<PAGE>
Pursuant to Rule 424(b)(5)
to Registration No. 333-24035
PROSPECTUS SUPPLEMENT TO PROSPECTUS DATED APRIL 8, 1997
2,500,000 SHARES
LOGO
COMMON SHARES OF BENEFICIAL INTEREST
(PAR VALUE $1.00 PER SHARE)
---------------
Security Capital Pacific Trust ("PTR") is an equity real estate investment
trust ("REIT") whose objective is to be the preeminent real estate operating
company focusing on multifamily communities in its western United States
target market. PTR has elected to be taxed as a REIT for federal income tax
purposes and pays regular quarterly distributions to its shareholders.
All of the common shares of beneficial interest of PTR, par value $1.00 per
share (the "Common Shares"), offered hereby are being offered by PTR. See
"Underwriting".
The Common Shares are listed on the New York Stock Exchange (the "NYSE")
under the symbol "PTR." On May 29, 1997, the last reported sale price of the
Common Shares on the NYSE was $23.00 per Common Share. No person or persons
acting as a group may beneficially own more than 9.8% of PTR's outstanding
shares. See "Description of Common Shares--Restriction on Size of Holdings" in
the accompanying Prospectus.
---------------
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.
---------------
Goldman, Sachs & Co. has agreed to purchase from PTR the Common Shares
offered hereby for an aggregate purchase price of $54,481,250. PTR has granted
Goldman, Sachs & Co. an option for 30 days to purchase up to 375,000
additional Common Shares solely to cover over-allotments. If such option is
exercised in full, the total proceeds to PTR will be $62,653,437, before
deducting expenses payable by PTR, estimated at approximately $150,000.
---------------
Goldman, Sachs & Co. proposes to offer the Common Shares from time to time
for sale in one or more transactions on the NYSE, in the over-the-counter
market or otherwise, at market prices prevailing at the time of sale, at
prices related to prevailing market prices or at negotiated prices, subject to
prior sale when, as and if delivered to and accepted by Goldman, Sachs & Co.
See "Underwriting".
The Common Shares offered hereby are offered by Goldman, Sachs & Co., as
specified herein, subject to receipt and acceptance by them and subject to
their right to reject any order in whole or in part. It is expected that
delivery of the Common Shares will be made in New York, New York on or about
June 4, 1997, against payment therefor in immediately available funds.
GOLDMAN, SACHS & CO.
---------------
The date of this Prospectus Supplement is May 29, 1997.
<PAGE>
CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS
THAT MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE COMMON SHARES, INCLUDING
OVER-ALLOTMENT AND SHORT-COVERING TRANSACTIONS IN THE COMMON SHARES, AND THE
IMPOSITION OF A PENALTY BID, IN CONNECTION WITH THE OFFERING. FOR A
DESCRIPTION OF THESE ACTIVITIES, SEE "UNDERWRITING".
S-2
<PAGE>
SECURITY CAPITAL PACIFIC TRUST
PTR is an equity REIT which was formed in 1963. PTR's objective is to be the
preeminent real estate operating company focusing on multifamily communities
in its western United States target market. Through its REIT management
agreement with Security Capital Pacific Incorporated (the "REIT Manager"), PTR
has access to the extensive services provided by the REIT Manager and its
specialized service affiliates, which provide PTR with access to the same
resources as a fully integrated operating company. The REIT Manager and its
specialized service affiliates have 125 professionals dedicated to
implementing PTR's highly focused operating and investment strategy. See
"Recent Developments" for a description of a proposed merger transaction
involving PTR and the REIT Manager.
PTR believes its investment discipline is unique because it is based on
state-of-the-art research capabilities provided by Security Capital Real
Estate Research Group Incorporated ("Security Capital Real Estate Research"),
an affiliate of the REIT Manager. Security Capital Real Estate Research
employs six full-time professionals focused on producing the best available
research on the 289 submarkets in PTR's target market. Using its resources to
identify superior growth opportunities, PTR focuses on the strategic
development, acquisition and operation of multifamily communities. At April
30, 1997, PTR owned and operated or was developing 51,175 multifamily units
with a total expected investment of $2.6 billion. In addition, as of the same
date, PTR had contingent contracts or letters of intent, subject to PTR's
final due diligence and approval of all entitlements, to acquire land for the
development of an estimated 5,821 multifamily units with a total budgeted
development cost of approximately $532.2 million and owned land for the future
development of an expected 1,866 multifamily units with a total budgeted
development cost of $101.5 million. PTR's recent investment activity has been
focused primarily on key metropolitan areas in California, the Pacific
Northwest and Salt Lake City, which PTR feels will produce strong cash flow
growth over the long term. As of April 30, 1997, PTR's properties were located
in 23 metropolitan areas in 12 states. For more information regarding such
properties, see "Item 2. Properties" in PTR's Annual Report on Form 10-K for
the fiscal year ended December 31, 1996 (the "Form 10-K").
PTR seeks to achieve long-term sustainable growth in cash flow by maximizing
the operating performance of its core portfolio through value-added operating
systems and concentrating its highly experienced team of professionals on
developing and acquiring industry-leading product in targeted submarkets
identified by proprietary research as exhibiting strong job growth and
favorable demographic trends. PTR believes that population and employment
growth are the primary demand generators for multifamily product. Based on
forecasts published by Woods & Poole Economics, Inc., the projected population
growth in PTR's primary target market cities is 28.8% for the years 1997
through 2016, whereas the projected population growth of the United States as
a whole for the same period is 16.8%. For the same period, job growth is
projected to be 28.4% in PTR's primary target market cities, compared to 20.8%
for the United States as a whole.
PTR's investment strategy is focused on three principal components: (1) the
development of state-of-the-art new communities targeted primarily at one of
the largest segments of the renter market, moderate income households; (2) the
acquisition of multifamily communities exhibiting high cash flow growth
potential or attractive redevelopment opportunities; and (3) the execution of
its asset optimization strategy, which involves the disposition of properties
which no longer meet PTR's investment objectives and the redeployment of the
proceeds, typically on a tax-deferred basis, into assets that in PTR's view
offer better long-term cash flow growth prospects.
S-3
<PAGE>
The table below illustrates the growth in PTR's multifamily portfolio, based
on total expected investment, resulting from the execution of this investment
strategy since 1991 (the REIT Manager was retained in March 1991):
<TABLE>
<CAPTION>
TOTAL EXPECTED INVESTMENT(1)
---------------------------------------------------------------------
DECEMBER 31,
APRIL 30, ----------------------------------------------------------
1997 1996 1995 1994 1993 1992 1991
---------- ---------- ---------- ---------- -------- -------- -------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
Operating Communities:
Acquired(2)............ $1,628,835 $1,514,018 $1,270,419 $ 937,683 $666,497 $205,600 $31,487
Developed(2)........... 386,949 377,810 244,848 171,505 66,893 54,852 24,416
---------- ---------- ---------- ---------- -------- -------- -------
Total operating
communities......... 2,015,784 1,891,828 1,515,267 1,109,188 733,390 260,452 55,903
Communities under
construction........... 338,498 354,852 297,549 170,017 140,563 73,898 16,207
Communities in planning
and owned(3)........... 264,015 209,155 118,347 194,001 73,578 -- --
---------- ---------- ---------- ---------- -------- -------- -------
Total owned
communities......... $2,618,297 $2,455,835 $1,931,163 $1,473,206 $947,531 $334,350 $72,110
========== ========== ========== ========== ======== ======== =======
</TABLE>
- --------
(1) For operating communities, represents cost, including budgeted
renovations. For communities under construction and in planning,
represents total budgeted development cost, which includes
the cost of land, fees, permits, payments to contractors, materials,
architectural and engineering fees and interest and property taxes to be
capitalized during the construction period. Does not include land held for
future development, which is less than 2% of assets, based on cost.
(2) Net of any dispositions.
(3) The term "in planning" means that construction is anticipated to commence
within 12 months.
PTR's executive offices are located at 7777 Market Center Avenue, El Paso,
Texas 79912 and its telephone number is (915) 877-3900.
USE OF PROCEEDS
The net proceeds from the sale of the Common Shares offered hereby are
expected to be approximately $54.3 million, all of which will be used to repay
borrowings under PTR's $350 million unsecured revolving line of credit (the
"Line") and its short-term borrowing agreement with Texas Commerce Bank,
National Association (the "TCB Agreement"). The Line bears interest at the
greater of the federal funds rate plus 0.5% or prime (8.50% at May 23, 1997)
or, at PTR's option, LIBOR plus 1.125% (6.875% at May 23, 1997), which premium
can vary from 0.75% to 1.50% based upon PTR's current senior unsecured debt
rating, and is scheduled to mature in August 1998 (subject to extension
annually for an additional year with the approval of the lenders). Loans under
the TCB Agreement bear interest at an overnight rate, which ranged from 5.94%
to 6.50% during the three months ended March 31, 1997. At May 23, 1997, $94.5
million in borrowings were outstanding under the Line and $18.1 million in
borrowings were outstanding under the TCB Agreement. PTR expects to make
additional borrowings under the Line and the TCB Agreement following this
Offering (defined below). Borrowings under the Line and the TCB Agreement are
used for the development and acquisition of multifamily communities and for
working capital purposes.
