Securities in uncertificated form, PROVIDED that such action shall not adversely
affect the interests of the Holders of the Debt Securities of any series in any
material respect; (v) to change or eliminate any provisions of the Indenture,
PROVIDED that any such change or 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; (viii) to provide for the acceptance of appointment by a successor
Trustee or facilitate the administration of the trusts under the Indenture by
more than one Trustee; (ix) to cure any ambiguity, defect or inconsistency in
the Indenture, PROVIDED that such action shall not adversely affect the
interests of Holders of Debt Securities of any series in any material respect;
or (x) to supplement any of the provisions of the 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 in any material
respect (Section 901).
The Indenture provides that in determining whether the Holders of the
requisite principal amount of Outstanding Debt Securities of a series have given
any request, demand, authorization, direction, notice, consent or waiver
thereunder or whether a quorum is present at a meeting of Holders of Debt
Securities, (i) the principal amount of an Original Issue Discount Security that
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 a 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 an Original
Issue Discount Security, the U.S. dollar equivalent on the issue date of such
Debt Security of the amount determined as provided in (i) above), (iii) the
principal amount of an Indexed Security that shall be deemed
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Outstanding shall be the principal face amount of such Indexed Security at
original issuance, unless otherwise provided with respect to such Indexed
Security pursuant to the Indenture, and (iv) Debt Securities owned by the
Operating Partnership or any other obligor upon the Debt Securities or any
affiliate of the Operating Partnership or of such other obligor shall be
disregarded.
The Indenture contains provisions for convening meetings of the Holders of
Debt Securities of a series (Section 1501). A meeting will be permitted to be
called at any time by the Trustee, and also, upon request, by the Operating
Partnership 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 (Section 1502). Except for any consent that must be
given by the Holder of each Debt Security affected by certain modifications and
amendments of the Indenture, any resolution presented at a meeting or adjourned
meeting duly reconvened at which a quorum is present will be permitted to be
adopted by the affirmative vote of the Holders of a majority in principal amount
of the Outstanding Debt Securities of that series; PROVIDED, HOWEVER, that,
except as referred to above, any resolution with respect to any request, demand,
authorization, direction, notice, consent, waiver or other action that may be
made, given or taken by the Holders of a specified percentage, which is less
than a majority, in principal amount of the Outstanding Debt Securities of a
series may be adopted at a meeting or adjourned meeting duly reconvened at which
a quorum is present by the affirmative vote of the Holders of such specified
percentage in principal amount of the Outstanding Debt Securities of that
series. Any resolution passed or decision taken at any meeting of Holders of
Debt Securities of any series duly held in accordance with the Indenture will be
binding on all Holders of Debt Securities of that series. The quorum at any
meeting called to adopt a resolution, and at any reconvened meeting, will be
Persons holding or representing a majority in principal amount of the
Outstanding Debt Securities of a series; PROVIDED, HOWEVER, that if any action
is to be taken at such meeting with respect to a consent or waiver which may be
given by the Holders of not less than a specified percentage in principal amount
of the Outstanding Debt Securities of a series, the Persons holding or
representing such specified percentage in principal amount of the Outstanding
Debt Securities of such series will constitute a quorum (Section 1504).
Notwithstanding the foregoing provisions, if any action is to be taken at a
meeting of Holders of Debt Securities of any series with respect to any request,
demand, authorization, direction, notice, consent, waiver or other action that
the 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 the Indenture (Section
1504).
DISCHARGE, DEFEASANCE AND COVENANT DEFEASANCE
The Operating Partnership may discharge certain obligations to Holders of
any series of Debt Securities that have not already been delivered to the
Trustee for cancellation and that either have become due and payable or will
become due and payable within one year (or scheduled for redemption within one
year) by irrevocably depositing with the 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 (Sections 1401 and 1404).
