<PAGE>
PROSPECTUS SUPPLEMENT
(To Prospectus dated December 31, 1997)
LOGO
$125,000,000 7.20% Notes due 2013
Interest on the 7.20% Notes due 2013 (the "Notes") of Security Capital Pacific
Trust ("PTR") offered hereby is payable semi-annually on March 1, and
September 1, commencing September 1, 1998. Principal installments on the Notes
will commence on March 1, 2009. The Notes will mature on March 1, 2013. See
"Description of Notes--Principal and Interest." The Notes may be redeemed at
any time at the option of PTR, in whole or in part, at a redemption price
equal to the sum of (i) the principal amount of the Notes being redeemed plus
accrued interest thereon to the redemption date and (ii) the Make-Whole Amount
(as defined herein) if any. See "Description of the Notes--Optional
Redemption."
The Notes will be represented by one or more global securities ("Global
Securities") registered in the name of The Depository Trust Company ("DTC") or
its nominee. Beneficial interests in the Global Securities will be shown on,
and transfers thereof will be effected only through, records maintained by DTC
and its participants. Owners of beneficial interests in the Global Securities
will be entitled to physical delivery of the Notes in certificated form only
under the limited circumstances described under "Description of Notes--Book-
Entry Procedures."
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS SUPPLEMENT OR THE PROSPECTUS TO WHICH
IT RELATES. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
UNDERWRITING
PRICE TO DISCOUNTS AND PROCEEDS TO
PUBLIC(1) COMMISSIONS(2) PTR(1)(3)
- --------------------------------------------------
<S> <C> <C> <C>
Per Note 99.947% .675% 99.272%
- --------------------------------------------------
Total $124,933,750 $843,750 $124,090,000
- --------------------------------------------------
</TABLE>
(1) Plus accrued interest, if any, from March 6, 1998.
(2) PTR has agreed to indemnify the several Underwriters against certain
liabilities, including liabilities under the Securities Act of 1933, as
amended. See "Underwriting."
(3) Before deducting expenses payable by PTR estimated at $275,000.
The Notes are offered, subject to prior sale, when, as and if accepted by the
Underwriters and subject to approval of certain legal matters by Skadden,
Arps, Slate, Meagher & Flom LLP, counsel for the Underwriters. It is expected
that delivery of the Notes will be made on or about March 6, 1998 through the
facilities of DTC, against payment therefor in immediately available funds.
J.P. MORGAN & CO. GOLDMAN, SACHS & CO.
March 3, 1998
<PAGE>
CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN, OR OTHERWISE AFFECT THE PRICE OF THE NOTES.
SPECIFICALLY, THE UNDERWRITERS MAY OVERALLOT IN CONNECTION WITH THE OFFERING,
AND MAY BID FOR, AND PURCHASE, THE NOTES IN THE OPEN MARKET. FOR A DESCRIPTION
OF THESE ACTIVITIES, SEE "UNDERWRITING".
No person has been authorized to give any information or to make any
representations other than those contained or incorporated by reference in this
Prospectus Supplement or the Prospectus, and, if given or made, such
information or representations must not be relied upon as having been
authorized. This Prospectus Supplement and the Prospectus do not constitute an
offer to sell or the solicitation of an offer to buy any securities other than
the securities to which they relate or any offer to sell or the solicitation of
any offer to buy such securities in any jurisdictions in which such offer or
solicitation is unlawful. Neither the delivery of this Prospectus Supplement or
the Prospectus nor any sale made hereunder or thereunder shall, under any
circumstances, create any implication that there has been no change in the
affairs of PTR since the date hereof or thereof or that the information
contained or incorporated by reference herein or therein is correct as of any
time subsequent to the date of such information.
