<PAGE>
Rule 424(b)(5)
Registration No. 33-86444
PROSPECTUS SUPPLEMENT
- -----------------
(TO PROSPECTUS DATED DECEMBER 1, 1994)
LOGO
17,800,000 COMMON SHARES OF BENEFICIAL INTEREST
Property Trust of America ("PTR") is an equity real estate investment trust
that primarily owns, develops, acquires and operates income-producing
multifamily properties in the southwestern and western United States. The last
reported sale price of PTR's Common Shares of Beneficial Interest, $1.00 par
value per share (the "Common Shares"), on the New York Stock Exchange (the
"NYSE") on February 10, 1995 was $16.75. See "Price Range of Common Shares and
Distributions."
This Prospectus Supplement relates to up to 17,800,000 Common Shares that
PTR is offering to its shareholders in a subscription offering (the
"Offering") at a price of $16.375 per Common Share (the "Subscription Price").
Each holder of record of Common Shares at the close of business on February
21, 1995 (the "Record Date"), other than PTR's largest shareholder, Security
Capital Realty Incorporated (which management intends to name Security Capital
Group Incorporated, herein referred to as "Security Capital Group"), is
entitled to subscribe for one Common Share at the Subscription Price for every
1.94 Common Shares held of record at the close of business on the Record Date.
The subscription period will expire on March 23, 1995 at 5:00 p.m., New York
City time, or such later date as PTR may determine in its sole discretion (the
"Expiration Date"). The right of holders of Common Shares on the Record Date
to subscribe for Common Shares at the Subscription Price is not transferable.
See "The Offering--Subscription Right." To the extent that shareholders do not
subscribe for all Common Shares to which they are entitled, PTR will allocate
available Common Shares to oversubscribing shareholders (including Security
Capital Group as if it had fully subscribed for Common Shares based on the
number of Common Shares it is receiving in the Merger (as hereinafter
defined)) and, at its discretion, to third parties. Security Capital Markets
Group Incorporated ("Capital Markets Group"), an affiliate of PTR, will act as
placement agent. See "The Offering--Oversubscription Privilege" and "--
Unsubscribed Shares and Third Party Sales."
The closing of the Offering is conditioned upon the consummation of the
merger (the "Merger") of Security Capital Pacific Incorporated ("PACIFIC")
with and into PTR. See "The Merger" and "The Offering--Condition to Closing."
Upon consummation of the Merger, PTR will change its name to "Security Capital
Pacific Trust." The Offering is designed to allow PTR shareholders other than
Security Capital Group the opportunity to purchase Common Shares at the same
price at which PACIFIC shareholders are receiving Common Shares in the Merger
and to maintain PTR's current balance sheet ratios. To assure maintenance of
PTR's current balance sheet ratios, Security Capital Group has agreed to
purchase $50 million of Common Shares in the Offering, which amount will be
reduced to the extent that subscriptions are received by PTR from parties
other than Security Capital Group. See "The Offering--Principal Shareholder."
Shareholders of PTR who do not fully subscribe for Common Shares in the
Offering will own a smaller equity ownership and voting interest in PTR after
the consummation of the Offering and the Merger than if they were to fully
subscribe for Common Shares. There is no minimum number of Common Shares
required to be sold as a condition to the consummation of the Offering.
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.
THE ATTORNEY GENERAL OF THE STATE OF NEW YORK HAS NOT
PASSED ON OR ENDORSED THE MERITS OF THIS OFFERING.
ANY REPRESENTATION TO THE CONTRARY IS UNLAWFUL.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRICE TO UNDERWRITING PROCEEDS TO
PUBLIC DISCOUNT(1) PTR(2)
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Per Common Share................ $16.375 None $16.375
- ------------------------------------------------------------------------------------------
Total........................... $291,475,000 None $291,475,000
- ------------------------------------------------------------------------------------------
</TABLE>
(1) PTR has agreed to indemnify the placement agent against certain
liabilities, including liabilities under the Securities Act of 1933, as
amended. See "The Offering--Unsubscribed Shares and Third Party Sales."
(2) Before deducting expenses payable by PTR, estimated at $300,000.
The date of this Prospectus Supplement is February 10, 1995
<PAGE>
IN CONNECTION WITH THIS OFFERING, PTR OR ITS AFFILIATES MAY EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE COMMON SHARES
AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH
TRANSACTIONS MAY BE EFFECTED ON THE NEW YORK STOCK EXCHANGE OR OTHERWISE. SUCH
STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
<PAGE>
PROSPECTUS SUPPLEMENT SUMMARY
The following summary is qualified in its entirety by the detailed
information appearing elsewhere in this Prospectus Supplement or the
accompanying Prospectus or incorporated herein or therein by reference.
Adjusted pro forma information regarding 47,814 multifamily units owned
(comprising operating properties, developments under construction and
developments in planning) as of December 31, 1994 includes 5,703 multifamily
units and land for the development of 840 multifamily units being acquired by
PTR in the Merger, and are shown at their cost plus budgeted renovations and
budgeted development cost, as applicable. Other pro forma financial information
does not give effect to the completion of planned renovations, developments
under construction and developments in planning.
PROPERTY TRUST OF AMERICA
PTR's objective is to be the preeminent real estate operating company
focusing on multifamily property in its target market. PTR's REIT Manager is
Security Capital (Southwest) Incorporated (the "REIT Manager" or "REIT
Management"), a wholly owned subsidiary of Security Capital Group. Through its
REIT Manager, PTR is a fully integrated operating company which engages in
development, acquisition, operation and long term ownership of multifamily
properties. PTR currently owns and operates or is developing 47,814 multifamily
units, on an adjusted pro forma basis. The aggregate adjusted pro forma
investment cost, including planned renovations, of all of PTR's adjusted pro
forma multifamily properties is $1.89 billion. See "Property Trust of America"
for a detail of PTR's investment cost. PTR has elected to be taxed as a real
estate investment trust ("REIT") for federal income tax purposes. PTR seeks to
achieve long term sustainable growth in cash flow and distributions through a
commitment to fundamental real estate research, actively reviewing and
reallocating assets to product types and submarkets with strong growth
prospects, developing industry-leading multifamily product designed for the
largest renter groups and making opportunistic acquisitions. See "Business--
Strategy for Cash Flow and Distribution Growth."
PTR has traditionally focused on multifamily assets in the Southwest. At its
meeting on November 4, 1994, PTR's Board of Trustees (the "Board") expanded
PTR's target market to include a six-state region of the western United States
comprised of California, Idaho, Nevada, Oregon, Utah and Washington. The assets
being acquired from PACIFIC in the Merger are located in some of these markets,
which PTR's REIT Manager believes have significant growth prospects. Pursuant
to the Merger, each then outstanding share of PACIFIC common stock will be
converted into the right to receive 0.611 Common Shares (the "Exchange Ratio").
The Exchange Ratio was determined by dividing $10.00 (the value of a share of
PACIFIC common stock as agreed upon between PTR and PACIFIC) by $16.375 (the
closing sale price of the Common Shares on the NYSE on December 6, 1994, the
date the Merger Agreement (as hereinafter defined) was entered into, which is
the same as the Subscription Price). The price of $16.375 per share on which
the Exchange Ratio was based exceeded the 30-day trailing average of the
closing price for the Common Shares on the NYSE (the Common Share price
increased following the announcement of the proposed Merger but such increase
cannot be attributed solely to the Merger). The $10.00 value of a share of
PACIFIC common stock essentially represents PACIFIC's cost of its properties
and is the same price at which PACIFIC sold shares of its common stock in all
of its prior private offerings. Upon consummation of the Merger, PTR will
change its name to "Security Capital Pacific Trust." See "The Merger." A copy
of the Joint Proxy/Information Statement and Prospectus relating to the Merger
is being sent to shareholders under separate cover.
The REIT Manager believes that PTR's expanded target market presents
attractive opportunities for long term increases in per share operating results
because of its growing job market and population. After completion of the
Merger, the REIT Manager will change its name to "Security Capital Pacific
Incorporated."
S-3
<PAGE>
PTR highlights include:
. The Merger, which will result in PTR's entry into attractive, growing
target markets in the western United States, the addition to PTR's
portfolio of 18 operating properties (including two properties to be
acquired by PACIFIC within 40 days of the date of this Prospectus
Supplement) comprising 5,703 multifamily units with a total investment
cost, including planned renovations, of $251.8 million, and three
development properties (including one development property to be acquired
by PACIFIC within 40 days of the date of this Prospectus Supplement)
comprising 840 multifamily units and an increase in PTR's pro forma per
share operating results for 1994. See "The Merger."
. Average rental rates increased 6.42% for PTR's multifamily properties
that were fully operational throughout both 1994 and 1993. At December
31, 1994, on an adjusted pro forma basis, PTR's operating multifamily
properties were 95.1% leased.
. PTR believes that development of multifamily properties from the ground
up that are built for long term ownership and are designed to meet broad
renter preferences and demographic trends will provide a greater source
of long term cash flow growth in the future than acquisitions. PTR
expects to complete an additional 815 multifamily units after the date of
this Prospectus Supplement and before March 31, 1995. On an adjusted pro
forma basis, PTR has completed $208.9 million of developments, has $204.6
million of developments under construction and owns land for which it is
planning $296.7 million of developments.
. Security Capital Group, PTR's largest shareholder, which owns 31.9% of
the Common Shares, is the owner of the REIT Manager and has provided
investment capital to PTR, at the same times and on the same terms made
available to public investors and other shareholders. See "The Offering--
Principal Shareholder."
. Based on forecasts published by Woods & Poole Economics, Inc., the
projected growth in population of PTR's primary target market, including
PACIFIC's primary target market, is 39.5% for the years 1994-2015,
whereas the projected growth in population in the U.S. as a whole for
such period is 19.2%. For the same time period, job growth is projected
to be 31.5% in PTR's primary target market, including PACIFIC's primary
target market, and 22.4% in the U.S. as a whole.
. A review of local market information in PTR's primary target market,
including PACIFIC's primary target market, indicates that the number of
multifamily units for which building permits have been issued has
declined significantly from mid-1980 levels. In 1985, 55,005 units were
permitted as compared to 32,394 units in 1994.
. PTR's long term debt as a percentage of total book capitalization was 27%
at December 31, 1994, on a pro forma basis after giving effect to the
Merger and certain operating multifamily properties subsequently acquired
or to be acquired within 40 days of the date of this Prospectus
Supplement by PTR and PACIFIC and not including the effects of the
Offering. At February 10, 1995, PTR had $125 million of borrowings
outstanding under its $275 million revolving line of credit, which PTR is
negotiating to increase to $350 million.
S-4
<PAGE>
PROPERTY TRUST OF AMERICA
SUMMARY OF MULTIFAMILY PROPERTIES
The information on the chart below is as of December 31, 1994 and includes
5,703 multifamily units and land for the development of 840 multifamily units
being acquired in the Merger.
<TABLE>
<CAPTION>
ACQUISITION OR
COMPLETION PERCENTAGE BUDGETED
DATE UNITS LEASED(1) COST(2)
-------------- ----- ---------- --------------
<S> <C> <C> <C> <C>
PROPERTIES STABILIZED AT
DECEMBER 31, 1994(3):
Woodside Village--Houston,
Texas........................ 07/15/75 196 98.4% $ 6,390,709
Tigua Village--El Paso,
Texas*....................... 05/31/78 184 93.4 2,148,995
Las Flores--El Paso, Texas*... 12/31/83 468 93.6 8,026,456
Park Place Phase I--Las
Cruces, New Mexico*.......... 03/15/89 160 91.1 4,457,581
Spring Park--El Paso, Texas*.. 09/30/90 180 93.9 5,211,767
Rancho Vizcaya--Santa Fe, New
Mexico....................... 08/28/91 212 96.2 11,969,064
Pavilions Phase I--
Albuquerque, New Mexico...... 09/12/91 118 94.6 7,355,179
Park Place Phase II--Las
Cruces, New Mexico*.......... 09/30/91 132 91.1 4,132,729
Shadow Ridge Phase I--El Paso,
Texas........................ 12/31/91 208 92.8 5,367,233
Cobblestone Village--San
Antonio, Texas............... 02/27/92 184 93.5 4,381,994
Sonoran Terraces--Tucson,
Arizona...................... 03/09/92 374 97.9 17,772,755
Contour Place--San Antonio,
Texas........................ 03/12/92 126 88.1 2,572,120
San Marina--Phoenix, Arizona.. 04/08/92 400 97.0 6,831,797
Cobble Creek--Tucson, Arizona. 05/19/92 301 96.0 7,650,415
Dobson Bay Club--Phoenix,
Arizona...................... 05/27/92 166 97.6 6,139,504
Mountain Village--El Paso,
Texas........................ 05/29/92 288 98.6 7,078,119
Sandia Ridge--Albuquerque, New
Mexico....................... 06/05/92 272 97.8 7,344,375
Craycroft Gardens--Tucson,
Arizona...................... 07/09/92 101 99.0 1,935,453
The Crest--El Paso, Texas*.... 07/31/92 232 94.0 7,963,798
Tierra Antigua--Tucson,
Arizona...................... 07/31/92 147 95.9 5,424,623
Pavilions Phase II--
Albuquerque, New Mexico*..... 07/31/92 122 94.6 8,025,027
Homestead Village-Skillman--
Dallas, Texas*............... 08/24/92 133 87.2 3,068,546
Villas of St. Tropez Phase I--
San Antonio, Texas........... 09/17/92 273 92.3 10,712,283
Hickory Ridge--Denver,
Colorado..................... 09/18/92 688 97.2 23,187,032
Lakeside Villas--San Antonio,
Texas........................ 09/30/92 292 91.8 13,519,664
Oakhampton Place--San Antonio,
Texas........................ 09/30/92 280 93.9 12,124,821
Spyglass--Austin, Texas....... 11/06/92 298 97.3 10,400,762
Sunwood--Denver, Colorado..... 11/20/92 156 95.5 5,985,392
Superstition Park--Phoenix,
Arizona...................... 12/03/92 376 96.3 12,447,988
Papago Crossing--Phoenix,
Arizona...................... 12/10/92 180 96.1 3,706,106
Homestead Village-Stemmons--
Dallas, Texas*............... 12/13/92 132 95.4 3,189,094
The Enclave--Santa Fe, New
Mexico....................... 12/23/92 204 97.6 9,713,612
Moorings at Mesa Cove--
Phoenix, Arizona............. 12/30/92 406 96.1 16,997,914
Camino Real--San Antonio,
Texas........................ 02/03/93 176 93.8 6,140,490
Sundown Village Phase I--
Tucson, Arizona.............. 02/25/93 250 99.6 8,412,991
Doubletree--El Paso, Texas.... 03/18/93 284 96.8 6,125,928
San Marin--Phoenix, Arizona*.. 03/31/93 276 99.3 17,971,199
The Ridge--Austin, Texas...... 04/21/93 326 99.4 10,393,046
Windsail--Tucson, Arizona..... 04/27/93 300 98.3 9,818,935
Vista del Sol--Albuquerque,
New Mexico................... 05/07/93 168 99.4 5,913,461
Cambrian--Denver, Colorado.... 05/13/93 383 98.4 11,947,276
</TABLE>
S-5
<PAGE>
PROPERTY TRUST OF AMERICA
SUMMARY OF MULTIFAMILY PROPERTIES
<TABLE>
<CAPTION>
ACQUISITION OR
COMPLETION PERCENTAGE BUDGETED
DATE UNITS LEASED(1) COST(2)
-------------- ----- ---------- --------------
<S> <C> <C> <C> <C>
Reflections Phase I--Denver,
Colorado..................... 05/19/93 208 99.0% $ 8,680,207
The Cedars--Denver, Colorado.. 05/21/93 408 97.6 16,691,066
Homestead Village-Tollway--
Dallas, Texas*............... 05/28/93 120 88.9 2,725,748
Cielo Vista--El Paso, Texas... 06/30/93 378 87.8 6,093,804
Villas of Castle Hills--San
Antonio, Texas............... 07/02/93 163 95.7 5,851,373
Rancho Mirage--San Antonio,
Texas........................ 07/02/93 254 91.7 4,751,305
Shadowood--Austin, Texas...... 07/29/93 235 99.2 6,452,750
Wellington Place--Albuquerque,
New Mexico................... 08/11/93 280 100.0 9,785,156
The Shores/The Marina--San
Antonio, Texas............... 08/24/93 232 84.5 6,547,380
The Phoenix--El Paso, Texas*.. 08/31/93 336 89.6 9,923,565
Fox Creek--Denver, Colorado... 09/10/93 175 100.0 6,401,246
Pheasant Run--Phoenix,
Arizona...................... 09/15/93 248 98.8 8,569,634
Bay Club--Phoenix, Arizona.... 09/28/93 472 98.7 14,797,329
Cannon Place--Austin, Texas... 10/27/93 184 97.3 6,675,422
Woodland Park--Dallas, Texas.. 10/29/93 216 94.0 7,277,592
Somerset--Dallas, Texas....... 10/29/93 372 94.9 14,754,689
Cranbrook Forest--Houston,
Texas........................ 10/29/93 261 98.1 7,056,757
Apple Ridge--Dallas, Texas.... 10/29/93 304 98.4 10,668,599
Warrington--Oklahoma City,
Oklahoma..................... 11/04/93 204 96.1 6,154,000
Southern Slope--Tulsa,
Oklahoma..................... 11/12/93 142 96.5 5,402,015
Squire's Court--Portland,
Oregon+...................... 11/16/93 235 98.7 11,203,680
Knight's Castle--Portland,
Oregon+...................... 11/16/93 296 98.0 13,518,037
Double Tree I--Portland,
Oregon+...................... 11/16/93 245 98.8 10,695,197
Corrales Pointe--Albuquerque,
New Mexico................... 11/30/93 208 99.5 6,672,274
Haystack--Tucson, Arizona..... 12/01/93 272 98.5 6,984,174
Pineloch--Houston, Texas...... 12/09/93 440 89.8 13,560,000
Summerstone--Dallas, Texas.... 12/15/93 192 100.0 6,979,764
Post Oak Ridge--Dallas, Texas. 12/15/93 486 98.8 14,798,701
Applegate--San Antonio, Texas. 12/15/93 344 94.5 9,894,553
Towne East Village--San
Antonio, Texas............... 12/15/93 100 88.0 2,396,708
The Gables--San Antonio,
Texas........................ 12/15/93 192 97.4 6,907,240
Indian Creek--Dallas, Texas... 12/15/93 328 97.3 10,696,422
Marbach Park--San Antonio,
Texas........................ 12/15/93 304 93.1 7,853,076
Palisades Park--San Antonio,
Texas........................ 12/15/93 328 85.4 8,004,562
Weslayan Oaks--Houston, Texas. 12/15/93 84 96.4 3,914,302
Anderson Mill Oaks--Austin,
Texas........................ 12/15/93 350 98.0 12,310,395
The Pond--San Antonio, Texas.. 12/15/93 328 89.9 11,763,776
Panther Springs--San Antonio,
Texas........................ 12/15/93 88 86.4 3,968,075
Braeswood Park--Houston,
Texas........................ 12/16/93 240 96.7 12,524,337
Sunstone--Phoenix, Arizona.... 12/16/93 242 100.0 10,447,227
Presidio at South Mountain--
Phoenix, Arizona............. 12/16/93 600 98.5 31,332,354
Riverwood Heights--Portland,
Oregon+...................... 12/16/93 240 100.0 10,166,734
Quail Run--Dallas, Texas...... 12/16/93 278 98.6 11,019,101
Custer Crossing--Dallas,
Texas........................ 12/16/93 244 97.5 10,423,339
Club at the Green--Portland,
Oregon+...................... 12/16/93 254 98.8 11,358,973
</TABLE>
S-6
<PAGE>
PROPERTY TRUST OF AMERICA
SUMMARY OF MULTIFAMILY PROPERTIES
<TABLE>
<CAPTION>
ACQUISITION OR
COMPLETION PERCENTAGE BUDGETED
DATE UNITS LEASED(1) COST(2)
-------------- ------ ---------- --------------
<S> <C> <C> <C> <C>
Rock Creek--Austin, Texas.... 12/17/93 314 98.4% $ 9,862,320
Villa Caprice--Tucson,
Arizona..................... 12/20/93 268 97.4 8,753,390
The Ridge--Phoenix, Arizona.. 12/27/93 380 97.6 12,613,234
Entrada Point--Albuquerque,
New Mexico.................. 01/31/94 208 98.1 7,335,000
Saddle Brook--Austin, Texas*. 01/31/94 308 98.1 13,216,332
King's Crossing--Las Vegas,
Nevada+..................... 02/03/94 440 99.6 19,639,670
Homestead Village-North
Richland Hills--Dallas,
Texas*...................... 02/28/94 134 90.0 3,513,248
Homestead Village-West by
Northwest--Houston, Texas*.. 02/28/94 134 92.4 3,428,244
Homestead Village-Coit Road--
Dallas, Texas*.............. 02/28/94 134 87.0 3,408,182
Mountain Shadow--Salt Lake
City, Utah+................. 03/18/94 174 98.3 5,761,388
Sunterra--Las Vegas, Nevada+. 03/18/94 444 100.0 14,421,605
Greenpointe--Salt Lake City,
Utah+....................... 03/18/94 192 99.5 6,183,091
The Crescent--San Antonio,
Texas*...................... 03/31/94 306 97.4 15,573,787
Comanche Wells--Albuquerque,
New Mexico.................. 04/20/94 179 95.5 5,027,401
Silvercliff--Denver,
Colorado.................... 04/29/94 312 97.8 16,214,719
Seahawk--Houston, Texas...... 04/29/94 224 97.8 8,419,252
La Mirage--Austin, Texas*.... 04/30/94 348 99.1 17,121,033
Chasewood--Houston, Texas.... 05/12/94 260 95.0 13,511,682
Cimarron Trail--Oklahoma
City, Oklahoma.............. 06/28/94 228 97.8 7,036,565
Horizons at Peccole Ranch--
Las Vegas, Nevada+.......... 06/28/94 408 94.1 21,734,646
Apple Creek--Omaha, Nebraska. 06/30/94 384 96.1 13,402,075
Plaza Del Oro--Houston,
Texas....................... 06/30/94 348 93.4 12,227,201
San Marquis South--Phoenix,
Arizona*.................... 07/31/94 264 99.2 13,462,263
The Meadows of Santa Fe--
Santa Fe, New Mexico*....... 07/31/94 296 95.3 12,758,637
San Antigua--Phoenix,
Arizona*.................... 08/31/94 320 99.7 23,863,867
Homestead Village-Park Ten--
Houston, Texas*............. 10/31/94 135 59.4 3,921,104
------ ----- --------------
SUBTOTALS/AVERAGE.......... 29,404 95.9% $1,057,018,807
------ ----- --------------
PROPERTIES PRE-STABILIZED AT
DECEMBER 31, 1994(3):
Scottsdale Greens--Phoenix,
Arizona..................... 01/24/94 644 85.3% $ 26,981,655
Scripps Landing--San Diego,
California.................. 01/25/94 160 96.3 9,020,999
Beverly Palms--Houston,
Texas....................... 02/02/94 362 98.9 10,140,866
North Mountain Village--
Phoenix, Arizona............ 04/14/94 568 98.8 18,334,000
Rio Cancion--Tucson, Arizona. 04/14/94 379 97.9 19,249,435
Peaks at Papago Park Phase
I--Phoenix, Arizona......... 05/02/94 624 98.7 28,088,175
Foxfire--Phoenix, Arizona.... 05/02/94 188 100.0 7,221,226
Tierrasanta Ridge--San Diego,
California.................. 06/14/94 340 83.8 19,602,589
Homestead Village-Fuqua--
Houston, Texas*............. 06/30/94 134 69.2 3,326,902
The Hamptons--Las Vegas,
Nevada+..................... 07/27/94 492 95.5 20,133,834
Brompton Court--Houston,
Texas....................... 07/28/94 794 85.5 30,509,630
Meridian at Murrayhill--
Portland, Oregon+........... 09/23/94 312 95.5 16,995,087
</TABLE>
S-7
<PAGE>
PROPERTY TRUST OF AMERICA
SUMMARY OF MULTIFAMILY PROPERTIES
<TABLE>
<CAPTION>
ACQUISITION OR
COMPLETION PERCENTAGE BUDGETED
DATE UNITS LEASED(1) COST(2)
-------------- ----- ---------- --------------
<S> <C> <C> <C> <C>
Walden Pond--Seattle,
Washington+.................. 10/21/94 316 96.2% $ 13,739,441
Anchor Village--Las Vegas,
Nevada+...................... 10/26/94 896 91.3 40,420,407
Homestead Village-Westheimer--
Houston, Texas*.............. 10/31/94 134 68.8 4,006,834
Homestead Village-Bammel-
Westfield--Houston, Texas*... 10/31/94 134 77.8 3,454,878
Homestead Village-
Fredricksburg--San Antonio,
Texas*....................... 10/31/94 136 66.1 4,097,811
Dymaxion--San Antonio, Texas.. 11/22/94 190 97.9 4,526,350
Shadow Ridge Phase II--El
Paso, Texas*................. 11/30/94 144 92.8 6,899,180
Timber Ridge--Dallas, Texas... 12/01/94 160 98.8 7,029,520
Dockside--San Antonio, Texas.. 12/22/94 73 89.0 2,188,275
Logan's Ridge--Seattle,
Washington+.................. 12/23/94 258 95.5 13,385,000
Cherry Creek--Salt Lake City,
Utah+........................ 01/17/95 225 95.2 8,835,000
Double Tree II--Portland,
Oregon+...................... (4) 124 94.4 6,750,000
Matanza Creek--Seattle,
Washington+.................. (4) 152 95.0 6,849,000
----- ---- --------------
SUBTOTALS/AVERAGE........... 7,939 91.9% $ 331,786,094
----- ---- --------------
DEVELOPMENTS UNDER CONSTRUCTION
AT DECEMBER 31, 1994:
Homestead Village-Stemmons
Phase II--Dallas, Texas...... 04/09/92 57 N/A $ 1,465,810
Acacia Park--El Paso, Texas... 02/24/93 336 N/A 13,702,840
Sterling Heights--San Antonio,
Texas........................ 07/09/93 224 N/A 12,042,790
Reflections Phase II--Denver,
Colorado..................... 07/14/93 208 N/A 11,377,941
Sundown Village Phase II--
Tucson, Arizona.............. 08/20/93 80 N/A 4,488,912
Ridgeline Village II--Austin,
Texas........................ 09/09/93 456 N/A 24,855,550
San Marquis North--Phoenix,
Arizona...................... 09/14/93 208 N/A 10,769,191
La Paloma--Albuquerque, New
Mexico....................... 10/01/93 424 N/A 24,127,423
Hunter's Run--Austin, Texas... 10/19/93 240 N/A 11,641,735
Homestead Village-Stafford--
Houston, Texas............... 10/28/93 134 N/A 3,637,570
Homestead Village-West
Arlington--Dallas, Texas..... 11/15/93 138 N/A 3,978,937
Medical Drive--San Antonio,
Texas........................ 12/30/93 276 N/A 13,314,855
Patriot Apartments--El Paso,
Texas........................ 01/12/94 320 N/A 12,319,867
Estancia del Sol--Albuquerque,
New Mexico................... 03/23/94 192 N/A 11,966,124
Homestead Village-South
Arlington--Dallas, Texas..... 05/02/94 141 N/A 3,986,916
Homestead Village-Medical
Center--Houston, Texas....... 05/09/94 165 N/A 5,299,295
Memorial Oaks Phase I--
Houston, Texas............... 05/09/94 360 N/A 18,632,819
Homestead Village-
Willowbrook--Houston, Texas.. 06/27/94 138 N/A 3,915,589
Homestead Village-Burnet
Road--Austin, Texas.......... 08/22/94 133 N/A 4,037,582
Homestead Village-
I10/DeZavala--San Antonio,
Texas........................ 09/29/94 142 N/A 4,337,173
Homestead Village-
281/Bitters--San Antonio,
Texas........................ 10/05/94 154 N/A 4,685,337
----- --------------
SUBTOTALS................... 4,526 $ 204,584,256
----- --------------
DEVELOPMENTS IN PLANNING AT
DECEMBER 31, 1994:
Ridgeline Village I--Austin,
Texas........................ 09/09/93 168 N/A $ 9,038,567
Ridgeline Village III--Austin,
Texas........................ 09/09/93 448 N/A 26,265,345
Hobby Horse--Austin, Texas.... 09/22/93 168 N/A 10,157,709
</TABLE>
S-8
<PAGE>
PROPERTY TRUST OF AMERICA
SUMMARY OF MULTIFAMILY PROPERTIES
<TABLE>
<CAPTION>
ACQUISITION OR
COMPLETION PERCENTAGE BUDGETED
DATE UNITS LEASED(1) COST(2)
-------------- ------ ---------- --------------
<S> <C> <C> <C> <C>
Hobby Horse Railroad--Austin,
Texas....................... 10/19/93 168 N/A $ 7,935,670
Memorial Heights Phase I--
Houston, Texas.............. 03/18/94 360 N/A 18,278,833
Memorial Heights Phase II--
Houston, Texas.............. 03/18/94 476 N/A 24,324,922
St. Francis--Santa Fe, New
Mexico...................... 03/31/94 176 N/A 10,231,709
Villas of St. Tropez Phase
II--San Antonio, Texas...... 04/18/94 96 N/A 4,252,438
Peaks at Papago Park Phase
II--Phoenix, Arizona........ 05/02/94 136 N/A 6,956,888
Memorial Oaks Phase II--
Houston, Texas.............. 05/09/94 264 N/A 13,402,564
Walker Ranch Phase I--San
Antonio, Texas.............. 05/12/94 452 N/A 22,770,415
Walker Ranch Phase II--San
Antonio, Texas.............. 05/12/94 356 N/A 16,915,683
Walker Ranch Phase III--San
Antonio, Texas.............. 05/12/94 120 N/A 6,319,656
Reno Vista Ridge--Reno,
Nevada+..................... 05/13/94 324 N/A 17,857,146
Remington--Salt Lake City,
Utah+....................... 07/26/94 288 N/A 15,049,022
Ventana Canyon--Tucson,
Arizona..................... 08/31/94 432 N/A 24,103,983
Homestead Village-Denver Tech
Center--Denver, Colorado.... 09/14/94 158 N/A 5,104,377
Homestead Village-Iliff--
Denver, Colorado............ 10/31/94 138 N/A 4,361,076
Homestead Village-
Scottsdale--Phoenix,
Arizona..................... 11/15/94 120 N/A 4,075,227
Seven Bar Ranch Phase I--
Albuquerque, New Mexico..... 11/22/94 368 N/A 18,293,294
Seven Bar Ranch Phase II--
Albuquerque, New Mexico..... 11/22/94 252 N/A 12,526,930
Homestead Village-Ft. Worth--
Dallas, Texas............... 11/29/94 99 N/A 2,802,661
Homestead Village-Las
Colinas--Dallas, Texas...... 12/16/94 150 N/A 4,539,311
Scholls Ferry--Portland,
Oregon+..................... (4) 228 N/A 11,170,682
------ --------------
SUBTOTALS.................. 5,945 $ 296,734,108
------ --------------
TOTALS..................... 47,814 $1,890,123,265
====== ==============
</TABLE>
- --------
*Property developed by PTR.