S-4
<PAGE>
PRICE RANGE OF COMMON SHARES AND DISTRIBUTIONS
MARKET INFORMATION
The Common Shares are listed on the NYSE under the symbol "PTR." The
following table sets forth the high and low sales prices of the Common Shares
as reported in the NYSE Composite Tape and cash distributions per Common
Share, for the periods indicated.
<TABLE>
<CAPTION>
CASH
HIGH LOW DISTRIBUTIONS
------- ------- -------------
<S> <C> <C> <C>
1995:
First Quarter............................. $18 3/8 $16 3/8 $0.2875
Second Quarter............................ 18 1/8 16 5/8 0.2875
Third Quarter............................. 19 1/4 17 0.2875
Fourth Quarter............................ 20 1/2 17 1/4 0.2875
1996:
First Quarter............................. 22 1/4 19 1/4 0.31
Second Quarter............................ 22 3/8 20 1/2 0.31
Third Quarter............................. 22 5/8 20 1/4 0.31
Fourth Quarter............................ 23 5/8 19 0.31
1997:
First Quarter............................. 25 1/8 21 0.325
Second Quarter (through May 29)........... 24 1/4 22 1/8 0.325
</TABLE>
In addition to the quarterly cash distributions shown above, PTR made a
special distribution of 0.125694 shares of common stock of Homestead Village
Incorporated ("Homestead") and warrants to purchase 0.084326 shares of
Homestead common stock per Common Share (the "Homestead Distribution") on
November 12, 1996. The securities distributed in the Homestead Distribution
had a market value of $3.032 per Common Share, based on the closing prices of
such securities on the American Stock Exchange on November 11, 1996, the day
prior to the distribution date. The Homestead Distribution resulted in an
adjustment of $3.125 per Common Share ($21.875 before and $18.750 after) on
the NYSE on November 12, 1996.
As of May 23, 1997, PTR had approximately 76,748,201 Common Shares
outstanding, approximately 3,030 record holders of Common Shares and
approximately 23,000 beneficial holders of Common Shares.
DISTRIBUTIONS
In order to qualify as a REIT, PTR 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 non-cash 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 85 consecutive quarterly cash
distributions on the Common Shares.
PTR announces the following year's projected annual distribution level after
the annual budget review and approval in December of each year by PTR's Board
of Trustees (the "Board"). At its December 10, 1996 Board meeting, the Board
announced an increase in the annual distribution level from $1.24 to $1.30 per
Common Share. The first quarter distribution was paid on February 20, 1997 to
shareholders of record on February 7, 1997 and the second quarter distribution
of $0.325 per Common Share was paid on May 29, 1997 to shareholders of record
on May 13, 1997. The payment of distributions is subject to the discretion of
the Board and is dependent upon the financial condition and operating results
of PTR.
S-5
<PAGE>
Pursuant to the terms of PTR's Series A Preferred Shares and Series B
Preferred Shares (the "Preferred Shares"), PTR is restricted from declaring or
paying any distribution with respect to its Common Shares unless all
cumulative distributions with respect to the Preferred Shares have been paid
and sufficient funds have been set aside for Preferred Share distributions
that have been declared.
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 the Common Shares. To the
extent that a distribution exceeds both current and accumulated earnings and
profits and the shareholder's basis in the Common Shares, it will generally 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. For federal income tax purposes, the following
summarizes the taxability of cash distributions paid on the Common Shares in
1995 and 1994 and the estimated taxability for 1996:
<TABLE>
<CAPTION>
1996 1995 1994
----- ----- -----
<S> <C> <C> <C>
Per Common Share:
Ordinary income....................................... $0.61 $0.92 $0.68
Capital gains......................................... 0.11 -- --
Return of capital..................................... 0.52 0.23 0.32
----- ----- -----
Total............................................... $1.24 $1.15 $1.00
===== ===== =====
</TABLE>
The Homestead securities distributed by PTR to each holder of Common Shares
in the Homestead Distribution were valued at $2.16 per Common Share for
federal income tax purposes, of which $1.06 was taxable as ordinary income,
$0.19 was taxable as a capital gain and $0.91 was treated as a return of
capital.
On July 21, 1994, in addition to the normal Common Share distributions paid,
PTR redeemed the shareholder purchase rights issued pursuant to the Rights
Agreement dated as of February 23, 1990, as amended. Pursuant to the
redemption, each holder of record at the close of business on July 21, 1994
was entitled to receive $0.01 per shareholder purchase right. The redemption
price was paid on August 12, 1994 and was taxable as ordinary income for
federal income tax purposes.
Under federal income tax rules, PTR's earnings and profits are first
allocated to its Preferred Shares which increases the portion of the Common
Shares distribution classified as return of capital. See "Item 7. Management's
Discussion and Analysis of Financial Condition and Results of Operations--
Results of Operations" in the Form 10-K.
PTR's tax return for the year ended December 31, 1996 has not been filed,
and the taxability information for 1996 is based upon the best available data.
PTR's tax returns for prior years have not been examined by the Internal
Revenue Service (the "Service") and, therefore, the taxability of the
dividends is subject to change.
RECENT DEVELOPMENTS
THE MERGER
In January 1997, Security Capital Group Incorporated ("Security Capital")
made a proposal to each of the Board, the Board of Trustees of Security
Capital Industrial Trust ("SCI") and the Board of Directors of Security
Capital Atlantic Incorporated ("ATLANTIC") to exchange Security Capital's
respective REIT management and property management companies for common shares
of PTR, SCI and ATLANTIC, with the result that each of PTR, SCI and ATLANTIC
would become internally managed. On March 24, 1997, Security Capital and PTR
entered into a Merger and Issuance Agreement (the "Merger Agreement"), which
is subject to customary conditions, including the approval
S-6
<PAGE>
of PTR's shareholders. SCI and ATLANTIC entered into similar agreements with
Security Capital on such date; however, the Merger described below is
independent of such transactions. Pursuant to the Merger Agreement, Security
Capital will cause the REIT Manager and SCG Realty Services Incoroporated
("SCG Realty Services") to be merged into a newly formed subsidiary of PTR
(the "Merger"). The employees of the REIT Manager and SCG Realty Services will
become employees of PTR as a result of the Merger, which will be consummated
as follows:
. Security Capital will transfer all of its shares of the REIT Manager and
SCG Realty Services to a newly formed subsidiary of PTR in exchange for
Common Shares valued at approximately $75.8 million.
. The number of Common Shares issuable to Security Capital will be based on
the average closing price of the Common Shares over the five-day period
prior to the record date for determining PTR's shareholders entitled to
vote at the meeting in connection with the Merger, subject to such
average being not more than $27.11475 or less than $21.63525. If the
average market price of the Common Shares falls outside of the range,
then the number of Common Shares issuable to Security Capital will be
based on the high or low end of the range, as the case may be.
. In order to allow holders of Common Shares to maintain their relative
ownership of PTR, PTR will conduct a rights offering concurrently with
the solicitation of PTR shareholders to vote on the Merger Agreement. The
rights offering is designed to allow PTR's shareholders (other than
Security Capital) the opportunity to maintain their relative ownership in
PTR. Security Capital has agreed not to exercise or sell any of the
rights it receives in the rights offering. The exercise price for Common
Shares in the rights offering is expected to be the same price at which
Common Shares will be issued to Security Capital in the Merger if the
average market price of the Common Shares remains within the range
described above. If the average market price of the Common Shares is
below the minimum price of the range, the rights offering will be
conducted at such average price, and if the average market price of the
Common Shares is above the maximum price of the range, the rights
offering will be conducted at such maximum price. Any Common Shares
issued pursuant to the rights offering will be offered only by means of a
separate prospectus. The closing of the rights offering is contingent
upon the consummation of the Merger.