TABLE OF CONTENTS
PROSPECTUS SUPPLEMENT
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Ratio of Earnings to Fixed Charges......................................... S-3
Use of Proceeds............................................................ S-3
Forward-Looking Statements................................................. S-3
Recent Developments........................................................ S-3
Description of Notes....................................................... S-4
Underwriting............................................................... S-7
Validity of Notes.......................................................... S-7
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....................................................... 31
Experts.................................................................... 32
Available Information...................................................... 33
Incorporation by Reference................................................. 33
Legal Matters.............................................................. 33
</TABLE>
S-2
<PAGE>
RATIO OF EARNINGS TO FIXED CHARGES
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>
YEAR ENDED DECEMBER 31,
---------------------------
1993 1994 1995 1996 1997(1)
---- ---- ---- ---- -------
<S> <C> <C> <C> <C> <C>
Ratio of earnings to fixed charges.................. 4.0 2.6 3.2 2.5 1.1
</TABLE>
- --------
(1) Earnings from operations for 1997 included a one-time non-cash charge of
$71.7 million associated with costs incurred in acquiring PTR's REIT
manager and the affiliated property manager from Security Capital Group
Incorporated ("Security Capital Group"), an affiliate. Excluding the
charge, the ratio of earnings to fixed charges for the year-ended December
31, 1997 would be 2.0.
USE OF PROCEEDS
The net proceeds to PTR from the sale of the Notes offered hereby are
expected to be approximately $124 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 Chase Bank of Texas,
National Association (the "Chase Agreement"). The Line bears interest at the
greater of prime (8.50% at February 26, 1998) or the federal funds rate (5.375%
at February 26, 1998) plus 0.50% (5.875% at February 26, 1998) or at PTR's
option, LIBOR (5.625% at February 26, 1998) plus 0.75% (6.375% at February 26,
1998). The spread over LIBOR can vary from LIBOR plus 0.50% to LIBOR plus 1.50%
based upon the rating of PTR's senior unsecured debt. The Line is scheduled to
mature in August 1999 (which maturity date may be extended annually for an
additional year with the approval of the lenders). Loans under the Chase
Agreement bear interest at an overnight rate, which has ranged from 5.94% to
7.13%. At February 26, 1998, $273.0 million in borrowings were outstanding
under the Line and $15.6 million in borrowings were outstanding under the Chase
Agreement. PTR expects to make additional borrowings under the Line and the
Chase Agreement following this offering. Borrowings under the Line and the
Chase Agreement are used for the development and acquisition of multifamily
properties and for working capital purposes.
FORWARD-LOOKING STATEMENTS
The statements contained in this Registration Statement, or incorporated by
reference, that are not historical facts are forward-looking statements within
the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the
Securities Exchange Act of 1934. These forward-looking statements are based on
current expectations, estimates and projections about the industry and markets
in which PTR operates, management's beliefs and assumptions made by management.
Words such as "expects," "anticipates," "intends," "plans," "believes,"
"seeks," "estimates," and variations of such words and similar expressions are
intended to identify such forward-looking statements. These statements are not
guarantees of future performance and involve certain risks, uncertainties and
assumptions which are difficult to predict. Therefore, actual outcomes and
results may differ materially from what is expressed or forecasted in such
forward-looking statements. PTR undertakes no obligation to update publicly any
forward-looking statements, whether as a result of new information, future
events or otherwise. PTR's operating results depend primarily on income from
multifamily communities, which is substantially influenced by (i) the demand
and supply of multifamily units in PTR's primary target market and submarkets,
(ii) operating expense levels, (iii) the effectiveness of property level
operations and (iv) the pace and price at which PTR can acquire and develop
additional multifamily communities. Capital and credit market conditions which
affect PTR's cost of capital also influence operating results.
RECENT DEVELOPMENTS
On February 26, 1998, PTR announced that it has increased its expected 1998
development starts to more than $420 million of new communities--a 40% increase
over the $300 million in expected starts previously reported. Including these
communities, the company's total development pipeline exceeds $1.33 billion in
its target markets. PTR believes that new development communities will continue
to be a powerful component of the company's incremental growth in funds from
operations per share. PTR also expects to complete and stabilize more than $250
million in new development communities annually for the next four years.