+Property being acquired by PTR in the Merger. Acquisition date shown
represents date acquired by PACIFIC.
(1) Represents percentage leased as of December 31, 1994. The information
presented for properties acquired subsequent to December 31, 1994 is based
on information provided by the seller of the property.
(2) Represents cost at December 31, 1994, including planned renovations and
budgeted development cost for properties stabilized or pre-stabilized.
Budgeted development cost at December 31, 1994 includes the cost of land,
fees, permits, payments to contractors, architectural and engineering fees
and interest and property taxes to be capitalized during the construction
period, for properties under development.
(3) For definitions of stabilized and pre-stabilized, see "Business--
Multifamily Properties."
(4) Properties to be acquired by PACIFIC within 40 days of the date of this
Prospectus Supplement.
LAND HELD FOR DEVELOPMENT AT DECEMBER 31, 1994
While land prices are favorable, PTR has acquired and will acquire, on an
unleveraged basis, prudent amounts of zoned land for multifamily development in
the foreseeable future. At December 31, 1994, PTR held three sites for future
multifamily development, aggregating approximately 71.6 acres in two target
market cities. Such land was acquired on an unleveraged basis and represents an
aggregate investment cost of $2.99 million. For purposes of the property charts
and other information in this Prospectus Supplement, land held for prospective
developments, which comprises less than 1% of assets, based on cost, is not
aggregated with the multifamily properties.
S-9
<PAGE>
THE OFFERING
Securities Offered.......... 17,800,000 Common Shares.
Subscription Right.......... Each holder of record of Common Shares on the
Record Date is entitled to subscribe for one
Common Share at the Subscription Price for every
1.94 Common Shares held of record at the close of
business on the Record Date. The right of holders
of Common Shares on the Record Date to subscribe
for Common Shares at the Subscription Price is
not transferable. See "The Offering--Subscription
Right."
Oversubscription Privilege.. A holder of Common Shares on the Record Date who
fully subscribes for all Common Shares to which
such holder is entitled may also subscribe for
additional Common Shares, at the Subscription
Price, to the extent all of the Common Shares
covered by this Prospectus Supplement are not
subscribed for by other shareholders. See "The
Offering--Oversubscription Privilege."
Expiration Date............. The subscription period will expire on March 23,
1995 at 5:00 p.m., New York City time, or such
later date as PTR may determine in its sole
discretion. See "The Offering--Expiration Date."
Subscription Price.......... $16.375 per Common Share.
Closing Price of the Common
Shares on the NYSE on
December 6, 1994, (the day
prior to announcement of
the Offering and the
Merger)....................
$16.375 per Common Share.
Closing Price of the Common
Shares on the NYSE on
February 10, 1995.......... $16.75 per Common Share.
Subscription and Escrow Chemical Bank, PTR Subscription Offering, P.O.
Agent...................... Box 3085, GPO Station, New York, NY 10116-3085;
or 55 Water Street, North Bldg., Room 234--2nd
Floor, New York, NY 10041.
Common Shares Outstanding
Before the Offering and
the Merger................. 50,456,038
Common Shares Outstanding
After the Offering and the
Merger.....................
76,724,498 (assuming the Offering is fully
subscribed)
Use of Proceeds............. The Offering is intended to provide funds for the
development and acquisition of multifamily
properties, for the repayment of indebtedness
under PTR's revolving credit line and for working
capital purposes. See "Use of Proceeds."
Condition to Closing........ The closing of the Offering is conditioned upon
the consummation of the Merger. See "The Merger"
and "The Offering--Condition to Closing."
S-10
<PAGE>
SUMMARY HISTORICAL FINANCIAL DATA
(Amounts in thousands, except ratio information and per share data)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30, YEAR ENDED DECEMBER 31,
------------------ ---------------------------------------------
1994 1993 1993 1992 1991 1990 1989
-------- -------- -------- -------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
OPERATIONS SUMMARY:
Rental Income........... $131,103 $ 50,852 $ 76,186 $ 31,010 $14,721 $12,207 $10,101
Total Revenues.......... 133,196 52,354 78,418 32,779 15,817 13,314 10,856
General and
Administrative
Expenses............... 522 433 660 436 697 1,241 984
REIT Management Fee..... 9,443 4,619 7,073 2,711 793 -- --
Earnings from
Operations(1).......... 33,004 14,289 23,191 9,037 2,078 1,969 989
Gain (loss) on Sale of
Investments............ -- 2,302 2,302 (51) (611) 101 --
Preferred Share
Distributions Paid..... 12,075 -- 1,341 -- -- -- --
Net Earnings
Attributable to Common
Shares................. 20,929 16,591 24,152 8,986 1,467 2,070 989
Common Share
Distributions Paid(2).. $ 33,970 $ 20,019 $ 29,162 $ 13,059 $ 4,179 $ 4,259 $ 4,204
PER SHARE DATA:
Net Earnings
Attributable to Common
Shares................. $ 0.46 $ 0.49 $ 0.66 $ 0.46 $ 0.21 $ 0.41 $ 0.20
Common Share
Distributions Paid(2).. 0.75 0.615 0.82 0.70 0.64 0.84 0.83
Preferred Share
Distributions Paid..... $ 1.3125 $ -- $ 0.1458 $ -- $ -- $ -- $ --
Weighted Average Common
Shares Outstanding 45,490 33,950 36,549 19,435 7,123 5,071 5,065
OTHER DATA:
Funds from Operations
Attributable to Common
Shares(3) $ 41,315 $ 24,579 $ 36,422 $ 15,268 $ 5,404 $ 4,335 $ 3,626
Net Cash Provided by
Operating Activities... 66,747 27,636 49,275 20,252 6,092 1,647 4,533
Net Cash Used by
Investing Activities... (307,156) (198,405) (529,093) (229,489) (33,553) (12,905) (11,797)
Net Cash Provided by
Financing Activities... $247,359 $220,808 $478,345 $185,130 $57,259 $ 9,941 $ 7,327
</TABLE>
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
------------- ------------------------------------------
1994 1993 1992 1991 1990 1989
------------- -------- -------- -------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
FINANCIAL POSITION:
Real Estate Owned, at
cost................... $1,233,021 $872,610 $337,274 $117,572 $84,892 $70,117
Total Assets............ 1,244,537 890,301 342,235 141,020 81,544 69,278
Line of Credit.......... 53,500 51,500 54,802 101 8,522 10,416
Long Term Debt.......... 200,000 -- -- -- -- --
Mortgages Payable....... 96,200 48,872 30,824 35,772 32,599 15,634
Total Liabilities....... 386,913 135,284 94,186 38,707 44,138 29,682
Shareholders' Equity.... $ 857,624 $755,017 $248,049 $102,313 $37,406 $39,596
Number of Common Shares
Outstanding............ 50,397 44,645 27,034 13,161 5,071 5,071
</TABLE>
- --------
(1) Earnings from operations for the nine months ended September 30, 1994 and
for both the nine months ended September 30, 1993 and the year ended
December 31, 1993 reflect a $1.6 million and a $2.3 million provision,
respectively, for possible losses relating to investments in non-
multifamily properties.
(2) A distribution of $0.25 per Common Share was declared by PTR's Trustees on
December 28, 1993 and was paid on February 18, 1994 to shareholders of
record as of February 4, 1994.
(3) Funds from Operations means net income computed in accordance with
generally accepted accounting principles ("GAAP"), excluding gains (or
losses) from debt restructuring and sales of property, plus depreciation
and amortization, and after adjustments for unconsolidated partnerships and
joint ventures. PTR believes that Funds from Operations is helpful in
understanding a property portfolio in that such calculation reflects cash
flow from operating activities and the properties' ability to support
interest payments and general operating expenses before the impact of
certain activities, such as gains or losses from property sales and changes
in accounts receivable and accounts payable. Funds from Operations should
not be considered as an alternative to net earnings or any other GAAP
measurement of performance as an indicator of PTR's operating performance
or as an alternative to cash flows from operating, investing or financing
activities as a measure of liquidity.
S-11
<PAGE>
RECENT OPERATING RESULTS
The following tables set forth preliminary unaudited Total Revenues, Funds
from Operations Attributable to Common Shares, Net Earnings Attributable to
Common Shares, Net Earnings Attributable to Common Shares per Share, Weighted
Average Common Shares Outstanding and Common Share Distributions Paid for the
twelve months ended December 31, 1994 and 1993 for PTR.
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
----------------
1994 1993
-------- -------
(IN THOUSANDS,
EXCEPT
PER SHARE DATA)
<S> <C> <C>
Total Revenues................................................ $186,105 $78,418
Funds from Operations Attributable to Common Shares........... $ 58,208 $36,422
Net Earnings Attributable to Common Shares.................... $ 30,619 $24,152
Net Earnings Attributable to Common Shares per Share.......... $ 0.66 $ 0.66
Weighted Average Common Shares Outstanding.................... 46,734 36,549
Common Share Distributions Paid............................... $ 1.00 $ 0.82
</TABLE>
SUMMARY PRO FORMA FINANCIAL DATA
The following tables set forth certain unaudited pro forma condensed combined
financial information for PTR after giving effect to (i) the Merger, (ii)
certain operating multifamily properties subsequently acquired or to be
acquired within 40 days of the date of this Prospectus Supplement by PTR and
PACIFIC and (iii) the Offering (to the extent of $50 million for which a
standby purchase commitment exists), as if these transactions had been
consummated, with respect to statements of earnings data, at January 1, 1993,
or, with respect to balance sheet data, as of September 30, 1994. The following
tables present such information as if the Merger had been accounted for under
the purchase method. The information presented is derived from, should be read
in conjunction with, and is qualified in its entirety by reference to, the
unaudited pro forma condensed combined financial data and the notes thereto and
the separate historical financial statements and the notes thereto incorporated
by reference herein. The unaudited pro forma condensed combined financial data
have been included for comparative purposes only and do not purport to be
indicative of the results of operations or financial position which actually
would have been obtained if these transactions had been effected at the dates
indicated or of the financial position or results of operations which may be
obtained in the future.
<TABLE>
<CAPTION>
NINE MONTHS
ENDED YEAR ENDED
SEPTEMBER 30, DECEMBER 31,
1994(1) 1993(1)(2)
------------- ------------
(IN THOUSANDS, EXCEPT PER
SHARE DATA)
<S> <C> <C>
OPERATIONS SUMMARY:
Rental Income....................................... $172,987 $202,972
Total Revenues...................................... 174,885 204,943
General and Administrative Expense.................. 579 585
REIT Management Fee................................. 12,319 13,559
Net Earnings from Operations(3)..................... 43,249 44,038
Net Earnings Attributable to Common Shares.......... 31,174 35,817
PER SHARE DATA:
Net Earnings Attributable to Common Shares.......... $ 0.52 $ 0.63
Common Share Distributions(4)....................... 0.75 0.82
Weighted Average Common Shares Outstanding.......... 60,350 57,221
OTHER DATA:
Funds from Operations Attributable to Common
Shares(5).......................................... $ 57,261 $ 64,285
</TABLE>
S-12
<PAGE>
<TABLE>
<CAPTION>
SEPTEMBER 30,
1994(1)
-------------
<S> <C> <C>
FINANCIAL POSITION:
Real Estate Owned, at cost........................... $1,494,520
Total Assets......................................... 1,499,120
Line of Credit....................................... 58,123
Long Term Debt....................................... 200,000
Mortgages Payable.................................... 155,638
Total Liabilities.................................... 452,896
Shareholders' Equity(6).............................. $1,046,224
Number of Common Shares Outstanding.................. 61,918
</TABLE>
- --------
(1) The amounts presented herein have been restated to reflect the effects of
properties acquired during 1993, 1994 and 1995 by PTR and PACIFIC,
including two properties to be acquired within 40 days of the date of this
Prospectus Supplement.
(2) Reflects operations of PACIFIC from October 22, 1993 (the date of its
inception).
(3) PTR's earnings from operations for the nine months ended September 30, 1994
and for the year ended December 31, 1993 reflect a $1.6 million and a $2.3
million provision, respectively, for possible losses relating to
investments in non-multifamily properties.
(4) A distribution of $0.25 per Common Share was declared by PTR's Trustees on
December 28, 1993 and was paid on February 18, 1994 to shareholders of
record as of February 4, 1994.
(5) Funds from Operations means net income computed in accordance with GAAP,
excluding gains (or losses) from debt restructuring and sales of property,
plus depreciation and, in the case of PTR, amortization, and after
adjustments for unconsolidated partnerships and joint ventures. PTR
believes that Funds from Operations is helpful in understanding a property
portfolio in that such calculation reflects cash flow from operating
activities and the properties' ability to support interest payments and
general operating expenses before the impact of certain activities, such as
gains or losses from property sales and changes in accounts receivable and
accounts payable. Funds from Operations should not be considered as an
alternative to net earnings or any other GAAP measurement of performance as
an indicator of PTR's or PACIFIC's operating performance or as an
alternative to cash flows from operating, investing or financing activities
as a measure of liquidity.
(6) This calculation assumes the issuance of approximately 8,468,460 Common
Shares, based on an Exchange Ratio of 0.611 Common Shares for each share of
PACIFIC common stock outstanding at the effective time of the Merger. The
actual number of Common Shares issuable in the Merger may vary in
accordance with the terms of the Merger Agreement.
S-13
<PAGE>
PROPERTY TRUST OF AMERICA
PTR's objective is to be the preeminent real estate operating company
focusing on multifamily property in its target market. As a fully integrated
operating company, through its experienced REIT Manager, PTR engages in
development, acquisition, operation and long term ownership of multifamily
properties. PTR currently owns and operates or is developing 47,814 multifamily
units, on an adjusted pro forma basis. The aggregate adjusted pro forma
investment cost, including planned renovations, of all of PTR's adjusted pro
forma multifamily properties is $1.89 billion. This amount is comprised of the
historical recorded investment in real estate at September 30, 1994 of $1.23
billion plus subsequent real estate acquisitions of $265.3 million, including
$252.2 million being acquired in the Merger, planned renovation costs of $24.5
million and budgeted costs to complete development properties of $403.7
million, less investment in non-multifamily properties and land held for future
development of $36.4 million. PTR has elected to be taxed as a REIT for federal
income tax purposes. PTR seeks to achieve long term sustainable growth in cash
flow and distributions through a commitment to fundamental real estate
research, actively reviewing and reallocating assets to product types and
submarkets with strong growth prospects, developing industry-leading
multifamily product designed for the largest renter groups and making
opportunistic acquisitions. See "Business--Strategy for Cash Flow and
Distribution Growth."
PTR has traditionally focused on multifamily assets in the Southwest. At its
meeting on November 4, 1994, the Board expanded PTR's target market to include
a six-state region of the western United States comprised of California, Idaho,
Nevada, Oregon, Utah and Washington. The assets being acquired from PACIFIC in
the Merger are located in some of these markets, which the REIT Manager
believes have significant growth prospects. The REIT Manager believes that
PTR's expanded target market presents attractive opportunities for long term
increases in per share operating results because of its growing job market and
population.
PTR was formed in 1963 and is a real estate investment trust organized under
the laws of Maryland. Its principal executive offices are located at 7777
Market Center Avenue, El Paso, Texas 79912, and its telephone number is (915)
877-3900.
THE MERGER
On December 6, 1994, PTR, PACIFIC and Security Capital Group entered into an
Agreement and Plan of Merger (the "Merger Agreement") providing for the Merger
of PACIFIC with and into PTR. At such time as the Merger becomes effective,
each then outstanding share of PACIFIC common stock will be converted into the
right to receive 0.611 Common Shares. No fractional Common Shares will be
issued in the Merger, but holders of PACIFIC common stock will be entitled to
receive a pro rata cash payment in lieu thereof. The Exchange Ratio was
determined by dividing $10.00 (the value of a share of PACIFIC common stock as
agreed upon between PTR and PACIFIC) by $16.375 (the closing sale price of the
Common Shares on the NYSE on December 6, 1994, which is the same as the
Subscription Price). The price of $16.375 per share on which the Exchange Ratio
was based exceeded the 30-day trailing average of the closing price of the
Common Shares on the NYSE (the Common Share price increased following the
announcement of the proposed Merger but such increase cannot be attributed
solely to the Merger). The $10.00 value of a share of PACIFIC common stock
agreed upon between PTR and PACIFIC essentially represents PACIFIC's cost of
its properties and is the same price at which PACIFIC sold shares of its common
stock in all of its prior private offerings.
PTR and PACIFIC have scheduled special meetings of their respective
shareholders to be held on March 23, 1995 to vote on the Merger. The
affirmative vote of the holders of at least two-thirds of the outstanding
Common Shares and at least two-thirds of the outstanding PACIFIC common stock
is required to approve the Merger. Security Capital Group, which owned 31.9% of
the Common Shares on February 10, 1995, has agreed to vote all such Common
Shares in favor of the Merger. Security Capital Group has also agreed to
S-14
<PAGE>
vote its 97.6% ownership of PACIFIC common stock in favor of the Merger,
thereby assuring approval of the Merger by PACIFIC's shareholders. The Merger
is subject to the satisfaction or waiver of certain other conditions, and the
Merger Agreement may be terminated at any time prior to the closing in certain
circumstances. The closing of the Merger is a condition to the closing of the
Offering. See "The Offering--Condition to Closing."
PTR will be the surviving entity in the Merger and its name will be changed
to "Security Capital Pacific Trust." The current trustees and executive
officers of PTR will continue in office after the Merger. PTR does not
currently anticipate any changes in its investment strategies or policies or
its distribution policy in connection with the Merger other than the resulting
expansion of its existing target market. After completion of the Merger, the
REIT Manager will change its name to "Security Capital Pacific Incorporated."
For a more detailed description of the terms of the Merger, refer to the Joint
Proxy/Information Statement and Prospectus sent to shareholders under separate
cover.
USE OF PROCEEDS
The net proceeds to PTR from the sale of the Common Shares offered hereby are
estimated to be approximately $291.2 million (assuming the sale of all
17,800,000 Common Shares in the Offering). The net proceeds will be used for
the development and acquisition of additional multifamily properties, as
suitable opportunities arise, for the repayment of indebtedness under PTR's
revolving line of credit and for working capital purposes. See "Business--
Strategic Accomplishments." Pending investment in multifamily properties, PTR
will invest any remaining net proceeds in short term money market instruments.
At February 10, 1995, approximately $125 million of borrowings were outstanding
under PTR's $275 million unsecured revolving line of credit with Texas Commerce
Bank National Association, as agent bank ("TCB"), which matures in August 1996
and bears interest at the greater of prime (9.0%) or the federal funds rate
plus 0.5% (6.4531%) or, at PTR's option, LIBOR plus 1.75% (7.875% based upon a
one month contract). The interest rate may increase to LIBOR plus 2.0% if PTR's
senior unsecured debt were downgraded by Standard & Poor's Corporation. PTR is
currently negotiating an increase in this line to $350 million. In addition,
pursuant to the terms of the Merger, PTR is obligated to pay the outstanding
balance of PACIFIC's revolving line of credit prior to consummation of the
Merger. At February 10, 1995, approximately $45.3 million of borrowings were
outstanding under PACIFIC's revolving line of credit. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations--
Liquidity and Capital Resources."
S-15
<PAGE>
CAPITALIZATION
The following table sets forth the book capitalization of PTR at September
30, 1994, and as adjusted to give effect to (i) the Merger, (ii) certain
operating multifamily properties subsequently acquired or to be acquired within
40 days of the date of this Prospectus Supplement by PTR and PACIFIC and (iii)
the Offering (to the extent of $50 million for which a standby purchase
commitment exists and excluding expenses of the Offering). The table should be
read in conjunction with the financial statements of PTR incorporated by
reference herein.
<TABLE>
<CAPTION>
SEPTEMBER 30, 1994
----------------------
AS
HISTORICAL ADJUSTED
---------- ----------
(AMOUNTS IN THOUSANDS
EXCEPT SHARE DATA)
<S> <C> <C>
Mortgages payable............................... $ 96,200 $ 155,638
---------- ----------
Long Term Unsecured Debt (1):
6 7/8% Notes due 2008......................... 100,000 100,000
7 1/2% Notes due 2014......................... 100,000 100,000
---------- ----------
200,000 200,000
---------- ----------
Shareholders' Equity:
Shares of Beneficial Interest, $1.00 par
value; 150,000,000 shares authorized;
Series A Preferred Shares (liquidation
preference $25.00 per share); 9,200,000
shares issued.............................. 230,000 230,000
Common Shares; 50,561,666 shares issued,
62,083,561 shares issued as adjusted....... 50,562 62,083
Additional paid-in capital.................. 621,787 798,866
Distributions in excess of net earnings......... (42,796) (42,796)
Less Common Shares held in treasury, at cost--
164,478........................................ (1,929) (1,929)
---------- ----------
Total Shareholders' Equity (2).................. 857,624 1,046,224
---------- ----------
Total Capitalization (2).................. $1,153,824 $1,401,862
========== ==========
</TABLE>
- --------
(1) The Notes (as hereinafter defined) have an average life to maturity of
14.25 years and an average effective interest cost, inclusive of offering
discounts, issuance costs and an interest rate protection agreement, of
7.37% per annum. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations--Liquidity and Capital Resources--
Financing Activities."
(2) If the Offering is fully subscribed, Total Shareholders' Equity and Total
Capitalization, as adjusted, will be $1,287,700,000 and $1,643,338,000,
respectively.
S-16
<PAGE>
PRICE RANGE OF COMMON SHARES AND DISTRIBUTIONS
The Common Shares are listed on the NYSE under the symbol "PTR." The
following table sets forth the high and low sale prices of the Common Shares as
reported in the New York Stock Exchange Composite Tape by CompuServe, and
distributions declared, for the periods indicated.
<TABLE>
<CAPTION>
HIGH LOW DISTRIBUTIONS
------- ------- -------------
<S> <C> <C> <C>
1992
First Quarter............................. $12 1/8 $ 9 3/4 $0.175
Second Quarter............................ 11 3/4 10 0.175
Third Quarter............................. 12 3/4 10 7/8 0.175
Fourth Quarter............................ 14 1/2 11 3/4 0.175(1)
1993
First Quarter............................. 20 14 0.205
Second Quarter............................ 19 5/8 17 1/8 0.205
Third Quarter............................. 21 5/8 18 3/8 0.205
Fourth Quarter............................ 21 1/2 17 5/8 0.205
1994
First Quarter............................. 21 5/8 18 1/4 0.250(2)
Second Quarter............................ 20 1/8 17 3/4 0.250
Third Quarter............................. 18 7/8 17 5/8 0.250
Fourth Quarter............................ 18 3/8 15 1/2 0.250
1995
First Quarter (through February 10)....... 18 3/8 16 3/4 0.2875(3)
</TABLE>
- --------
(1) Declared in the third quarter of 1992 for payment in the fourth quarter of
1992.
(2) Declared in the fourth quarter of 1993 for payment in the first quarter of
1994.
(3) Declared in the fourth quarter of 1994 and payable February 13, 1995 to
holders of record on February 2, 1995.
See the cover page of this Prospectus Supplement for the price of a Common
Share as of a recent date. On February 10, 1995, there were approximately
50,456,038 Common Shares outstanding, which were held of record by
approximately 3,500 shareholders.
PTR, in order to qualify as a REIT, is required to make distributions (other
than capital gain distributions) to its shareholders in amounts at least equal
to (i) the sum of (A) 95% of its "REIT taxable income" (computed without regard
to the dividends paid deduction and its net capital gain) and (B) 95% of the
net income (after tax), if any, from foreclosure property, minus (ii) the sum
of certain items of noncash income. PTR's distribution strategy is to
distribute what it believes is a conservative percentage of its cash flow,
permitting PTR to retain funds for capital improvements and other investments
while funding its distributions. PTR has paid 75 consecutive quarterly cash
distributions.
PTR announces the following year's projected annual distribution level after
the Board's annual budget review and approval in December of each year. At its
December 6, 1994 board meeting, the Board announced a projected increase in the
annual distribution level from $1.00 to $1.15 per Common Share. The payment of
distributions is subject to the discretion of the Board and is dependent upon
the financial condition and operating results of PTR.
For federal income tax purposes, distributions may consist of ordinary
income, capital gains, non-taxable return of capital or a combination thereof.
Distributions that exceed PTR's current and accumulated earnings and profits
(calculated for tax purposes) constitute a return of capital rather than a
dividend and reduce the shareholder's basis in his or her Common Shares. To the
extent that a distribution exceeds both current and accumulated earnings and
profits and the shareholder's basis in his or her Common Shares, it will
generally
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<PAGE>
be treated as gain from the sale or exchange of that shareholder's Common
Shares. PTR annually notifies shareholders of the taxability of distributions
paid during the preceding year. The following summarizes the taxability of
distributions paid in 1994, 1993 and 1992 in respect of the Common Shares. The
estimated taxability of the 1994 distributions is based on preliminary,
unaudited financial information.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------
1994 1993 1992 1991
----- ----- ----- -----
<S> <C> <C> <C> <C>
Per Common Share:
Ordinary Income................................. $0.68 $0.65 $0.67 $0.25
Capital Gains................................... -- 0.11 0.03 --
Return of Capital............................... 0.32 0.06 -- 0.39
----- ----- ----- -----
Total......................................... $1.00 $0.82 $0.70 $0.64
===== ===== ===== =====
</TABLE>
No portion of the 1992 distributions constituted return of capital, due to
certain acquisition and sale transactions consummated in 1992 that increased
reported earnings and profits for 1992. Under federal income tax rules, PTR's
earnings and profits are first allocated to its Preferred Shares (as
hereinafter defined), which increases the portion of the Common Shares
distribution classified as return of capital. PTR's tax returns have not been
examined by the Internal Revenue Service and, therefore, the taxability of
distributions is subject to change. The portion of distributions characterized
as return of capital results primarily from the excess of distributions over
earnings, primarily because non-cash charges such as depreciation are added to
earnings in determining distribution levels. Depreciation has increased as new
properties have been added. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations--Results of Operations."
DIVIDEND REINVESTMENT AND SHARE PURCHASE PLAN
PTR has a Dividend Reinvestment and Share Purchase Plan (the "Plan") that
allows holders of Common Shares to acquire additional Common Shares by
automatically reinvesting distributions. Common Shares are acquired pursuant to
the Plan at a price equal to 98% of the market price of such Common Shares,
without payment of any brokerage commission or service charge. The Plan also
allows shareholders to purchase a limited number of additional Common Shares at
98% of the market price of such Common Shares, by making optional cash
payments, without payment of any brokerage commission or service charge.
Shareholders who do not participate in the Plan continue to receive
distributions as declared.
BUSINESS
STRATEGY FOR CASH FLOW AND DISTRIBUTION GROWTH
PTR seeks to achieve long term sustainable growth in cash flow and
distributions through a commitment to fundamental real estate research,
actively reviewing and reallocating assets to product types and submarkets with
strong growth prospects, developing industry-leading multifamily product
designed for the largest renter groups and making opportunistic acquisitions.
Commitment to Fundamental Real Estate Research. PTR utilizes its affiliate,
Security Capital (U.S.) Investment Research Incorporated ("Security Capital
(U.S.) Investment Research"), to conduct comprehensive evaluations of its
target markets on a submarket-by-submarket basis to identify those submarkets
and product types that present above average prospects for cash flow growth.
These evaluations, combined with PTR's experience in development and as one of
the largest multifamily property owners in its target market, enable PTR to
identify the submarkets with the highest projected job and population growth
and to determine the product type to develop, acquire and own in each submarket
to appeal to the local resident base.
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<PAGE>
Asset Review and Reallocation. PTR develops and acquires properties with a
view to effective long term operation and ownership. REIT Management's asset
managers actively review PTR's asset base. These reviews generate operating and
capital plans and, with guidance from Security Capital (U.S.) Investment
Research, identify submarkets and product types that PTR believes represent
better long term growth opportunities. In evaluating each multifamily community
owned or being considered for development or acquisition, the REIT Manager
focuses on those components that it believes provide the greatest opportunity
for consistent rental increases and high occupancies over the long term.
Submarket locations and demographics, unit size, density and amenities of each
community are important contributors to long term income growth. Based upon
PTR's market research and in an effort to optimize its portfolio allocation,
PTR may from time to time seek to dispose of assets that in management's view
do not meet PTR's long term investment criteria and redeploy the proceeds
therefrom, preferably through like-kind exchanges, into assets that it believes
provide better long term growth opportunities.
Development. On an adjusted pro forma basis, PTR has completed $208.9 million
of developments, has $204.6 million of developments under construction and owns
land for which it is planning $296.7 million of developments. PTR has engaged
in multifamily development since 1970. PTR has developed from the ground up, or
has under development, 37.6%, based on cost, of its multifamily portfolio as of
December 31, 1994, on an adjusted pro forma basis. Historically, actual
operating results on properties developed by PTR have generally exceeded
projected operating results and the results available from acquisitions. PTR's
development strategy is to focus on developing state of the art product in
attractive submarkets to meet renter preferences and demographic trends. PTR
believes that developing communities designed for long term appeal to the
largest portion of the renter base will allow PTR to achieve more consistent
rental increases and higher occupancies over the long term and, thereby,
realize cash flow growth. PTR minimizes development risks by having zoning,
site planning, construction budgets and similar risks resolved or assumed by
third parties prior to PTR's commitment. PTR also targets development for
markets with high occupancy rates where population and job growth trends
indicate increasing future demand. PTR cannot eliminate all development risk
but believes that the opportunities to better control product and realize
higher returns from development properties compensate for the retained risk.