. As part of the Merger transaction, and in order to permit holders of
Common Shares to benefit from the Merger transaction on the same basis as
equity holders in Security Capital, Security Capital will issue warrants
pro rata to PTR's shareholders, other than Security Capital, to acquire
shares of its Class B Common Stock having an aggregate subscription price
at the time of the warrant issuance of approximately $102.0 million. The
warrant issuance will occur subject to and after the closing of the
Merger and after the closing of the rights offering. The number of
warrants to be received by each shareholder in the warrant issuance will
be determined after PTR's shareholders have approved the Merger. The
number of shares of Class B Common Stock subject to the warrants will be
based on the closing price of the Class B Common Stock on the date the
warrants are issued to the agent for the warrant issuance for subsequent
distribution to holders of Common Shares. It is expected that application
will be made for listing of the Class B Common Stock and the warrants on
the NYSE, although there can be no assurance that either, or both, the
Class B Common Stock or the warrants will be so listed. The warrants will
expire one year after issuance and will contain customary anti-dilution
provisions. The issuance of the warrants by Security Capital is
contingent upon the closing of the Merger. Any securities issued pursuant
to the warrant issuance will be offered only by means of a separate
prospectus which will be delivered to PTR's shareholders.
No shareholder will be required to pay any cash or other consideration for
the warrants received in the warrant issuance or surrender or exchange Common
Shares in order to receive warrants.
S-7
<PAGE>
However, PTR believes that a shareholder receiving warrants pursuant to the
warrant issuance should have ordinary taxable income equal to the value of the
warrants on the issuance date.
As part of the Merger, PTR and Security Capital will enter into an amended
and restated Investor Agreement (as so amended and restated, the "Amended and
Restated Investor Agreement"), which will provide that, without first having
consulted with the nominees of Security Capital designated in writing, PTR may
not seek Board approval of (i) PTR's annual budget; (ii) incurring expenses in
any year exceeding (a) any line item in the annual budget by the greater of
$500,000 or 20% and (b) the total expenses set forth in the annual budget by
15%; (iii) the acquisition or sale of any assets in any single transaction or
series of related transactions in the ordinary course of PTR's business where
the aggregate purchase price paid or received by PTR exceeds $25 million; and
(iv) entering into any new contract with a service provider (a) for investment
management, property management or leasing services or (b) that reasonably
contemplates annual contract payments by PTR in excess of $1 million. PTR is
under no obligation to accept or comply with any advice offered by Security
Capital with respect to the foregoing matters.
Additionally, so long as Security Capital beneficially owns at least 25% of
the Common Shares, Security Capital will have the right to approve the
following matters proposed by PTR: (i) the issuance or sale of any Common
Shares (including the grant of any rights, options or warrants to subscribe
for or purchase Common Shares or any security convertible into or exchangeable
for Common Shares or the issuance or sale of any security convertible into or
exchangeable for Common Shares) at a price per share less than the fair market
value of a Common Share on the date of such issuance or sale; (ii) the
issuance and sale of any disqualified shares (as defined) if, as a result
thereof, PTR's Fixed Charge Coverage Ratio (as defined) would be less than 1.4
to 1.0; (iii) the adoption of any employee benefit plan pursuant to which
shares of beneficial interest of PTR or any securities convertible into shares
of beneficial interest of PTR may be issued and any action with respect to the
compensation of the senior officers of PTR (including the granting or award of
any bonuses or share-based incentive awards); and (iv) the incurrence of any
additional indebtedness (including guarantees and including renegotiations and
restructurings of existing indebtedness) if, as a result thereof, PTR's
Interest Expense Coverage Ratio (as defined) would be less than 2.0 to 1.0.
The restriction referred to in clause (i) above does not apply to (A) the sale
or grant of any options to purchase shares of beneficial interest of PTR
pursuant to the provisions of any benefit plan approved by the shareholders of
PTR, (B) the issuance or sale of shares of beneficial interest upon the
exercise of any rights, options or warrants granted, or upon the conversion or
exchange of any convertible or exchangeable security issued or sold, prior to
the closing date of the Merger or in accordance with the provisions of the
Amended and Restated Investor Agreement, (C) the issuance and sale of any
shares of beneficial interest of PTR pursuant to any dividend reinvestment and
share purchase plan approved by the Board or (D) the issuance, grant of
distribution of rights, options or warrants to all holders of Common Shares
entitling them to subscribe for or purchase shares of beneficial interest of
PTR or securities convertible into or exercisable for shares of beneficial
interest.
The Amended and Restated Investor Agreement will also provide that, so long
as Security Capital owns at least 10% of the outstanding Common Shares, PTR
may not increase the number of persons serving on the Board to more than
eight. Security Capital also will be entitled to designate one or more persons
as trustees of PTR, as follows: (i) so long as Security Capital owns at least
10% but less than 25% of the outstanding Common Shares, it is entitled to
nominate one person; and (ii) so long as Security Capital owns at least 25% of
the outstanding Common Shares, it is entitled to nominate that number of
persons as shall bear approximately the same ratio to the total number of
members of the Board as the number of Common Shares beneficially owned by
Security Capital bears to the total number of outstanding Common Shares,
provided, that Security Capital shall be entitled to designate no more than
three persons so long as the Board consists of no more than eight members.
In recognition of Security Capital's unique corporate culture, Security
Capital will be permitted to make job opportunities with its affiliates,
including ATLANTIC and SCI, available to the officers and
S-8
<PAGE>
employees of PTR. Security Capital must give the Board two weeks notice prior
to making an opportunity available to a senior officer of PTR.
Under the proposed terms of the Merger Agreement, PTR will also enter into
an Administrative Services Agreement with a subsidiary of Security Capital.
Under this agreement, Security Capital will provide PTR with certain
administrative services selected by PTR. The fees payable to Security Capital
will be equal to Security Capital's cost of providing such services, plus 20%
(not to exceed market). For the initial term of the agreement (through
December 31, 1998), the fees payable to Security Capital will not exceed
approximately $7.7 million, of which $2.2 million will apply to the period
between closing of the Merger and December 31, 1997 and the remainder will
apply to 1998.
In addition, pursuant to a Protection of Business Agreement to be entered
into with Security Capital as part of the Merger Agreement, Security Capital
will agree that, for a three year term, neither it nor any REIT management or
property management company affiliated with it will, within the United States,
provide substantially the same advice and services as those being provided by
the REIT Manager and SCG Realty Services to any person owning or operating
real property that is or is planned to be used primarily for multifamily
communities.
The Merger is subject to approval by holders of two-thirds of the
outstanding Common Shares, receipt of favorable tax opinions and customary
closing conditions.
INTERESTS OF CERTAIN PERSONS IN THE TRANSACTION
If the Merger is consummated, the current officers and employees of the REIT
Manager and SCG Realty Services (except C. Ronald Blankenship and Jeffrey A.
Klopf) will become officers and employees of PTR and be compensated for their
services by PTR. The following table sets forth the compensation for R. Scot
Sellers (who is expected to become PTR's Chief Executive Officer) and the four
other most highly compensated executive officers of PTR (the "Named Executive
Officers") who will become employees of PTR and for all executive officers as
a group (who will become employees of PTR) for 1996. All compensation for 1996
was paid by Security Capital.
<TABLE>
<CAPTION>
OTHER ANNUAL
NAME AND TITLE SALARY BONUS COMPENSATION
-------------- --------- -------- ------------
<S> <C> <C> <C>
R. Scot Sellers, Manager Director............ $214,000 $235,000 0
Patrick R. Whelan, Managing Director......... 190,000 150,000 0
Jeffrey B. Allen, Senior Vice President...... 225,000 125,000 0
Jay S. Jacobson, Senior Vice President....... 165,000 80,000 0
Bryan J. Flanagan, Senior Vice President..... 180,000 60,750 0
Executive Officers as a group (7 persons).... 1,309,000 851,250 0
</TABLE>
For 1997, each Named Executive Officer will remain an employee of the REIT
Manager and be compensated by Security Capital until the closing of the
Merger, at which time he will become an employee of PTR and be compensated by
PTR. For 1997, each Named Executive Officer will receive a salary and be
eligible for a target bonus. The actual amount of the bonus (which may be
higher or lower than the target bonus) will be determined at the end of the
year and will be based on several factors, including individual performance,
PTR's performance and other relevant factors. PTR will continue the same
compensation arrangements for the portion of 1997 in which the Named Executive
Officers are employees of PTR. The Named Executive Officers are expected to be
paid the following salaries for 1997 and will be eligible for the following
target bonuses for 1997:
<TABLE>
<CAPTION>
TARGET
NAME AND TITLE SALARY BONUS
-------------- -------- --------
<S> <C> <C>
R. Scot Sellers, Chief Executive Officer............... $250,000 $150,000
Patrick B. Whelan, Managing Director................... 200,000 100,000
Jeffrey B. Allen, Senior Vice President................ 250,000 70,000
Jay S. Jacobson, Senior Vice President................. 198,000 40,000
Bryan J. Flanagan, Senior Vice President............... 190,000 45,000
</TABLE>
S-9
<PAGE>
In addition, subject to shareholder approval, during 1997 the officers and
employees may be granted options to purchase Common Shares. Such persons may
also be granted the right to purchase Common Shares under the 1997 Long-Term
Incentive Plan; PTR will loan such officers up to 95% of the purchase price
for Common Shares so purchased on a full recourse basis. Additionally, during
1997 such persons may also be granted options to acquire shares of Class A
Common Stock of Security Capital.