The Indenture provides that, if the provisions of Article Fourteen are made
applicable to the Debt Securities of or within any series pursuant to Section
301 of the Indenture, the Operating Partnership 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,
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assessment or governmental charge with respect to payments on such Debt
Securities and the obligations to register the transfer or exchange of such Debt
Securities, to replace temporary or mutilated, destroyed, lost or stolen Debt
Securities, to maintain an office or agency in respect of such Debt Securities
and to hold moneys for payment in trust) ("defeasance") (Section 1402) or (b) to
be released from its obligations with respect to such Debt Securities under
Sections 1004 to 1011, inclusive, of the Indenture (including the restrictions
described under "Certain Covenants") and its obligations with respect to any
other covenant, and any omission to comply with such obligations shall not
constitute a default or an Event of Default with respect to such Debt Securities
("covenant defeasance") (Section 1403), in either case upon the irrevocable
deposit by the Operating Partnership with the 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 Operating Partnership has delivered to the Trustee an Opinion of
Counsel (as specified in the Indenture) to the effect that the Holders of such
Debt Securities will not recognize income, gain or loss for U.S. federal income
tax purposes as a result of such defeasance or covenant defeasance and will be
subject to U.S. federal income tax on the same amounts, in the same manner and
at the same times as would have been the case if such defeasance or covenant
defeasance had not occurred, and such Opinion of Counsel, in the case of
defeasance, must refer to and be based upon a ruling of the Internal Revenue
Service or a change in applicable United States federal income tax law occurring
after the date of the Indenture (Section 1404).
"Government Obligations" means securities which are (i) direct obligations
of the United States of America or the government which issued the foreign
currency in which the Debt Securities of a particular series are payable, for
the payment of which its full faith and credit is pledged or (ii) obligations of
a person controlled or supervised by and acting as an agency or instrumentality
of the United States of America or such government which issued the foreign
currency in which the Debt Securities of such series are payable, the payment of
which is unconditionally guaranteed as a full faith and credit obligation by the
United States of America or such other government, which, in either case, are
not callable or redeemable at the option of the issuer thereof, and shall also
include a depository receipt issued by a bank or trust company as custodian with
respect to any such Government Obligation or a specific payment of interest on
or principal of any such Government Obligation held by such custodian for the
account of the holder of a depository receipt, PROVIDED that (except as required
by law) such custodian is not authorized to make any deduction from the amount
payable to the holder of such depository receipt from any amount received by the
custodian in respect of the Government Obligation or the specific payment of
interest on or principal of the Government Obligation evidenced by such
depository receipt.
Unless otherwise provided in the applicable Prospectus Supplement, if after
the Operating Partnership 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 Indenture or the terms of such Debt Security to
receive payment in a currency, currency unit or composite currency other than
that in which such deposit has been made in respect of such Debt Security, or
(b) a Conversion Event (as defined below) occurs in respect of the currency,
currency unit or composite currency in which such deposit has been made, the
indebtedness represented by such Debt Security shall be deemed to have been, and
will be, fully discharged and satisfied through the payment of the principal of
(and premium, if any) and interest on such Debt Security as they become due out
of the proceeds yielded by converting the amount so deposited in respect of such
Debt Security into the currency, currency unit or composite currency in which
such Debt Security becomes payable as a result of such election or such
Conversion Event based on the applicable market exchange rate. "Conversion
Event" means the cessation
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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 Community 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 Operating Partnership effects covenant defeasance with
respect to any Debt Securities and such Debt Securities are declared due and
payable because of the occurrence of any Event of Default other than the Event
of Default described in clause (d) under "Events of Default, Notice and Waiver"
with respect to Sections 1004 to 1011, inclusive, of the 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 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 Operating Partnership 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.
NO CONVERSION RIGHTS
The Debt Securities will not be convertible into or exchangeable for any
capital stock of the Company or equity interest in the Operating Partnership.
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 (the "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 March 31,
1996.
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,
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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;
(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) Whether interests in such Preferred Stock will be represented by
Depositary Shares;
(11) Any other specific terms, preferences, rights, limitations or
restrictions of such Preferred Stock;
(12) A discussion of federal income tax considerations applicable to such
Preferred Stock;
(13) 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;
(14) 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
(15) 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
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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 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).
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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 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
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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.
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
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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 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
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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 "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 DEPOSITARY SHARES
GENERAL
The Company may issue receipts ("Depositary Receipts") for Depositary
Shares, each of which will represent a fractional interest of a share of a
particular series of Preferred Stock, as specified in the applicable Prospectus
Supplement. Shares of Preferred Stock of each series represented by Depositary
Shares will be deposited under a separate deposit agreement (each, a "Deposit
Agreement") among the Company, the depositary named therein (a "Preferred Stock
Depositary") and the holders from time to time of the Depositary Receipts.