Development opportunities also permit PTR to incorporate into multifamily
communities proprietary technologies and designs aimed at enhancing long term
rental growth while reducing ongoing maintenance costs. PTR has had the
opportunity to evaluate and refine its multifamily product through its long
history of development. PTR, unlike a typical merchant builder, intends to own
long term the properties that it develops. Hence, PTR focuses on the quality of
construction, materials and design with a view towards minimizing long term
operation and maintenance costs.
REIT Management believes that development of multifamily units from the
ground up that are built for long term ownership and are designed to meet broad
renter preferences and demographic trends will provide a greater source of long
term cash flow growth in the future. Therefore, while land prices are
favorable, PTR has acquired and will acquire, on an unleveraged basis, prudent
amounts of zoned land for multifamily development in the foreseeable future.
For purposes of the property charts and other information in this Prospectus
Supplement, land held for these prospective developments, which comprises less
than 1% of assets, based on cost, is not aggregated with the multifamily
properties.
Opportunistic Acquisitions. Based on research provided by Security Capital
(U.S.) Investment Research, PTR selectively takes advantage of market
opportunities to acquire undeveloped land and multifamily properties at
attractive prices. PTR's experienced acquisition and due diligence
professionals have selectively acquired $897.1 million of multifamily
properties, including planned renovations, and land for the development of
$626.2 million of multifamily properties, including budgeted development costs,
since January 1, 1992.
PTR believes that effective execution of the strategy described above will
contribute to long term growth in cash flow and distributions.
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<PAGE>
MULTIFAMILY PROPERTIES
PTR categorizes operating multifamily properties (which include all
properties not under development) as either "stabilized" or "pre-stabilized."
The term "stabilized" means that renovation, repositioning, new management and
new marketing programs (or development and marketing in the case of newly-
developed properties) have been completed and in effect for a sufficient period
of time (but in no case longer than 12 months or, in the case of properties
requiring major rehabilitation, as long as 18 months) to achieve 93% occupancy
at market rents. Prior to being "stabilized," a property is considered "pre-
stabilized." Due to its active development and acquisition programs, 76.1% of
PTR's adjusted pro forma operating multifamily properties, based on cost, were
classified by PTR as stabilized as of December 31, 1994, with another 5.4%
expected to be stabilized by March 31, 1995. At December 31, 1994, PTR's
adjusted pro forma operating multifamily properties were 95.1% leased.
PTR's adjusted pro forma multifamily properties are primarily garden style,
two-story multifamily dwellings that range in size from 57 units to 896 units.
Resident leases are generally for six-month to twelve-month terms and require
security deposits. PTR owns 25 properties that will contain affordable
corporate efficiency units to be rented for terms generally shorter than six
months. As of December 31, 1994, nine of these properties were under
development, including one in the leasing stage, and five were in planning. PTR
expects to develop more of these properties.
PTR believes that its multifamily communities generally occupy strategic
locations in growing submarkets. Excluding corporate efficiency properties, the
average unit size for adjusted pro forma properties operating, under
development and in planning is 834 square feet, with 53.5% of the units having
two or more bedrooms. Many units have washer/dryer connections and walk-in
closets, which REIT Management believes substantially enhance marketability.
PTR improves attractiveness by investing in extensive landscaping when
developing or repositioning multifamily units. Other features frequently
included in PTR's multifamily communities are swimming pools, playgrounds,
volleyball courts, fitness centers and community rooms.
PTR expects to continue to focus a portion of its future development and
acquisition efforts on moderate income multifamily housing, which includes
moderately priced apartments and efficiency units priced to appeal to the
largest sector of the renter market, based on income, age and family size.
NON-MULTIFAMILY PROPERTIES
PTR focuses its investment and development activities on multifamily
properties. It will continue to aggressively manage non-multifamily properties
in order to maximize cash flow, and periodic sales of non-multifamily
properties may occur as opportunities arise.
Hotel. PTR owns a 338-room, five-story hotel building located in the
Fisherman's Wharf area of San Francisco, California. The hotel building is
leased to Holiday Inns of America, Inc. The lease expires in 2018. Holiday Inns
has recently renovated portions of this building at its own expense. The
effective annual rent is 25% of the hotel's gross room revenues and 5% of gross
food and beverage sales. Holiday Inns operates this building jointly with its
243-room building across the street, and PTR's rental income is based on total
revenues for both buildings, prorated based on the number of rooms in PTR's
building. Average occupancy for the one-year period ended December 31, 1994 was
82.8%, at an average room rate of $89.77.
Office/Industrial. PTR owns one office building through a 40% owned joint
venture, and owns three industrial properties. PTR's office building is located
in the Dallas, Texas metropolitan area. At December 31, 1994, this office
building was 96.1% leased. PTR's industrial properties are warehouse/showroom
facilities located in Texas and California, ranging in size from 37,200 square
feet to 130,000 square feet and were 100% leased at December 31, 1994.
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<PAGE>
INVESTMENT ANALYSIS
Prospective property investments are analyzed pursuant to several
underwriting criteria, including purchase price, competition and other market
factors, and prospects for growth in income and market value. PTR's development
or acquisition decision is based upon the expected contribution of the property
to cash flow growth and increases in shareholder distributions. The expected
economic contribution is based on an estimate of all cash revenues from leases
and other revenue sources, minus expenses incurred in operating the property
(generally, real estate taxes, insurance, maintenance, personnel costs and
utility charges, but excluding depreciation, debt service and amortization of
loan costs). Residual value and the effects of debt financing are not
considered in the calculation.
For operating properties that PTR has acquired, stabilized operations
generally have been achieved six to 12 months after acquisition. For properties
that PTR has developed, stabilized operations generally have been achieved 12
to 18 months after construction commenced. "Stabilized" means that capital
improvements, repositioning, new management and new marketing programs (or
development and marketing, in the case of newly developed properties) have been
completed and in effect for a sufficient period of time (but in no case longer
than 12 months or, in the case of properties requiring major rehabilitation, as
long as 18 months) to achieve stabilized occupancy (typically 93%) at market
rents. At December 31, 1994, PTR's stabilized adjusted pro forma properties
were 95.9% leased.
The economic contribution of properties cannot be predicted with certainty,
and no assurance can be given that developed or acquired properties will
contribute to increased cash flow and shareholder distributions, or that
developments and acquisitions will be available on comparable terms in the
future.
STRATEGIC ACCOMPLISHMENTS
Developments and Acquisitions
The REIT Manager's development and acquisition specialists are each assigned
to a specific metropolitan area within PTR's target market where they are
present each week to review available properties and meet with potential
sellers. PTR has selectively developed and acquired multifamily properties
where land costs, demographic trends and market trends indicate a high
likelihood of achieving expected operating results. This system has resulted in
multifamily property developments and acquisitions on favorable terms. As of
December 31, 1994, on an adjusted pro forma basis, the multifamily portfolio
consisted of the following:
<TABLE>
<CAPTION>
NUMBER
OF UNITS TOTAL COST(1)
-------- --------------
<S> <C> <C>
Properties Acquired.............................. 31,807 $1,179,908,094
Developments Completed........................... 5,536 208,896,807
Developments Under Construction.................. 4,526 204,584,256
Developments in Planning......................... 5,945 296,734,107
------ --------------
Totals....................................... 47,814 $1,890,123,264
====== ==============
</TABLE>
- --------
(1) Represents cost, including planned renovations, for properties owned at
December 31, 1994. Represents acquisition cost, including planned
renovations, for 5,703 multifamily units and land for the development of
840 multifamily units being acquired in the Merger. Represents budgeted
development cost, which includes the cost of land, fees, permits, payments
to contractors, architectural and engineering fees and interest and
property taxes to be capitalized during the construction period, for
properties under development. Does not include land held for future
development, which is less than 1% of assets based on cost.
At February 10, 1995, PTR and PACIFIC on a combined basis had contingent
contracts or letters of intent, subject to final due diligence, to acquire land
for the near term development of 4,973 multifamily units with an aggregate
estimated development cost of $223.9 million. At the same date, PTR and PACIFIC
on a
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<PAGE>
combined basis also had contingent contracts or letters of intent, subject to
final due diligence, for the acquisition of 1,782 additional multifamily units
with an aggregate investment cost of $75.6 million, including planned
renovations. See "Management's Discussion and Analysis of Financial Condition
and Results of Operations--Liquidity and Capital Resources."
Asset Management
The REIT Manager believes that a successful REIT must actively manage its
properties in order to increase cash flow and enhance the long term economic
performance of the properties. Prior to retaining the REIT Manager, PTR's
properties were managed by several different property managers for whom PTR was
one of many customers. In order to gain more control over multifamily
operations, in August 1991, the REIT Manager retained SCG Realty Services
Incorporated ("SCG Realty Services"), a property management firm, to replace
other firms as the property manager for most of PTR's multifamily properties.
At December 31, 1994, SCG Realty Services managed 81.4% of PTR's adjusted pro
forma operating multifamily units, with the balance in various stages of
transition to SCG Realty Services' management.
SCG Realty Services has over 955 employees dedicated to the management of
PTR's properties. SCG Realty Services emphasizes locally-based management of
PTR's properties and has opened ten local offices to serve PTR's target market.
This network improves SCG Realty Services' ability to respond to changes in
local market conditions and resident needs. The REIT Manager believes that SCG
Realty Services has developed superior operating procedures, financial
controls, information systems and training programs, which it expects to
positively affect rental returns and occupancy rates. In addition, incentive
compensation programs have been implemented for on-site property managers to
further improve the performance of the properties. SCG Realty Services also
assists the REIT Manager in performing due diligence on properties being
evaluated for acquisition and in preparing property operating budgets.
The REIT Manager has taken an active role in overseeing SCG Realty Services'
management of PTR's multifamily properties. Security Capital Group owns 100% of
SCG Realty Services' voting stock. The REIT Manager has assembled a staff of
asset managers to provide better oversight and long term direction.
Capital Markets
REIT Management believes that a successful REIT must have the ability to
access the equity and debt markets efficiently, expeditiously and
inexpensively. PTR's capital markets ability permits it to capitalize on the
development and acquisition opportunities that PTR believes exist in its target
market. In order to maximize this function and enhance relationships with major
institutional sources of capital, Security Capital Group has formed a
registered broker-dealer subsidiary, Security Capital Markets Group
Incorporated ("Capital Markets Group"). Capital Markets Group's services are
included in the REIT Manager's fee and do not result in a separate charge to
PTR. Capital Markets Group and the REIT Manager have arranged innovative public
offering structures, underwritten offerings and substantial credit facilities
for PTR, including:
In June 1991, PTR raised $21.4 million of net proceeds from a rights
offering to holders of Common Shares;
In November 1991, PTR raised $45.6 million of net proceeds from a public
offering of Common Shares to shareholders and institutions;
In April 1992, PTR raised $69.8 million of net proceeds from a public
offering of Common Shares that was 71% underwritten by a syndicate of
investment banks;
In October 1992, PTR raised $73.4 million of net proceeds from a rights
offering to holders of Common Shares and new institutional investors and a
sale of shelf-registered Common Shares;
In February and March 1993, PTR raised $129.5 million of net proceeds
from a public offering of Common Shares that was 82% underwritten by a
syndicate of investment banks;
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<PAGE>
In September 1993, PTR raised $165.3 million of net proceeds from a
rights offering to holders of Common Shares and a sale of shelf-registered
Common Shares to institutional investors;
In November 1993, PTR raised $219.7 million of net proceeds from an
underwritten public offering of Cumulative Convertible Series A Preferred
Shares of Beneficial Interest, $1.00 par value per share ("Preferred
Shares");
In February 1994, PTR raised $196.4 million of net proceeds from an
underwritten public offering of fully amortizing, long term senior debt
securities (see "Management's Discussion and Analysis of Financial
Condition and Results of Operations--Liquidity and Capital Resources--
Financing Activities"); and
In August 1994, PTR raised $101.8 million of net proceeds from a rights
offering to holders of Common Shares.
For the Common Share offerings, PTR's underwriting commissions (all of which
were paid to unaffiliated underwriters) have been $8.8 million, representing
1.42% of gross proceeds of $618.5 million, compared to an average commission
cost of 5.49% for all public equity REIT offerings of common shares, other than
initial public offerings, from January 1, 1991 through December 31, 1994, or
$25.2 million less than the industry average commission on the same amount of
gross proceeds.
When the REIT Manager was retained, PTR had $14.3 million of lines of credit
available to it for developments and acquisitions. The REIT Manager has
arranged increases in PTR's borrowing capacity as follows:
In October 1991, the REIT Manager negotiated a $20 million line of credit
for PTR from TCB at an interest rate of prime plus 1/2 of 1%;
In August 1992, with the REIT Manager's assistance in the syndication
process, TCB arranged with a group of banks to increase this line of credit
to $72 million at an interest rate of prime plus 1/4 of 1%;
In February 1993, the REIT Manager negotiated and assisted in syndicating
an increase in the line of credit to $125 million;
In November 1993, the REIT Manager negotiated and assisted in syndicating
an extension of this line of credit from August 1994 to August 1995 and an
increase to $200 million, with a reduction in interest rate to prime or, at
PTR's option, LIBOR plus 2%;
In August 1994, the REIT Manager negotiated and assisted in converting
the line of credit to an unsecured facility;
In October 1994, the REIT Manager negotiated and assisted in syndicating
an extension of the line of credit from August 1995 to August 1996 and an
increase to $275 million, with a reduction in interest rate to the greater
of prime or the federal funds rate plus 0.5% or, at PTR's option, LIBOR
plus 1.75% to 2.0% (varying based upon the rating of PTR's senior unsecured
debt by Standard & Poor's Corporation); and
In January 1995, the REIT Manager commenced negotiations to increase the
line of credit to $350 million and achieve pricing concessions.
PTR's increased borrowing capacity enables it to develop and acquire
multifamily properties prior to equity and long term debt offerings and to
eliminate or minimize the amount of cash it must invest in short term
investments at low yields. PTR expects to fund additional growth in 1995
through this Offering and, if needed, further issuances of unsecured long term,
fixed rate amortizing debt securities similar to the Notes issued in February
1994.
PTR's strategy includes maintaining a conservative ratio of long term debt to
total book capitalization (27% at December 31, 1994, on a pro forma basis after
giving effect to the Merger and certain operating multifamily properties
subsequently acquired or to be acquired within 40 days of the date of this
Prospectus supplement by PTR and PACIFIC and not including the effects of the
Offering). PTR believes its current
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<PAGE>
conservative leverage provides considerable flexibility to prudently utilize
long term debt as a financing tool in the future. During 1995, PTR intends to
prudently increase its capital base with debt, while keeping long term debt
below 50% of total book capitalization. PTR also intends to limit the sum of
total long term and outstanding revolving credit debt to less than 50% of the
sum of book capitalization and outstanding revolving credit debt (34% at
December 31, 1994, on a pro forma basis after giving effect to the Merger and
certain operating multifamily properties subsequently acquired or to be
acquired within 40 days of the date of this Prospectus Supplement by PTR and
PACIFIC and not including the effects of the Offering).
REIT MANAGEMENT
GENERAL
The REIT Manager provides both strategic and day-to-day management for PTR,
including research, investment analysis, acquisition and development services,
asset management, capital markets services, disposition of assets and legal and
accounting services, all of which are included in the REIT Management fee.
Hence, PTR depends upon the quality of the management provided by the REIT
Manager. As of February 10, 1995, 95 professionals were employed by the REIT
Manager and its specialized service affiliates (including professionals
employed by PACIFIC's REIT manager). The REIT Manager also provides office and
other facilities for PTR's needs.
The REIT Manager believes that the quality of management should be assessed
in light of the following factors:
Management Depth/Succession. Management should have several senior executives
with the leadership, operational, investment and financial skills and
experience to oversee the entire operations of the REIT. The REIT Manager
believes that several of its senior officers could serve as the principal
executive officer and continue PTR's performance. See "--Directors, Trustees
and Officers of PTR, the REIT Manager and Relevant Affiliates."
Strategic Vision. Management should have the strategic vision to determine an
investment focus that provides favorable initial yields and growth prospects.
The REIT Manager demonstrated its strategic vision by focusing PTR on
multifamily properties in target markets where demographic and supply factors
have permitted high occupancies at increasing rents. This favorable environment
has been enhanced by financing constraints for competitors, which have
permitted investments by PTR on attractive terms. See "Business--Strategic
Accomplishments--Developments and Acquisitions" and "Management's Discussion
and Analysis of Financial Condition and Results of Operations."
Research Capability. Management should have the means for researching markets
to determine appropriate investment opportunities. PTR divides its target
market into numerous submarkets for analysis purposes. The REIT Manager and its
affiliate, Security Capital (U.S.) Investment Research, have several
professionals devoting substantial time to research, on a submarket-by-
submarket basis, who are closely supervised by the Managing Directors of the
REIT Manager; hence, the REIT Manager's research has provided guidance for
PTR's strategic focus and investment program.
Investment Committee Process. Investment committees should provide discipline
and guidance to the investment activities of the REIT in order to achieve its
investment goals. The members of the REIT Manager's Investment Committee have a
combined 69 years of experience in the real estate industry. See "--Directors,
Trustees and Officers of PTR, the REIT Manager and Relevant Affiliates." The
Investment Committee receives detailed written analyses and research, in a
standardized format, from the REIT Manager's development and acquisition
personnel and evaluates all prospective investments pursuant to uniform
underwriting criteria prior to submission of investment recommendations to the
Board. The quality of the REIT Manager's Investment Committee process is
evident from the ability of PTR to achieve its investment goals, generally
realizing its projected initial returns and growth from multifamily
investments.
Development/Redevelopment Capability. Development returns generally are
higher than acquisition returns. PTR can better control property quality of
developed properties than acquired properties. Hence,
S-24
<PAGE>
development is an important source of cash flow growth even during competitive
acquisition markets. By internally developing projects and redeveloping well
located operating properties, management can capture for the REIT the value
that normally escapes through sales premiums paid to successful developers. The
REIT Manager's personnel have substantial development and redevelopment
experience, as described in "--Directors, Trustees and Officers of PTR, the
REIT Manager and Relevant Affiliates." The REIT Manager has 33 full-time
development professionals (which include seven due diligence professionals).
The REIT Manager has under construction 4,526 multifamily units for PTR, with a
total budgeted cost of $204.6 million, and has in the final planning stages, on
an adjusted pro forma basis, an estimated 5,945 multifamily units with a total
budgeted cost of $296.7 million. The REIT Manager has engaged in substantial
development on behalf of PTR at attractive yields that have exceeded
projections. See "Business--Multifamily Properties" and "--Strategic
Accomplishments--Developments and Acquisitions."
Acquisitions Capability/Due Diligence Process. Management should have
experienced senior personnel dedicated to acquiring investments and performing
intelligent and thorough due diligence. The REIT Manager has 12 full-time
acquisition and due diligence professionals (including the seven due diligence
professionals who also focus on development) and has developed uniform systems
and procedures for due diligence. As described under "Business--Strategic
Accomplishments--Developments and Acquisitions," the REIT Manager's acquisition
and due diligence personnel have screened and selected a large volume of
successful investments.
Capital Markets Capability. Management must be able effectively to raise
equity and debt capital for the REIT in order for the REIT to achieve growth
through investment. As set forth under "Business--Strategic Accomplishments--
Capital Markets," the REIT Manager has successfully arranged funding for PTR's
investment program.
Operating Capability. Management can substantially improve cash flow by
actively and effectively managing assets. As described under "Business--
Strategy for Cash Flow and Distribution Growth" and "--Strategic
Accomplishments--Asset Management," the REIT Manager and its affiliates have
devoted substantial personnel and financial resources to control and
effectively administer the management of PTR's multifamily assets.
Communications/Shareholder Relations Capability. A REIT's success in capital
markets and asset acquisition activities can be enhanced by management's
ability to effectively communicate the REIT's strategy and performance to
investors, sellers of property and the financial media. The REIT Manager
believes that PTR has now generally established an excellent reputation among
these constituencies through its performance and the REIT Manager's
communications ability. The REIT Manager provides at its expense full-time
personnel who prepare informational materials for and conduct periodic meetings
with shareholders, the investment community and analysts.
Successfully combining the foregoing attributes can establish for a REIT the
ability to increase cash flow and the market valuation of the REIT's portfolio.
PTR's cash flow and market valuation have both increased under the REIT
Manager's administration.
DIRECTORS, TRUSTEES AND OFFICERS OF PTR, THE REIT MANAGER AND RELEVANT
AFFILIATES
Trustees of PTR and Directors and Senior Officers of the REIT Manager.
Members of the REIT Manager's Investment Committee are designated by an
asterisk.
*C. RONALD BLANKENSHIP--45--Chairman of PTR; since March 1991, Chairman of
the REIT Manager and Managing Director of Security Capital Group; from June
1988 to March 1991, Regional Partner, Trammell Crow Residential, Chicago,
Illinois (multifamily real estate development and property management); prior
thereto, Executive Vice President and Chief Financial Officer, The Mischer
Corporation,
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<PAGE>
Houston, Texas (multibusiness holding company with investments primarily in
real estate). While with Trammell Crow Residential, Mr. Blankenship was on the
Management Board for Trammell Crow Residential Services, a property management
company that managed approximately 90,000 multifamily units nationwide, and was
chief executive officer of Trammell Crow Residential Services-North, which
managed 10,000 multifamily units in the Midwest and Northeast. In his various
positions prior to his affiliation with the REIT Manager, Mr. Blankenship
supervised the development of approximately 9,300 multifamily units. Mr.
Blankenship supervises the overall operations of PTR and the REIT Manager.
JAMES A. CARDWELL--62--Trustee of PTR; Chairman and Chief Executive Officer,
Petro PSC, L.P., El Paso, Texas (operation of full-service truck stopping
centers); Director, El Paso Electric Company.
JOHN T. KELLEY, III--54--Trustee of PTR; advisory Trustee of Security Capital
Industrial Trust, Aurora, Colorado (ownership and development of industrial
parks in the western, midwestern and southeastern United States), an affiliate
of the REIT Manager; from 1987 to 1991, Chairman of the Board, Kelley-Harris
Company, Inc., El Paso, Texas (real estate investment company); from 1968 to
1987, Managing Director, LaSalle Partners Limited, Chicago, Illinois (corporate
real estate services). Mr. Kelley is also a Director of Security Capital Group
and Texas Commerce Bank El Paso, National Association.
CALVIN K. KESSLER--63--Trustee of PTR; President and principal shareholder,
Kessler Industries, Inc., El Paso, Texas (manufacturer of furniture and
aluminum castings).
WILLIAM G. MYERS--66--Trustee of PTR; Trustee of Security Capital Industrial
Trust; Chief Executive Officer of Ojai Ranch and Investment Company, Inc.,
Santa Barbara, California, which he founded in 1963 (agri-business and other
investments); Director, Idetek, Inc., Sunnyvale, California (food diagnostic
start-up company).
JAMES H. POLK, III--52--Trustee of PTR; Managing Director of Capital Markets
Group since August 1992. Mr. Polk has been affiliated with the REIT Manager
since March 1991; prior thereto, he was President of PTR for sixteen years. He
is registered with the National Association of Securities Dealers, Inc. and is
a past President of the National Association of Real Estate Investment Trusts,
Inc.
JOHN C. SCHWEITZER--50--Trustee of PTR; Managing Partner, Continental
Properties Company, Austin, Texas (real estate and investments).
PATRICK R. WHELAN--37--Director of the REIT Manager since February 1995;
President of SCG Realty Services since October 1994, where he is responsible
for overall property management; from February 1994 to October 1994, Senior
Vice President and Co-Manager of Multifamily Acquisitions of Security Capital
Group; from April 1991 to January 1994, Senior Vice President of Trammell Crow
Company (development, acquisition and management of commercial properties)
where he most recently had regional responsibilities for asset management,
leasing and acquisitions/dispositions of a $300 million portfolio of
properties.
*DAVID C. DRESSLER, JR.--41--Managing Director of SCG Multifamily Development
Incorporated ("SCG Multifamily Development") since January 1994, PTR since May
1993 and the REIT Manager since April 1992; from 1984 to May 1991, Regional
Partner, Trammell Crow Residential, Boston, Massachusetts (multifamily real
estate development and property management). While with Trammell Crow
Residential, Mr. Dressler was on the Management Board for Trammell Crow
Residential Services (managing 90,000 multifamily units nationwide) and was co-
founder and a board member of Trammell Crow Residential Services-North, which
managed 10,000 multifamily units in the Midwest and Northeast. In his various
positions prior to his affiliation with the REIT Manager, Mr. Dressler
supervised the development of approximately 6,500 multifamily units. Mr.
Dressler supervises the development activities of the REIT Manager on behalf of
PTR.
CONSTANCE B. MOORE--39--Managing Director of PTR since May 1994, Director and
Managing Director of the REIT Manager since March 1994, Senior Vice President
of Security Capital Group from March 1993 to June 1994; from January 1990 to
December 1992, President and Director of Kingswood Realty Advisors, Inc.,
investment advisor to ICM Property Investors, a NYSE listed REIT, and from
March
S-26
<PAGE>
1991 to December 1992, President and Director of ICM Property Investors; from
April 1989 to December 1989, consultant to Bedford Properties, a real estate
development and management firm where Ms. Moore was responsible for acquiring a
controlling interest in ICM Property Investors and Kingswood for Bedford; from
January 1983 to November 1988, Senior Vice President and Director of
Consolidated Capital Equities Corporation where she was in charge of portfolio
and asset management for Consolidated Capital's $3.0 billion diversified debt
and equity portfolio.
*R. SCOT SELLERS--37--Managing Director of PTR since September 1994; from May
1994 to September 1994, Senior Vice President of PTR; Senior Vice President of
SCG Multifamily Development since January 1994 where he has overall
responsibility for PTR's development program; Director and Managing Director of
the REIT Manager since September 1994; from April 1993 to May 1994, Senior Vice
President of Security Capital Group, where he was responsible for portfolio
acquisitions from institutional sources; from September 1981 to April 1993, Mr.
Sellers was an operating partner and Vice President of Lincoln Property Company
(LPC) (development, acquisition and management of multifamily properties) where
he was responsible, among other things, for the development of more than 6,500
apartment units in a number of different markets.
JOSHUA M. BROWN--43--Senior Vice President of PTR and the REIT Manager since
September 1994, where he has overall responsibility for multifamily
acquisitions and dispositions; from January 1991 to June 1994, President of
Prentiss Properties Realty Advisors, Inc., where he directed the firm's tax-
exempt institutional advisory business; from June 1983 to December 1990 Vice
President of Fayez Sarofim & Co., where he worked with the firm's real estate
advisory group, Sarofim Realty Advisors; prior thereto, Vice President,
Director of Investment Administration for CB Institutional Realty Advisors in
Los Angeles.
*JOHN H. GARDNER, JR.--41--Director of the REIT Manager since February 1995;
Senior Vice President of PTR and the REIT Manager since September 1994, where
he has overall responsibility for multifamily asset management; from December
1984 to January 1993, Vice President of Asset Management and through September
1994, Managing Director and Principal of Copley Real Estate Advisors in Boston,
where he had overall responsibility for the portfolio management function for
eight accounts valued at $7.5 billion; prior thereto, Real Estate Manager of
Equity Real Estate at John Hancock Companies.
Other Officers.
ARIEL AMIR--35--Vice President of Security Capital Group since June 1994;
from September 1985 to April 1994, an attorney with the law firm of Weil,
Gotshal & Manges, New York, New York where he practiced securities and
corporate law for eight years. Mr. Amir provides securities offerings and
corporate acquisition services to PTR.
ANTHONY R. ARNEST--44--Vice President of PTR and the REIT Manager since
November 1994, where he is the head of the due diligence group; from December
1990 to September 1994, Mr. Arnest maintained a private law practice
specializing in real estate, development and business and financial consulting;
from March 1990 to November 1990, Director of Infill Acquisitions with Lewis
Homes of California; from January 1986 to March 1990, Vice President, Director
of Acquisitions and Forward Planning/Due Diligence with Wesco Development;
prior thereto, House Counsel for Torino Development.
MARK G. CONROE--37--Vice President of PTR and the REIT Manager since January
1995, where he has overall responsibility for the multifamily corporate
affordable housing development program, Homestead Village properties; from
February 1994 to January 1995, Vice President of Security Capital Atlantic
Incorporated, where he was a member of the development group; from October 1991
to February 1994, President of Classic Communities, Inc., a home building
company; prior thereto, General Partner and Executive Vice President of the
Mozart Development Company, a real estate development company.
PETER M. GRIMM--52--Vice President of SCG Multifamily Development since
January 1994 and Vice President of PTR, of which he has been an officer since
1975.
S-27
<PAGE>
JAMES M. HARLEY--42--Vice President of PTR and the REIT Manager since June
1993, where he provides asset management services for PTR's Homestead Village
properties; from 1988 to July 1993, Regional Vice President--Acquisitions and
Development of Holiday Inn Worldwide; prior thereto, Senior Vice President--
Hotel Division of Webb Companies, a Lexington, Kentucky based real estate
development company.
NELSON L. HENRY--59--Vice President of PTR since December 1994, where he is a
member of the development group with responsibilities for production and
project construction planning; from January 1983 to September 1993,
Construction Vice President for Lincoln Property Company N.C. Inc. where he was
responsible for the coordination of development in Colorado and California;
prior thereto, President of Royal Investment Corporation, a regional
multifamily and single-family developer.
JAY S. JACOBSON--41--Vice President of SCG Multifamily Development since
January 1994 and PTR since July 1993; from 1988 to June 1993, Vice President--
Residential Development for Michael Swerdlow Companies, Inc. and Hollywood
Inc., South Florida real estate development/management companies under common
control, where he was responsible for the planning and development of over
2,200 multifamily units as well as other development projects; from 1981 to
1988, General Partner and Chief Executive Officer of Meridian Land Company, a
Denver-based real estate development company.
WILLIAM KELL--38--Vice President of the REIT Manager since June 1991 and Vice
President of PTR since October 1993, where he has overall responsibility for
multifamily accounting and financial reporting; from 1987 to 1991, Vice
President and Treasurer, Bohannon Development Corporation, El Paso, Texas
(multifamily development); prior thereto, Manager with KPMG Peat Marwick in its
El Paso, Texas office.
STEVEN R. LEBLANC--37--Vice President of SCG Multifamily Development since
January 1994 and PTR since March 1992; from 1984 to 1992, Operating Partner and
Senior Vice President, Lincoln Property Company, Dallas, Texas (multifamily
real estate owners and operators).