The Board will also adopt a 401(k) plan which will permit eligible employees
to make pre-tax contributions of up to $9,500 to the plan or such other amount
as may be permitted under Section 401(k) of the Internal Revenue Code of 1986,
as amended (the "Code"). PTR will match 50% of participants' contributions
that do not exceed 6% of their compensation. PTR intends to make such matching
contributions in the form of Common Shares. Participants will become vested in
the matching contributions 20% per each year of service. Employees of the REIT
Manager and SCG Realty Services will be credited for service for the time they
were employees of the REIT Manager or SCG Realty Services.
CERTAIN FEDERAL INCOME TAX CONSIDERATIONS
The following is a summary of certain federal income tax matters of general
application pertaining to the holding and disposing of Common Shares under the
Code. This discussion is general in nature and is not exhaustive of all
possible tax considerations, nor does the discussion address any state, local
or foreign tax considerations. The discussion is based on current law, is for
general information only, and is not tax advice. This discussion does not
purport to deal with all aspects of federal income taxation that may be
relevant to particular shareholders in light of their personal investment or
tax circumstances, or to certain types of shareholders (including insurance
companies, tax exempt organizations, financial institutions or broker dealers,
foreign corporations and persons who are not citizens or residents of the
United States) subject to special treatment under the federal income tax laws.
PTR has not requested and will not request a ruling from the Service with
respect to any of the federal income tax issues discussed below.
This Prospectus Supplement does not address the taxation of PTR or the
impact on PTR of its election to be taxed as a REIT. Such matters are
addressed in the accompanying Prospectus under "Federal Income Tax
Considerations--Taxation of PTR." Prospective investors should consult, and
must depend on, their own tax advisors regarding the state, local, foreign and
other tax consequences of holding and disposing of Common Shares.
For a discussion regarding the taxation of dividends and other
distributions, see "Federal Income Tax Considerations--Taxation of PTR's
Shareholders" in the accompanying Prospectus.
For a discussion of backup withholding, see "Federal Income Tax
Considerations--Other Tax Considerations--Backup Withholding" in the
accompanying Prospectus.
Upon the sale or exchange of Common Shares to a party other than PTR, a
holder of Common Shares will realize a capital gain or loss measured by the
difference between the amount realized on the sale or other disposition and
the holder's adjusted tax basis in the Common Shares (provided the Common
Shares are held as a capital asset). Such gain or loss will be a long term
capital gain or loss if the holder's holding period with respect to the Common
Shares is more than one year at the time of the sale or exchange. Further, any
loss on a sale of Common Shares which were held by the holder for six months
or less and with respect to which a capital gain dividend was received will be
treated as a long term capital loss, up to the amount of the capital gain
dividend received with respect to such shares.
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<PAGE>
TAX EFFECTS OF THE MERGER
The following is a summary of the material U.S. federal income tax
considerations of the Merger, the rights offering and the warrant issuance.
The Merger has been structured to constitute a tax-free reorganization
within the meaning of Section 368(a) of the Code, and, as a condition to
closing, PTR will receive an opinion from Mayer, Brown & Platt to this effect.
Accordingly, neither Security Capital nor PTR will recognize gain or loss on
the Merger, and PTR's tax basis and holding period for the assets acquired
pursuant to the Merger will be the same as Security Capital's. PTR, however,
will be subject to a corporate-level tax if it disposes of any of the assets
acquired in the Merger at any time during the 10-year period beginning on the
closing date of the Merger. PTR does not currently anticipate disposing of any
of the acquired assets. While PTR will succeed to the federal income tax
liabilities of the REIT Manager and SCG Realty Services and will be severally
liable for the federal income tax liabilities of the Security Capital
consolidated federal income tax group, Security Capital has agreed to
indemnify PTR for such liabilities. The Merger will not result in a taxable
event to the PTR shareholders.
PTR will also receive an opinion from Mayer, Brown & Platt to the effect
that, based on representations of PTR with respect to stock ownership, gross
income, asset and distribution requirements applicable to REITs, the Merger
will not jeopardize PTR's qualification as a REIT under the Code.
While the distribution of the rights to purchase Common Shares is expected
to constitute a tax-free rights dividend, it is possible that a PTR
shareholder would be considered to have ordinary income upon receipt of the
rights equal to the fair market value of the rights at the time of the
distribution. Moreover, if the rights offering does not constitute a tax-free
rights dividend, the receipt of the rights by tax-exempt shareholders should
be treated as unrelated business taxable income. Further information
concerning the sale, disposition or exercise of the rights will be provided in
the prospectus which will be delivered to PTR's shareholders in connection
with the rights offering.
PTR's shareholders receiving Security Capital warrants pursuant to the
warrant issuance should have ordinary taxable income equal to the value of the
warrants at the time of distribution. Moreover, the receipt of the Security
Capital warrants by tax-exempt shareholders should be treated as unrelated
business taxable income. Further information concerning the sale, disposition,
exercise or expiration of the warrants will be provided in the proxy
statement/prospectus which will be delivered to PTR's shareholders in
connection with the Merger.
UNDERWRITING
Subject to the terms and conditions contained in the Underwriting Agreement
and the related Pricing Agreement (collectively, the "Underwriting
Agreement"), PTR has agreed to sell to Goldman, Sachs & Co. (the
"Underwriter"), and Goldman, Sachs & Co. has agreed to purchase from PTR, an
aggregate of 2,500,000 Common Shares. Under the terms and conditions of the
Underwriting Agreement, Goldman, Sachs & Co. is committed to take and pay for
all of the Common Shares offered hereby (the "Offering"), if any are taken.
The Underwriter has advised PTR that it proposes initially to offer the
Common Shares to the public from time to time for sale in one or more
transactions on the NYSE, in the over-the-counter market or otherwise, at
market prices prevailing at the time of sale, at prices related to prevailing
market prices or at negotiated prices, subject to prior sale when, as and if
delivered to and accepted by the Underwriter. In connection with the sale of
the 2,500,000 Common Shares included in the Offering, the Underwriter may be
deemed to have received compensation from PTR in the form of underwriting
discounts. The Underwriter may effect such transactions by selling Common
Shares to or
S-11
<PAGE>
through dealers, and such dealers may receive compensation in the form of
discounts, concessions or commissions from the Underwriter and/or the
purchasers of such Common Shares for whom they may act as agents or to whom
they may sell as principal.
PTR has granted Goldman, Sachs & Co. an option, exercisable for 30 days
after the date of this Prospectus Supplement, to purchase up to 375,000
additional Common Shares solely to cover over-allotments, if any.
In connection with the Offering, the Underwriter may purchase and sell
Common Shares in the open market. These transactions may include overallotment
transactions and purchases to cover short positions created by the Underwriter
in connection with the Offering. Short positions created by the Underwriter
involve the sale by the Underwriter of a greater number of Common Shares than
it is required to purchase from PTR in the Offering. The Underwriter also may
impose a penalty bid, whereby selling concessions allowed to broker-dealers in
respect of the Common Shares sold in the Offering for their account may be
reclaimed by the Underwriter if such Common Shares are repurchased by the
Underwriter in covering transactions. These activities may maintain or
otherwise affect the market price of the Common Shares, which may be higher
than the price that might otherwise prevail in the open market; and these
activities, if commenced, may be discontinued at any time. These transactions
may be effected on the NYSE, in the over-the-counter market or otherwise.
Security Capital, PTR and certain officers and Trustees of PTR have agreed,
during the period beginning from the date of this Prospectus Supplement and
continuing to and including the date 90 days after the last date of delivery
of Common Shares to the Underwriter pursuant to the Underwriting Agreement,
not to offer, sell, contract to sell or otherwise dispose of any securities of
PTR (other than (a) pursuant to employee or trustee stock option plans
existing or contemplated, or on the conversion or exchange of convertible or
exchangeable securities outstanding, on the date of this Prospectus
Supplement, (b) pursuant to rights offerings to existing shareholders (which
may include sales of unsubscribed and additional Common Shares to third
parties), (c) the issuance of limited partnership interests (which partnership
interests may be exchangeable for Common Shares after such 90-day period or
into convertible preferred shares which are convertible into Common Shares) or
(d) the issuance of Common Shares in exchange for the interests of Security
Capital in the REIT Manager and SCG Realty Services pursuant to the Merger
Agreement) which are substantially similar to the Common Shares or securities
convertible into or exchangeable for securities that are substantially similar
to the Common Shares without the prior written consent of the Underwriter.
In the Underwriting Agreement, PTR has agreed to indemnify the Underwriter
against certain liabilities, including liabilities under the Securities Act of
1933, as amended.