S-3
<PAGE>
PTR has positioned its $1.33 billion development pipeline in supply-
constrained markets with high barriers to entry, including $943 million in the
West Coast markets of San Francisco, Southern California, Seattle, Portland and
Salt Lake City. A total of $383 million of new communities are under
construction or in planning in other targeted PTR submarkets in cities
including Denver, Phoenix and downtown Houston. PTR believes that the lease-up
of these new communities should allow the company to continue to exceed its
projected development yields.
DESCRIPTION OF NOTES
The following description of the terms of the Notes offered hereby (referred
to in the accompanying Prospectus as the "Debt Securities") supplements, and to
the extent inconsistent therewith replaces, the description of the general
terms and provisions of the Debt Securities set forth in the accompanying
Prospectus, to which description reference is hereby made.
GENERAL
The Notes are a series of Debt Securities (which is more fully described in
the accompanying Prospectus) to be issued pursuant to 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 as successor trustee to Morgan Guaranty
Trust Company of New York (the "Trustee"). The Notes will be limited to an
aggregate principal amount of $125.0 million. The terms of the Notes include
those provisions contained in the Indenture (the terms of which are more fully
described in the accompanying Prospectus) and those made part of the Indenture
by reference to the Trust Indenture Act of 1939, as amended (the "Trust
Indenture Act"). The Notes are subject to all such terms, and holders of Notes
are referred to the Indenture and Trust Indenture Act for a statement thereof.
PTR currently has approximately $630.0 million of indebtedness outstanding
pursuant to the Indenture.
The Notes will be direct, senior unsecured obligations of PTR and will rank
equally with all other unsecured and unsubordinated indebtedness of PTR from
time to time outstanding. However, the Notes are effectively subordinated to
mortgages and other secured indebtedness of PTR and PTR's subsidiaries, which
encumbered certain assets of PTR and PTR's subsidiaries (approximately $265.7
million of secured debt was outstanding at December 31, 1997).
As of December 31, 1997, on a pro forma basis giving effect to the issuance
of the Notes offered hereby and the application of the net proceeds therefrom,
the total outstanding indebtedness of PTR and its subsidiaries was
approximately $1.13 billion. PTR may incur additional indebtedness, subject to
the provisions described under "Description of Debt Securities--Certain
Covenants--Limitations on Incurrence of Debt" in the accompanying Prospectus.
Reference is made to the section entitled "Description of Debt Securities--
Certain Covenants" in the accompanying Prospectus for a description of the
covenants applicable to the Notes. The defeasance and covenant defeasance
provisions of the Indenture described under "Description of Debt Securities--
Discharge, Defeasance and Covenant Defeasance" in the accompanying Prospectus
will apply to the Notes. Each of the covenants described in the Prospectus
under the caption "Description of Debt Securities--Certain Covenants" will be
subject to defeasance.
The Notes will only be issued in fully registered form in denominations of
$1,000 and integral multiples thereof.
PRINCIPAL AND INTEREST
The Notes will bear interest at 7.20% per annum and will mature on March 1,
2013. The Notes will bear interest from March 6, 1998 or from the immediately
preceding Interest Payment Date (as defined below) to which interest has been
paid, payable semi-annually in arrears on March 1 and September 1 of each year,
commencing on September 1, 1998 (each, an "Interest Payment Date"), to the
persons in whose name the applicable Notes are registered in the Security
Register on the preceding February 15 or August 15 (whether or not a Business
Day, as defined below), as the case may be (each, a "Regular Record Date").
Interest on the Notes will be computed on the basis of a 360-day year of twelve
30-day months.
S-4
<PAGE>
Installments of principal of $200 will be paid on each $1,000 principal
amount of the Notes on each March 1 (a "Principal Payment Date"), commencing on
March 1, 2009. The aggregate principal payment on each Principal Payment Date
shall equal $25.0 million.