B. THOMAS MILLER, JR.--33--Vice President of Security Capital (U.S.)
Investment Research since January 1994 where he conducts strategic market
analysis for the REIT Manager and affiliated companies; from December 1985 to
December 1993, Senior Manager with the Arthur Andersen Real Estate Services
Group in Washington D.C.; prior thereto, an Associate with Kenneth Leventhal &
Co. in Dallas.
GLENN E. MORGAN--34--Vice President of Security Capital (U.S.) Investment
Research since January 1994, where he is responsible for market research; from
December 1992 to December 1993, Mr. Morgan developed actuarial and econometric
models for American Credit Indemnity, a subsidiary of Dun & Bradstreet.
JOHN R. PATTERSON--43--Vice President of PTR and the REIT Manager since
January 1995, where he has overall responsibility for operations and asset
management of the corporate affordable housing product, Homestead Village
properties; from July 1993 to January 1995, a Senior Vice President in business
development at NationsBank in Atlanta; prior thereto, Division President and
Partner of Trammell Crow Residential Services.
THOMAS L. POE--37--Vice President of the REIT Manager since April 1992, Vice
President of PTR since June 1994 and Controller of PTR since October 1994,
where he is responsible for accounting and financial reporting; from 1988 to
1992, Vice President of Finance for the Mischer Corporation, Houston, Texas
(real estate investments).
HAROLD D. RILEY--58--Vice President of the REIT Manager since March 1991,
where he provides accounting and financial reporting services; Vice President
of PTR since 1974.
PAUL E. SZUREK--34--Secretary and General Counsel of the REIT Manager and
PTR; Senior Vice President, and from April 1991 to June 1993, Vice President,
Secretary and General Counsel of Security Capital Group; prior thereto, a
shareholder and attorney with the law firm of Kemp, Smith, Duncan & Hammond, El
Paso, Texas, where he practiced securities law for seven years. Mr. Szurek
provides securities offering and corporate acquisition services to PTR and
oversees the provision of legal services to PTR.
S-28
<PAGE>
MARK N. TENNISON--34--Vice President of SCG Multifamily Development since
January 1994 and PTR since July 1992; from May 1991 to July 1992, Executive
Vice President/Chief Operating Officer of Metro Concap, Inc., an operator of
over 7,100 multifamily units; from January 1991 to May 1991, attorney for the
Federal Deposit Insurance Corporation; and from August 1987 to December 1990,
Partner with Trammell Crow Residential (development, construction and
management of multifamily properties).
In addition, an affiliate of the REIT Manager employs a number of accounting
professionals who provide centralized accounting services for PTR.
Officers of PACIFIC's REIT Manager. Each of the following persons is expected
to become an officer of PTR and the REIT Manager upon consummation of the
Merger:
MARK J. CHAPMAN--37--Vice President of PACIFIC since November 1994, where he
is a member of the asset management group; from July 1989 to November 1994,
Vice President at Copley Real Estate Advisors, Inc. where he directed asset
management for Copley assets located from Connecticut to Virginia, valued in
excess of $1.5 billion; prior thereto, Director of Asset Management for Liberty
Real Estate with responsibility for assets east of the Mississippi River,
including multifamily, office and retail properties.
RICHARD W. DICKASON--38--Vice President of PACIFIC since December 1993, where
he is a member of the development group; from July 1992 to September 1993,
President at J.M. Peters Company/Capital Pacific Homes, where he acquired
property for the development of single-family homes and apartments; from May
1980 to January 1992, Partner and Vice President of Lincoln Property Company
N.C. Inc. where he was responsible for the acquisition, development,
construction and management of a sizable multifamily residential portfolio in
the California marketplace; prior thereto, Mr. Dickason represented private
investors in the development of condominiums, townhouses, shopping centers and
single-family homes throughout California.
JOSEPH G. DI CRISTINA--35--Vice President of PACIFIC since August 1994, where
he is a member of the development group; prior thereto, Vice President of
Forward Planning at Robertson Homes.
W. GEOFFREY JEWETT--46--Vice President of PACIFIC since November 1994, where
he is a member of the asset management group; from May 1994 to November 1994,
Vice President of Security Capital (Atlantic) Incorporated where he had overall
responsibility for the acquisitions group; from September 1993 to April 1994,
Mr. Jewett was involved with and then had overall responsibility for
acquisitions for PACIFIC; prior thereto, Vice President of LaSalle Partners
Limited in its acquisitions and property finance group where he provided
investment property sale, financing and acquisition services on behalf of
corporate and institutional clients throughout the western United States.
JOHN JORDANO, III--38--Vice President of PACIFIC since August 1994, where he
is a member of the development group; from January 1992 to July 1994, Senior
Vice President of Prospect Partners where he was responsible for identifying
and advising individual and corporate clients on financial institution and
Resolution Trust Corporation REO apartment acquisition and investment
opportunities in the western United States; prior thereto, Partner with
Trammell Crow Residential Company where he established the Sacramento office
and was responsible for the development of multifamily projects.
GREGG A. PLOUFF--39--Vice President of PACIFIC since July 1994, and a member
of the acquisitions group since November 1993; prior to November 1993, Mr.
Plouff served in an acquisitions consulting capacity for PTR; prior thereto,
Mr. Plouff was with Trammell Crow Residential, most recently as a partner,
where he was involved with residential development in the Dallas, Chicago and
Southern California markets.
K. BRUCE WEBSTER--38--Senior Vice President of PACIFIC since November 1994,
where he has responsibility for PACIFIC's portfolio performance and asset
management; from June 1993 to November 1994, Vice President of Asset Management
at Irvine Apartment Communities with responsibility for property operations,
portfolio performance and long-term positioning; prior thereto, President and
Chief Operating
S-29
<PAGE>
Officer of Trammell Crow Residential Services North where he had responsibility
and accountability for management company operations and property performance
in the midwestern and northeastern United States.
DAVID B. WOODWARD--28--Vice President of PACIFIC since November 1993, where
he has overall responsibility for asset management services; from June 1993 to
October 1993, Mr. Woodward was with PTR where he was a member of the asset
management group; prior thereto, asset manager with USF&G's Real Estate
Division.
Shareholder Relations and Capital Markets. The following persons provide
shareholder relations and capital markets services to PTR:
DOUGLAS K. BALL--54--Senior Vice President of PTR and the REIT Manager since
June 1993, President since May 1994 and Senior Vice President from August 1993
to May 1994 of Capital Markets Group, where he participates in capital markets
and institutional investor relations; from August 1990 to June 1993, Senior
Vice President of Koll-Rubloff in its Strategic Management Division, where he
provided strategic real estate consulting and transaction services to diverse
corporate clients throughout the United States; from August 1988 to July 1990,
engaged in private investment activities; from April 1981 to July 1988,
Managing Director of LaSalle Partners Limited, where he served as Director of
the Services Division. Prior thereto, Mr. Ball was National Director of
Insurance Industry Marketing at IBM Corporation. Mr. Ball is registered with
the National Association of Securities Dealers, Inc.
K. SCOTT CANON--32--Vice President of Capital Markets Group since August 1993
and a member of Capital Markets Group since March 1992; from September 1991 to
March 1992, a personal account director for Chase Manhattan Investment
Services; from August 1987 to September 1991, a member of private client
services for Goldman, Sachs & Co. Mr. Canon is registered with the National
Association of Securities Dealers, Inc.
JEFFREY A. COZAD--30--Senior Vice President of Capital Markets Group since
December 1994, Vice President from September 1992 to November 1994 (in its New
York office since June 1993) and a member of Capital Markets Group since March
1992; from August 1991 to August 1992, a member of Security Capital Group; in
June 1991, Mr. Cozad obtained a M.B.A. from The University of Chicago; prior
thereto, an analyst with LaSalle Partners Limited, where he provided corporate
real estate services to major institutions from 1986 to 1989. Mr. Cozad is
registered with the National Association of Securities Dealers, Inc.
GERARD DE GUNZBURG--47--Vice President of Capital Markets Group in its New
York office since January 1993; from June 1988 to December 1992, a consultant
to American and European companies; prior thereto, Director and Partner of
Lincoln Property Company, Europe, where he arranged real estate financing from
1976 to 1988. Mr. de Gunzburg is registered with the National Association of
Securities Dealers, Inc.
ALISON C. HEFELE--35--Vice President of Capital Markets Group since February
1994, where she provides capital markets services for affiliates of the firm;
from January 1990 to February 1994, Vice President with Prudential Real Estate
Investors (strategic planning and business development for institutional real
estate investment management services); from September 1985 to January 1990, a
management consultant with McKinsey & Company; prior thereto, a financial
analyst with Morgan Stanley Realty Inc. Ms. Hefele is registered with the
National Association of Securities Dealers, Inc.
JAMES H. POLK, III--51--See "--Directors, Trustees and Officers of PTR, the
REIT Manager and Relevant Affiliates--Trustees of PTR and Directors and Senior
Officers of the REIT Manager."
S-30
<PAGE>
POTENTIAL CONFLICTS OF INTEREST
The REIT Manager is philosophically opposed to engaging in, and has agreed in
writing not to engage in, any principal transaction with PTR, including but not
limited to purchases, sales or leases of property or borrowing or lending of
funds, except for certain transactions approved by a majority of the
independent Trustees not otherwise interested in such transaction as being fair
and reasonable to PTR and on terms and conditions not less favorable to PTR
than those available from unaffiliated third parties. Additionally, PTR's
Restated Declaration of Trust prohibits PTR from selling property to a sponsor,
the REIT Manager, a trustee or affiliates thereof. PTR's Restated Declaration
of Trust further provides that PTR shall not enter into any other principal
transaction (including without limitation the making of loans, borrowing money
or investing in joint ventures) with a sponsor, the REIT Manager, a trustee or
affiliates thereof, except for transactions approved by a majority of the
independent Trustees not otherwise interested in such transaction as being fair
and reasonable to PTR and on terms and conditions not less favorable to PTR
than those available from unaffiliated third parties. The sole activity of the
REIT Manager is advising PTR.
The REIT Management Agreement (as hereinafter defined) permits affiliates of
the REIT Manager to provide property management and other services to PTR for
compensation. The fees charged for such services must be comparable to fees
that would be charged by unaffiliated, qualified third parties. Any property
management fees are reviewed annually by the Board and must be approved by a
majority of the independent Trustees. See "Business--Strategic
Accomplishments--Asset Management."
With limited exceptions, officers and employees of the REIT Manager spend all
their time on PTR's affairs. In the future, certain officers or employees may
be transferred to or from other affiliates of the REIT Manager, consistent with
REIT Management's plan for management depth and orderly succession.
With a view to resolving potential conflicts of interest and protecting the
interests of PTR's shareholders against such possible conflicts, PTR's Restated
Declaration of Trust requires that a majority of the Board be unaffiliated with
the REIT Manager or its affiliates. PTR's independent Trustees are required to
monitor the performance of the REIT Manager. All affiliate transactions must be
approved by a majority of independent Trustees. PTR's independent Trustees are
compensated in Common Shares.
PROPERTIES
PORTFOLIO COMPOSITION
The following table indicates the composition of PTR's properties, on an
adjusted pro forma basis at December 31, 1994:
<TABLE>
<CAPTION>
ADJUSTED
PRO FORMA
PERCENTAGE OF
NUMBER OF ASSETS BASED
PROPERTIES ON COST(1)
---------- -------------
<S> <C> <C>
Multifamily...................................... 182 98%
Office/Industrial................................ 4 1
Hotel............................................ 1 1
--- ---
Total........................................ 187 100%
=== ===
</TABLE>
- --------
(1) Represents cost, including planned renovations and budgeted development
cost, for properties owned at December 31, 1994. Represents acquisition
cost, including planned renovations, for 5,703 multifamily units and land
for the development of 840 multifamily units being acquired in the Merger.
Budgeted development cost includes the cost of land, fees, permits,
payments to contractors, architectural and engineering fees and interest
and property taxes to be capitalized during the construction period, for
properties under development. Does not include land held for future
development, which is less than 1% of assets based on cost.
S-31
<PAGE>
GEOGRAPHIC DISTRIBUTION
PTR's adjusted pro forma multifamily and non-multifamily properties are
located in 22 metropolitan areas in 11 states. The table below demonstrates the
geographic distribution of PTR's equity real estate investments, on an adjusted
pro forma basis at December 31, 1994:
<TABLE>
<CAPTION>
ADJUSTED
PRO FORMA
PERCENTAGE OF
NUMBER OF ASSETS BASED
PROPERTIES ON COST(1)
---------- -------------
<S> <C> <C>
Albuquerque, New Mexico.......................... 12 6%
Austin, Texas.................................... 15 9
Dallas, Texas.................................... 21 7
Denver, Colorado................................. 10 6
El Paso, Texas................................... 13 5
Houston, Texas................................... 22 12
Las Cruces, New Mexico........................... 2 *
Las Vegas, Nevada................................ 5 6
Oklahoma City, Oklahoma.......................... 2 1
Omaha, Nebraska.................................. 1 1
Ontario, California.............................. 1 *
Phoenix, Arizona................................. 20 15
Portland, Oregon................................. 8 5
Reno, Nevada..................................... 1 1
Salt Lake City, Utah............................. 4 2
San Antonio, Texas............................... 28 12
San Diego, California............................ 2 1
San Francisco, California........................ 1 1
Santa Fe, New Mexico............................. 4 2
Seattle, Washington.............................. 3 2
Tucson, Arizona.................................. 11 6
Tulsa, Oklahoma.................................. 1 *
--- ---
Total........................................ 187 100%
=== ===
</TABLE>
- --------
*Less than 1%.
(1) Represents cost, including planned renovations and budgeted development
cost, for properties owned at December 31, 1994. Represents acquisition
cost, including planned renovations, for 5,703 multifamily units and land
for the development of 840 multifamily units being acquired in the Merger.
Budgeted development cost includes the cost of land, fees, permits,
payments to contractors, architectural and engineering fees and interest
and property taxes to be capitalized during the construction period, for
properties under development. Does not include land held for future
development, which is less than 1% of assets based on cost.
S-32
<PAGE>
SELECTED HISTORICAL FINANCIAL DATA
The following table sets forth selected historical financial data for PTR and
should be read in conjunction with the financial statements incorporated by
reference herein (amounts in thousands, except ratio information and per share
data).
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30, YEAR ENDED DECEMBER 31,
-------------------- --------------------------------------------------
1994 1993 1993 1992 1991 1990 1989
--------- --------- --------- --------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
OPERATIONS SUMMARY:
Rental Income........... $ 131,103 $ 50,852 $ 76,186 $ 31,010 $ 14,721 $ 12,207 $ 10,101
Total Revenues.......... 133,196 52,354 78,418 32,779 15,817 13,314 10,856
General and
Administrative
Expenses............... 522 433 660 436 697 1,241 984
REIT Management Fee..... 9,443 4,619 7,073 2,711 793 -- --
Earnings from
Operations(1).......... 33,004 14,289 23,191 9,037 2,078 1,969 989
Gain (loss) on Sale of
Investments............ -- 2,302 2,302 (51) (611) 101 --
Preferred Share
Distributions Paid..... 12,075 -- 1,341 -- -- -- --
Net Earnings
Attributable to Common
Shares................. 20,929 16,591 24,152 8,986 1,467 2,070 989
Common Share
Distributions Paid(2).. $ 33,970 $ 20,019 $ 29,162 $ 13,059 $ 4,179 $ 4,259 $ 4,204
PER SHARE DATA:
Net Earnings
Attributable to Common
Shares................. $ 0.46 $ 0.49 $ 0.66 $ 0.46 $ 0.21 $ 0.41 $ 0.20
Common Share
Distributions Paid(2).. 0.75 0.615 0.82 0.70 0.64 0.84 0.83
Preferred Share
Distributions Paid..... $ 1.3125 $ -- $ 0.1458 $ -- $ -- $ -- $ --
Weighted Average Common
Shares Outstanding..... 45,490 33,950 36,549 19,435 7,123 5,071 5,065
OTHER DATA:
Funds from Operations
Attributable to Common
Shares(3).............. $ 41,315 $ 24,579 $ 36,422 $ 15,268 $ 5,404 $ 4,335 $ 3,626
Net Cash Provided by
Operating Activities... 66,747 27,636 49,275 20,252 6,092 1,647 4,533
Net Cash Used by
Investing Activities... (307,156) (198,405) (529,093) (229,489) (33,553) (12,905) (11,797)
Net Cash Provided by
Financing Activities... $ 247,359 $ 220,808 $ 478,345 $ 185,130 $ 57,259 $ 9,941 $ 7,327
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31,
SEPTEMBER 30, ------------------------------------------
1994 1993 1992 1991 1990 1989
------------- -------- -------- -------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
FINANCIAL POSITION:
Real Estate Owned, at
cost................... $1,233,021 $872,610 $337,274 $117,572 $84,892 $70,117
Total Assets............ 1,244,537 890,301 342,235 141,020 81,544 69,278
Line of Credit.......... 53,500 51,500 54,802 101 8,522 10,416
Long Term Debt.......... 200,000 -- -- -- -- --
Mortgages Payable....... 96,200 48,872 30,824 35,772 32,599 15,634
Total Liabilities....... 386,913 135,284 94,186 38,707 44,138 29,682
Shareholders' Equity.... $ 857,624 $755,017 $248,049 $102,313 $37,406 $39,596
Number of Common Shares
Outstanding............ 50,397 44,645 27,034 13,161 5,071 5,071
</TABLE>
- --------
(1) Earnings from operations for the nine months ended September 30, 1994 and
for both the nine months ended September 30, 1993 and the year ended
December 31, 1993 reflect a $1.6 million and a $2.3 million provision,
respectively, for possible losses relating to investments in non-
multifamily properties.
(2) A distribution of $0.25 per Common Share was declared by PTR's Trustees on
December 28, 1993 and was paid on February 18, 1994 to shareholders of
record as of February 4, 1994.
(3) Funds from Operations means net income computed in accordance with GAAP,
excluding gains (or losses) from debt restructuring and sales of property,
plus depreciation and amortization, and after adjustments for
unconsolidated partnerships and joint ventures. PTR believes that Funds
from Operations is helpful in understanding a property portfolio in that
such calculation reflects cash flow from operating activities and the
properties' ability to support interest payments and general operating
expenses before the impact of certain activities, such as gains or losses
from property sales and changes in accounts receivable and accounts
payable. Funds from Operations should not be considered as an alternative
to net earnings or any other GAAP measurement of performance as an
indicator of PTR's operating performance or as an alternative to cash flows
from operating, investing or financing activities as a measure of
liquidity.
S-33
<PAGE>
RECENT OPERATING RESULTS
The following tables set forth preliminary unaudited Total Revenues, Funds
from Operations Attributable to Common Shares, Net Earnings Attributable to
Common Shares, Net Earnings Attributable to Common Shares per Share, Weighted
Average Common Shares Outstanding and Common Share Distributions Paid for the
twelve months ended December 31, 1994 and 1993 for PTR.
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
----------------
1994 1993
-------- -------
(IN THOUSANDS,
EXCEPT PER SHARE
DATA)
<S> <C> <C>
Total Revenues........................................... $186,105 $78,418
Funds from Operations Attributable to Common Shares...... $ 58,208 $36,422
Net Earnings Attributable to Common Shares............... $ 30,619 $24,152
Net Earnings Attributable to Common Shares per Share..... $ 0.66 $ 0.66
Weighted Average Common Shares Outstanding............... 46,734 36,549
Common Share Distributions Paid.......................... $ 1.00 $ 0.82
</TABLE>
SELECTED PRO FORMA FINANCIAL DATA
The following tables set forth certain unaudited pro forma condensed combined
financial information for PTR after giving effect to (i) the Merger, (ii)
certain operating multifamily properties subsequently acquired or to be
acquired within 40 days of the date of this Prospectus Supplement by PTR and
PACIFIC and (iii) the Offering (to the extent of $50 million for which a
standby purchase commitment exists), as if these transactions had been
consummated, with respect to statements of earnings data, at January 1, 1993,
or, with respect to balance sheet data, as of September 30, 1994. The following
tables present such information as if the Merger had been accounted for under
the purchase method. The information presented is derived from, should be read
in conjunction with, and is qualified in its entirety by reference to, the
unaudited pro forma condensed combined financial data and the notes thereto and
the separate historical financial statements and the notes thereto incorporated
by reference herein. The unaudited pro forma condensed combined financial data
have been included for comparative purposes only and do not purport to be
indicative of the results of operations or financial position which actually
would have been obtained if these transactions had been effected at the dates
indicated or of the financial position or results of operations which may be
obtained in the future.
<TABLE>
<CAPTION>
NINE MONTHS YEAR
ENDED ENDED
SEPTEMBER 30, DECEMBER 31,
1994(1) 1993(1)(2)
------------- ------------
(IN THOUSANDS, EXCEPT PER
SHARE DATA)
<S> <C> <C>
OPERATIONS SUMMARY:
Rental Income....................................... $172,987 $202,972
Total Revenues...................................... 174,885 204,943
General and Administrative Expense.................. 579 585
REIT Management Fee................................. 12,319 13,559
Net Earnings from Operations(3)..................... 43,249 44,038
Net Earnings Attributable to Common Shares.......... 31,174 35,817
PER SHARE DATA:
Net Earnings Attributable to Common Shares.......... $ 0.52 $ 0.63
Common Share Distributions(4)....................... 0.75 0.82
Weighted Average Common Shares Outstanding.......... 60,350 57,221
OTHER DATA:
Funds from Operations Attributable to Common
Shares(5).......................................... $ 57,261 $ 64,285
</TABLE>
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<PAGE>
<TABLE>
<CAPTION>
SEPTEMBER 30,
1994(1)
-------------
<S> <C> <C> <C>
FINANCIAL POSITION:
Real Estate Owned, at cost....................... $1,494,520
Total Assets..................................... 1,499,120
Line of Credit................................... 58,123
Long Term Debt................................... 200,000
Mortgages Payable................................ 155,638
Total Liabilities................................ 452,896
Shareholders' Equity(6).......................... $1,046,224
Number of Common Shares Outstanding.............. 61,918
</TABLE>
- --------
(1) The amounts presented herein have been restated to reflect the effects of
properties acquired during 1993, 1994 and 1995, by PTR and PACIFIC,
including two properties to be acquired within 40 days of the date of this
Prospectus Supplement.
(2) Reflects operations of PACIFIC from October 22, 1993 (the date of its
inception).
(3) PTR's earnings from operations for the nine months ended September 30, 1994
and for the year ended December 31, 1993 reflect a $1.6 million and a $2.3
million provision, respectively, for possible losses relating to
investments in non-multifamily properties.
(4) A distribution of $0.25 per Common Share was declared by PTR's Trustees on
December 28, 1993 and was paid on February 18, 1994 to shareholders of
record as of February 4, 1994.
(5) Funds from Operations means net income computed in accordance with GAAP,
excluding gains (or losses) from debt restructuring and sales of property,
plus depreciation and, in the case of PTR, amortization, and after
adjustments for unconsolidated partnerships and joint ventures. PTR
believes that Funds from Operations is helpful in understanding a property
portfolio in that such calculation reflects cash flow from operating
activities and the properties' ability to support interest payments and
general operating expenses before the impact of certain activities, such as
gains or losses from property sales and changes in accounts receivable and
accounts payable. Funds from Operations should not be considered as an
alternative to net earnings or any other GAAP measurement of performance as
an indicator of PTR's or PACIFIC's operating performance or as an
alternative to cash flows from operating, investing or financing activities
as a measure of liquidity.
(6) This calculation assumes the issuance of approximately 8,468,460 Common
Shares, based on an Exchange Ratio of 0.611 Common Shares for each share of
PACIFIC common stock outstanding at the effective time of the Merger. The
actual number of Common Shares issuable in the Merger may vary in
accordance with the terms of the Merger Agreement.
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<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
OVERVIEW
PTR's operating results depend primarily upon income from multifamily
properties, which is substantially influenced by (i) the demand for and supply
of multifamily units in PTR's target market and submarkets, (ii) operating
expense levels and (iii) the pace and price at which PTR can develop and
acquire additional multifamily properties. Capital and credit market conditions
that affect PTR's cost of equity and debt capital also influence operating
results.
PTR's target market and submarkets have benefitted substantially in recent
periods from demographic trends (including job and population growth) that
increase the demand for multifamily units while financing constraints
(specifically, reduced availability of development capital) have limited new
construction to levels substantially below construction activity prior to 1986.
Consequently, rental rates for multifamily units have increased more than the
inflation rate for the last two years and are expected to continue experiencing
such increases for the next twelve months. Expense levels also influence
operating results, and rental expenses (other than real estate taxes) for
multifamily properties have generally increased at approximately the same rate
as rents for the past year and are expected to increase at a comparable rate
for the next twelve months.
REIT Management believes that development of multifamily properties from the
ground up that are built for long term ownership and are designed to meet broad
renter preferences and demographic trends will provide a greater source of long
term cash flow growth in the future. Therefore, while land prices are
favorable, PTR has acquired and will acquire, on an unleveraged basis, prudent
amounts of zoned land for multifamily development in the foreseeable future.
The REIT Manager believes PTR's ability to compete is significantly enhanced
relative to other companies because of the REIT Manager's depth of development
and acquisition personnel and presence in local markets combined with PTR's
access to investment capital.
RESULTS OF OPERATIONS
Interim Period Comparison
During the nine months ended September 30, 1994, PTR acquired 17 multifamily
properties aggregating 6,203 units for a total purchase price, including
planned renovations, of approximately $252.1 million and completed development
of 10 multifamily properties aggregating 2,378 units with a completed cost of
$109.2 million. At September 30, 1994, PTR had 3,629 multifamily units under
construction with a budgeted completed cost of $148.7 million and had in the
final planning stages an estimated 5,327 multifamily units with an aggregate
budgeted completed cost of $264.3 million. During the nine months ended
September 30, 1993, PTR acquired 17 multifamily properties aggregating 4,709
units for a total purchase price, including planned renovations, of
approximately $146.6 million and completed development of 3 multifamily
properties aggregating 732 units with a completed cost of $30.4 million. At
September 30, 1993, PTR had 3,127 multifamily units under construction with a
budgeted completed cost of $137.9 million.
The percentage of PTR's total rental income generated by multifamily
properties was 98.13% and 91.43% for the nine months ended September 30, 1994
and 1993, respectively. This percentage will continue to increase throughout
1995 due to past and ongoing multifamily property developments and acquisitions
and the periodic sale of non-multifamily properties. Projected 1995 property
level earnings before interest, taxes, depreciation and amortization ("EBITDA")
for all operating multifamily properties owned by PTR as of December 31, 1994,
on an adjusted pro forma basis not including the effects of the Offering, is
10.3% of PTR's aggregate cost for these properties. EBITDA does not represent
and should not be substituted for net earnings as defined by GAAP and is not
indicative of cash flows from operations or that cash flows are sufficient to
fund all cash needs. Aggregate cost for the properties includes the purchase
price, closing costs and budgeted capital improvements and marketing costs
prior to stabilization. Projected EBITDA is based
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<PAGE>
on current lease rates for stabilized properties and current market rates for
properties being stabilized and on anticipated operating expenses. No assurance
can be given that projected levels of EBITDA will be achieved by these
properties or that future developments and acquisitions will achieve the same
level of EBITDA relative to PTR's investment basis.
Property Operations
Including the newly acquired and developed assets, rental income increased
$80.3 million (157.8%) for the nine months ended September 30, 1994 over 1993,
partially offset by higher rental expenses which increased by $36.4 million
(179.7%) and depreciation expense, which increased $10.6 million (156.5%) for
the nine months ended September 30, 1994 over 1993. These increases are due to
operating multifamily acquisitions and multifamily developments placed in
service and to rental rate increases. For operating multifamily properties,
which comprise 97% of PTR's total operating properties based on cost at
September 30, 1994, rental expenses were 43.8% and 42.4% of rental revenues
during the nine months ended September 30, 1994 and 1993, respectively.
Multifamily Properties Fully Operating Throughout Both Periods
For the 29 multifamily properties that were fully operating throughout both
the nine months ended September 30, 1994 and 1993, property level EBITDA as a
percentage of PTR's aggregate investment in these properties increased to 11.1%
in 1994 from 10.6% in 1993. EBITDA does not represent and should not be
substituted for net earnings as defined by GAAP and is not indicative of cash
flows from operations or that cash flows are sufficient to fund all cash needs.
This increase in return on investment, which is a function of rental rate
growth, occupancy levels, expense rate growth and capital expenditure levels,
is attributable primarily to growth in rental rates. This increase in return on
investment was achieved at the same time that PTR increased its investment in
these properties by $2.1 million as a result of renovation and other capital
expenditures. The 7.4% increase in rental income (the majority resulting from a
6.81% rental rate increase) for such properties for the nine months ended
September 30, 1994 as compared to the same period in 1993 was offset by
increases in rental expenses, primarily due to real estate taxes and turnover
expenses.
Interest Income
Interest income for the nine months ended September 30, 1994 increased
$591,000 (39.3%) over 1993, primarily resulting from the addition of four
purchase money notes aggregating $12.4 million received in 1993 in conjunction
with non-multifamily property sales.
Interest Expense
Interest expense increased $10.5 million (297.3%) for the nine months ended
September 30, 1994 as compared to 1993. The increase is primarily attributable
to interest expense of $9.3 million resulting from the issuance of $200 million
of long term notes in February 1994, as more fully discussed under "--Liquidity
and Capital Resources--Financing Activities."
Mortgage interest expense increased $2.3 million (115.1%) for the nine months
ended September 30, 1994 as compared to 1993 as a result of the addition of six
mortgages aggregating $56.8 million during the nine month period ended
September 30, 1994 and three mortgages aggregating $27.0 million during 1993
that were assumed or given in connection with the acquisition of multifamily
properties.
Line of credit interest expense increased $1.6 million (52.4%) for the nine
months ended September 30, 1994 as compared to 1993 resulting primarily from
the amortization of additional loan costs (commitment fees, title policies and
legal expenses) relating to PTR's revolving credit facility. Average borrowings
on the line of credit were approximately $54.9 million (with an average
interest rate of 7.24%) during the nine months ended September 30, 1994, as
compared to average borrowings of $40.4 million (with an average interest rate
of 6.30%) during 1993.
S-37
<PAGE>
The increases in interest expense were offset by an increase of $2.7 million
(178.6%) in capitalized interest. The increase in capitalized interest is
attributable to increased multifamily development activity for the nine months
ended September 30, 1994 as compared to 1993.