VALIDITY OF COMMON SHARES
The validity of the issuance of the Common Shares offered pursuant to this
Prospectus Supplement will be passed upon for PTR by Mayer, Brown & Platt,
Chicago, Illinois, and for the Underwriter by Sullivan & Cromwell, New York,
New York.
S-12
<PAGE>
PROSPECTUS
$300,000,000
DEBT SECURITIES, PREFERRED SHARES AND COMMON SHARES*
----------------
Security Capital Pacific Trust ("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 (together, 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 by PTR, 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.
*Pursuant to Rule 429 under the Securities Act of 1933, as amended (the
"Securities Act"), this Prospectus also relates to an additional
$120,000,000 of the Debt Securities and Preferred Shares of Beneficial
Interest which were registered under a previous registration statement.
----------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS
THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
----------------
The date of this Prospectus is April 8, 1997.
<PAGE>
SECURITY CAPITAL PACIFIC TRUST
PTR's objective is to be the preeminent real estate operating company
focusing on the development, acquisition, operation and long-term ownership of
multifamily communities in its western United States target market. Through
its REIT Management Agreement with Security Capital Pacific Incorporated (the
"REIT Manager" or "REIT Management"), PTR has access to the extensive services
provided by the REIT Manager and its specialized service affiliates, which
provides PTR with access to the same resources as a fully integrated operating
company. The REIT Manager and its specialized service affiliates have 129
professionals dedicated to implementing PTR's highly focused operating and
investment strategy.
PTR seeks to achieve long-term sustainable growth in cash flow by maximizing
the operating performance of its core portfolio through value-added operating
systems and concentrating its highly experienced team of professionals on
developing and acquiring industry-leading product in targeted submarkets.
These submarkets are identified by proprietary research as exhibiting strong
job growth and favorable demographic trends.
PTR's investment strategy is focused on three principal components: (1) the
development of state-of-the-art new communities targeted primarily at one of
the largest segments of the renter market, moderate income households; (2) the
acquisition of multifamily communities exhibiting high cash flow growth
potential or attractive redevelopment opportunities; and (3) the execution of
its asset optimization strategy, which involves the disposition of properties
which no longer meet PTR's investment objectives and the redeployment of the
proceeds, typically on a tax-deferred basis, into assets that in PTR's view
offer better long-term cash flow growth prospects.
PTR was organized in 1963 as a real estate investment trust 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 communities, as suitable
opportunities arise, for the repayment of certain outstanding indebtedness at
such time and for working capital purposes.
RATIO INFORMATION
For the purpose of computing these ratios, (a) "earnings" consist of
earnings from operations plus fixed charges other than capitalized interest
and (b) "fixed charges" consist of interest on borrowed funds (including
capitalized interest) and amortization of debt discount and expense.
<TABLE>
<CAPTION>
PERIOD ENDED DECEMBER
31,
------------------------
1992 1993 1994 1995 1996
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Ratio of earnings to fixed charges.................... 2.9 4.0 2.6 3.2 2.5
Ratio of earnings to fixed charges and Preferred Share
dividends............................................ 2.9 3.4 1.6 1.9 1.7
</TABLE>
2
<PAGE>
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
incorporated by reference 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 below 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 PTR's Board of Trustees (the "Board") 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.
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 series of Debt Securities;
(2) the aggregate principal amount of such series of Debt Securities and
any limit on such principal amount;
(3) the percentage of the principal amount at which the Debt Securities
of such series 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 by which such date or dates will be
determined, on which the principal of such Debt Securities will be payable
and the amount of principal payable thereon;
(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 by which such date or dates will be
determined, 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, and the manner in which, 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;
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<PAGE>
(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 the Debt Securities of such series 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 the Debt
Securities of such series 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 the Debt
Securities of such series pursuant to any sinking fund or analogous
provision or at the option of a Holder thereof, and the period or periods
within which, the date or dates upon which, the price or prices at which,
the currency or currencies, currency unit or units or composite currency or
currencies in which, and the other terms and conditions upon which such
Debt Securities shall 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 the Debt Securities of such series 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 the Debt Securities of such
series may be determined with reference to an index, formula or other
method (which index, formula or method may be, but need not be, based on a
currency or 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 the Debt Securities of such
series are to be payable, at the election of PTR or a Holder, in a currency
or currencies, currency unit or units or composite currency or currencies,
other than that in which such Debt Securities are denominated or stated to
be payable, the period or periods within which, and the terms and
conditions upon which, such election may be made, and the time and manner
of, and identity of the exchange rate agent with responsibility for,
determining the exchange rate between the currency or currencies 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 series of Debt Securities with respect to the Events of Default or
covenants set forth in the Indenture;
(14) whether the Debt Securities of such series will be issued in
certificated or book-entry form;
(15) whether the Debt Securities of such series 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 the terms and conditions
relating thereto;
(16) the applicability, if any, of the defeasance and covenant defeasance
provisions of Article Fourteen of the Indenture to such series of Debt
Securities and any provisions in modification thereof, in addition thereto
or in lieu thereof;
(17) if the Debt Securities of such series 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 the Debt Securities of such series 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 series of Debt Securities not inconsistent
with the provisions of the Indenture (Section 301).
4
<PAGE>
The Debt Securities may provide for less than the entire principal amount
thereof to be payable upon declaration of acceleration of the maturity thereof
or bear no interest or bear interest at a rate which at the time of issuance
is below market rates ("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 of
PTR. However, PTR's Restated Declaration of Trust, as amended and supplemented
(the "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 Group Incorporated ("Security Capital Group")). See "Description of
Common Shares--Restriction on Size of Holdings." Additionally, the Articles
Supplementary relating to PTR's Cumulative Convertible Series A Preferred
Shares of Beneficial Interest, par value $1.00 per share (the "Series A
Preferred Shares") and PTR's Series B Cumulative Redeemable Preferred Shares
of Beneficial Interest, par value $1.00 per share (the "Series B Preferred
Shares") restrict beneficial ownership of the Series A Preferred Shares and
Series B Preferred Shares, respectively, by a person, or persons acting as a
group, to 25% of the Series A Preferred Shares or Series B Preferred Shares,
as the case may be. 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 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).
If any Interest Payment Date, Principal Payment Date or the Maturity Date
falls on a day that is not a Business Day, the required payment shall be made
on the next Business Day as if it were made on the date such payment was due
and no interest shall accrue on the amount so payable for the period from and
after such Interest Payment Date, Principal Payment Date or the Maturity Date,
as the case may be. "Business Day" means any day, other than a Saturday or
Sunday, on which banks in Boston, Massachusetts are not required or authorized
by law or executive order to close. 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
5
<PAGE>
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).
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 Securities
Exchange Act of 1934, as amended (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
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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 1.5:1, 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, 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
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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 Securities and Exchange Commission (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 (i) within
15 days of each Required Filing Date (x) 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 (y) 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 (ii) 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): (i) interest on Debt of PTR and its
Subsidiaries, (ii) provision for taxes of PTR and its Subsidiaries based on
income, (iii) amortization of debt discount, (iv) provisions for gains and
losses on properties and property depreciation and amortization, (v) the
effect of any noncash charge resulting from a change in accounting principles
in determining Earnings from Operations for such period and (vi) 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
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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.
"Subsidiary" means, with respect to any Person, any corporation or other
entity of which a majority of (i) the voting power of the voting equity
securities or (ii) in the case of a partnership or any other entity other than
a corporation, the outstanding equity interest of which are owned, directly or
indirectly, by such Person. For the purposes of this definition, "voting
equity securities" means equity securities having voting power for the
election of directors, whether at all times or only so long as no senior class
of security has such voting power by reason of any contingency.
"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: (i) default
for 30 days in the payment of any installment of interest or Additional
Amounts payable on any Debt Security of such series; (ii) 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; (iii) default in making any
sinking fund payment as required for any Debt Security of such series; (iv)
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; (v)
default in the payment of an 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; (vi) 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
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$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; (vii) 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 (viii) 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 (i) 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 (ii) 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 (i)
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 (ii) 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 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
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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,
(i) 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; (ii) 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; (iii) 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; (iv) impair the right to institute suit for the
enforcement of any payment on or with respect to any such Debt Security; (v)
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
(vi) 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 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
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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 such 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 such series. The quorum at any
meeting called to adopt a resolution, and at any reconvened meeting, will be
Persons holding or representing a majority in principal amount of the
Outstanding Debt Securities of a series; provided, however, that if any action
is to be taken at such meeting with respect to a consent or waiver which may
be given by the Holders of not less than a specified percentage in principal
amount of the Outstanding Debt Securities of a series, the Persons holding or
representing such specified percentage in principal amount of the Outstanding
Debt Securities of such series will constitute a quorum (Section 1504).