Subject to the terms of the applicable Deposit Agreement, each owner of a
Depositary Receipt will be entitled, in proportion to the fractional interest of
a share of a particular series of Preferred Stock represented by the Depositary
Shares evidenced by such Depositary Receipt, to all the rights and preferences
of the Preferred Stock represented by such Depositary Shares (including
dividend, voting, conversion, redemption and liquidation rights).
The Depositary Shares will be evidenced by Depositary Receipts issued
pursuant to the applicable Deposit Agreement. Immediately following the issuance
and delivery of the Preferred Stock by the Company to a Preferred Stock
Depositary, the Company will cause such Preferred Stock Depositary to issue, on
behalf of the Company, the Depositary Receipts. Copies of the applicable form of
Deposit Agreement and Depositary Receipt may be obtained from the Company upon
request, and the statements made hereunder relating to Deposit Agreements and
the Depositary Receipts to be issued thereunder are summaries of certain
anticipated provisions thereof and do not purport to be complete and are subject
to, and qualified in their entirety by reference to, all of the provisions of
the applicable Deposit Agreement and related Depositary Receipts.
DIVIDENDS AND OTHER DISTRIBUTIONS
A Preferred Stock Depositary will be required to distribute all cash
dividends or other cash distributions received in respect of the applicable
Preferred Stock to the record holders of Depositary Receipts evidencing
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the related Depositary Shares in proportion to the number of such Depositary
Receipts owned by such holders, subject to certain obligations of holders to
file proofs, certificates and other information and to pay certain charges and
expenses to such Preferred Stock Depositary.
In the event of a distribution other than in cash, a Preferred Stock
Depositary will be required to distribute property received by it to the record
holders of Depositary Receipts entitled thereto, subject to certain obligations
of holders to file proofs, certificates and other information and to pay certain
charges and expenses to such Preferred Stock Depositary, unless such Preferred
Stock Depositary determines that it is not feasible to make such distribution,
in which case such Preferred Stock Depositary may, with the approval of the
Company, sell such property and distribute the net proceeds from such sale to
such holders.
No distribution will be made in respect of any Depositary Share to the
extent that it represents any Preferred Stock which has been converted or
exchanged.
WITHDRAWAL OF STOCK
Upon surrender of the Depositary Receipts at the corporate trust office of
the applicable Preferred Stock Depositary (unless the related Depositary Shares
have previously been called for redemption or converted), the holders thereof
will be entitled to delivery at such office, to or upon each such holder's
order, of the number of whole or fractional shares of the applicable Preferred
Stock and any money or other property represented by the Depositary Shares
evidenced by such Depositary Receipts. Holders of Depositary Receipts will be
entitled to receive whole or fractional shares of the related Preferred Stock on
the basis of the proportion of Preferred Stock represented by each Depositary
Share as specified in the applicable Prospectus Supplement, but holders of such
shares of Preferred Stock will not thereafter be entitled to receive Depositary
Shares therefor. If the Depositary Receipts delivered by the holder evidence a
number of Depositary Shares in excess of the number of Depositary Shares
representing the number of shares of Preferred Stock to be withdrawn, the
applicable Preferred Stock Depositary will be required to deliver to such holder
at the same time a new Depositary Receipt evidencing such excess number of
Depositary Shares.
REDEMPTION OF DEPOSITARY SHARES
Whenever the Company redeems shares of Preferred Stock held by a Preferred
Stock Depositary, such Preferred Stock Depositary will be required to redeem as
of the same redemption date the number of Depositary Shares representing shares
of the Preferred Stock so redeemed, provided the Company shall have paid in full
to such Preferred Stock Depositary the redemption price of the Preferred Stock
to be redeemed plus an amount equal to any accrued and unpaid dividends thereon
to the date fixed for redemption. The redemption price per Depositary Share will
be equal to the redemption price and any other amounts per share payable with
respect to the Preferred Stock. If fewer than all the Depositary Shares are to
be redeemed, the Depositary Shares to be redeemed will be selected pro rata (as
nearly as may be practicable without creating fractional Depositary Shares) or
by any other equitable method determined by the Company that preserves the REIT
status of the Company.