General and Administrative Expense and REIT Management Fee
The REIT Management fee paid by PTR fluctuates with the level of PTR's pre-
REIT Management fee cash flow, as defined in the REIT Management Agreement, and
therefore increased by $4.8 million (104.4%) during the nine months ended
September 30, 1994 as compared to 1993 because cash flow increased
substantially. See "--REIT Management Agreement." With the issuance of $200
million of amortizing long term debt as more fully described under "--Liquidity
and Capital Resources--Financing Activities," the REIT Management fee will
effectively decline in proportion to PTR's earnings from operations because
actual or assumed regularly scheduled principal and interest payments, as
defined in such agreement, associated with the long term debt will be deducted
from the cash flow amount on which the REIT Management fee is based.
Property Dispositions and Provision for Possible Loss
PTR develops and acquires properties with a view to effective long term
operation and ownership. Based upon PTR's market research and in an effort to
optimize its portfolio allocation, PTR may from time to time seek to dispose of
assets that in management's view do not meet PTR's long term investment
criteria and redeploy the proceeds therefrom, preferably through like-kind
exchanges, into assets that it believes provide better long term growth
opportunities.
PTR is a minority partner with a 40% interest in a partnership that owns and
operates an office building near Dallas, Texas. During the first quarter of
1994, the partnership adopted a strategy of disposing of the property rather
than continuing to hold the property as a long term investment. As a result,
the managing partner evaluated the building for net realizable value, which
resulted in a provision for possible loss of $4 million. PTR's share of the
loss provision is $1.6 million as reflected in the September 30, 1994 statement
of earnings. PTR's net carrying value after the provision is $2.85 million.
This provision has no impact on cash flow from operating activities nor does
PTR have any financial obligation to the partnership.
PTR focuses its investment and development activities on multifamily
properties. PTR will continue to aggressively manage non-multifamily properties
in order to maximize cash flow, and dispositions of such non-multifamily
properties may occur as opportunities arise. Properties are periodically
evaluated for net realizable value and provisions for possible losses are made
if required.
Preferred Share Distributions
In November of 1993, PTR issued $230 million of Preferred Shares at $25 per
share that are entitled to receive an annual distribution of $1.75 per share
(7.0% annual distribution rate), which amounted to $12.075 million for the nine
months ended September 30, 1994. The Preferred Share distributions do not
reduce the amount PTR has budgeted for Common Share distributions but do
increase the percentage of the Common Share distribution that constitutes a
non-taxable return of capital.
1993 COMPARED TO 1992
During 1993, PTR acquired 53 multifamily properties aggregating 13,772 units
for a total purchase price, including planned renovations, of approximately
$453.7 million, most of which was invested in the fourth quarter of 1993. In
addition, PTR completed development of three multifamily properties aggregating
732 units in 1993. During 1992, PTR acquired 20 multifamily properties
aggregating 5,512 units for a total purchase price, including planned
renovations, of approximately $183.0 million, most of which was invested after
April 30, 1992. In addition, two multifamily properties aggregating 354 units
then under development
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<PAGE>
were completed in 1992. In addition, rental rates from multifamily assets that
were stabilized (see "Business--Investment Analysis") during the fourth quarter
of 1992 and throughout 1993 increased 6.98%.
The percentage of PTR's total rental income generated by multifamily
properties was 93.4% in 1993 and 76.3% in 1992. This percentage will continue
to increase in future periods due to multifamily properties acquired in 1993
and 1994 as discussed above and the sale of non-multifamily properties as
discussed below.
During the period prior to a property being stabilized (see "Business--
Investment Analysis"), the REIT Manager's asset managers and the property
managers begin implementing expense controls, reconfigure the resident mix,
supervise renovations and implement a strategy to increase rental income. The
full benefits of these changes are not reflected until after the properties are
stabilized. As of December 31, 1993, 47% of the operating multifamily portfolio
was stabilized as compared to 59% at December 31, 1992. Per unit rental
expenses were 42.33% of per unit rental revenues during 1993, compared to
42.08% in 1992.
Including the newly acquired and developed assets, net earnings increased
$16.5 million (184%) for 1993 over 1992. The increased net earnings related
primarily to property revenue increases of $45.2 million (145.6%), partially
offset by higher rental expenses, which increased by $19.0 million (165.7%) for
the period. Depreciation expense increased $5.2 million (97.8%) for 1993 over
1992. This increase is due to multifamily acquisitions and multifamily
developments placed in service.
Properties Stabilized Throughout Both Periods
Multifamily. Rental income for the nine multifamily properties stabilized
throughout both years increased approximately $705,800 (6.4%) for 1993,
compared to 1992, partially offset by increases in rental expenses of $410,100
(9.0%) and depreciation of $72,700 (4.6%). The increase primarily related to a
5.74% average rental rate increase. Due primarily to commencement of major
renovations at one of these properties and the temporary effects of a new
development in one submarket, average occupancy decreased from 94.4% in 1992 to
92.8% in 1993.
Non-Multifamily. Rental income, rental expenses and depreciation for non-
multifamily properties owned throughout both years decreased $107,300 (3.1%),
$420,300 (97.5%) and $44,000 (8.1%), respectively, for 1993, compared to 1992.
The decrease in rental expense was primarily due to a decrease in land lease
expense as a result of PTR's acquisition of the land underlying PTR's Holiday
Inn building in San Francisco. Not included in these results are operating
results from the eight non-multifamily properties sold during 1993.
All Properties. For multifamily properties that were stabilized throughout
both years and non-multifamily properties that were owned throughout both
years, taken as a whole, rental income increased $598,600 (4.2%), rental
expenses decreased $10,200 (.2%), and depreciation increased $83,900 (4.0%).
Net income from property operations, after depreciation, for these properties
increased $524,800 (7.2%) for 1993 over 1992.
Interest and Other Income
Interest and other income for 1993 increased 26.2%, primarily resulting from
the addition of five purchase money notes aggregating $6.8 million received in
1992 and four purchase money notes aggregating $12.4 million received in 1993
in conjunction with property sales.
Interest Expense
Mortgage interest expense decreased $1.4 million (66.3%) for 1993, compared
to 1992. The decrease is attributable to interest savings resulting from
prepayments and pay offs aggregating $8.1 million on mortgages during 1993, an
increase of $1.8 million (185%) in capitalized interest during 1993 over 1992
due to increased levels of multifamily development activity, and lower interest
rates on an adjustable rate mortgage.
S-39
<PAGE>
Line of credit interest expense for 1993 was $2.1 million higher than for
1992, principally because of higher average outstanding balances and
amortization of additional loan costs (commitment fees, title policies and
legal expenses) relating to PTR's revolving credit facility, which was
increased from $72 million to $200 million during 1993. Average borrowings were
approximately $40.6 million (with an average interest rate of 6.3%) during
1993, as compared to average borrowings of $12.7 million (with an average
interest rate of 6.6%) during 1992.
PTR's interest expense will increase in future periods due to $200 million of
long term, fully amortizing, senior unsecured notes issued in February 1994.
See "--Liquidity and Capital Resources--Financing Activities."
General and Administrative Expense and REIT Management Fee
The REIT Management fee paid by PTR fluctuates with the level of PTR's pre-
REIT Management fee cash flow and therefore increased by $4.4 million (161%) in
1993 as compared to 1992 because cash flow increased substantially. See "--REIT
Management Agreement." As PTR arranges amortizing long term debt as more fully
described in "--Liquidity and Capital Resources" below, the REIT Management fee
will effectively decline in proportion to PTR's earnings from operations
because actual or assumed regularly scheduled principal payments, as defined in
such agreement, associated with the long term debt will be deducted from the
cash flow amount on which the REIT Management fee is based.
Property Sales and Provisions
PTR sold eight non-multifamily properties during 1993 at an aggregate gain of
$2.3 million. The overall result of these dispositions, net of provisions for
possible losses ($2.3 million), was immaterial to PTR's financial position and
results of operations. The provision for possible losses ($2.3 million) relates
to the write-down to the lower of cost and net realizable value of two non-
multifamily properties, Academy Mart Shopping Center and Ontario Industrial
Building. The Academy Mart Shopping Center was sold in the third quarter of
1993. A provision of $1.2 million to reduce the property to its net realizable
value was made in the second quarter. The single tenant occupant of the Ontario
Industrial Building had indicated to PTR that it was not going to renew its
lease which expired in early 1994. After reviewing the market conditions, it
was determined that a write-down of $1.1 million was appropriate, which was
recorded in the second quarter.
ENVIRONMENTAL MATTERS
PTR does not expect any environmental condition on its properties to
materially adversely affect its results of operations or financial position.
LIQUIDITY AND CAPITAL RESOURCES
The REIT Manager considers PTR's liquidity and ability to generate cash to be
adequate and expects it to continue to be adequate to meet PTR's development,
acquisition, operating, debt service and shareholder distribution requirements.
Net cash flow provided by operating activities increased by $39.1 million
(141.5%) for the nine months ended September 30, 1994 as compared to 1993. Net
cash flow provided by operating activities increased by $29.0 million (143%)
for 1993 as compared to 1992. These increases are due primarily to multifamily
property acquisitions and developments as described under "--Results of
Operations" above.
Investing Activities
During the nine months ended September 30, 1994, PTR invested $319.3 million
for the development, acquisition and renovation of multifamily properties, net
of $56.8 million in mortgages. During the first nine months of 1993, PTR
invested $205.9 million for the acquisition, development and renovation of
multifamily
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<PAGE>
properties, net of a $5 million mortgage. These developments, acquisitions and
renovations were financed with cash on hand and borrowings under PTR's
revolving line of credit, which were repaid with the proceeds from PTR's equity
and debt offerings.
PTR's investing activities used $108.8 million (55%) more cash in the first
nine months of 1994 as compared to the first nine months of 1993 and $299.6
million (131%) more cash in 1993 as compared to 1992. The increase in investing
activity was due to increased levels of multifamily property acquisitions and
developments.
At December 31, 1994, PTR had unfunded development commitments for
developments under construction of $104.2 million. Additionally, the land PTR
currently owns or controls through letters of intent or contingent contracts,
subject to PTR's final due diligence, will allow for the development of 11,345
additional multifamily units and the land which PTR is acquiring or will
control pursuant to the Merger will allow for the development of an additional
965 multifamily units, which will be an important generator of growth for PTR
in 1995 and beyond. The foregoing developments are subject to a number of
conditions, and PTR cannot predict with certainty that any of them will be
consummated.
Financing Activities
PTR's financing activities for the nine months ended September 30, 1994
provided $26.6 million (12.0%) more cash flow than for the comparable period in
1993. The increase in cash flow provided by financing activities is primarily
due to increased borrowings under the revolving line of credit. PTR's 1993
financing activities provided $293.2 million (158%) more cash flow than 1992
financing activities. The increase in cash flow provided by financing
activities was primarily due to increased offering proceeds: net proceeds from
equity offerings aggregating $514.2 million in 1993 as compared to $143.2
million in 1992. Proceeds from these offerings were used for development,
acquisition and renovation of multifamily properties or to repay revolving
credit balances incurred for such purposes and, in 1992, to purchase the land
under the Holiday Inn.
On August 4, 1994, PTR consummated a conversion of its $200 million revolving
line of credit facility with TCB and the other participating lenders into an
unsecured facility. Borrowings bear interest at the greater of prime or the
federal funds rate plus 0.5% or, at PTR's option, LIBOR plus 1.75% (7.875%
based upon a one month contract). The interest rate may increase to LIBOR plus
2.0% if PTR's senior unsecured debt were downgraded by Standard & Poor's
Corporation. Additionally, there is a commitment fee of 0.125% per annum on the
average unfunded line of credit balance. On October 27, 1994, the line of
credit was increased to $275 million and the maturity was extended to August
15, 1996. In January 1995, the REIT Manager commenced negotiations to increase
the line of credit to $350 million. The line of credit may annually be extended
for an additional year with the approval of TCB and the other participating
lenders. All debt incurrences are subject to covenants that PTR maintain (i) an
interest coverage ratio of not less than 2:1 (the actual ratio was 5.1:1 at
December 31, 1994), (ii) a debt to tangible net worth ratio no greater than 1:1
(the actual ratio was 0.5:1 at December 31, 1994), and (iii) an unencumbered
pool of real estate properties of which certain properties must meet certain
occupancy requirements and which have an aggregate historical cost of at least
175% of unsecured indebtedness. As of December 31, 1994, PTR was in compliance
with all debt covenants. At February 10, 1995, there were $125 million of
borrowings outstanding under the line of credit.
PTR expects to finance developments, acquisitions and renovations with cash
on hand and borrowings under its line of credit prior to future debt offerings
in order to efficiently respond to market opportunities while minimizing the
amount of cash invested in short term investments at lower yields. PTR believes
that its current conservative ratio of long term debt to total long term
capitalization, the sum of long term debt and shareholders' equity (27% at
December 31, 1994, on a pro forma basis after giving effect to the Merger and
certain operating multifamily properties subsequently acquired or to be
acquired within 40 days of the date of this Prospectus Supplement by PTR and
PACIFIC and not including the effects of the Offering), provides it
considerable flexibility to prudently utilize long term debt as a future
financing tool. PTR intends to limit the sum of long term debt and line of
credit debt to less than 50% of the sum of total book
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<PAGE>
capitalization. PTR expects to fund additional growth in 1995 through this
Offering and, if needed, further issuances of unsecured long term, fixed rate
amortizing debt securities similar to the Notes issued in February 1994.
On August 16, 1994, PTR raised $101.8 million of net proceeds from a rights
offering of 5,593,718 Common Shares of beneficial interest at a price of $18.25
per Common Share. PTR's shareholders of record on July 21, 1994 received a
distribution of one right for each Common Share held of record. Eight rights
were required to purchase one Common Share for $18.25 in the rights offering.
Security Capital Group exercised in full its rights to acquire Common Shares in
the offering at the same price paid by the public ($18.25 per Common Share) and
acquired additional rights in open market purchases. Proceeds from the offering
were used to fund developments and to invest in additional multifamily
properties in PTR's target market and to repay borrowings under PTR's line of
credit.
On February 8, 1994, PTR issued $100 million of 6.875% Senior Notes due 2008
(the "2008 Notes") and $100 million of 7.5% Senior Notes due 2014 (the "2014
Notes," together with the 2008 Notes collectively referred to as the "Notes").
The 2008 Notes bear interest at 6.875% per annum and require annual principal
payments of $12.5 million, commencing February 15, 2001. The 2014 Notes bear
interest at 7.5% per annum and require aggregate annual principal payments of
$10 million in 2009, $12.5 million in 2010, $15 million in 2011, $17.5 million
in 2012, $20 million in 2013 and $25 million in 2014. In February 1994, PTR
received $1.3 million in settlement of an interest protection agreement in the
form of a Forward Treasury Lock Agreement entered into with an investment
banker on January 28, 1994. The agreement included a determination date of
February 1, 1994 and a settlement date of February 2, 1994. The notional
amounts were $100 million with a reference price of 100.90625% and $75 million
with a reference price of 110.4375%. On February 2, 1994, the settlement prices
were 100.32813% and 109.46875%, respectively. There are no agreements
outstanding. Collectively, the Notes have an average life to maturity of 14.25
years and an average effective interest cost, inclusive of offering discounts,
issuance costs and an interest rate protection agreement, of 7.37% per annum.
The Notes are redeemable at any time at the option of PTR, in whole or in part,
at a redemption price equal to the sum of the principal amount of the Notes
being redeemed plus accrued interest thereon to the redemption date plus a
yield to maturity adjustment. The Notes are governed by the terms and
provisions of an indenture agreement (the "Indenture") between PTR and State
Street Bank and Trust Company, as trustee.
Under the terms of the Indenture, PTR can incur additional debt only if,
after giving effect to the debt being incurred and application of proceeds
therefrom, (i) the ratio of debt to total assets, as defined in the Indenture,
does not exceed 60% (the actual ratio was 29.5% at December 31, 1994), (ii) the
ratio of secured debt to total assets, as defined in the Indenture, does not
exceed 40% (the actual ratio was 7.0% at December 31, 1994), and (iii) PTR's
pro forma interest coverage ratio, as defined in the Indenture, for the four
preceding fiscal quarters is not less than 1.5 (the actual ratio was 4.0 for
the fiscal quarter ended December 31, 1994).
Distributions
PTR's current distribution policy is to pay quarterly distributions to
holders of Common Shares based upon what it believes to be a prudent percentage
of cash flow. Because depreciation is a non-cash expense, cash flow typically
will be greater than net earnings attributable to Common Shares. Therefore,
quarterly distributions paid will generally be higher than quarterly net
earnings.
Distributions paid on Common Shares exceeded net earnings attributable to
Common Shares by $13 million and $3.4 million for the nine months ended
September 30, 1994 and 1993, respectively; and by $5.0 million and $4.1 million
for 1993 and 1992, respectively, resulting in corresponding decreases in
shareholders' equity for each of the respective periods.
PTR announces the following year's projected annual distribution level after
the Board's annual budget review and approval in December of each year. At its
December 6, 1994 board meeting, the Board announced a projected increase in the
annual distribution level from $1.00 to $1.15 per Common Share. The payment of
distributions is subject to the discretion of the Board and is dependent upon
the financial condition and operating results of PTR.
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Pursuant to the terms of the Preferred Shares, PTR is restricted from
declaring or paying any distributions with respect to its Common Shares unless
all cumulative distributions with respect to the Preferred Shares have been
paid or sufficient funds have been set aside for distributions that have been
declared for the then current distribution period with respect to the Preferred
Shares.
Funds from Operations means net earnings computed in accordance with GAAP,
excluding gains (or losses) from debt restructuring and sales of property, plus
depreciation and amortization, and after adjustments for unconsolidated
partnerships and joint ventures. PTR believes that Funds from Operations is
helpful in understanding a property portfolio in that such calculation reflects
cash flow from operating activities and the properties' ability to support
interest payments and general operating expenses before the impact of certain
activities, such as gains or losses from property sales and changes in accounts
receivable and accounts payable. Funds from Operations attributable to Common
Shares increased $16.7 million (68.1%) to $41.3 million for the nine months
ended September 30, 1994 from $24.6 million for 1993, and increased from $15.3
million to $37.8 million from 1992 to 1993. The increases resulted primarily
from increased properties in operation. Funds from Operations should not be
considered as an alternative to net earnings or any other GAAP measurement of
performance as an indicator of PTR's operating performance or as an alternative
to cash flows from operating, investing or financing activities as a measure of
liquidity.
REIT MANAGEMENT AGREEMENT
Effective March 1, 1991, PTR entered into a REIT management agreement (the
"REIT Management Agreement") with the REIT Manager to provide management
services to PTR. All officers of PTR are employees of the REIT Manager and PTR
has no employees. See "REIT Management" for a description of the services
included in the REIT Management fee.
The REIT Management Agreement requires PTR to pay a base annual fee of
$855,000 plus 16% of cash flow as defined in the REIT Management Agreement
("Cash Flow") in excess of $4,837,000. In the REIT Management Agreement, Cash
Flow is calculated by reference to PTR's cash flow from operations before
deducting (i) fees paid to the REIT Manager, (ii) extraordinary expenses
incurred at the request of the independent Trustees of PTR, and (iii) 33% of
any interest paid by PTR on convertible subordinated debentures (of which there
have been none since inception of the REIT Management Agreement); and, after
deducting actual or assumed regularly scheduled principal and interest payments
for long term debt. The REIT Management Agreement provides that the long term
debt described above under "--Liquidity and Capital Resources" will be treated
as having regularly scheduled principal and interest payments like a 20-year,
level monthly payment, fully amortizing mortgage, and the assumed principal and
interest payments will be deducted from cash flow in determining the fee for
future periods. Cash Flow does not include realized gains from dispositions of
investments or income from cash equivalent investments. The REIT Manager also
receives a fee of .25% per year on the average daily balance of cash equivalent
investments. REIT management fees aggregated $13,182,000, $7,073,000 and
$2,711,000 for the years ended December 31, 1994, 1993 and 1992, respectively.
PTR is obligated to reimburse the REIT Manager for certain expenses incurred
by the REIT Manager on behalf of PTR, primarily travel expenses incurred in
seeking financing, property acquisitions, property sales, property development
and similar activities on behalf of PTR.
The REIT Management Agreement is renewable by PTR annually, subject to a
determination by the independent Trustees that the REIT Manager's performance
has been satisfactory and that the compensation payable to the REIT Manager is
fair. PTR may terminate the REIT Management Agreement on 60 days' notice.
Because of the year-to-year nature of the agreement, its maximum effect on
PTR's results of operations cannot be predicted, other than that REIT
Management fees will generally increase or decrease in proportion to cash flow
increases or decreases.
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THE OFFERING
SUBSCRIPTION RIGHT
Each holder of record of Common Shares at the close of business on the Record
Date, other than Security Capital Group, is entitled to subscribe for one
Common Share (the "Subscription Right") for every 1.94 Common Shares held of
record by such holder at the close of business on the Record Date, at the
Subscription Price of $16.375 per Common Share. The right of holders of Common
Shares on the Record Date to subscribe for Common Shares at the Subscription
Price is not transferable. A holder of Common Shares on the Record Date may (a)
fully subscribe for all Common Shares to which such holder is entitled, (b)
subscribe for a portion of the Common Shares to which such holder is entitled
or (c) not subscribe for any Common Shares pursuant to the Offering. In either
of the latter two cases, the shareholder's relative equity ownership and voting
interest in PTR would be smaller after the consummation of the Offering and the
Merger than if the shareholder were to fully subscribe for Common Shares.
The Offering is designed to allow PTR shareholders other than Security
Capital Group the opportunity to purchase Common Shares at the same price at
which PACIFIC shareholders are receiving Common Shares in the Merger and to
maintain PTR's current balance sheet ratios. To assure maintenance of PTR's
current balance sheet ratios, Security Capital Group has agreed to purchase $50
million of Common Shares in the Offering, which amount will be reduced to the
extent that subscriptions are received from parties other than Security Capital
Group. See "--Principal Shareholder."
SUBSCRIPTION PRICE
The Subscription Price for one Common Share in the Offering is $16.375.
EXPIRATION DATE
The subscription period for the Offering will expire at 5:00 p.m., New York
City time, on March 23, 1995 or such later date as PTR may determine in its
sole discretion. Notice will be given to shareholders of record on the Record
Date, by mail or by publication in a newspaper of national circulation, of a
new Expiration Date in the event that PTR extends the subscription period.
OVERSUBSCRIPTION PRIVILEGE
A holder of Common Shares on the Record Date who fully subscribes for all
Common Shares to which such holder is entitled pursuant to the Subscription
Right will have the further right to oversubscribe for additional Common Shares
(the "Oversubscription Privilege"), at the Subscription Price, to the extent
all of the Common Shares covered by this Prospectus Supplement are not
subscribed for by other shareholders pursuant to the Subscription Right.
Holders of Common Shares so entitled to exercise the Oversubscription Privilege
may subscribe for as many Common Shares as desired (subject to the maximum
number of Common Shares offered in the Offering and certain other
restrictions). See "--Limitation on Subscriptions." If the demand for Common
Shares pursuant to the Oversubscription Privilege exceeds the number of Common
Shares available, holders of Common Shares (including Security Capital Group,
to the extent that it oversubscribes, as if it had fully subscribed for Common
Shares based on the number of Common Shares it is receiving in the Merger)
shall participate in the Oversubscription Privilege (up to, but not exceeding,
the number of Common Shares oversubscribed for by each such holder) pro rata
based upon the number of Common Shares acquired by each such person pursuant to
the Subscription Right (without regard to the number of Common Shares
subscribed for by each such person pursuant to the Oversubscription Privilege),
with fractional Common Shares adjusted in any manner PTR deems appropriate.
Promptly after the Expiration Date, Capital Markets Group will send each
subscriber exercising the Oversubscription Privilege a written confirmation of
the number of Common Shares allocated to such subscriber under the
Oversubscription Privilege. Any amounts overpaid by the subscriber will be
refunded promptly without interest. See "--Subscription Proceeds."
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UNSUBSCRIBED SHARES AND THIRD PARTY SALES
PTR, with the assistance of Capital Markets Group (which will not receive any
compensation from PTR), will simultaneously with the Offering, on a limited
basis, seek well-regarded, long term third-party investors to acquire any
Common Shares for which subscriptions or oversubscriptions are not received or
accepted ("Unsubscribed Shares"). Capital Markets Group will offer the
Unsubscribed Shares, at the Subscription Price, on a best-efforts basis in
jurisdictions where it is authorized to do so. PTR will not pay any person any
commission or fee in connection with the offer or sale of the Common Shares.
PTR will indemnify Capital Markets Group against certain civil liabilities,
including liabilities under the Securities Act of 1933, as amended (the
"Securities Act"). No person has committed to underwrite the sale of
Unsubscribed Shares to third parties. The REIT Manager will pay a fee of
$250,000 to Capital Markets Group. PTR has agreed to pay the expenses of
Capital Markets Group related to the Offering, which expenses are not expected
to exceed $25,000.
Third-party investors who desire to purchase Unsubscribed Shares should mail
or deliver the subscription form (the "Subscription Form") to the Subscription
Agent (as hereinafter defined) at the appropriate address set forth under "--
Subscription Agent." The Subscription Form must be properly completed and duly
executed. Subscription Forms may be obtained by contacting the Secretary of PTR
at (915) 877-2700. Subscriptions for less than 1,000 Common Shares from third-
party investors will not be accepted. If subscriptions exceed available Common
Shares, PTR may allocate available Unsubscribed Shares in PTR's sole
discretion. Subscription Forms must be received by the Subscription Agent prior
to 5:00 p.m., New York City time, on the Expiration Date. Subscription Forms
received after such time will not be honored. Promptly after the Expiration
Date, Capital Markets Group will send each third-party investor a written
confirmation of the number of Common Shares allocated to such investor. On or
prior to the fifth business day after the Expiration Date, third-party
investors must deliver payment for the Common Shares subscribed for to the
Subscription Agent by wire transfer of immediately available funds, based upon
such investor's prorated allocation of Common Shares as notified by PTR or
Capital Markets Group.
Capital Markets Group is an affiliate of PTR's REIT Manager and, acting as
placement agent, may be deemed to be an "underwriter" under the Securities Act
in connection with the Offering.
LIMITATION ON SUBSCRIPTIONS
In its sole discretion, PTR may reduce subscriptions to ensure that no
subscriber (other than Security Capital Group, which is permitted under PTR's
Restated Declaration of Trust to own up to 49% of PTR's Common Shares, assuming
conversion or exchange of all PTR convertible or exchangeable securities) will
beneficially own more than 9.8% of PTR's Common Shares following consummation
of the Offering. PTR's Restated Declaration of Trust limits each shareholder's
beneficial ownership to 9.8% of the outstanding Common Shares without approval
of the Board. The Board has the authority pursuant to PTR's Restated
Declaration of Trust to redeem any Common Shares in excess of such 9.8% limit.
See "Description of Common Shares--Restriction on Size of Holdings," in the
accompanying Prospectus.
CONDITION TO CLOSING
The closing of the Offering is conditioned upon the consummation of the
Merger. The consummation of the Merger is subject to a number of conditions.
See "The Merger." In the event that the Merger Agreement is terminated or the
Merger otherwise fails to occur on or prior to April 30, 1995 or the Offering
otherwise fails to close for any reason on or prior to such date, all funds
received from subscribers will be refunded promptly, together with a pro rata
share of any net interest earned thereon. See "--Subscription Proceeds."
WITHDRAWAL
PTR reserves the right to withdraw the Offering at any time prior to or on
the Expiration Date and for any reason (including, without limitation, the
market price of the Common Shares), in which event all funds received from
subscribers will be refunded promptly, together with a pro rata share of any
net interest earned thereon. See "--Subscription Proceeds."
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PRINCIPAL SHAREHOLDER
Security Capital Group currently owns approximately 31.9% of the outstanding
Common Shares. Upon consummation of the Merger, Security Capital Group's
ownership of Common Shares would increase to approximately 41.3% before giving
effect to the Offering. In order to assure maintenance of PTR's balance sheet
ratios, Security Capital Group has agreed to purchase $50 million of Common
Shares in the Offering. Security Capital Group's investment will be reduced to
the extent that subscriptions are received from shareholders other than
Security Capital Group. Security Capital Group may oversubscribe for additional
Common Shares and, if the demand for Common Shares pursuant to the
Oversubscription Privilege exceeds the number of Common Shares available,
Security Capital Group will participate in the Oversubscription Privilege, to
the extent that it oversubscribes, pro rata together with other oversubscribing
shareholders as if Security Capital Group had fully subscribed for Common
Shares based on the number of Common Shares it is receiving in the Merger. If
Security Capital Group acquires $50 million of Common Shares in the Offering
and no other shareholder subscribes for Common Shares, Security Capital Group's
ownership would further increase to 44.2% of the Common Shares.
SUBSCRIPTION AGENT
The subscription agent and escrow agent for the Offering is Chemical Bank
(the "Subscription Agent"). The address to which Subscription Forms, Notices of
Guaranteed Delivery and payments (other than wire transfers) should be mailed
or delivered is:
If by Regular Mail: If by Hand Delivery, Express Mail or
Courier:
Chemical Bank
PTR Subscription Offering Chemical Bank
P.O. Box 3085 PTR Subscription Offering
GPO Station 55 Water Street,
New York, New York 10116-3085 North Building
Room 234--2nd Floor
New York, New York 10041
Delivery of Subscription Forms, Notices of Guaranteed Delivery and payments
(other than wire transfers) other than as set forth above will not constitute a
valid delivery.
ANY QUESTIONS OR REQUESTS FOR ASSISTANCE CONCERNING THE METHOD OF SUBSCRIBING
FOR COMMON SHARES OR FOR ADDITIONAL COPIES OF THIS PROSPECTUS SUPPLEMENT SHOULD
BE DIRECTED TO PTR'S INFORMATION AGENT, GEORGESON & COMPANY, INC., AT (800)
223-2064.
FRACTIONAL SHARES
No fractional Common Shares will be issued, and PTR may adjust for fractional
Common Shares resulting from the exercise of the Oversubscription Privilege in
any manner it deems appropriate.