Notwithstanding the foregoing provisions, if any action is to be taken at a
meeting of Holders of Debt Securities of any series with respect to any
request, demand, authorization, direction, notice, consent, waiver or other
action that the Indenture expressly provides may be made, given or taken by
the Holders of a specified percentage in principal amount of all Outstanding
Debt Securities affected thereby, or of the Holders of such series and one or
more additional series: (i) there shall be no minimum quorum requirement for
such meeting and (ii) the principal amount of the Outstanding Debt Securities
of such series that vote in favor of such request, demand, authorization,
direction, notice, consent, waiver or other action shall be taken into account
in determining whether such request, demand, authorization, direction, notice,
consent, waiver or other action has been made, given or taken under the
Indenture (Section 1504).
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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 of the
Indenture) 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 (i) 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 (ii) 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 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
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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, (i) 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
(ii) 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 (iv) 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
(vii) under "--Events of Default, Notice and Waiver" with respect to any other
covenant as to which there has been covenant defeasance, the amount in such
currency, currency unit or composite currency in which such Debt Securities
are payable, and Government Obligations on deposit with the Trustee, will be
sufficient to pay amounts due on such Debt Securities at the time of their
Stated Maturity but may not be sufficient to pay amounts due on such Debt
Securities at the time of the acceleration resulting from such Event of
Default. However, 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.
REGISTRATION AND TRANSFER
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
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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 conversion or 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). PTR may at any time designate a transfer agent (in
addition to the Trustee) with respect to any series of Debt Securities. If PTR
has designated such a transfer agent or transfer agents, 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
(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).
BOOK-ENTRY PROCEDURES
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
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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 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).
TRUSTEE
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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DESCRIPTION OF PREFERRED SHARES
GENERAL
Subject to limitations prescribed by Maryland law and the Declaration of
Trust, the Board is authorized to issue, from the authorized but unissued
shares of beneficial interest 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 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 or a duly authorized committee thereof. On March 10, 1997, PTR had
6,105,119 of its Series A Preferred Shares issued and outstanding and held of
record by approximately 90 shareholders and 4,200,000 of its Series B
Preferred Shares issued and outstanding and held of record by approximately
310 shareholders.
Reference is made to the Prospectus Supplement relating to the series of
Preferred Shares being offered for the specific terms thereof, including:
(1) The title and stated value of such series of Preferred Shares;
(2) The number of shares of such series of 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 Preferred Shares of such series;
(4) The date from which dividends on Preferred Shares of such series
shall cumulate, if applicable;
(5) The procedures for any auction and remarketing, if any, for Preferred
Shares of such series;
(6) The provision for a sinking fund, if any, for Preferred Shares of
such series;
(7) The provision for redemption, if applicable, of Preferred Shares of
such series;
(8) Any listing of such series of Preferred Shares on any securities
exchange;
(9) The terms and conditions, if applicable, upon which Preferred Shares
of such series will be convertible into Common Shares, including the
conversion price (or manner of calculation thereof);
(10) Whether interests in Preferred Shares of such series will be
represented by Global Securities;
(11) Any other specific terms, preferences, rights, limitations or
restrictions of such series of Preferred Shares;
(12) A discussion of federal income tax considerations applicable to
Preferred Shares of such series;
(13) The relative ranking and preferences of Preferred Shares of such
series 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 Shares
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 of Preferred Shares of such series, in each case as may be
appropriate to preserve the status of PTR as a REIT.
RANK
Unless otherwise specified in the applicable Prospectus Supplement, the
Preferred Shares of each Series 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 series of 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 of such series;
and (iii) junior to all equity securities issued by PTR the terms of which
specifically provide that such equity securities rank senior to Preferred
Shares of such series.
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DIVIDENDS
Holders of Preferred Shares of each series shall be entitled to receive,
when, as and if declared by the Board, 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.
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 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 or (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 series) 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.
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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.
The Prospectus Supplement relating to a series of Preferred Shares that is
subject to mandatory redemption will specify the number of Preferred Shares of
such series 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, Preferred
Shares of such series 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 Preferred Shares
of any series shall have been or contemporaneously are declared and paid or
declared and a sum sufficient for the payment thereof set apart for payment
for all past dividend periods and the then current dividend period or (ii) if
such series of Preferred Shares does not have a cumulative dividend, full
dividends on all 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 Preferred
Shares of any series 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 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 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 on all 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 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 Preferred
Shares of such series in proportion to the number of Preferred Shares of such
series 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 90
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 Preferred 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 Preferred 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
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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 Preferred Shares will terminate,
except the right to receive the redemption price.
LIQUIDATION PREFERENCE
Upon any voluntary or involuntary liquidation, dissolution or winding up of
the affairs of PTR, then, before any distribution or payment shall be made to
the holders of any Common Shares or any other class or series of shares of
beneficial interest of PTR ranking junior to such series of 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 of such series
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 of such
series and the corresponding amounts payable on all shares of other classes or
series of capital shares of PTR ranking on a parity with Preferred Shares of
such series in the distribution of assets, then the holders of Preferred
Shares of such series 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 of such series, 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 of such series 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
entity, 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 of each series will not have any voting
rights, except as set forth below or in the applicable Prospectus Supplement
or as otherwise required by applicable law. The following is a summary of the
voting rights that, 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
Preferred Shares of such series or any other series of Preferred Shares
ranking on a parity with such series of Preferred Shares with respect in each
case to the payment of dividends, amounts upon liquidation, dissolution and
winding up ("Parity Shares") are in arrears, whether or not earned or
declared, the number of Trustees then constituting the Board will be increased
by two, and the holders of Preferred Shares of such series, 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 the Board at any annual meeting of
shareholders or a properly called special meeting of the holders of Preferred
Shares of such series 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 Preferred Shares of such series 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 Group and certain of its affiliates
beneficially own in excess of 10% of the outstanding Common Shares, in any
such vote by holders of Preferred Shares of
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such series, Security Capital Group and certain of its affiliates shall vote
their Preferred Shares of such series, if any, in the same respective
percentages as the Preferred Shares of such series and Voting Preferred Shares
that are not held by such persons.
The approval of two-thirds of the outstanding Preferred Shares of such
series 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 of the Preferred Shares of such series or the Voting
Preferred Shares; (ii) enter into a share exchange that affects the Preferred
Shares of such series, consolidate with or merge into another entity, or
permit another entity to consolidate with or merge into PTR, unless in each
such case each Preferred Share of such series remains outstanding without a
material and adverse change to its terms and rights or is converted into or
exchanged for preferred shares 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 Preferred Share of such series (except for changes that
do not materially and adversely affect the holders of the Preferred Shares of
such series); or (iii) authorize, reclassify, create, or increase the
authorized amount of any class of shares having rights senior to the Preferred
Shares of such series 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 other series of Preferred Shares ranking junior
to such series of Preferred Shares with respect in each case to the payment of
dividends, amounts upon liquidation, dissolution and winding up ("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 Preferred Shares of such series.
Except as provided above and as required by law, the holders of Preferred
Shares of each series will not be 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 Preferred Shares of any series
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 of such series 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 of such series or PTR, the events requiring an
adjustment of the conversion price and provisions affecting conversion in the
event of the redemption of the Preferred Shares of such series.
RESTRICTIONS ON OWNERSHIP
As discussed below under "Description of Common Shares--Restriction on Size
of Holdings," 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
shares of beneficial interest 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 and the Series B 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
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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
(as hereinafter defined). 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.
All certificates representing shares of Preferred Shares will bear a legend
referring to the restrictions described above.
DESCRIPTION OF COMMON SHARES
GENERAL
The Declaration of Trust authorizes PTR to issue up to 150,000,000 Shares of
Beneficial Interest, par value $1.00 per share, consisting of Common Shares,
Preferred Shares and such other types or classes of shares of beneficial
interest as the Board may create and authorize from time to time. At March 10,
1997 approximately 76,042,168 Common Shares were issued and outstanding and
held of record by approximately 3,050 shareholders.
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 pursuant to
subscription offerings or rights offerings or upon conversion of Preferred
Shares which are offered pursuant to such Prospectus Supplement and
convertible into Common Shares for no additional consideration. 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 the
Declaration of Trust and PTR's Bylaws.
The outstanding Common Shares are fully paid and, except as set forth below
under "--Shareholder Liability," non-assessable. Each Common Share entitles
the holder to one vote on all matters requiring a vote of shareholders,
including the election of Trustees. Holders of Common Shares do not have the
right to cumulate their votes in the election of Trustees, which means that
the holders of a majority of the outstanding Common Shares can elect all of
the Trustees then standing for election. Holders of Common Shares are entitled
to such distributions as may be declared from time to time by the Board out of
funds legally available therefor. Holders of Common Shares have no conversion,
redemption, preemptive or exchange rights to subscribe to any securities of
PTR. In the event of a liquidation, dissolution or winding up of the affairs
of PTR, the holders of the Common Shares are entitled to share ratably in the
assets of PTR remaining after provision for payment of all liabilities to
creditors and payment of liquidation preferences and accrued dividends, if
any, on the Series A Preferred Shares and Series B Preferred Shares, and
subject to the rights of holders of other series of Preferred Shares, if any.