In each case, principal on the Notes will be payable to the persons in whose
name the applicable Notes are registered in the Security Register on the
preceding February 15 (whether or not a Business Day, as defined below).
The weighted average life of the Notes (as to all distributions of principal)
will be 13 years. The weighted average life of the Notes for this purpose
equals the number of years obtained by (i) multiplying the amount of each
payment of principal of the Notes by the number of years which will elapse
between the date of issuance and such payments, (ii) adding the products
obtained under clause (i), and (iii) dividing such sum by $125.0 million.
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 the City of New York are not required or authorized
by law or executive order to close.
OPTIONAL REDEMPTION
The Notes may be redeemed at any time at the option of PTR, in whole or in
part, at a redemption price equal to the sum of (i) the principal amount of the
Notes being redeemed plus accrued interest thereon to the redemption date and
(ii) the Make-Whole Amount, if any, with respect to such Notes (the "Redemption
Price").
From and after the date notice has been given as provided in the Indenture,
if funds for the redemption of any Notes called for redemption shall have been
made available on such redemption date, such Notes will cease to bear interest
on the date fixed for such redemption specified in such notice and the only
right of the Holders of the Notes will be to receive payment of the Redemption
Price.
Notice of any optional redemption of any Notes will be given to Holders at
their addresses, as shown in the Security Register, not more than 60 nor less
than 30 days prior to the date fixed for redemption. The notice of redemption
will specify, among other items, the Redemption Price and the principal amount
of the Notes held by such Holder to be redeemed.
If less than all the Notes are to be redeemed at the option of PTR, PTR will
notify the Trustee at least 45 days prior to the redemption date (or such
shorter period as satisfactory to the Trustee) of the aggregate principal
amount of the Notes to be redeemed and the redemption date. The Trustee shall
select, in such manner as it shall deem fair and appropriate, Notes to be
redeemed in whole or in part. Notes may be redeemed in part in the minimum
authorized denomination for Notes or in any integral multiple thereof.
"Make-Whole Amount" means, in connection with any optional redemption or
accelerated payment of any Note, the excess, if any, of (i) the aggregate
present value as of the date of such redemption or accelerated payment of each
dollar of principal being redeemed or paid and the amount of interest
(exclusive of interest accrued to the date of redemption or accelerated
payment) that would have been payable in respect of such dollar if such
redemption or accelerated payment had not been made, determined by discounting,
on a semiannual basis, such principal and interest at the Reinvestment Rate
(determined on the third Business Day preceding the date such notice of
redemption is given or declaration of acceleration is made) from the respective
dates on which such principal and interest would have been payable if such
redemption or accelerated payment had not been made, over (ii) the aggregate
principal amount of the Notes being redeemed or paid.
"Reinvestment Rate" means 0.25% (one-fourth of one percent) plus the
arithmetic mean of the yields under the respective headings "This Week" and
"Last Week" published in the Statistical Release under the caption "Treasury
Constant Maturities" for the maturity (rounded to the nearest month)
corresponding to the remaining life to maturity, as of the payment date of the
principal being redeemed or paid. If no maturity exactly corresponds to such
maturity, yields for the two published maturities most closely corresponding to
such maturity shall be calculated pursuant to the immediately preceding
sentence and the Reinvestment Rate shall be interpolated or extrapolated from
such yields
S-5
<PAGE>
on a straight-line basis, rounding in each of such relevant periods to the
nearest month. For the purposes of calculating the Reinvestment Rate, the most
recent Statistical Release published prior to the date of determination of the
Make-Whole Amount shall be used.
"Statistical Release" means the statistical release designated "H.15(519)" or
any successor publication which is published weekly by the Federal Reserve
System and which establishes yields on actively traded United States government
securities adjusted to constant maturities, or, if such statistical release is
not published at the time of any determination under the Indenture, then such
other reasonably comparable index which shall be designated by PTR.