METHOD OF EXERCISING SUBSCRIPTION RIGHT AND OVERSUBSCRIPTION PRIVILEGE
Common Shares may be subscribed for pursuant to the Subscription Right and
the Oversubscription Privilege by properly completing and executing the
Subscription Form accompanying this Prospectus Supplement and mailing or
delivering the Subscription Form, together with payment of the full
Subscription Price for each Common Share subscribed for pursuant to the
Subscription Right and the Oversubscription Privilege, to the Subscription
Agent at the appropriate address set forth above. Banks, trust companies,
securities dealers and brokers that hold Common Shares as nominees for more
than one beneficial owner may, upon proper showing to the Subscription Agent,
exercise their Subscription Right and Oversubscription
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Privilege on the same basis as if the beneficial owners were record holders on
the Record Date. Payments must be made in United States currency by personal
check, cashier's check, bank draft or money order payable to the order of "PTR
Subscription Offering." In the case of shareholders whose Common Shares are
held of record through The Depository Trust Company ("DTC"), such shareholders
may exercise the Subscription Right by returning a completed Subscription Form,
together with payment of the full Subscription Price, which may be effected by
transfer from such holder's DTC account to the Subscription Agent's DTC
account. Except as described under "--Late Delivery of Payment and Subscription
Forms," to be accepted, the properly completed Subscription Form and the
payment must be received by the Subscription Agent prior to 5:00 p.m., New York
City time, on the Expiration Date. Subscription Forms received after such time
will not be accepted.
The instruction letter accompanying the Subscription Form should be read
carefully and strictly followed. DO NOT SEND SUBSCRIPTION FORMS OR PAYMENTS TO
PTR. Except as described under the captions "--Unsubscribed Shares and Third
Party Sales" and "--Late Delivery of Payments and Subscription Forms," no
subscription will be deemed to have been received until the Subscription Agent
has received delivery of a properly completed and executed Subscription Form
and payment of the full Subscription Price. The risk of delivery of all
documents and payments is on subscribers, not PTR or the Subscription Agent. If
the mail is used, it is recommended that insured, registered mail, return
receipt requested, be used and that a sufficient number of days be allowed to
ensure delivery to the Subscription Agent before the Expiration Date.
LATE DELIVERY OF PAYMENTS AND SUBSCRIPTION FORMS
If, prior to the Expiration Date, the Subscription Agent has received a
properly completed and duly executed Notice of Guaranteed Delivery
substantially in the form accompanying this Prospectus Supplement (either by
hand, mail, telegram or facsimile transmission) specifying the name of the
shareholder and the number of Common Shares subscribed for (stating separately
the number of Common Shares subscribed for pursuant to the Subscription Right
and the Oversubscription Privilege) and guaranteeing that the properly
completed and executed Subscription Form and payment of the full Subscription
Price for each Common Share subscribed for will be delivered to the
Subscription Agent within five NYSE trading days after the Expiration Date,
such subscription may be accepted, subject to the Subscription Agent's
withholding the stock certificates for the Common Shares until receipt of the
properly completed and executed Subscription Form and payment of such amount
within such time period. The Notice of Guaranteed Delivery must be guaranteed
by a commercial bank or a trust company having an office, branch or agency in
the United States, a member firm of a registered national securities exchange
or a member of the National Association of Securities Dealers, Inc. Notices of
Guaranteed Delivery and payments should be mailed or delivered to the
appropriate address set forth under "--Subscription Agent" or Notices of
Guaranteed Delivery may be sent by facsimile to (212) 629-8015 or (212) 629-
8016. To confirm receipt of a facsimile transmission, subscribers may call
(212) 613-7137.
VALIDITY OF SUBSCRIPTIONS
All questions with respect to the validity and form of exercise of the
Subscription Right or the Oversubscription Privilege or third-party
subscriptions for Unsubscribed Shares (including time of receipt and
eligibility to participate in the Offering) will be determined solely by PTR,
which determination shall be final and binding. Once made, subscriptions and
directions are irrevocable, and no alternative, conditional or contingent
subscriptions or directions will be accepted. PTR reserves the absolute right
to reject any subscriptions or directions not properly submitted or the
acceptance of which, in the opinion of PTR's counsel, would be unlawful. Any
irregularities in connection with subscriptions must be cured prior to the
Expiration Date unless waived by PTR in its sole discretion. Neither PTR nor
the Subscription Agent shall be under any duty to give notification of defects
in such subscriptions or incur any liability for failure to give such
notification. A subscription will be deemed to have been accepted (subject to
PTR's right to withdraw
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or terminate the Offering) only when a duly completed Subscription Form, any
other required documents and good funds with respect to such subscription have
been received by the Subscription Agent. PTR's interpretations of the terms and
conditions of the Offering shall be final and binding.
RIGHTS OF SUBSCRIBERS
Subscribers will have no rights as shareholders of PTR with respect to Common
Shares subscribed for until certificates representing such Common Shares are
issued to them. Subscribers will have no right to revoke their subscriptions
after delivery to the Subscription Agent of a completed and executed
Subscription Form and any other required documents.
SUBSCRIPTION PROCEEDS
All proceeds received by the Subscription Agent with respect to the exercise
of the Subscription Right and the Oversubscription Privilege and with respect
to third-party subscriptions for Unsubscribed Shares will be held by the
Subscription Agent in an escrow account. Such proceeds will be invested only in
short term bank time deposits, short term certificates of deposit, short term
government securities or any other investment permitted by Rule 15c2-4 under
the Securities Exchange Act of 1934. If the Offering is withdrawn or terminated
for any reason, the Subscription Agent will return promptly to each subscriber
all funds received from such subscriber, together with a pro rata share of any
net interest earned thereon. Amounts overpaid by subscribers due to proration
of oversubscriptions or otherwise will be refunded promptly without interest.
DELIVERY OF CERTIFICATES
Certificates for Common Shares purchased in the Offering will be mailed as
soon as practicable after the Expiration Date and receipt of all required
documents and payment in full of the Subscription Price due for such Common
Shares. In the case of shareholders whose Common Shares are held through DTC
and third-party investors who arrange for delivery and payment through DTC, the
appropriate participant account will be credited. A subscriber will be
refunded, as soon as practicable after the Expiration Date, any portion of the
amount previously paid without interest to the extent that his or her
subscription pursuant to the Oversubscription Privilege or his or her
subscription for Unsubscribed Shares is not accepted.
CERTAIN FEDERAL INCOME TAX CONSIDERATIONS REGARDING THE OFFERING
The following is a summary of certain federal income tax consequences to PTR
and shareholders of PTR resulting from the Offering. The discussion set forth
below is based upon the Internal Revenue Code of 1986, as amended, the Treasury
Regulations promulgated thereunder, judicial authority and current
administrative rulings and pronouncements, as currently in effect. PTR has not
requested a ruling from the Internal Revenue Service with respect to the
federal income tax consequences of the Offering. Accordingly, no assurance can
be given that the tax consequences will be as described below. Further, the
federal income tax consequences to any particular shareholder may be affected
by matters not discussed below. For example, certain types of investors
(including individuals who are not United States citizens or residents, foreign
corporations, life insurance companies and tax exempt organizations) may be
subject to special rules not addressed herein. There also may be state, local
or foreign tax considerations applicable to each shareholder. THE DISCUSSION
SET FORTH BELOW IS INCLUDED FOR GENERAL INFORMATION ONLY. EACH SHAREHOLDER IS
URGED TO CONSULT HIS OR HER OWN TAX ADVISOR AS TO THE CONSEQUENCES OF THE
OFFERING TO HIM OR HER UNDER FEDERAL LAW AND APPLICABLE STATE, LOCAL AND
FOREIGN TAX LAWS.
Consequences of the Offering. The discussion of federal income tax
consequences of the Offering set forth below assumes that the Common Shares
owned by a shareholder and the Common Shares issued pursuant to the Offering
constitute capital assets in the hands of such shareholder. It should be noted
that under current
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law, net capital gains of individuals are, under certain circumstances, taxed
at lower rates than items of ordinary income. The deductibility of capital
losses is subject to limitations. A shareholder should consult with a tax
advisor for information concerning currently applicable federal tax rates.
Subject to the assumptions and qualifications above, for federal income tax
purposes:
1. No gain or loss will generally be recognized by a shareholder
(including a foreign shareholder) upon the purchase of a Common Share
pursuant to the Subscription Right or the Oversubscription Privilege. The
tax basis of the Common Shares purchased pursuant to the Subscription Right
or the Oversubscription Privilege will be equal to the Subscription Price
paid for such Common Shares. The holding period of the Common Shares
purchased pursuant to the Subscription Right or the Oversubscription
Privilege will commence on the date of purchase. Upon the subsequent sale
of such Common Shares (other than to PTR pursuant to a redemption), the
shareholder will generally recognize capital gain or loss in an amount
equal to the difference between the proceeds of the sale and the
shareholder's tax basis of such Common Shares. Such gain or loss will be
long term capital gain or loss if the shareholder's holding period for such
Common Shares is more than one year on the date of sale.
2. PTR will not recognize any gain or loss upon the receipt of cash for
Common Shares pursuant to the Subscription Right or the Oversubscription
Privilege.
3. PTR will qualify as a "domestically-controlled REIT" so long as less
than 50% in value of its Common Shares is held by foreign persons (i.e.
non-resident aliens and foreign corporations, partnerships, trusts and
estates). It is currently anticipated that PTR will qualify as a
domestically-controlled REIT. Under these circumstances, gain from the sale
of the Common Shares by a foreign person should not be subject to U.S.
taxation, unless such gain is effectively connected with such person's U.S.
business or, in the case of an individual foreign person, such person is
present within the U.S. for more than 182 days in such taxable year.
VALIDITY OF COMMON SHARES
The validity of the Common Shares offered hereby will be passed upon for PTR
by Mayer, Brown & Platt, Chicago, Illinois. Certain legal matters relating to
the Offering will be passed upon for Capital Markets Group by Mayer, Brown &
Platt, Chicago, Illinois.
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PROSPECTUS
LOGO
$564,784,800 DEBT SECURITIES, PREFERRED SHARES AND COMMON SHARES
----------------
Property Trust of America ("PTR") may from time to time offer in one or more
series its (i) unsecured senior debt securities (the "Debt Securities"), (ii)
Preferred Shares of Beneficial Interest, par value $1.00 per share (the
"Preferred Shares") and (iii) Common Shares of Beneficial Interest, par value
$1.00 per share (the "Common Shares"). The Debt Securities, Preferred Shares
and Common Shares (collectively, the "Offered Securities") may be offered,
separately or together, in separate series, in amounts, at prices and on terms
to be set forth in a supplement to this Prospectus (a "Prospectus Supplement").
The specific terms of the Offered Securities in respect of which this
Prospectus is being delivered will be set forth in the applicable Prospectus
Supplement and will include, where applicable: (i) in the case of Debt
Securities, the specific title, aggregate principal amount, 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 PTR or repayment at
the option of the Holder, terms for sinking fund payments, and any initial
public offering price; (ii) in the case of Preferred Shares, the specific title
and stated value, any dividend, liquidation, redemption, conversion, voting and
other rights, and any initial public offering price; and (iii) in the case of
Common Shares, any initial public offering price. In addition, such specific
terms may include limitations on direct or beneficial ownership and
restrictions on transfer of the Offered Securities, in each case as may be
appropriate to preserve the status of PTR as a real estate investment trust
("REIT") for federal income tax purposes.
The applicable Prospectus Supplement will also contain information, where
applicable, about certain United States federal income tax considerations
relating to, and any listing on a securities exchange of, the Offered
Securities covered by such Prospectus Supplement.
The Offered Securities may be offered directly, through agents designated
from time to time by PTR, or to or through underwriters or dealers. If any
agents or underwriters are involved in the sale of any of the Offered
Securities, their names, and any applicable purchase price, fee, commission or
discount arrangement between or among them, will be set forth, or will be
calculable from the information set forth, in the applicable Prospectus
Supplement. See "Plan of Distribution." No Offered Securities may be sold
without delivery of the applicable Prospectus Supplement describing the method
and terms of the offering of such series of Offered Securities.
----------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
----------------
THE 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 DECEMBER 1, 1994.
<PAGE>
AVAILABLE INFORMATION
PTR is subject to the informational requirements of the Securities Exchange
Act of 1934, as amended (the "Exchange Act"), and, in accordance therewith,
files reports, proxy statements and other information with the Securities and
Exchange Commission (the "Commission"). Such reports, proxy statements and
other information can be inspected and copied at the public reference
facilities maintained by the Commission at Room 1024, 450 Fifth Street, N.W.,
Washington, D.C. 20549; Room 1204, Citicorp Center, 500 West Madison Street,
Suite 1400, Chicago, Illinois 60661-2511; and 7 World Trade Center, 13th Floor,
New York, New York 10048. Copies of such material can be obtained at prescribed
rates from the Public Reference Section of the Commission at 450 Fifth Street,
N.W., Washington, D.C. 20549. PTR's outstanding Common Shares and Cumulative
Convertible Series A Preferred Shares of Beneficial Interest, $1.00 par value
("Series A Preferred Shares"), are listed on the New York Stock Exchange (the
"NYSE") under the symbols "PTR" and "PTR-PRA," respectively, and all such
reports, proxy statements and other information filed by PTR with the NYSE may
be inspected at the NYSE's offices at 20 Broad Street, New York, New York
10005.
This Prospectus constitutes part of a registration statement on Form S-3
(together with all amendments and exhibits, the "Registration Statement") filed
by PTR with the Commission under the Securities Act of 1933, as amended (the
"Securities Act"). This Prospectus does not contain all of the information set
forth in the Registration Statement, certain parts of which are omitted in
accordance with the rules and regulations of the Commission. For further
information, reference is hereby made to the Registration Statement.
INCORPORATION BY REFERENCE
There are incorporated herein by reference the following documents heretofore
filed by PTR with the Commission:
(a) PTR's Annual Report on Form 10-K for the fiscal year ended December
31, 1993;
(b) PTR's Quarterly Reports on Form 10-Q for the quarters ended March 31,
June 30, and September 30, 1994;
(c) PTR's Current Reports on Form 8-K dated January 22, February 3 (as
amended by Form 8 dated July 28, Form 8-K/A No. 1 dated May 21, and Form 8-
K/A No. 2 dated August 11), November 4, November 22, and December 17, 1993,
and February 2, April 29, May 3, July 11, July 19, July 27, and November
30, 1994; and
(d) The description of PTR's preferred share purchase rights contained in
PTR's registration statement on Form 8-A filed with the Commission on July
12, 1994 (as amended by Form 8-A/A No. 1 dated July 20, 1994).
All documents subsequently filed by PTR pursuant to Sections 13(a), 13(c), 14
or 15(d) of the Exchange Act prior to the termination of the offering of the
Offered Securities, shall be deemed to be incorporated by reference in this
Prospectus and to be a part hereof from the date of filing of such documents.
Any statement contained herein or in a document incorporated or deemed to be
incorporated by reference herein shall be deemed to be modified or superseded
for purposes of this Prospectus to the extent that a statement contained
herein, or in any subsequently filed document which is also or is deemed to be
incorporated by reference herein, modifies or supersedes such statement. Any
such statement so modified or superseded shall not be deemed, except as so
modified or superseded, to constitute a part of this Prospectus.
PTR will provide without charge to each person, including any beneficial
owner, to whom a copy of this Prospectus is delivered, upon the written or oral
request of such person, a copy of any or all of the documents incorporated
herein by reference, other than exhibits to such documents unless such exhibits
are specifically incorporated by reference into such documents. Requests should
be addressed to Secretary, Property Trust of America, 7777 Market Center
Avenue, El Paso, Texas 79912, telephone number: (915) 877-3900.
PROPERTY TRUST OF AMERICA
PTR's objective is to be the preeminent real estate operating company
focusing on multifamily property in its target market. As a fully integrated
operating company, through its experienced REIT management team, PTR engages in
development, acquisition, operation and long term ownership of multifamily
properties. PTR operates as a REIT. PTR seeks to achieve long term sustainable
growth in cash flow and dividends
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through a commitment to fundamental real estate research, actively reviewing
and reallocating assets to product types and submarkets with strong growth
prospects, developing industry-leading multifamily product designed for the
largest renter groups and making opportunistic acquisitions. PTR's REIT
Manager, Security Capital (Southwest) Incorporated (the "REIT Manager" or "REIT
Management"), provides PTR with strategic and day-to-day management, including
research, investment analysis, development, acquisition, due diligence, asset
management, capital markets, legal and accounting services. PTR's REIT Manager
believes that PTR's target market presents attractive investment opportunities
because of its growing population and job market and the reduced supply of real
estate investment capital.
PTR was formed in 1963 and is a real estate investment trust organized under
the laws of Maryland. Its principal executive offices are located at 7777
Market Center Avenue, El Paso, Texas 79912, and its telephone number is (915)
877-3900.
USE OF PROCEEDS
Unless otherwise described in the applicable Prospectus Supplement, the net
proceeds from the sale of the Offered Securities will be used for the
development and acquisition of additional multifamily properties, as suitable
opportunities arise, for the repayment of certain outstanding indebtedness at
such time, for working capital purposes and, to a lesser extent, for capital
improvements to properties.
DESCRIPTION OF DEBT SECURITIES
The Debt Securities are to be issued under an Indenture, dated as of February
1, 1994, as supplemented by the First Supplemental Indenture, dated as of
February 2, 1994 (as so supplemented, the "Indenture"), between PTR and State
Street Bank and Trust Company (the "Trustee"). The Indenture has been filed as
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 225
Franklin Street, Boston, Massachusetts 02110 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, 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 PTR and will
rank equally with all other unsecured and unsubordinated indebtedness of PTR.
The Indenture provides that the Debt Securities may be issued without limit as
to aggregate principal amount, in one or more series, in each case as
established from time to time in or pursuant to authority granted by a
resolution of the Board of Trustees of PTR 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 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 (Sections 101 and 609), and,
except as otherwise indicated herein, any action described herein to be taken
by the Trustee may be taken by each such Trustee with respect to, and only with
respect to, the one or more series of Debt Securities for which it is Trustee
under the 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 principal amount;
(3) the percentage of the principal amount at which such Debt Securities
will be issued and, if other than the full principal amount thereof, the
portion of the principal amount thereof payable upon declaration of
acceleration of the maturity thereof, or the method by which any such
portion shall be determined;
(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 and the
amount of principal payable thereon;
(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 such interest will accrue, the Interest Payment Dates on
which any such interest will be payable, the Regular Record Dates for such
Interest Payment Dates, or the method by which such Dates 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 comprised of twelve 30-day months;
(7) the place or places where the principal of (and premium or Make-Whole
Amount (as defined), if any) and interest and Additional Amounts, if any,
on such Debt Securities will be payable, where such Debt Securities may be
surrendered for registration of transfer or exchange and where notices or
demands to or upon PTR in respect of such Debt Securities and the Indenture
may be served;
(8) the period or periods within which, the price or prices (including
the premium or Make-Whole Amount, if any) at which, the currency or
currencies in which, and the other terms and conditions upon which such
Debt Securities may be redeemed, as a whole or in part, at the option of
PTR, if PTR is to have such an option;
(9) the obligation, if any, of PTR 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 United States 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 or Make-
Whole Amount, if any) or interest, if any, on such Debt Securities may be
determined with reference to an index, formula or other method (which
index, formula or method may, 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) whether the principal of (and premium or Make-Whole Amount, if any)
or interest or Additional Amounts, if any, on such Debt Securities are to
be payable, at the election of PTR or a Holder, in one or more currencies
other than that in which such Debt Securities are denominated or stated to
be payable, the period or periods within which, and the terms and
conditions upon which, such election may be made, and the time and manner
of, and identity of the exchange rate agent with responsibility for,
determining the exchange rate between the currency or currencies in which
such Debt Securities are denominated or stated to be payable and the
currency or currencies in which such Debt Securities are to be so payable;
(13) any additions to, modifications of or deletions from the terms of
such Debt Securities with respect to the Events of Default or covenants set
forth in the Indenture;
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(14) whether such Debt Securities will be issued in certificated or book-
entry form;
(15) whether such Debt Securities will be in registered or bearer form
and, if in registered form, the denominations thereof if other than $1,000
and any integral multiple thereof and, if in bearer form, the denominations
thereof if other than $5,000 and terms and conditions relating thereto;
(16) the applicability, if any, of the defeasance and covenant defeasance
provisions of Article Fourteen of the Indenture;
(17) 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;
(18) whether and under what circumstances PTR will pay Additional Amounts
as contemplated in the Indenture on such Debt Securities in respect of any
tax, assessment or governmental charge and, if so, whether PTR will have
the option to redeem such Debt Securities in lieu of making such payment;
and
(19) any other terms of such Debt Securities not inconsistent with the
provisions of the Indenture (Section 301).
The Debt Securities may provide for less than the entire principal amount
thereof to be payable upon declaration of acceleration of the maturity thereof
("Original Issue Discount Securities"). Special United States federal income
tax, accounting and other considerations applicable to Original Issue Discount
Securities will be described in the applicable Prospectus Supplement.
Under the Indenture, PTR will have the ability, in addition to the ability to
issue Debt Securities with terms different from those of Debt Securities
previously issued, without the consent of the Holders, to reopen a previous
issue of a series of Debt Securities and issue additional Debt Securities of
such series.
Except as set forth below under "Certain Covenants--Limitations on Incurrence
of Debt," the Indenture does not contain any other provisions that would limit
the ability of PTR to incur indebtedness or that would afford Holders of Debt
Securities protection in the event of a highly leveraged or similar transaction
involving PTR or in the event of a change of control. However, PTR's Restated
Declaration of Trust restricts beneficial ownership of PTR's outstanding Common
Shares by a single person, or persons acting as a group, to 9.8% of such Common
Shares, with certain exceptions (including an exception for the ownership of up
to 49% of such Common Shares in the case of Security Capital Realty
Incorporated ("Security Capital Realty")). See "Description of Common Shares--
Restriction on Size of Holdings." Additionally, the Articles Supplementary
relating to the Series A Preferred Shares restrict beneficial ownership of such
Series A Preferred Shares by a person, or persons acting as a group, to 25% of
such Series A Preferred Shares. Similarly, the Articles Supplementary for each
series of Preferred Shares will contain certain provisions restricting the
ownership and transfer of the Preferred Shares. See "Description of Preferred
Shares--Restrictions on Ownership." These restrictions are designed to preserve
PTR's status as a REIT and, therefore, may act to prevent or hinder a change of
control. Reference is made to the applicable Prospectus Supplement for
information with respect to any deletions from, modifications of or additions
to the Events of Default or covenants of PTR that are described below,
including any addition of a covenant or other provision providing event risk or
similar protection.
DENOMINATIONS, INTEREST, REGISTRATION AND TRANSFER
Unless otherwise described in the applicable Prospectus Supplement, the Debt
Securities of any series issued in registered form will be issuable in
denominations of $1,000 and integral multiples thereof. Unless otherwise
described in the applicable Prospectus Supplement, the Debt Securities of any
series issued in bearer form will be issuable in denominations of $5,000
(Section 302).
Unless otherwise specified in the applicable Prospectus Supplement, the
principal of (and premium or Make-Whole Amount, if any) and interest on any
series of Debt Securities will be payable at the corporate
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trust office of the Trustee, initially located at 225 Franklin Street, Boston,
Massachusetts 02110; provided that, at the option of PTR, payment of interest
may be made by check mailed to the address of the Person entitled thereto as it
appears in the Security Register or by wire transfer of funds to such Person to
an account maintained within the United States (Sections 301, 305, 306, 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
either may 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
of which 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 (Section 307).
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 PTR 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 PTR with
respect to any series of Debt Securities, PTR may at any time rescind the
designation of any such transfer agent or approve a change in the location at
which any such transfer agent acts, except that PTR will be required to
maintain a transfer agent in each Place of Payment for such series. PTR may at
any time designate additional transfer agents with respect to any series of
Debt Securities (Section 1002).
Neither PTR nor the Trustee shall be required to (i) issue, register the
transfer of or exchange Debt Securities of any series during a period beginning
at the opening of business 15 days before any selection of Debt Securities of
that series to be redeemed and ending at the close of business on the day of
mailing of the relevant notice of redemption; (ii) register the transfer of or
exchange any Debt Security, or portion thereof, called for redemption, except
the unredeemed portion of any Debt Security being redeemed in part; or (iii)
issue, register the transfer of or exchange any Debt Security which has been
surrendered for repayment at the option of the Holder, except the portion, if
any, of such Debt Security not to be so repaid (Section 305).
MERGER, CONSOLIDATION OR SALE
PTR may consolidate with, or sell, lease or convey all or substantially all
of its assets to, or merge with or into, any other entity, provided that (a)
either PTR shall be the continuing entity, or the successor entity (if other
than PTR) formed by or resulting from any such consolidation or merger or which
shall have received the transfer of such assets is a Person organized and
existing under the laws of the United States or any State thereof and shall
expressly assume payment of the principal of (and premium or Make-Whole Amount,
if any) and any interest (including Additional Amounts, if any) on all of 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 PTR or any Subsidiary as a result thereof as having been
incurred by PTR 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).
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CERTAIN COVENANTS
Limitations on Incurrence of Debt. PTR will not, and will not permit any
Subsidiary to, incur any Debt (as defined below) if, immediately after giving
effect to the incurrence of such additional Debt and the application of the
proceeds thereof, the aggregate principal amount of all outstanding Debt of PTR
and its Subsidiaries on a consolidated basis determined in accordance with
generally accepted accounting principles is greater than 60% of the sum of
(without duplication) (i) PTR's Total Assets (as defined below) as of the end
of the calendar quarter covered in PTR's Annual Report on Form 10-K or
Quarterly Report on Form 10-Q, as the case may be, most recently filed with the
Commission (or, if such filing is not permitted under the Exchange Act, with
the Trustee) prior to the incurrence of such additional Debt and (ii) the
purchase price of any real estate assets or mortgages receivable acquired, and
the amount of any securities offering proceeds received (to the extent that
such proceeds were not used to acquire real estate assets or mortgages
receivable or used to reduce Debt), by PTR or any Subsidiary since the end of
such calendar quarter, including those proceeds obtained in connection with the
incurrence of such additional Debt (Section 1004).
In addition to the foregoing limitation on the incurrence of Debt, PTR will
not, and will not permit any Subsidiary to, incur any Debt secured by any
mortgage, lien, charge, pledge, encumbrance or security interest of any kind
upon any of the property of PTR or any Subsidiary if, immediately after giving
effect to the incurrence of such additional Debt and the application of the
proceeds thereof, the aggregate principal amount of all outstanding Debt of PTR
and its Subsidiaries on a consolidated basis which is secured by any mortgage,
lien, charge, pledge, encumbrance or security interest on property of PTR or
any Subsidiary is greater than 40% of PTR's Total Assets (Section 1004).
In addition to the foregoing limitations on the incurrence of Debt, PTR will
not, and will not permit any Subsidiary to, incur any Debt if the ratio of
Consolidated Income Available for Debt Service (as defined below) to the Annual
Service Charge (as defined below) for the four consecutive fiscal quarters most
recently ended prior to the date on which such additional Debt is to be
incurred shall have been less than 1.5, on a pro forma basis after giving
effect thereto and to the application of the proceeds therefrom, and calculated
on the assumption that (i) such Debt and any other Debt incurred by PTR and its
Subsidiaries since the first day of such four-quarter period and the
application of the proceeds therefrom, including to refinance other Debt, had
occurred at the beginning of such period; (ii) the repayment or retirement of
any other Debt by PTR and its Subsidiaries since the first day of such four-
quarter period had been incurred, repaid or retired at the beginning of such
period (except that, in making such computation, the amount of Debt under any
revolving credit facility shall be computed based upon the average daily
balance of such Debt during such period); (iii) in the case of Acquired Debt
(as defined below) or Debt incurred in connection with any acquisition since
the first day of such four-quarter period, the related acquisition had occurred
as of the first day of such period with the appropriate adjustments with
respect to such acquisition being included in such pro forma calculation; and
(iv) in the case of any acquisition or disposition by PTR or its Subsidiaries
of any asset or group of assets since the first day of such four-quarter
period, whether by merger, stock purchase or sale, or asset purchase or sale,
such acquisition or disposition or any related repayment of Debt had occurred
as of the first day of such period with the appropriate adjustments with
respect to such acquisition or disposition being included in such pro forma
calculation (Section 1004).
Existence. Except as permitted under "--Merger, Consolidation or Sale," PTR
will do or cause to be done all things necessary to preserve and keep in full
force and effect its existence, rights (charter and statutory) and franchises;
provided, however, that PTR 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 1005).
Maintenance of Properties. PTR will cause all of its properties used or
useful in the conduct of its business or the business of any Subsidiary to be
maintained and kept in good condition, repair and working order and supplied
with all necessary equipment and will cause to be made all necessary repairs,
renewals, replacements,
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betterments and improvements thereof, all as in the judgment of PTR may be
necessary so that the business carried on in connection therewith may be
properly and advantageously conducted at all times; provided, however, that PTR
and its Subsidiaries shall not be prevented from selling or otherwise disposing
for value its properties in the ordinary course of business (Section 1006).
Insurance. PTR will, and will 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 1007).
Payment of Taxes and Other Claims. PTR will pay or discharge or cause to be
paid or discharged, before the same shall become delinquent, (i) all taxes,
assessments and governmental charges levied or imposed upon it or any
Subsidiary or upon the income, profits or property of PTR or any Subsidiary,
and (ii) all lawful claims for labor, materials and supplies which, if unpaid,
might by law become a lien upon the property of PTR or any Subsidiary;
provided, however, that PTR shall not be required to pay or discharge or cause
to be paid or discharged any such tax, assessment, charge or claim whose
amount, applicability or validity is being contested in good faith by
appropriate proceedings (Section 1008).
Provision of Financial Information. Whether or not PTR is subject to Section
13 or 15(d) of the Exchange Act, PTR will, to the extent permitted under the
Exchange Act, file with the Commission the annual reports, quarterly reports
and other documents which PTR would have been required to file with the
Commission pursuant to such Section 13 and 15(d) (the "Financial Statements")
if PTR were so subject, such documents to be filed with the Commission on or
prior to the respective dates (the "Required Filing Dates") by which PTR would
have been required so to file such documents if PTR were so subject. PTR 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 PTR would have been required to file with
the Commission pursuant to Section 13 or 15(d) of the Exchange Act if PTR were
subject to such Sections and (ii) file with the Trustee copies of the annual
reports, quarterly reports and other documents which PTR would have been
required to file with the Commission pursuant to Section 13 or 15(d) of the
Exchange Act if PTR were subject to such Sections and (y) if filing such
documents by PTR with the Commission is not permitted under the Exchange Act,
promptly upon written request and payment of the reasonable cost of duplication
and delivery, supply copies of such documents to any prospective Holder
(Section 1009).