The right of holders of the Common Shares are subject to the rights and
preferences established by the Board for the Series A Preferred Shares and
Series B Preferred Shares and any other series of Preferred Shares which may
subsequently be issued by PTR. See "Description of Preferred Shares."
PURCHASE RIGHTS
On July 11, 1994, the Board 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. The holders of any additional Common Shares issued after such date and
before the redemption or expiration of the Purchase Rights are also entitled
to receive one Purchase Right for each such additional Common Share. Each
Purchase Right entitles the holder under certain circumstances to purchase
from PTR one
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one-hundredth of a share of a series of 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 Group and its affiliates) or announces a tender offer or
exchange 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 the time equal to twice the Purchase Right's exercise price. The Purchase
Rights held by certain 20% shareholders (other than Security Capital Group)
would not be exercisable. The Purchase Rights will expire on July 21, 2004 and
are subject to redemption in whole, but not in part, at a price of $.01 per
Purchase Right payable in cash, shares of PTR or any other form of
consideration determined by the Board.
TRANSFER AGENT
The transfer agent and registrar for the Common Shares is ChaseMellon
Shareholder Services, L.L.C. The Common Shares are listed on the New York
Stock Exchange (the "NYSE") under the symbol "PTR."
RESTRICTION ON SIZE OF HOLDINGS
The Declaration of Trust restricts beneficial ownership of PTR's outstanding
shares of beneficial interest by a single person, or persons acting as a
group, to 9.8% of such shares. The purposes of the restriction 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 Code, not more
than 50% in value of its outstanding shares of beneficial interest may be
owned by five or fewer individuals at any time during the last half of any
taxable year. The restriction permits five persons to acquire up to a maximum
of 9.8% each, or an aggregate of 49% of the outstanding shares, and, thus,
assist the Board in protecting and preserving PTR's REIT status for tax
purposes. This restriction does not apply to Security Capital Group, which
counts as numerous holders for purposes of the tax rule, because its shares
are attributed to its shareholders for purposes of this rule.
Shares of beneficial interest owned by a person or group of persons in
excess of 9.8% (49% in the case of Security Capital Group and its affiliates)
of the outstanding shares of beneficial interest ("Excess Shares") are subject
to redemption by PTR, at its option, upon 30 days' notice, 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. 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 shares of beneficial interest which would make the transferee
a holder of Excess Shares. Shareholders of PTR are required to disclose, upon
demand of the Board, such information with respect to their direct and
indirect ownership of shares of PTR as the Board 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 any underwriter in a
public offering and sale of shares of beneficial interest of PTR or to any
transaction involving the issuance of shares of beneficial interest in which a
majority of the Board 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 Group's ownership of shares is attributed for tax purposes to
its shareholders. The Board has permitted Security Capital Group to acquire up
to 49% of the outstanding Common Shares.
TRUSTEE LIABILITY
The 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 Declaration of
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Trust and Maryland law governing 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 or gross negligence in the conduct
of their duties.
SHAREHOLDER LIABILITY
Both Maryland statutory law governing REITs organized under the laws of the
state and the Declaration of Trust provide that shareholders shall not be
personally or individually liable for any debt, act, omission or obligation of
PTR or the Board. The 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 or her 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.
FEDERAL INCOME TAX CONSIDERATIONS
PTR intends to operate in a manner that permits it to satisfy the
requirements for taxation as a REIT under the applicable provisions of the
Code. No assurance can be given, however, that such requirements will be met.
The following is a description of the federal income tax consequences to PTR
and its shareholders of the treatment of PTR as a REIT. Since these provisions
are highly technical and complex, each prospective purchaser of the Offered
Securities is urged to consult his or her own tax advisor with respect to the
federal, state, local, foreign and other tax consequences of the purchase,
ownership and disposition of the Offered Securities.
Based upon certain representations of PTR with respect to the facts as set
forth and explained in the discussion below, in the opinion of Mayer, Brown &
Platt, counsel to PTR, PTR has been organized in conformity with the
requirements for qualification as a REIT, and its proposed method of operation
described in this Prospectus and as represented by management will enable it
to satisfy the requirements for such qualification.
This opinion is conditioned upon certain representations made by PTR as to
certain factual matters relating to PTR's organization and intended or
expected manner of operation. In addition, this opinion is based on the law
existing and in effect on the date hereof. PTR's qualification and taxation as
a REIT will depend on PTR's ability to meet on a continuing basis, through
actual operating results, asset composition, distribution levels and diversity
of stock ownership, the various qualification tests imposed under the Code
discussed below. Mayer, Brown & Platt will not review compliance with these
tests on a continuing basis. No assurance can be given that PTR will satisfy
such tests on a continuing basis.
In brief, if certain detailed conditions imposed by the REIT provisions of
the Code are met, entities such as PTR, that invest primarily in real estate
and that otherwise would be treated for federal income tax purposes as
corporations, are generally not taxed at the corporate level on their "REIT
taxable income" that is currently distributed to shareholders. This treatment
substantially eliminates the "double taxation" (at both the corporate and
shareholder levels) that generally results from the use of corporations.
If PTR fails to qualify as a REIT in any year, however, it will be subject
to federal income taxation as if it were a domestic corporation, and its
shareholders will be taxed in the same manner as shareholders of ordinary
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corporations. In this event, PTR could be subject to potentially significant
tax liabilities, and therefore the amount of cash available for distribution
to its shareholders would be reduced or eliminated.
The Board believes that PTR has been organized and operated and currently
intends that PTR will continue to operate in a manner that permits it to
qualify as a REIT. There can be no assurance, however, that this expectation
will be fulfilled, since qualification as a REIT depends on PTR continuing to
satisfy numerous asset, income and distribution tests described below, which
in turn will be dependent in part on PTR's operating results.
The following summary is based on existing law, is not exhaustive of all
possible tax considerations and does not give a detailed discussion of any
state, local, or foreign tax considerations, nor does it discuss all of the
aspects of federal income taxation that may be relevant to a prospective
shareholder in light of his or her particular circumstances or to certain
types of shareholders (including insurance companies, tax-exempt entities,
financial institutions or broker-dealers, foreign corporations and persons who
are not citizens or residents of the United States) subject to special
treatment under the federal income tax laws.
TAXATION OF PTR
To qualify as a REIT under the Code for a taxable year, PTR must meet
certain organizational and operational requirements.
Asset Tests
At the close of each quarter of PTR's taxable year, PTR must satisfy certain
tests relating to the nature of its assets (determined in accordance with
generally accepted accounting principles). First, at least 75% of the value of
PTR's total assets must be represented by interests in real property,
interests in mortgages on real property, shares in other REITs, cash, cash
items, and government securities, and qualified temporary investments. Second,
although the remaining 25% of PTR's assets generally may be invested without
restriction, securities in this class may not exceed either (i) in the case of
securities of any non-government issuer, 5% of the value of PTR's total assets
or (ii) 10% of the outstanding voting securities of any one issuer.
Gross Income Tests
For each taxable year at least 75% of PTR's gross income must be derived
from certain real estate sources, including rents from real property and
interest on mortgage obligations. Real estate sources for purposes of those
requirements also include 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 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's management of the property and rendering of
services to tenants must either be with respect to usual or customary services
or furnished through a qualified independent contractor.
In addition to deriving 75% of its gross income from the sources listed
above, at least 95% of PTR's gross income for the taxable year must be derived
from real estate sources described above or from dividends, interest, gains
from the sale or disposition of stock or other securities that are not dealer
property and specified other items. Dividends (including PTR's share of any
dividends paid by PTR Development Services Incorporated ("PTR Development
Services") and interest on any obligations not collateralized by an interest
in real property qualify for purposes of the 95% test, but not for purposes of
that 75% test.
PTR must also derive less than 30% of its gross income for each taxable year
from the sale or other disposition of: (i) real property held for less than
four years (other than foreclosure property and by reason of involuntary
conversion); (ii) stock or securities held for less than one year; and (iii)
property in a prohibited transaction.
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Ownership Restrictions
PTR must satisfy certain ownership restrictions under the Code that limit
(i) concentration of ownership of its shares of capital stock by specified
persons and (ii) ownership by PTR of its tenants. The Declaration of Trust
restricts the transfer of shares when necessary to maintain PTR's
qualification as a REIT under these standards. See "Description of Common
Shares--Restrictions on Size of Holdings." However, because the Code imposes
broad attribution rules in determining constructive ownership, no assurance
can be given that these restrictions would be effective in maintaining PTR's
REIT status.