From and after the date fixed for redemption, all dividends in respect of
the shares of Preferred Stock so called for redemption will cease to accrue, the
Depositary Shares so called for redemption will no longer be deemed to be
outstanding and all rights of the holders of the Depositary Receipts evidencing
the Depositary Shares so called for redemption will cease, except the right to
receive any moneys payable upon such redemption and any money or other property
to which the holders of such Depositary Receipts were entitled upon such
redemption upon surrender thereof to the applicable Preferred Stock Depositary.
VOTING OF THE PREFERRED STOCK
Upon receipt of notice of any meeting at which the holders of the applicable
Preferred Stock are entitled to vote, a Preferred Stock Depositary will be
required to mail the information contained in such notice of meeting to the
record holders of the Depositary Receipts evidencing the Depositary Shares which
represent such Preferred Stock. Each record holder of Depositary Receipts
evidencing Depositary Shares on the record date (which will be the same date as
the record date for the Preferred Stock) will be entitled to
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instruct such Preferred Stock Depositary as to the exercise of the voting rights
pertaining to the amount of Preferred Stock represented by such holder's
Depositary Shares. Such Preferred Stock Depositary will be required to vote the
amount of Preferred Stock represented by such Depositary Shares in accordance
with such instructions, and the Company will agree to take all reasonable action
which may be deemed necessary by such Preferred Stock Depositary in order to
enable such Preferred Stock Depositary to do so. Such Preferred Stock Depositary
will be required to abstain from voting the amount of Preferred Stock
represented by such Depositary Shares to the extent it does not receive specific
instructions from the holders of Depositary Receipts evidencing such Depositary
Shares. A Preferred Stock Depositary will not be responsible for any failure to
carry out any instruction to vote, or for the manner or effect of any such vote
made, as long as any such action or non-action is in good faith and does not
result from negligence or willful misconduct of such Preferred Stock Depositary.
LIQUIDATION PREFERENCE
In the event of the liquidation, dissolution or winding up of the Company,
whether voluntary or involuntary, the holders of each Depositary Receipt will be
entitled to the fraction of the liquidation preference accorded each share of
Preferred Stock represented by the Depositary Share evidenced by such Depositary
Receipt, as set forth in the applicable Prospectus Supplement.
CONVERSION OF PREFERRED STOCK
The Depositary Shares, as such, will not be convertible into Common Stock or
any other securities or property of the Company. Nevertheless, if so specified
in the applicable Prospectus Supplement relating to an offering of Depositary
Shares, the Depositary Receipts may be surrendered by holders thereof to the
applicable Preferred Stock Depositary with written instructions to such
Preferred Stock Depositary to instruct the Company to cause conversion of the
Preferred Stock represented by the Depositary Shares evidenced by such
Depositary Receipts into whole shares of Common Stock, other shares of Preferred
Stock of the Company or other shares of stock, and the Company will agree that
upon receipt of such instructions and any amounts payable in respect thereof, it
will cause the conversion thereof utilizing the same procedures as those
provided for delivery of Preferred Stock to effect such conversion. If the
Depositary Shares evidenced by a Depositary Receipt are to be converted in part
only, a new Depositary Receipt or Receipts will be issued for any Depositary
Shares not to be converted. No fractional shares of Common Stock will be issued
upon conversion, and if such conversion will result in a fractional share being
issued, an amount will be paid in cash by the Company equal to the value of the
fractional interest based upon the closing price of the Common Stock on the last
business day prior to the conversion.
AMENDMENT AND TERMINATION OF A DEPOSIT AGREEMENT
Any form of Depositary Receipt evidencing Depositary Shares which will
represent Preferred Stock and any provision of a Deposit Agreement will be
permitted at any time to be amended by agreement between the Company and the
applicable Preferred Stock Depositary. However, any amendment that materially
and adversely alters the rights of the holders of Depositary Receipts or that
would be materially and adversely inconsistent with the rights granted to the
holders of the related Preferred Stock will not be effective unless such
amendment has been approved by the existing holders of at least two-thirds of
the applicable Depositary Shares evidenced by the applicable Depositary Receipts
then outstanding. No amendment shall impair the right, subject to certain
anticipated exceptions in the Deposit Agreements, of any holder of Depositary
Receipts to surrender any Depositary Receipt with instructions to deliver to the
holder the related Preferred Stock and all money and other property, if any,
represented thereby, except in order to comply with law. Every holder of an
outstanding Depositary Receipt at the time any such amendment becomes effective
shall be deemed, by continuing to hold such Depositary Receipt, to consent and
agree to such amendment and to be bound by the applicable Deposit Agreement as
amended thereby.