As used herein,
"Acquired Debt" means Debt of a Person (i) existing at the time such Person
becomes a Subsidiary or (ii) assumed in connection with the acquisition of
assets from such Person, in each case, other than Debt incurred in connection
with, or in contemplation of, such Person becoming a Subsidiary or such
acquisition. Acquired Debt shall be deemed to be incurred on the date of the
related acquisition of assets from any Person or the date the acquired Person
becomes a Subsidiary.
"Annual Service Charge" as of any date means the maximum amount which is
payable in any period for interest on, and original issue discount of, Debt of
PTR and its Subsidiaries and the amount of dividends which are payable in
respect of any Disqualified Stock.
"Capital Stock" means, with respect to any Person, any capital stock
(including preferred stock), shares, interests, participations or other
ownership interests (however designated) of such Person and any rights (other
than debt securities convertible into or exchangeable for corporate stock),
warrants or options to purchase any thereof.
"Consolidated Income Available for Debt Service" for any period means
Earnings from Operations (as defined below) of PTR and its Subsidiaries plus
amounts which have been deducted, and minus amounts which have been added, for
the following (without duplication): (a) interest on Debt of PTR and its
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Subsidiaries, (b) provision for taxes of PTR and its Subsidiaries based on
income, (c) amortization of debt discount, (d) provisions for gains and losses
on properties and property depreciation and amortization, (e) the effect of any
noncash charge resulting from a change in accounting principles in determining
Earnings from Operations for such period and (f) amortization of deferred
charges.
"Debt" of PTR or any Subsidiary means any indebtedness of PTR or any
Subsidiary, whether or not contingent, in respect of (i) borrowed money or
evidenced by bonds, notes, debentures or similar instruments, (ii) indebtedness
secured by any mortgage, pledge, lien, charge, encumbrance or any security
interest existing on property owned by PTR or any Subsidiary, (iii) the
reimbursement obligations, contingent or otherwise, in connection with any
letters of credit actually issued or amounts representing the balance deferred
and unpaid of the purchase price of any property or services, except any such
balance that constitutes an accrued expense or trade payable, or all
conditional sale obligations or obligations under any title retention
agreement, (iv) the principal amount of all obligations of PTR or any
Subsidiary with respect to redemption, repayment or other repurchase of any
Disqualified Stock or (v) any lease of property by PTR or any Subsidiary as
lessee which is reflected on PTR's Consolidated Balance Sheet as a capitalized
lease in accordance with generally accepted accounting principles to the
extent, in the case of items of indebtedness under (i) through (iii) above,
that any such items (other than letters of credit) would appear as a liability
on PTR's Consolidated Balance Sheet in accordance with generally accepted
accounting principles, and also includes, to the extent not otherwise included,
any obligation by PTR or any Subsidiary to be liable for, or to pay, as
obligor, guarantor or otherwise (other than for purposes of collection in the
ordinary course of business), Debt of another Person (other than PTR or any
Subsidiary) (it being understood that Debt shall be deemed to be incurred by
PTR or any Subsidiary whenever PTR or such Subsidiary shall create, assume,
guarantee or otherwise become liable in respect thereof).
"Disqualified Stock" means, with respect to any Person, any Capital Stock of
such Person which by the terms of such Capital Stock (or by the terms of any
security into which it is convertible or for which it is exchangeable or
exercisable), upon the happening of any event or otherwise (i) matures or is
mandatorily redeemable, pursuant to a sinking fund obligation or otherwise,
(ii) is convertible into or exchangeable or exercisable for Debt or
Disqualified Stock or (iii) is redeemable at the option of the holder thereof,
in whole or in part, in each case on or prior to the Stated Maturity of the
series of Debt Securities.
"Earnings from Operations" for any period means net earnings excluding gains
and losses on sales of investments, net as reflected in the financial
statements of PTR and its Subsidiaries for such period determined on a
consolidated basis in accordance with generally accepted accounting principles.
"Total Assets" as of any date means the sum of (i) PTR's Undepreciated Real
Estate Assets and (ii) all other assets of PTR determined in accordance with
generally accepted accounting principles (but excluding accounts receivable and
intangibles).
"Undepreciated Real Estate Assets" as of any date means the cost (original
cost plus capital improvements) of real estate assets of PTR and its
Subsidiaries on such date, before depreciation and amortization determined on a
consolidated basis in accordance with generally accepted accounting principles.
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 or Additional Amounts
payable on any Debt Security of such series; (b) default in the payment of the
principal of (or premium or Make-Whole Amount, if any, on) any Debt Security of
such series at its Maturity; (c) default in making any sinking fund payment as
required for any Debt Security of such series; (d) default in the performance
of any other covenant of PTR contained in the Indenture (other than a covenant
added to the Indenture solely for the benefit of a series of Debt Securities
issued thereunder other than such series), continued for 60 days after written
notice as provided in the Indenture; (e) default in the payment of an
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aggregate principal amount exceeding $10,000,000 of any evidence of
indebtedness of PTR 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) the entry by a court of competent jurisdiction of
one or more judgments, orders or decrees against PTR or any of its Subsidiaries
in an aggregate amount (excluding amounts fully covered by insurance) in excess
of $10,000,000 and such judgments, orders or decrees remain undischarged,
unstayed and unsatisfied in an aggregate amount (excluding amounts fully
covered by insurance) in excess of $10,000,000 for a period of 30 consecutive
days; (g) certain events of bankruptcy, insolvency or reorganization, or court
appointment of a receiver, liquidator or trustee of PTR or any Significant
Subsidiary or for all or substantially all of either of its property; and (h)
any other Event of Default provided with respect to a particular series of Debt
Securities (Section 501). The term "Significant Subsidiary" means each
significant subsidiary (as defined in Regulation S-X promulgated by the
Commission) of PTR.
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, and the Make-Whole Amount, if any, on,
all of the Debt Securities of that series to be due and payable immediately by
written notice thereof to PTR (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) 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) PTR shall have deposited with the Trustee all required
payments of the principal of (and premium or Make-Whole Amount, if any) and
interest, and any Additional Amounts, on the Debt Securities of such series (or
of all Debt Securities then outstanding under the Indenture, as the case may
be), plus certain fees, expenses, disbursements and advances of the Trustee and
(b) all Events of Default, other than the nonpayment of accelerated principal
(or specified portion thereof and the Make-Whole Amount, if any) or interest,
with respect to 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 or Make-Whole Amount, if any) or interest or
Additional Amounts payable on any Debt Security of such series or (y) in
respect of a covenant or provision contained in the Indenture that cannot be
modified or amended without the consent of the Holder of each Outstanding Debt
Security affected thereby (Section 513).
The Trustee is required to give notice to the Holders of Debt Securities
within 90 days of a default under the Indenture; 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 or Make-Whole Amount, if any) or interest or
Additional Amounts payable on any Debt Security of such series or in the
payment of any sinking fund installment in respect of any Debt Security of such
series) if the Responsible Officers of 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
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an event of Default from the Holders of not less than 25% in principal amount
of the Outstanding Debt Securities of such series, as well as an offer of
reasonable indemnity (Section 507). This provision will not prevent, however,
any Holder of Debt Securities from instituting suit for the enforcement of
payment of the principal of (and premium or Make-Whole Amount, if any),
interest on, and Additional Amounts payable with respect to, such Debt
Securities at the respective due dates thereof (Section 508).
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 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, PTR must deliver to the
Trustee a certificate, signed by one of several specified officers, 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
(Section 1010).
MODIFICATION OF THE INDENTURE
Modifications and amendments of the Indenture may be made with the consent of
the Holders of not less than a majority in principal amount of all 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 or Make-Whole Amount, if any), or any
installment of principal of or interest or Additional Amounts payable on, any
such Debt Security; (b) reduce the principal amount of, or the rate or amount
of interest on, or any premium or Make-Whole Amount payable on redemption of,
or any Additional Amounts payable with respect to, any such Debt Security, or
reduce the amount of principal of an Original Issue Discount Security or Make-
Whole Amount, if any, that would be due and payable upon declaration of
acceleration of the maturity thereof or would be provable in bankruptcy, or
adversely affect any right of repayment of the Holder of any such Debt
Security; (c) change the Place of Payment, or the coin or currency, for payment
of principal of (and premium or Make-Whole Amount, if any), or interest on, or
any Additional Amounts payable with respect to, any such Debt Security; (d)
impair the right to institute suit for the enforcement of any payment on or
with respect to any such Debt Security; (e) reduce the 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 Holders of not less than a majority in principal amount of Outstanding
Debt Securities have the right to waive compliance by PTR with certain
covenants in the Indenture (Section 1012).
Modifications and amendments of the Indenture may be made by PTR 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 PTR as
obligor under the Indenture; (ii) to add to the covenants of PTR for the
benefit of the Holders of all or any series of Debt Securities or to surrender
any right or power conferred upon PTR 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
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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 and any related coupons; (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 or to make
any other changes, provided that in each case, such action shall not adversely
affect the interests of Holders of Debt Securities of any series in any
material respect; (x) to close the Indenture with respect to the authentication
and delivery of additional series of Debt Securities or to qualify, or maintain
qualification of, the Indenture under the TIA; or (xi) 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 United States 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 United States dollar equivalent on the
issue date of such Debt Security of the amount determined as provided in (i)
above), (iii) the principal amount of an Indexed Security that shall be deemed
outstanding shall be the principal face amount of such Indexed Security at
original issuance, unless otherwise provided with respect to such Indexed
Security pursuant to Section 301 of the Indenture, and (iv) Debt Securities
owned by PTR or any other obligor upon the Debt Securities or any Affiliate of
PTR or of such other obligor shall be disregarded (Section 101).
The Indenture contains provisions for convening meetings of the Holders of
Debt Securities of a series (Section 1501). A meeting may be called at any time
by the Trustee, and also, upon request, by PTR 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 may be adopted by the affirmative vote of the Holders of a majority
in principal amount of the Outstanding Debt Securities of that series;
provided, however, that, except as referred to above, any resolution with
respect to any request, demand, authorization, direction, notice, consent,
waiver or other action that may be made, given or taken by the Holders of a
specified percentage, which is less than a majority, in principal amount of the
Outstanding Debt Securities of a series may be adopted at a meeting or
adjourned meeting duly reconvened at which a quorum is present by the
affirmative vote of the Holders of such specified percentage in principal
amount of the Outstanding Debt Securities of that series. Any resolution passed
or decision taken at any meeting of Holders of Debt Securities of any series
duly held in accordance with the Indenture will be binding on all Holders of
Debt Securities of that series. The quorum at any meeting called to adopt a
resolution, and at any reconvened meeting, will be Persons holding or
representing a majority in principal amount of the Outstanding Debt Securities
of a series; provided, however, that if any action is to be taken at such
meeting with respect to a consent or waiver which may be given by the Holders
of not less than a specified percentage in principal amount of the Outstanding
Debt Securities of a series, the Persons holding or representing such specified
percentage in principal amount of the Outstanding Debt Securities of such
series will constitute a quorum (Section 1504).
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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).
Any request, demand, authorization, direction, notice, consent, waiver or
other action provided by the Indenture to be given or taken by a specified
percentage in principal amount of the Holders of any or all series of Debt
Securities may be embodied in and evidenced by one or more instruments of
substantially similar tenor signed by such specified percentage of Holders in
person or by agent duly appointed in writing; and, except as otherwise
expressly provided in the Indenture, such action shall become effective when
such instrument or instruments are delivered to the Trustee. Proof of execution
of any instrument or of a writing appointing any such agent shall be sufficient
for any purpose of the Indenture and (subject to Article Six) conclusive in
favor of the Trustee and PTR, if made in the manner specified above (Section
1507).
DISCHARGE, DEFEASANCE AND COVENANT DEFEASANCE
PTR 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 or Make-Whole
Amount, if any) and interest and Additional Amounts payable to the date of such
deposit (if such Debt Securities have become due and payable) or to the Stated
Maturity or Redemption Date, as the case may be (Section 401).
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, PTR may elect either (a) to defease and be discharged
from any and all obligations with respect to such Debt Securities (except for
the obligation to pay Additional Amounts, if any, upon the occurrence of
certain events of tax, assessment or governmental charge with respect to
payments on such Debt Securities and the obligations to register the transfer
or exchange of such Debt Securities, to replace temporary or mutilated,
destroyed, lost or stolen Debt Securities, to maintain an office or agency in
respect of such Debt Securities and to hold moneys for payment in trust)
("defeasance") (Section 1402) or (b) to be released from its obligations with
respect to such Debt Securities under Sections 1004 to 1009, inclusive, of the
Indenture (being the restrictions described under "--Certain Covenants") and,
if provided pursuant to Section 301 of the Indenture, its obligations with
respect to any other covenant, and any omission to comply with such obligations
shall not constitute a default or an Event of Default with respect to such Debt
Securities ("covenant defeasance") (Section 1403), in either case upon the
irrevocable deposit by PTR 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 or Make-Whole Amount, if any) and interest on
such Debt Securities, and any mandatory sinking fund or analogous payments
thereon, on the scheduled due dates therefor.
Such a trust may only be established if, among other things, PTR 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
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recognize income, gain or loss for United States federal income tax purposes as
a result of such defeasance or covenant defeasance and will be subject to
United States federal income tax on the same amounts, in the same manner and at
the same times as would have been the case if such defeasance or covenant
defeasance had not occurred, and such Opinion of Counsel, in the case of
defeasance, must refer to and be based upon a ruling of the Internal Revenue
Service or a change in applicable United States federal income tax 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 (Section 101).
Unless otherwise provided in the applicable Prospectus Supplement, if after
PTR has deposited funds and/or Government Obligations to effect defeasance or
covenant defeasance with respect to Debt Securities of any series, (a) the
Holder of a Debt Security of such series is entitled to, and does, elect
pursuant to Section 301 of 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 or Make-Whole Amount, if any) and interest on such
Debt Security as they become due out of the proceeds yielded by converting the
amount so deposited in respect of such Debt Security into the currency,
currency unit or composite currency in which such Debt Security becomes payable
as a result of such election or such cessation of usage based on the applicable
market exchange rate (Section 1405). "Conversion Event" means the cessation of
use of (i) a currency, currency unit or composite currency (other than the ECU
or other currency unit) both by the government of the country which issued such
currency and for the settlement of transactions by a central bank or other
public institutions of or within the international banking community, (ii) the
ECU both within the European Monetary System and for the settlement of
transactions by public institutions of or within the European Communities or
(iii) any currency unit or composite currency other than the ECU for the
purposes for which it was established. Unless otherwise provided in the
applicable Prospectus Supplement, all payments of principal of (and premium or
Make-Whole Amount, if any) and interest on any Debt Security that is payable in
a Foreign Currency that ceases to be used by its government of issuance shall
be made in United States dollars (Section 101).
In the event PTR effects covenant defeasance with respect to any Debt
Securities and such Debt Securities are declared due and payable because of the
occurrence of any Event of Default other than the Event of Default described in
clause (d) under "--Events of Default, Notice and Waiver" with respect to
Sections 1004 to 1009, inclusive, of 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
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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, PTR 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.
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 ("Global Securities") that will be deposited
with, or on behalf of, a depository (the "Depository") identified in the
applicable Prospectus Supplement relating to such series. Global Securities, if
any, are expected to be deposited with The Depository Trust Company, as
Depository. Global Securities may be issued in fully registered form and may be
issued in either temporary or permanent form. Unless and until it is exchanged
in whole or in part for the individual Debt Securities represented thereby, a
Global Security may not be transferred except as a whole by the Depository for
such Global Security to a nominee of such Depository or by a nominee of such
Depository to such Depository or another nominee of such Depository or by the
Depository or any nominee of such Depository to a successor Depository or any
nominee of such successor.
The specific terms of the depository arrangement with respect to a series of
Debt Securities will be described in the applicable Prospectus Supplement
relating to such series. Unless otherwise indicated in the applicable
Prospectus Supplement, PTR anticipates that the following provisions will apply
to depository arrangements.
Upon the issuance of a Global Security, the Depository for such Global
Security or its nominee will credit on its book-entry registration and transfer
system the respective principal amounts of the individual Debt Securities
represented by such Global Security to the accounts of persons that have
accounts with such Depository ("Participants"). Such accounts shall be
designated by the underwriters, dealers or agents with respect to such Debt
Securities or by PTR if such Debt Securities are offered and sold directly by
PTR. Ownership of beneficial interests in a Global Security will be limited to
Participants or persons that may hold interests through Participants. Ownership
of beneficial interests in such Global Security will be shown on, and the
transfer of that ownership will be effected only through, records maintained by
the applicable Depository or its nominee (with respect to beneficial interests
of Participants) and records of Participants (with respect to beneficial
interests of persons who hold through Participants). The laws of some states
require that certain purchasers of securities take physical delivery of such
securities in definitive form. Such limits and laws may impair the ability to
own, pledge or transfer beneficial interest in a Global Security.
So long as the Depository for a Global Security or its nominee is the
registered owner of such Global Security, such Depository or such nominee, as
the case may be, will be considered the sole owner or holder of the Debt
Securities represented by such Global Security for all purposes under the
Indenture. Except as provided below or in the applicable Prospectus Supplement,
owners of beneficial interest in a Global Security will not be entitled to have
any of the individual Debt Securities of the series represented by such Global
Security registered in their names, will not receive or be entitled to receive
physical delivery of any such Debt Securities of such series in definitive form
and will not be considered the owners or holders thereof under the Indenture.
Payments of principal of, any premium or Make-Whole Amount and any interest
on, or any Additional Amounts payable with respect to, individual Debt
Securities represented by a Global Security registered in the name of a
Depository or its nominee will be made to the Depository or its nominee, as the
case may be, as the registered owner of the Global Security representing such
Debt Securities. None of PTR, the Trustee, any Paying Agent or the Security
Registrar for such Debt Securities will have any responsibility or liability
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for any aspect of the records relating to or payments made on account of
beneficial ownership interests in the Global Security for such Debt Securities
or for maintaining, supervising or reviewing any records relating to such
beneficial ownership interests.
PTR expects that the Depository for a series of Debt Securities or its
nominee, upon receipt of any payment of principal, premium, Make-Whole Amount
or interest in respect of a permanent Global Security representing any of such
Debt Securities, immediately will credit Participants' accounts with payments
in amounts proportionate to their respective beneficial interests in the
principal amount of such Global Security for such Debt Securities as shown on
the records of such Depository or its nominee. PTR also expects that payments
by Participants to owners of beneficial interests in such Global Security held
through such Participants will be governed by standing instructions and
customary practices, as is the case with securities held for the account of
customers in bearer form or registered in "street name." Such payments will be
the responsibility of such Participants.
If a Depository for a series of Debt Securities is at any time unwilling,
unable or ineligible to continue as depository and a successor depository is
not appointed by PTR within 90 days, PTR will issue individual Debt Securities
of such series in exchange for the Global Security representing such series of
Debt Securities. In addition, PTR may, at any time and in its sole discretion,
subject to any limitations described in the applicable Prospectus Supplement
relating to such Debt Securities, determine not to have any Debt Securities of
such series represented by one or more Global Securities and, in such event,
will issue individual Debt Securities of such series in exchange for the Global
Security or Securities representing such series of Debt Securities. Individual
Debt Securities of such series so issued will be issued in denominations,
unless otherwise specified by PTR, of $1,000 and integral multiples thereof.
NO PERSONAL LIABILITY
No past, present or future trustee, officer, employee or shareholder, as
such, of PTR or any successor thereof shall have any liability for any
obligations of PTR under the Debt Securities or the Indenture or for any claim
based on, in respect of, or by reason of, such obligations or their creation.
Each Holder of Debt Securities by accepting such Debt Securities waives and
releases all such liability. The waiver and release are part of the
consideration for the issue of Debt Securities (Section 111).
DESCRIPTION OF COMMON SHARES
GENERAL
PTR has 150 million Shares of Beneficial Interest, $1.00 par value,
authorized. On November 11, 1994, PTR had 50,397,188 Common Shares issued and
outstanding, which were held of record by approximately 3,450 shareholders. PTR
has reserved 150,000 Common Shares for issuance upon the exercise of options
pursuant to the Property Trust of America Share Option Plan for Outside
Trustees. In addition, PTR held 164,478 Common Shares in treasury as of
November 11, 1994 and 11,189,040 Common Shares were reserved for issuance upon
conversion of Series A Preferred Shares.
The following description sets forth certain general terms and provisions of
the Common Shares to which any Prospectus Supplement may relate, including a
Prospectus Supplement which provides for Common Shares issuable upon conversion
of Preferred Shares. The statements below describing the Common Shares are in
all respects subject to and qualified in their entirety by reference to the
applicable provisions of PTR's Restated Declaration of Trust and Bylaws.
The outstanding Common Shares are fully paid and, except as set forth below
under "--Shareholder Liability," non-assessable. Each Common Share has one vote
on all matters requiring a vote of shareholders. Holders of Common Shares do
not have the right to cumulate their votes in the election of Trustees. Holders
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of Common Shares are entitled to receive dividends when, as and if declared by
the Board of Trustees. Common Shares do not have preemptive, redemption or
conversion rights or the benefit of a sinking fund. In the event of a
liquidation, dissolution or winding up of PTR, the holders of the Common Shares
are entitled to receive ratably the assets remaining after satisfaction of all
liabilities and payment of liquidation preferences and accrued dividends, if
any, on the Series A Preferred Shares, any classes of preferred shares ranking
on a parity with the Series A Preferred Shares with respect to the payment of
dividends and amounts upon dissolution and winding up ("Parity Shares") and any
preferred shares ranking senior to the Parity Shares with respect to the
payment of dividends or amounts upon liquidation, dissolution or winding up.
The right of holders of the Common Shares are subject to the rights and
preferences established by the Trustees for any preferred shares which may
subsequently be issued by PTR. See "Description of Preferred Shares."
PURCHASE RIGHTS
On July 11, 1994, the Board of Trustees declared a dividend of one preferred
share purchase right (a "Purchase Right") for each Common Share outstanding,
payable to holders of Common Shares of record at the close of business on July
21, 1994. Each Purchase Right entitles the holder under certain circumstances
to purchase from PTR one one-hundredth of a share of Series B Junior
Participating Preferred Shares, par value $1.00 per share (the "Participating
Preferred Shares") at a price of $60.00 per one one-hundredth of a
Participating Preferred Share, subject to adjustment. Purchase Rights are
exercisable when a person or group of persons acquires 20% or more of the
outstanding Common Shares (49% in the case of Security Capital Realty and
certain defined affiliates) or announces a tender offer for 25% or more of the
outstanding Common Shares. Under certain circumstances, each Purchase Right
entitles the holder to purchase, at the Purchase Right's then current exercise
price, a number of Common Shares having a market value of twice the Purchase
Right's exercise price. The acquisition of PTR pursuant to certain mergers or
other business transactions would entitle each holder to purchase, at the
Purchase Right's then current exercise price, a number of the acquiring
company's common shares having a market value at that time equal to twice the
Purchase Right's exercise price. The Purchase Rights held by certain 20%
shareholders (other than Security Capital Realty) would not be exercisable. The
Purchase Rights will expire in July 2004 and are subject to redemption in
whole, but not in part, at a price of $0.01 per Purchase Right payable in cash,
shares of PTR or any other form of consideration determined by PTR's Board of
Trustees.
TRANSFER AGENT
The transfer agent and registrar for the Common Shares is Chemical Bank, P.O.
Box 3068, JAF Building, New York, New York 10116-3068. The Common Shares are
listed on the NYSE under the symbol "PTR."
RESTRICTION ON SIZE OF HOLDINGS
PTR's Restated Declaration of Trust restricts beneficial ownership of PTR's
outstanding capital shares by a single person, or persons acting as a group, to
9.8% of PTR's Common Shares. Beneficial ownership of Common Shares includes
Common Shares which a person may acquire upon conversion of Preferred Shares,
including Series A Preferred Shares. The purposes of these provisions are to
assist in protecting and preserving PTR's REIT status and to protect the
interest of shareholders in takeover transactions by preventing the acquisition
of a substantial block of shares unless the acquiror makes a cash tender offer
for all outstanding shares. For PTR 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 by five or fewer individuals at any
time during the last half of PTR's taxable year. The provision permits five
persons to acquire up to a maximum of 9.8% of the Common Shares each, or an
aggregate of 49% of the outstanding Common Shares, and, thus, assists the
Trustees in protecting and preserving PTR's REIT status for tax purposes.
Capital shares owned by a person or group of persons in excess of 9.8% (49%
in the case of Security Capital Realty and certain defined affiliates) of PTR's
outstanding Common Shares ("Excess Shares") are subject to redemption by PTR,
at its option, upon 30 days' notice, at a price equal to the average daily per
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share closing sale price during the 30-day period ending on the business day
prior to the redemption date. PTR may make payment of the redemption price at
any time or times up to the earlier of five years after the redemption date or
liquidation of PTR. PTR may refuse to effect the transfer of any Common Shares
which would make the transferee a holder of Excess Shares. Shareholders of PTR
are required to disclose, upon demand of the Board of Trustees, such
information with respect to their direct and indirect ownership of Common
Shares as the Board of Trustees deems necessary to comply with the provisions
of the Code pertaining to qualification, for tax purposes, of REITs, or to
comply with the requirements of any other appropriate taxing authority.
The 9.8% restriction does not apply to acquisitions by an underwriter in a
public offering and sale of Common Shares or to any transaction involving the
issuance of Common Shares in which a majority of the Board of Trustees
determines that the eligibility of PTR to qualify as a REIT for federal income
tax purposes will not be jeopardized or the disqualification of PTR as a REIT
is advantageous to the shareholders. Security Capital Realty's ownership of
Common Shares is attributed for tax purposes to its shareholders. The Board of
Trustees has permitted Security Capital Realty to acquire up to 49% of PTR's
outstanding Common Shares.
TRUSTEE LIABILITY
PTR's Restated Declaration of Trust provides that Trustees shall not be
individually liable for any obligation or liability incurred by or on behalf of
PTR or by Trustees for the benefit and on behalf of PTR. Under the Restated
Declaration of Trust and Maryland law respecting REITs, Trustees are not liable
to PTR or the shareholders for any act or omission except for acts or omissions
which constitute bad faith, willful misfeasance, gross negligence or reckless
disregard of duties to PTR and its shareholders.
SHAREHOLDER LIABILITY
Both Maryland statutory law governing REITs organized under the laws of that
state (the "Maryland REIT Law") and PTR's Restated Declaration of Trust provide
that shareholders shall not be personally or individually liable for any debt,
act, omission or obligation of PTR or the Trustees. PTR's Restated Declaration
of Trust further provides that PTR shall indemnify and hold each shareholder
harmless from all claims and liabilities to which the shareholder may become
subject by reason of his being or having been a shareholder and that PTR shall
reimburse each shareholder for all legal and other expenses reasonably incurred
by the shareholder in connection with any such claim or liability, except to
the extent that such claim or liability arises out of the shareholder's bad
faith, willful misconduct or gross negligence and provided that such
shareholder gives PTR prompt notice of any such claim or liability and permits
PTR to conduct the defense thereof. In addition, PTR is required to, and as a
matter of practice does, insert a clause in its management and other contracts
providing that shareholders assume no personal liability for obligations
entered into on behalf of PTR. Nevertheless, with respect to tort claims,
contractual claims where shareholder liability is not so negated, claims for
taxes and certain statutory liability, the shareholders may, in some
jurisdictions, be personally liable to the extent that such claims are not
satisfied by PTR. Inasmuch as PTR carries public liability insurance which it
considers adequate, any risk of personal liability to shareholders is limited
to situations in which PTR's assets plus its insurance coverage would be
insufficient to satisfy the claims against PTR and its shareholders.
DESCRIPTION OF PREFERRED SHARES
GENERAL
Subject to limitations prescribed by Maryland law and the Restated
Declaration of Trust, the Board of Trustees is authorized to issue, from the
authorized but unissued capital shares of PTR, Preferred Shares in series and
to establish from time to time the number of Preferred Shares to be included in
such series and to fix the designation and any preferences, conversion and
other rights, voting powers, restrictions, limitations
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as to dividends, qualifications and terms and conditions of redemption of the
shares of each series, and such other subjects or matters as may be fixed by
resolution of the Board of Trustees or duly authorized committee thereof. On
November 11, 1994, PTR had 9,200,000 of its Series A Preferred Shares, issued
and outstanding and held of record by approximately 100 shareholders.
Reference is made to the Prospectus Supplement relating to the Preferred
Shares offered thereby for specific terms, including:
(1) The title and stated value of such Preferred Shares;
(2) The number of shares of such Preferred Shares offered, the
liquidation preference per share and the offering price of such Preferred
Shares;
(3) The dividend rate(s), period(s) and/or payment date(s) or method(s)
of calculation thereof applicable to such Preferred Shares;
(4) The date from which dividends on such Preferred Shares shall
cumulate, if applicable;
(5) The procedures for any auction and remarketing, if any, for such
Preferred Shares;
(6) The provision for a sinking fund, if any, for such Preferred Shares;
(7) The provision for redemption, if applicable, of such Preferred
Shares;
(8) Any listing of such Preferred Shares on any securities exchange;
(9) The terms and conditions, if applicable, upon which such Preferred
Shares will be convertible into Common Shares of PTR, including the
conversion price (or manner of calculation thereof);
(10) Whether interests in such Preferred Shares will be represented by
Global Securities;
(11) Any other specific terms, preferences, rights, limitations or
restrictions of such Preferred Shares;
(12) A discussion of federal income tax considerations applicable to such
Preferred Shares;
(13) The relative ranking and preferences of such Preferred Shares as to
dividend rights and rights upon liquidation, dissolution or winding up of
the affairs of PTR;
(14) Any limitations on issuance of any series of preferred stock ranking
senior to or on a parity with such series of Preferred Shares as to
dividend rights and rights upon liquidation, dissolution or winding up of
the affairs of PTR; 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
PTR as a REIT.
RANK
Unless otherwise specified in the Prospectus Supplement, the Preferred Shares
will, with respect to dividend rights and rights upon liquidation, dissolution
or winding up of PTR, rank (i) senior to all classes or series of Common
Shares, and to all equity securities ranking junior to such Preferred Shares;
(ii) on a parity with all equity securities issued by PTR the terms of which
specifically provide that such equity securities rank on a parity with the
Preferred Shares; and (iii) junior to all equity securities issued by PTR the
terms of which specifically provide that such equity securities rank senior to
the Preferred Shares.