Annual Distribution Requirements
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 respect
to net capital gains or the dividends paid deduction) for each 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. Nevertheless, it is PTR's policy to distribute at least 95% of
its taxable income. REITs may also incur taxes for certain other activities.
Failure to Quality
If PTR fails to qualify for taxation as a REIT in any taxable year and
certain relief provisions do not apply, PTR will be subject to tax (including
applicable alternative minimum tax) on its taxable income at regular corporate
rates. Distributions to shareholders in any year in which PTR fails to quality
as a REIT will not be deductible by PTR, nor generally will they be required
to be made under the Code. In such event, to the extent of current and
accumulated earnings and profits, all distributions to shareholders will be
taxable as ordinary income, and subject to certain limitations in the Code,
corporate distributees may be eligible for the dividends-received deduction.
Unless entitled to relief under specific statutory provisions, PTR also will
be disqualified from reelecting taxation as a REIT for the four taxable years
following the year during which qualification was lost.
TAXATION OF PTR'S SHAREHOLDERS
Distributions paid to PTR's shareholders out of current or accumulated
earnings and profits of PTR will generally be taxed to them as ordinary
income. Such distributions are not eligible for the dividends-receivable
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 distribution and
regardless of the length of time a shareholder has held his shares. Capital
gains distributions are not eligible for the dividends-received deduction for
corporations. Any loss on a sale of shares that were held for six months or
less and with respect to which a capital gain distribution was received will
be treated as a long-term capital loss, up to the amount of the capital gain
distribution received with respect to such shares. A distribution 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. To
the extent such a distribution exceeds such basis, it will be treated as
capital gain to those shareholders holding their shares as capital assets. PTR
will notify each shareholder as to the portions of each distribution that, in
its view, constitute ordinary income, capital gain 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.
OTHER TAX CONSIDERATIONS
PTR Development Services
PTR Development Services will pay Federal and state income taxes at the full
applicable corporate rates on its income prior to payment of any dividends.
PTR Development Services will attempt to minimize the amount of such taxes,
but there can be no assurance whether or to the extent to which measures taken
to minimize taxes will be successful. To the extent that PTR Development
Services is required to pay Federal, state or local taxes, the cash available
for distribution by PTR Development Services to its shareholders will be
reduced accordingly.
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Backup Withholding
PTR will report to its domestic shareholders and to the Internal Revenue
Service the amount of distributions paid during each calendar year, and the
amount of tax withheld, if any, with respect thereto. Under the backup
withholding rules, a shareholder may be subject to backup withholding at
applicable rates with respect to distributions paid unless such shareholder
(i) is a corporation or comes within certain other exempt categories and, when
required, demonstrates this fact or (ii) provides a taxpayer identification
number, certifies as to no loss of exemption from backup withholding, and
otherwise complies with applicable requirements of the backup withholding
rules. A shareholder that does not provide PTR with its correct taxpayer
identification number may also be subject to penalties imposed by the IRS. Any
amount paid as backup withholding will be credited against the shareholder's
income tax liability. In addition, PTR may be required to withhold a portion
of capital gain distributions made to any shareholders who fail to certify
their non-foreign status to PTR.
EACH PROSPECTIVE PURCHASER IS ADVISED TO CONSULT WITH HIS OR HER OWN TAX
ADVISOR REGARDING THE SPECIFIC TAX CONSEQUENCES TO HIM OR HER OF THE PURCHASE,
OWNERSHIP, AND SALES OF COMMON SHARES, PREFERRED SHARES OR DEBT SECURITIES IN
AN ENTITY ELECTING TO BE TAXED AS A REAL ESTATE INVESTMENT TRUST, INCLUDING
THE FEDERAL, STATE, LOCAL, FOREIGN, AND OTHER TAX CONSEQUENCES OF SUCH
PURCHASE, OWNERSHIP, SALE AND ELECTION AND OF POTENTIAL CHANGES IN APPLICABLE
TAX LAWS.
PLAN OF DISTRIBUTION
PTR may sell the Offered Securities to one or more underwriters or dealers
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 through subscription rights distributed to PTR shareholders and direct
placements to third parties. In connection with subscription offerings or the
distribution of subscription rights to shareholders, if all the underlying
Offered Securities are not subscribed for, PTR may sell such unsubscribed
Offered Securities to third parties directly or through agents and, in
addition, whether or not all of the underlying Offered Securities are
subscribed for, PTR may concurrently offer additional Offered Securities to
third parties directly or through agents, which agents may be affiliated with
PTR. Any underwriter, dealer or agent involved in the offer and sale of the
Offered Securities will be named in the applicable Prospectus Supplement.
The distribution of the Offered Securities may be effected from time to time
in one or more transactions 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 (any of which may represent a discount from the prevailing
market price). 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 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.
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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 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, 1996 and 1995, and for
each of the years in the three-year period ended December 31, 1996, and
related schedule, incorporated by reference herein and the combined statement
of revenues and certain expenses for certain multifamily communities as of
December 31, 1995, incorporated by reference herein, have been incorporated by
reference herein and in the Registration Statement (as defined below) 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.
LEGAL MATTERS
The validity of the Offered Securities will be passed upon for PTR by Mayer,
Brown & Platt, Chicago, Illinois. Mayer, Brown & Platt has in the past
represented and is currently representing PTR and certain of its affiliates,
including Security Capital Group.
AVAILABLE INFORMATION
PTR is subject to the informational requirements of the Exchange Act and, in
accordance therewith, files reports, proxy statements and other information
with 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,
and are also available on the Commission's worldwide web site at
http://www.sec.gov. 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, Series A
Preferred Shares and Series B Preferred Shares are listed on the NYSE under
the symbols "PTR," "PTR-PRA" and "PTR-PRB," 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. 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.
28
<PAGE>
INCORPORATION BY REFERENCE
There are incorporated herein by reference the following documents filed by
PTR with the Commission (File No. 1-10272):
(a) PTR's Annual Report on Form 10-K for the fiscal year ended December
31, 1996;
(b) PTR's Current Reports on Form 8-K filed January 27, 1997, February
20, 1997 and March 26, 1997; and
(c) The description of PTR's preferred share purchase rights contained in
PTR's registration statement on Form 8-A, as amended.
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 information
incorporated herein by reference, other than exhibits to such information
unless such exhibits are specifically incorporated by reference into such
documents. Requests should be addressed to Secretary, Security Capital Pacific
Trust, 7777 Market Center Avenue, El Paso, Texas 79912, telephone number:
(915) 877-3900.
29
<PAGE>
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NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESEN-
TATIONS OTHER THAN THOSE CONTAINED OR INCORPORATED BY REFERENCE IN THIS PRO-
SPECTUS SUPPLEMENT AND THE PROSPECTUS, AND, IF GIVEN OR MADE, SUCH INFORMATION
OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED. THIS PRO-
SPECTUS SUPPLEMENT AND THE PROSPECTUS DO NOT CONSTITUTE AN OFFER TO SELL OR A
SOLICITATION OF AN OFFER TO BUY ANY SECURITIES OTHER THAN THE SECURITIES TO
WHICH IT RELATES OR AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY
SUCH SECURITIES IN ANY CIRCUMSTANCES IN WHICH SUCH OFFER OR SOLICITATION IS UN-
LAWFUL. NEITHER THE DELIVERY OF THIS PROSPECTUS SUPPLEMENT AND THE PROSPECTUS
NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICA-
TION THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF PTR SINCE THE DATE HEREOF
OR THAT THE INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT
TO ITS DATE.
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TABLE OF CONTENTS
PROSPECTUS SUPPLEMENT
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Security Capital Pacific Trust............................................. S-3
Use of Proceeds............................................................ S-4
Price Range of Common Shares and Distributions............................. S-5
Recent Developments........................................................ S-6
Certain Federal Income Tax Considerations.................................. S-10
Underwriting............................................................... S-11
Validity of Common Shares.................................................. S-12
PROSPECTUS
Security Capital Pacific Trust............................................. 2
Use of Proceeds............................................................ 2
Ratio Information.......................................................... 2
Description of Debt Securities............................................. 3
Description of Preferred Shares............................................ 17
Description of Common Shares............................................... 22
Federal Income Tax Considerations.......................................... 24
Plan of Distribution....................................................... 27
Experts.................................................................... 28
Legal Matters.............................................................. 28
Available Information...................................................... 28
Incorporation by Reference................................................. 29
</TABLE>
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2,500,000 SHARES
[LOGO SECURITY CAPITAL PACIFIC TRUST]
COMMON SHARES
OF BENEFICIAL INTEREST
(PAR VALUE $1.00 PER SHARE)
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PROSPECTUS SUPPLEMENT
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GOLDMAN, SACHS & CO.
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