BOOK-ENTRY PROCEDURES
The Notes will be issued in the form of one or more Global Securities that
will be deposited with, or on behalf of, DTC and registered in the name of
DTC's nominee. Except as described in the accompanying Prospectus under the
caption "Description of Debt Securities--Global Securities," the Notes will not
be issuable in definitive form. So long as the Notes are represented by one or
more Global Securities, DTC's nominee will be considered the sole owner or
holder of the Notes for all purposes under the Indenture, and the beneficial
owners of the Notes will be entitled only to those rights and benefits afforded
to them in accordance with DTC's regular operating procedures. See "Description
of Debt Securities--Global Securities" in the accompanying Prospectus.
THE FOLLOWING IS BASED ON INFORMATION FURNISHED BY DTC:
DTC will act as securities depository for the Notes. The Notes will be issued
as fully registered securities registered in the name of Cede & Co. (DTC's
partnership nominee). One fully registered Note certificate will be issued with
respect to the Notes.
DTC is a limited-purpose trust company organized under the New York Banking
Law, a "banking organization" within the meaning of the New York Banking Law, a
member of the Federal Reserve System, a "clearing corporation" within the
meaning of the New York Uniform Commercial Code, and a "clearing agency"
registered pursuant to the provisions of Section 17A of the Securities Exchange
Act of 1934, as amended. DTC holds securities that its participants (the
"Participants") deposit with DTC. DTC also facilitates the settlement among
Participants of securities transactions, such as transfers and pledges, in
deposited securities through electronic computerized book-entry changes in
Participants' accounts, thereby eliminating the need for physical movement of
securities certificates. Direct Participants include securities brokers and
dealers (including the Underwriters), banks, trust companies, clearing
corporations, and certain other organizations ("Direct Participants"). DTC is
owned by a number of its Direct Participants and by the New York Stock
Exchange, Inc., the American Stock Exchange, Inc. and the National Association
of Securities Dealers, Inc. Access to the DTC system is also available to
others, such as securities brokers and dealers, banks and trust companies that
clear through or maintain a custodial relationship with a Direct Participant,
either directly or indirectly. The rules applicable to DTC and its Participants
are on file with the Securities and Exchange Commission.
SAME-DAY SETTLEMENT AND PAYMENT
Settlement for the Notes will be made by the Underwriters in immediately
available funds. All payments of principal and interest will be made by PTR in
immediately available funds or the equivalent, so long as DTC continues to make
its Same-Day Funds Settlement System available to PTR.
S-6
<PAGE>
UNDERWRITING
Subject to the terms and conditions of the underwriting agreement (the
"Underwriting Agreement") dated the date hereof, J.P. Morgan Securities Inc.
and Goldman, Sachs & Co. (the "Underwriters") have agreed to purchase, and PTR
has agreed to sell to the Underwriters all of the Notes offered hereby in the
respective principal amounts set forth below.
<TABLE>
<CAPTION>
PRINCIPAL AMOUNT
UNDERWRITERS OF NOTES
------------ ----------------
<S> <C>
J.P. Morgan Securities Inc.............................. $ 75,000,000
Goldman, Sachs & Co..................................... 50,000,000
------------
Total............................................... $125,000,000
============
</TABLE>
Under the terms and subject to the conditions set forth in the Underwriting
Agreement, the Underwriters are obligated to purchase all the Notes, if any are
purchased.
The Underwriters have advised PTR that they initially propose to offer the
Notes directly to the public at the public offering prices set forth on the
cover page of this Prospectus Supplement, and to certain dealers at such prices
less a concession not in excess of 0.40% of the principal amount of the Notes.
The Underwriters may allow, and such dealers may reallow, a concession not in
excess of 0.25% of the principal amount of the Notes to certain other dealers.