A Deposit Agreement will be permitted to be terminated by the Company upon
not less than 30 days' prior written notice to the applicable Preferred Stock
Depositary if (i) such termination is necessary to preserve the Company's status
as a REIT or (ii) a majority of each series of Preferred Stock affected by such
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termination consents to such termination, whereupon such Preferred Stock
Depositary will be required to deliver or make available to each holder of
Depositary Receipts, upon surrender of the Depositary Receipts held by such
holder, such number of whole or fractional shares of Preferred Stock as are
represented by the Depositary Shares evidenced by such Depositary Receipts
together with any other property held by such Preferred Stock Depositary with
respect to such Depositary Receipts. The Company will agree that if a Deposit
Agreement is terminated to preserve the Company's status as a REIT, then the
Company will use its best efforts to list the Preferred Stock issued upon
surrender of the related Depositary Shares on a national securities exchange. In
addition, a Deposit Agreement will automatically terminate if (i) all
outstanding Depositary Shares thereunder shall have been redeemed, (ii) there
shall have been a final distribution in respect of the related Preferred Stock
in connection with any liquidation, dissolution or winding up of the Company and
such distribution shall have been distributed to the holders of Depositary
Receipts evidencing the Depositary Shares representing such Preferred Stock or
(iii) each share of the related Preferred Stock shall have been converted into
stock of the Company not so represented by Depositary Shares.
CHARGES OF A PREFERRED STOCK DEPOSITARY
The Company will pay all transfer and other taxes and governmental charges
arising solely from the existence of a Deposit Agreement. In addition, the
Company will pay the fees and expenses of a Preferred Stock Depositary in
connection with the performance of its duties under a Deposit Agreement.
However, holders of Depositary Receipts will pay the fees and expenses of a
Preferred Stock Depositary for any duties requested by such holders to be
performed which are outside of those expressly provided for in the applicable
Deposit Agreement.
RESIGNATION AND REMOVAL OF DEPOSITARY
A Preferred Stock Depositary will be permitted to resign at any time by
delivering to the Company notice of its election to do so, and the Company will
be permitted at any time to remove a Preferred Stock Depositary, any such
resignation or removal to take effect upon the appointment of a successor
Preferred Stock Depositary. A successor Preferred Stock Depositary will be
required to be appointed within 60 days after delivery of the notice of
resignation or removal and will be required to be a bank or trust company having
its principal office in the United States and having a combined capital and
surplus of at least $50,000,000.
MISCELLANEOUS
A Preferred Stock Depositary will be required to forward to holders of
Depositary Receipts any reports and communications from the Company which are
received by such Preferred Stock Depositary with respect to the related
Preferred Stock.
Neither a Preferred Stock Depositary nor the Company will be liable if it is
prevented from or delayed in, by law or any circumstances beyond its control,
performing its obligations under a Deposit Agreement. The obligations of the
Company and a Preferred Stock Depositary under a Deposit Agreement will be
limited to performing their duties thereunder in good faith and without
negligence (in the case of any action or inaction in the voting of Preferred
Stock represented by the applicable Depositary Shares), gross negligence or
willful misconduct, and neither the Company nor any applicable Preferred Stock
Depositary will be obligated to prosecute or defend any legal proceeding in
respect of any Depositary Receipts. Depositary Shares or shares of Preferred
Stock represented thereby unless satisfactory indemnity is furnished. The
Company and any Preferred Stock Depositary will be permitted to rely on written
advice of counsel or accountants, or information provided by persons presenting
shares of Preferred Stock represented thereby for deposit, holders of Depositary
Receipts or other persons believed in good faith to be competent to give such
information, and on documents believed in good faith to be genuine and signed by
a proper party.
In the event a Preferred Stock Depositary shall receive conflicting claims,
requests or instructions from any holders of Depositary Receipts, on the one
hand, and the Company, on the other hand, such Preferred Stock Depositary shall
be entitled to act on such claims, requests or instructions received from the
Company.