DIVIDENDS
Holders of Preferred Shares of each series shall be entitled to receive,
when, as and if declared by the Board of Trustees of PTR, out of assets of PTR
legally available for payment, cash dividends at such rates and on such dates
as will be set forth in the applicable Prospectus Supplement. Each such
dividend shall be payable to holders of record as they appear on the share
transfer books of PTR on such record dates as shall be fixed by the Board of
Trustees of PTR.
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Dividends on any series of the Preferred Shares may be cumulative or
noncumulative, 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 Trustees of PTR fails to
declare a dividend payable on a dividend payment date on any series of the
Preferred Shares for which dividends are noncumulative, then the holders of
such series of the Preferred Shares will have no right to receive a dividend in
respect of the dividend period ending on such dividend payment date, and PTR
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 Shares of any series are outstanding, no full dividends shall be
declared or paid or set apart for payment on the Preferred Shares of PTR of any
other series ranking, as to dividends, on a parity with or junior to the
Preferred Shares of such series for any period unless (i) if such series of
Preferred Shares 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 Shares of such
series for all past dividend periods and the then current dividend period or
(ii) if such series of Preferred Shares 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 Shares of such
series. When dividends are not paid in full (or a sum sufficient for such full
payment is not so set apart) upon the Preferred Shares of any series and the
shares of any other series of Preferred Shares ranking on a parity as to
dividends with the Preferred Shares of such series, all dividends declared upon
Preferred Shares of such series and any other series of Preferred Shares
ranking on a parity as to dividends with such Preferred Shares shall be
declared pro rata so that the amount of dividends declared per share on the
Preferred Shares of such series and such other series of Preferred Shares shall
in all cases bear to each other the same ratio that accrued dividends per share
on the Preferred Shares of such series (which shall not include any cumulation
in respect of unpaid dividends for prior dividend periods if such series of
Preferred Shares does not have a cumulative dividend) and such other series of
Preferred Shares 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 Shares of such series which may be in arrears.
Except as provided in the immediately preceding paragraph, unless (i) if such
series of Preferred Shares has a cumulative dividend, full cumulative dividends
on the Preferred Shares of such series have been or contemporaneously are
declared and paid or declared and a sum sufficient of 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 Shares does not have a cumulative
dividend, full dividends on the Preferred Shares of such series have been or
contemporaneously are declared and paid or declared and a sum sufficient for
the payment thereof set apart for payment for the then current dividend period,
no dividends (other than in Common Shares or other capital shares ranking
junior to the Preferred Shares 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 Shares or any other
capital shares of PTR ranking junior to or on a parity with the Preferred
Shares of such series as to dividends or upon liquidation, nor shall any Common
Shares or any other capital shares of PTR ranking junior to or on a parity with
the Preferred Shares 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
shares of any such shares) by PTR (except by conversion into or exchange for
other capital shares of PTR ranking junior to the Preferred Shares of such
series as to dividends and upon liquidation).
Any dividend payment made on a series of Preferred Shares shall first be
credited against the earliest accrued but unpaid dividend due with respect to
shares of such series which remains payable.
REDEMPTION
If so provided in the applicable Prospectus Supplement, the Preferred Shares
will be subject to mandatory redemption or redemption at the option of PTR, 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.
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The Prospectus Supplement relating to a series of Preferred Shares that is
subject to mandatory redemption will specify the number of such Preferred
Shares that shall be redeemed by PTR 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 series of Preferred Shares does not have a cumulative dividend, include
any cumulation 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 Shares of any series is payable only from the
net proceeds of the issuance of capital shares of PTR, the terms of such series
of Preferred Shares 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 Shares
shall automatically and mandatorily be converted into shares of the applicable
capital shares of PTR pursuant to conversion provisions specified in the
applicable Prospectus Supplement.
Notwithstanding the foregoing, unless (i) if such series of Preferred Shares
has a cumulative dividend, full cumulative dividends on all shares of any
series of Preferred Shares 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 Shares does not have a cumulative dividend,
full dividends on the Preferred Shares 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 Shares shall be redeemed unless all
outstanding Preferred Shares of such series are simultaneously redeemed;
provided, however, that the foregoing shall not prevent the purchase or
acquisition of Preferred Shares of such series pursuant to a purchase or
exchange offer made on the same terms to holders of all outstanding Preferred
Shares of such series, and, unless (i) if such series of Preferred Shares has a
cumulative dividend, full cumulative dividends on all outstanding shares of any
series of Preferred Shares 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 Shares does not have a cumulative dividend, full
dividends on the Preferred Shares 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, PTR shall not
purchase or otherwise acquire directly or indirectly any shares of Preferred
Shares of such series (except by conversion into or exchange for capital shares
of PTR ranking junior to the Preferred Shares of such series as to dividends
and upon liquidation).
If fewer than all of the outstanding Preferred Shares of any series are to be
redeemed, the number of shares to be redeemed will be determined by PTR 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 by such holders (with
adjustments to avoid redemption of fractional shares) or by lot in a manner
determined by PTR.
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 Shares of
any series to be redeemed at the address shown on the share transfer books of
PTR. Each notice shall state: (i) the redemption date; (ii) the number of
shares and series of the Preferred Shares to be redeemed; (iii) the redemption
price; (iv) the place or places where certificates for such Preferred Shares
are to be surrendered for payment of the redemption price; (v) that dividends
on the shares to be redeemed will cease to accrue on such redemption date; and
(vi) the date upon which the holder's conversion rights, if any, as to such
shares shall terminate. If fewer than all the Preferred Shares of any series
are to be redeemed, the notice mailed to each such holder thereof shall also
specify the number of Preferred Shares to be redeemed from each such holder. If
notice of redemption of any Preferred Shares has been given and if the funds
necessary for such redemption have been set aside by PTR in trust for the
benefit of the holders of any Preferred Shares so called for redemption, then
from and after the redemption date dividends will cease to accrue on such
Preferred Shares, and all rights of the holders of such shares will terminate,
except the right to receive the redemption price.
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LIQUIDATION PREFERENCE
Upon any voluntary or involuntary liquidation, dissolution or winding up of
the affairs of PTR, then, before any distribution or payment shall be made to
the holders of any Common Shares or any other class or series of capital shares
of PTR ranking junior to the Preferred Shares in the distribution of assets
upon any liquidation, dissolution or winding up of PTR, the holders of each
series of Preferred Shares shall be entitled to receive out of assets of PTR
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 cumulation in respect of unpaid
dividends for prior dividend periods if such series of Preferred Shares 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
Shares will have no right or claim to any of the remaining assets of PTR. In
the event that, upon any such voluntary or involuntary liquidation, dissolution
or winding up, the available assets of PTR are insufficient to pay the amount
of the liquidating distributions on all outstanding Preferred Shares and the
corresponding amounts payable on all shares of other classes or series of
capital shares of PTR ranking on a parity with the Preferred Shares in the
distribution of assets, then the holders of the Preferred Shares 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 Shares, the remaining assets of PTR shall be distributed among the
holders of any other classes or series of capital shares ranking junior to the
Preferred Shares 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
PTR with or into any other corporation, or the sale, lease or conveyance of all
or substantially all of the property or business of PTR, shall not be deemed to
constitute a liquidation, dissolution or winding up of PTR.
VOTING RIGHTS
Holders of the Preferred Shares 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. The following is a summary
of the voting rights applicable to the Series A Preferred Shares, which, unless
provided otherwise in the applicable Prospectus Supplement, will apply to each
series of Preferred Shares.
If six quarterly dividends (whether or not consecutive) payable on the Series
A Preferred Shares or any other Parity Shares are in arrears, whether or not
earned or declared, the number of Trustees then constituting the Board of
Trustees of PTR will be increased by two, and the holders of Series A Preferred
Shares, voting together as a class with the holders of any other series of
Parity Shares (any such other series, the "Voting Preferred Shares"), will have
the right to elect two additional trustees to serve on PTR's Board of Trustees
at any annual meeting of shareholders or a properly called special meeting of
the holders of Series A Preferred Shares and such Voting Preferred Shares and
at each subsequent annual meeting of shareholders until all such dividends and
dividends for the current quarterly period on the Series A Preferred Shares and
such other Voting Preferred Shares have been paid or declared and set aside for
payment. Such voting rights will terminate when all such accrued and unpaid
dividends have been declared and paid or set aside for payment. The term of
office of all trustees so elected will terminate with the termination of such
voting rights. For so long as Security Capital Realty and certain of its
affiliates beneficially own in excess of 10% of the outstanding Common Shares,
in any such vote by holders of Series A Preferred Shares, Security Capital
Realty and certain of its affiliates shall vote their Series A Preferred
Shares, if any, in the same respective percentages as the Series A Preferred
Shares and Voting Preferred Shares that are not held by such persons.
The approval of two-thirds of the outstanding Series A Preferred Shares and
all other series of Voting Preferred Shares similarly affected, voting as a
single class, is required in order to (i) amend PTR's Declaration of Trust to
affect materially and adversely the rights, preferences or voting power of the
holders
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of the Series A Preferred Shares or the Voting Preferred Shares, (ii) enter
into a share exchange that affects the Series A Preferred Shares, consolidate
with or merge into another entity, or permit another entity to consolidate with
or merge into PTR, unless in each such case each Series A Preferred Share
remains outstanding without a material and adverse change to its terms and
rights or is converted into or exchanged for convertible preferred stock of the
surviving entity having preferences, conversion or other rights, voting powers,
restrictions, limitations as to dividends, qualifications and terms or
conditions of redemption thereof identical to that of a Series A Preferred
Share (except for changes that do not materially and adversely affect the
holders of the Series A Preferred Shares) or (iii) authorize, reclassify,
create, or increase the authorized amount of any class of stock having rights
senior to the Series A Preferred Shares with respect to the payment of
dividends or amounts upon liquidation, dissolution or winding up. However, PTR
may create additional classes of Parity Shares and Junior Shares, increase the
authorized number of Parity Shares and Junior Shares and issue additional
series of Parity Shares and Junior Shares without the consent of any holder of
Series A Preferred Shares.
Except as provided above and as required by law, the holders of Series A
Preferred Shares are not entitled to vote on any merger or consolidation
involving PTR or a sale of all or substantially all of the assets of PTR.
CONVERSION RIGHTS
The terms and conditions, if any, upon which shares of any series of
Preferred Shares are convertible into Common Shares will be set forth in the
applicable Prospectus Supplement relating thereto. Such terms will include the
number of Common Shares into which the Preferred Shares are convertible, the
conversion price (or manner of calculation thereof), the conversion period,
provisions as to whether conversion will be at the option of the holders of the
Preferred Shares or PTR, the events requiring an adjustment of the conversion
price and provisions affecting conversion in the event of the redemption of
such Preferred Shares.
RESTRICTIONS ON OWNERSHIP
As discussed above under "Description of Common Shares--Restriction on Size
of Holdings," for PTR to qualify as a REIT under the Code, not more than 50% in
value of its outstanding capital shares may be owned by five or fewer
individuals at any time during the last half of a taxable year, and the capital
stock must be beneficially owned by 100 or more persons during at least 335
days of PTR's taxable year of 12 months. Therefore, the Articles Supplementary
for each series of Preferred Shares will contain certain provisions restricting
the ownership and transfer of the Preferred Shares (the "Preferred Shares
Ownership Limit Provision"). Except as otherwise described in the applicable
Prospectus Supplement relating thereto, the provisions of each Articles
Supplementary relating to the Preferred Shares Ownership Limit will provide (as
in the case of the Series A Preferred Shares) as summarized below.
The Preferred Shares Ownership Limit Provision will provide that, subject to
certain exceptions contained in such Articles Supplementary, no person, or
persons acting as a group, may beneficially own more than 25% of any series of
Preferred Shares outstanding at any time, except as a result of PTR's
redemption of Preferred Shares. Shares acquired in excess of the Preferred
Shares Ownership Limit Provision must be redeemed by PTR at a price equal to
the average daily per share closing sale price during the 30-day period ending
on the business day prior to the redemption date. Such redemption is not
applicable if a person's ownership exceeds the limitations due solely to PTR's
redemption of Preferred Shares; provided that thereafter any additional
Preferred Shares acquired by such person shall be Excess Shares. See
"Description of Common Shares--Restriction on Size of Holdings." From and after
the date of notice of such redemption, the holder of the Preferred Shares thus
redeemed shall cease to be entitled to any distribution (other than
distributions declared prior to the date of notice of redemption), voting
rights and other benefits with respect to such shares except the right to
receive payment of the redemption price determined as described above. The
Preferred Shares Ownership Limit Provision may not be waived with respect to
certain affiliates of PTR.
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All certificates representing shares of Preferred Shares will bear a legend
referring to the restrictions described above.
FEDERAL INCOME TAX CONSIDERATIONS
This section is a summary of certain federal income tax matters of general
application pertaining to REITs under the Code. The discussion is based on
current law and does not purport to deal with all aspects of federal income
taxation that may be relevant to investors subject to special treatment under
federal income tax laws, such as investors subject to the Employee Retirement
Income Security Act of 1974, as amended, other tax exempt investors, dealers in
securities or foreign persons. The provisions of the Code pertaining to REITs
are highly technical and complex and sometimes involve mixed questions of fact
and law. In addition, this section does not discuss foreign, state or local
taxation. PTR has not requested and will not request a ruling from the Internal
Revenue Service (the "Service") with respect to any of the federal income tax
issues discussed below. Prospective investors should consult, and must depend
on, their own tax advisors regarding the federal, state, local, foreign and
other tax consequences of holding and disposing of Common Shares, Preferred
Shares or Debt Securities.
TAXATION OF PTR
PTR believes that it has been organized and operated, and it intends to
continue to operate, in a manner qualifying it as a REIT under Sections 856
through 860 of the Code, but no assurance can be given that it will at all
times so qualify. PTR's ability to qualify as a REIT under the requirements of
the Code and the regulations promulgated thereunder is dependent upon actual
operating results.
To qualify as a REIT under the Code for a taxable year, PTR 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. First, its principal activities must be real
estate related. Generally, at least 75% of the value of the total assets of PTR
at the end of each calendar quarter must consist of real estate assets, cash or
governmental securities and for each taxable year at least 75% of its gross
income must be from real estate sources, including rents from real property and
interest on mortgage obligations. PTR may not own more than 10% of the
outstanding voting securities of any corporation; shares of qualified REITs,
qualified temporary investments and shares of certain wholly owned subsidiaries
are exempt from this prohibition. PTR holds assets through certain wholly owned
subsidiary corporations that it believes qualify for the exemption.
Additionally, gross income from the sale or other disposition of stock and
securities held for less than one year and of real property held for less than
four years must constitute less than 30% of the gross income for each taxable
year of a REIT. For each taxable year, at least 75% of a REIT's gross income
must be derived from specified real estate sources and 95% must be derived from
such real estate sources plus certain other permitted sources. Real estate
income for purposes of these requirements includes gains from the sale of real
property not held primarily for sale to customers in the ordinary course of
business, dividends on REIT shares, interest on loans secured by mortgages on
real property, certain rents from real property and income from foreclosure
property. For rents to qualify, they may not be based on the income or profits
of any person, except that they may be based on a percentage or percentages of
gross income or receipts, and, subject to certain limited exceptions, the REIT
may not manage the property or furnish services to tenants except through an
independent contractor which is paid an arm's-length fee and from which the
REIT derives no income.
PTR must satisfy certain ownership restrictions that limit (i) concentration
of ownership of capital stock by a few individuals and (ii) ownership by PTR of
its tenants. The outstanding capital stock of PTR must be held by at least 100
shareholders. No more than 50% in value of the outstanding capital stock,
including in some circumstances capital stock into which outstanding securities
might be converted, may be owned actually or constructively by five or fewer
individuals or certain other entities at any time during the last half of PTR's
taxable year. Accordingly, PTR's Restated Declaration of Trust restricts the
transfer of Common
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Shares, Preferred Shares and any other outstanding securities convertible into
Common Shares when necessary to maintain PTR's qualification as a REIT under
the Code. However, because the Code imposes broad attribution rules in
determining constructive ownership, no assurances can be given that the
restrictions of PTR's Restated Declaration of Trust will be effective in
maintaining PTR's REIT status. See "Description of Common Shares--Restriction
on Size of Holdings" and "Description of Preferred Shares--Restrictions on
Ownership." Because Security Capital Realty is a corporation, its ownership is
attributed proportionally to all of its shareholders.
So long as PTR qualifies for taxation as a REIT and distributes at least 95%
of its real estate investment trust taxable income (computed without regard to
net capital gains or the dividends-paid deduction) for its taxable year to its
shareholders annually, PTR itself will not be subject to federal income tax on
that portion of such income distributed to shareholders. PTR will be taxed at
regular corporate rates on all income not distributed to shareholders. PTR's
policy is to distribute at least 95% of its taxable income. REITs may also
incur taxes for certain other activities or to the extent distributions do not
satisfy certain other requirements.
Failure of PTR to qualify during any taxable year as a REIT could, unless
certain relief provisions were available, have a material adverse effect upon
its shareholders. If disqualified for taxation as a REIT for a taxable year,
PTR would also be disqualified for taxation as a REIT for the next four taxable
years, unless the failure was due to reasonable cause and not willful neglect.
PTR would be subject to federal income tax at corporate rates on all of its
taxable income and would not be able to deduct the dividends paid, which could
result in a discontinuation of or substantial reduction in dividends to
shareholders. Dividends would also be subject to the regular tax rules
applicable to dividends received by shareholders of corporations. Should the
failure to qualify be determined to have occurred retroactively in an earlier
tax year of PTR, the imposition of a substantial federal income tax liability
on PTR attributable to such nonqualifying tax years may adversely affect PTR's
ability to pay dividends. In the event that PTR fails to meet certain income
tests of the tax law, it may, generally, nonetheless retain its qualification
as a REIT if it pays a 100% tax on the amount by which it failed to meet the
income tests so long as its failure was due to reasonable cause and not willful
neglect. Any such taxes would adversely affect PTR's ability to pay dividends.
TAXATION OF THE SHAREHOLDERS OF PTR
As long as PTR qualifies as a REIT, distributions made to its shareholders
out of current or accumulated earnings and profits of PTR (which are not
designated as capital gain dividends) will generally be taxed to shareholders
as ordinary income either in the year of payment or, with respect to
distributions declared in the last quarter of any year and paid by January 31
of the following year, in the year of declaration and will not be eligible for
the dividends received deduction for corporations. PTR's earnings and profits
will first be allocated to any outstanding Preferred Shares. A distribution of
net capital gains by PTR will generally be treated as a long term capital gain
to shareholders to the extent properly designated by PTR as a capital gain
dividend and regardless of the length of time a shareholder has held his shares
of capital stock. Under Section 291 of the Code, however, corporate
shareholders may be required to treat up to 20% of any such capital gain as
ordinary income. Section 291 of the Code provides, in general, that if a
corporation sells or disposes of depreciable real property in a taxable
transaction, it must, to the extent of gain, include as ordinary income up to
20% of the depreciation previously taken on such property. Corporate
shareholders of a REIT are required to treat the portion of a capital gain
dividend attributable to the gain from the REIT's sale or exchange of
depreciable real property as subject to the 20% ordinary income rule. Capital
gains distributions are not eligible for the dividends-received deduction for
corporations. A dividend in excess of current or accumulated earnings and
profits will constitute a nontaxable return of capital, to the extent of the
shareholder's basis in his shares of capital stock, and is applied to reduce
the shareholder's basis in the shares of capital stock. To the extent such a
dividend is greater than such basis, it will be treated as capital gain to
those shareholders holding their shares of capital stock as capital assets. PTR
will notify shareholders as to the portions of each dividend which, in its
judgment, constitute ordinary income, capital gain dividends or return of
capital. Should PTR incur ordinary or capital losses, shareholders will not be
entitled to include such losses in their own income tax returns.
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<PAGE>
BACKUP WITHHOLDING
PTR will report to its U.S. shareholders and the Service the amount of
distributions 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 applicable rates with respect to distributions paid
unless such shareholder (a) is a corporation or falls within certain other
exempt categories and, when required, demonstrates this fact, or (b) provides a
taxpayer identification number, certifies as to no loss of exemption from
backup withholding and otherwise complies with applicable requirements of the
backup withholding rules. A shareholder that does not provide PTR with his
correct taxpayer identification number may also be subject to penalties imposed
by the Service. Any amount paid as backup withholding will be creditable
against the shareholder's income tax liability. In addition, PTR may be
required to withhold a portion of capital gain distributions to any
shareholders who fail to certify their nonforeign status to PTR.
PLAN OF DISTRIBUTION
PTR may sell the Offered Securities to one or more underwriters for public
offering and sale by them or may sell the Offered Securities to investors
directly or through agents, which agents may be affiliated with PTR. Direct
sales to investors may be accomplished through subscription offerings or
concurrent rights offerings to PTR shareholders and direct placements to third
parties. Any such underwriter or agent involved in the offer and sale of the
Offered Securities will be named in the applicable Prospectus Supplement.
Underwriters may offer and sell the Offered Securities at a fixed price or
prices, which may be changed, at prices related to the prevailing market prices
at the time of sale or at negotiated prices. PTR also may, from time to time,
authorize underwriters acting as PTR's agents to offer and sell the Offered
Securities upon the terms and conditions as set forth in the applicable
Prospectus Supplement. In connection with the sale of Offered Securities,
underwriters may be deemed to have received compensation from PTR in the form
of underwriting discounts or commissions and may also receive commissions from
purchasers of Offered Securities for whom they may act as agent. Underwriters
may sell Offered Securities to or through dealers, and such dealers may receive
compensation in the form of discounts, concessions or commissions from the
underwriters and/or commissions from the purchasers for whom they may act as
agent.
Any underwriting compensation paid by PTR to underwriters or agents in
connection with the offering of Offered Securities, and any discounts,
concessions or commissions allowed by underwriters to participating dealers,
will be set forth in the applicable Prospectus Supplement. Underwriters,
dealers and agents participating in the distribution of the Offered Securities
may be deemed to be underwriters, and any discounts and commissions received by
them and any profit realized by them on resale of the Offered Securities may be
deemed to be underwriting discounts and commissions, under the Securities Act.
Underwriters, dealers and agents may be entitled, under agreements entered into
with PTR, to indemnification against and contribution toward certain civil
liabilities, including liabilities under the Securities Act. Any such
indemnification agreements will be described in the applicable Prospectus
Supplement.
If so indicated in the applicable Prospectus Supplement, PTR will authorize
dealers acting as PTR's agents to solicit offers by certain institutions to
purchase Offered Securities from PTR at the public offering price set forth in
such Prospectus Supplement pursuant to Delayed Delivery Contracts ("Contracts")
providing for payment and delivery on the date or dates stated in such
Prospectus Supplement. Each Contract will be for an amount not less than, and
the aggregate principal amount of Offered Securities sold pursuant to Contracts
shall be not less nor more than, the respective amounts stated in the
applicable Prospectus Supplement. Institutions with whom Contracts, when
authorized, may be made include commercial and savings banks, insurance
companies, pension funds, investment companies, educational and charitable
institutions, and other institutions but will in all cases be subject to the
approval of PTR. Contracts will not be subject to any conditions except (i) the
purchase by an institution of the Offered Securities covered by its Contracts
shall not at the time of delivery be prohibited under the laws of any
jurisdiction in the United
26
<PAGE>
States to which such institution is subject, and (ii) if the Offered Securities
are being sold to underwriters, PTR shall have sold to such underwriters the
total principal amount of the Offered Securities less the principal amount
thereof covered by Contracts.
Certain of the underwriters and their affiliates may be customers of, engage
in transactions with and perform services for PTR and its subsidiaries in the
ordinary course of business.
EXPERTS
The financial statements of PTR as of December 31, 1993 and 1992 and for each
of the years in the three-year period ended December 31, 1993; the combined
statements of revenues and certain expenses for certain multifamily properties
acquired, or to be acquired, by PTR; and the statement of revenues and certain
expenses of Brompton Court Apartments, incorporated by reference herein, have
been incorporated by reference herein in reliance upon the reports of KPMG Peat
Marwick LLP, independent certified public accountants, incorporated by
reference herein, and upon the authority of said firm as experts in accounting
and auditing.
With respect to the unaudited interim financial information 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
PTR's quarterly reports on Form 10-Q for the quarters ended March 31, June 30,
and September 30, 1994, 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 for their reports on the unaudited interim
financial information because such 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 the Securities Act.
KPMG Peat Marwick LLP has not examined, compiled, or otherwise applied
agreed-upon procedures to the prospective financial information presented or
incorporated herein and, accordingly, does not express an opinion or any other
form of assurance on it.
LEGAL MATTERS
The validity of the Offered Securities will be passed upon for PTR by Mayer,
Brown & Platt, Chicago, Illinois.
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<PAGE>
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NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY REPRE-
SENTATIONS OTHER THAN THOSE CONTAINED OR INCORPORATED BY REFERENCE IN THIS
PROSPECTUS SUPPLEMENT OR THE PROSPECTUS, AND, IF GIVEN OR MADE, SUCH INFORMA-
TION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED.
THIS PROSPECTUS SUPPLEMENT AND THE PROSPECTUS DO NOT CONSTITUTE AN OFFER TO
SELL OR THE SOLICITATION OF AN OFFER TO BUY ANY SECURITIES OTHER THAN THE SE-
CURITIES TO WHICH THEY RELATE OR ANY OFFER TO SELL OR THE SOLICITATION OF ANY
OFFER TO BUY SUCH SECURITIES IN ANY CIRCUMSTANCES IN WHICH SUCH OFFER OR SO-
LICITATION IS UNLAWFUL. NEITHER THE DELIVERY OF THIS PROSPECTUS SUPPLEMENT OR
THE PROSPECTUS NOR ANY SALE MADE HEREUNDER AND THEREUNDER SHALL, UNDER ANY
CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE AF-
FAIRS OF PTR SINCE THE DATE HEREOF OR THEREOF OR THAT THE INFORMATION CON-
TAINED OR INCORPORATED BY REFERENCE HEREIN OR THEREIN IS CORRECT AS OF ANY
TIME SUBSEQUENT TO THE DATE OF SUCH INFORMATION.
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TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
PROSPECTUS SUPPLEMENT
<S> <C>
Prospectus Supplement Summary............................................. S-3
Property Trust of America................................................. S-14
The Merger................................................................ S-14
Use of Proceeds........................................................... S-15
Capitalization............................................................ S-16
Price Range of Common Shares and Distributions............................ S-17
Business.................................................................. S-18
REIT Management........................................................... S-24
Properties................................................................ S-31
Selected Historical Financial Data........................................ S-33
Recent Operating Results.................................................. S-34
Selected Pro Forma Financial Data......................................... S-34
Management's Discussion and Analysis of Financial Condition and Results of
Operations............................................................... S-36
The Offering.............................................................. S-44
Validity of Common Shares................................................. S-49
PROSPECTUS
Available Information..................................................... 2
Incorporation by Reference................................................ 2
Property Trust of America................................................. 2
Use of Proceeds........................................................... 3
Description of Debt Securities............................................ 3
Description of Common Shares.............................................. 16
Description of Preferred Shares........................................... 18
Federal Income Tax Considerations......................................... 24
Plan of Distribution...................................................... 26
Experts................................................................... 27
Legal Matters............................................................. 27
</TABLE>
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17,800,000 COMMON SHARES
OF BENEFICIAL INTEREST
LOGO
A REAL ESTATE INVESTMENT TRUST
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PROSPECTUS
SUPPLEMENT
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FEBRUARY 10, 1995
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<PAGE>
APPENDIX
On the inside front cover of the prospectus supplement, above the stabilization
legend, are a large map and two smaller bar graphs. Above the map is an
introduction: "PTR's Target Market is currently characterized by . . ." and
below the introduction is a title for the map: "Multifamily Portfolio Target
Market(1)". Footnote (1) is below the map and reads "Pro Forma December 31,
1994". Also below the map are keys to three symbols used on the map: a star,
referring to "Primary Target Market Cities"; a solid triangle, referring to
"Existing Properties"; and a hollow triangle, referring to "Properties Under
Development". The map is a map of the United States, with the following states
outlined and highlighted: Washington, Oregon, Idaho, California, Nevada, Utah,
Colorado, Arizona, New Mexico, Oklahoma and Texas. The following cities and
county are named on the map, with accompanying stars, solid triangles and hollow
triangles (if any) as follows: Seattle (a star and three solid triangles);
Portland (a star, seven solid triangles and one hollow triangle); Boise;
Sacramento; San Francisco; Fresno; Los Angeles; Orange County; San Diego (two
solid triangles); Reno (one hollow triangle); Las Vegas (five solid triangles);
Salt Lake City (a star, four solid triangles and one hollow triangle); Denver (a
star, seven solid triangles and three hollow triangles); Colorado Springs;
Phoenix (a star, seventeen solid triangles and three hollow triangles); Tucson
(a star, nine solid triangles and two hollow triangles); Santa Fe (a star, three
solid triangles and two hollow triangles); Albuquerque (a star, eight solid
triangles and four hollow triangles); Tulsa (one solid triangle); Oklahoma City
(two solid triangles); El Paso (a star, twelve solid triangles and two hollow
triangles); Dallas (fourteen solid triangles and five hollow triangles); Austin
(a star, eight solid triangles and seven hollow triangles); Houston (fifteen
solid triangles and seven hollow triangles); and San Antonio (a star, sixteen
solid triangles and eight hollow triangles). Below the map and above the two bar
graphs is an introduction to the bar graphs: ". . . favorable population and job
growth forecasts." Below the introduction is a title for the two bar graphs:
"PTR's Pro Forma Primary Target Market Versus U.S. Total". One bar graph is
titled "Population Growth Forecast 1994-2015", is marked from 0% to 50% on the
left in 5% increments and has two bars labeled "U.S. Total" and "PTR Primary
Target Market". The "U.S. Total" bar extends up to 19.2% and has that number
written above it. The "PTR Primary Target Market" bar extends up to 39.5% and
has that number written above it. The second bar graph is titled "Employment
Growth Forecast 1994-2015", is marked from 0% to 50% on the left in 5%
increments and has two bars labeled "U.S. Total" and "PTR Primary Target
Market". The "U.S. Total" bar extends up to 22.4% and has that number written
above it. The "PTR Primary Target Market" bar extends up to 31.5% and has that
number written above it. Below the two bar graphs are lines reading "Source:
Woods & Poole Economics, Inc. December 1994" and "Pro Forma Primary Target
Market: Albuquerque, Austin, Denver, El Paso, Phoenix, Portland, Salt Lake City,
San Antonio, Santa Fe, Seattle and Tucson".