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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 March 31, 1996,
there were 28,152,979 shares of Common Stock outstanding, 4,558,457 shares
reserved for issuance upon exchange of outstanding Units and 989,107 shares
reserved for issuance upon the exercise of outstanding stock options.
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 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
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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 American Stock
Transfer & Trust Company, New York, New York.
PLAN OF DISTRIBUTION
The Company and the Operating Partnership may sell Securities to 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 transactions 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.
In connection with the sale of Securities, underwriters may receive
compensation from the Company, from the Operating Partnership 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 or
the Operating Partnership, 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 or the Operating Partnership will be
described, in the Prospectus Supplement.
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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 or the Operating Partnership may elect
to list any series of Debt Securities, Preferred Stock or Depositary Shares on
an exchange, but neither is 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 and the Operating Partnership may enter into,
underwriters, dealers, and agents who participate in the distribution of
Securities may be entitled to indemnification by the Company or the Operating
Partnership 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 or the Operating Partnership in
the ordinary course of business.
If so indicated in the applicable Prospectus Supplement, the Company or the
Operating Partnership, as the case may be, will authorize underwriters or other
persons acting as the Company's or the Operating Partnership's agents to solicit
offers by certain institutions to purchase Securities from the Company or the
Operating Partnership 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 or the Operating Partnership,
as the case may be. 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. 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 and of
the Operating Partnership as of December 31, 1995 and 1994, and for each of the
years in the three-year period ended December 31, 1995, each incorporated herein
by reference have been incorporated herein in reliance upon 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.
With respect to the unaudited interim financial information for the periods
ended March 31, 1996 and 1995, incorporated by reference herein, the independent
certified public accountants have reported that they applied limited procedures
in accordance with professional standards for a review of such information.
However, their separate reports included in the Company's and the Operating
Partnership's quarterly reports on Form 10-Q for the quarter ended March 31,
1996, and incorporated by reference herein, state that they did not audit and
they do not express an opinion on that interim financial information.
Accordingly, the degree of reliance on their reports on such information should
be restricted in light of the limited nature of the review procedures applied.
The accountants are not subject to the liability provisions of section 11 of the
Securities Act of 1933 for their reports on the unaudited interim financial
information because those reports are not a "report" or a "part" of the
registration statement prepared or certified by the accountants within the
meaning of sections 7 and 11 of such Act.
26
<PAGE>
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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 UNDERWRITER.
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.
---------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
---------
<S> <C>
PROSPECTUS SUPPLEMENT
Prospectus Supplement Summary...................... S-3
The Company........................................ S-7
Recent Developments................................ S-11
Use of Proceeds.................................... S-12
Capitalization..................................... S-13
Selected Consolidated Financial Data............... S-14
Managements Discussion and Analysis of Financial
Condition and Results of Operations.............. S-17
Properties......................................... S-23
Management......................................... S-27
Description of Series B SUPeR Preferred Shares and
Depositary Shares................................ S-28
Certain Federal Income Tax Considerations.......... S-33
Underwriting....................................... S-36
Legal Matters...................................... S-37
PROSPECTUS
Available Information.............................. 2
Incorporation of Certain Documents by Reference.... 2
The Company and the Operating Partnership.......... 3
Use of Proceeds.................................... 3
Ratios of Earnings to Fixed Charges................ 3
Description of Debt Securities..................... 4
Description of Preferred Stock..................... 14
Description of Depositary Shares................... 20
Description of Common Stock........................ 24
Plan of Distribution............................... 25
Legal Opinions..................................... 26
Experts............................................ 26
</TABLE>
3,000,000 SHARES
[LOGO]
DEPOSITARY SHARES
EACH
REPRESENTING 1/10 OF A 7.99% SERIES B CUMULATIVE STEP-UP PREMIUM RATE-SM-
("SUPER-SM-") PREFERRED SHARE
(PAR VALUE $0.01 PER SHARE)
(LIQUIDATION PREFERENCE EQUIVALENT TO $50.00 PER DEPOSITARY SHARE)
-------------------
PROSPECTUS SUPPLEMENT
-------------------
MERRILL LYNCH & CO.
JULY 8, 1997
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