After the initial public offering, the public offering prices and such
concessions may be changed.
The Notes are a new issue of securities with no established trading market.
PTR has been advised by the Underwriters that the Underwriters intend to make a
market in the Notes but are not obligated to do so and may discontinue market
making at any time without notice. No assurance can be given as to the
liquidity of the trading markets for the Notes.
In connection with the offering, the Underwriters may engage in transactions
that stabilize, maintain or otherwise affect the price of the Notes.
Specifically, the Underwriters may overallot the offering, creating a syndicate
short position. In addition, the Underwriters may bid for, and purchase, in the
open market to cover syndicate shorts or to stabilize the price of the Notes.
Finally, the underwriting syndicate may reclaim selling concessions allowed for
distributing the Notes in the offering, if the syndicate repurchases previously
distributed Notes in syndicate covering transactions, in stabilization
transactions or otherwise. Any of these activities may stabilize or maintain
the market price of the Notes above independent market levels. The Underwriters
are not required to engage in these activities, and may end any of these
activities at any time.
PTR has agreed to indemnify the Underwriters against certain liabilities,
including liabilities under the Securities Act of 1933, as amended.
From time to time in the ordinary course of their respective businesses, J.P.
Morgan Securities Inc., and Goldman, Sachs & Co., and their respective
affiliates have provided and may in the future provide investment banking,
commercial banking and other financial services to PTR and its affiliates.
VALIDITY OF NOTES
The validity of the Notes offered hereby will be passed upon for PTR by
Mayer, Brown & Platt, Chicago, Illinois. Certain legal matters will be passed
upon for the Underwriters by Skadden, Arps, Slate, Meagher & Flom LLP, New
York, New York. Mayer, Brown & Platt has in the past represented, and is
currently representing, PTR and certain of its affiliates, including Security
Capital Group, a shareholder of PTR.
S-7
<PAGE>
PROSPECTUS
$400,000,000
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
$170,929,905 of the Debt Securities, Preferred Shares of Beneficial
Interest and Common Shares of Beneficial Interest which were registered
under previous registration statements.
----------------
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 December 31, 1997.
<PAGE>
SECURITY CAPITAL PACIFIC TRUST
PTR is a real estate operating company focused on acquiring, developing,
owning and operating multifamily communities in the western United States. PTR
believes that it distinguishes itself from its competition by being the only
company in its target market which combines all of the following:
1. A disciplined investment strategy based on proprietary research which
identifies high growth markets and submarkets with attractive long-term
demand and supply fundamentals for PTR's multifamily communities;
2. Development experience and proven capability to deliver consistent,
state-of-the-art multifamily communities which meet renter preferences and
demographic trends;
3. A focus on moderate income product which serves one of the largest
segments of the renter population and which PTR believes has very
attractive operating characteristics;
4. An investment strategy which allows PTR to redeploy its invested
capital and maximize the growth in cash flow generated by PTR's operating
multifamily communities; and
5. An organization of 287 professionals in 15 offices which combines
local market expertise with broad operating company experience.
The cornerstone of PTR's growth strategy is its commitment to fundamental
real estate research, allowing PTR to redeploy its capital into markets,
products and new business opportunities which PTR believes have the greatest
potential for long-term cash flow growth. Management believes that this
unique, research-driven strategy will continue to allow PTR to produce
attractive long-term returns for its shareholders.
PTR was organized in 1963 as a real estate investment trust under the laws
of Maryland. Its principal executive offices are located at 7670 South Chester
Street, Englewood, Colorado 80112, and its telephone number is (303) 708-5959.
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 and general corporate 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>
NINE MONTH
PERIOD ENDED DECEMBER ENDED
31, SEPTEMBER 30,
------------------------ ----------------
1992 1993 1994 1995 1996 1996 1997(1)
---- ---- ---- ---- ---- ------ --------
<S> <C> <C> <C> <C> <C> <C> <C>
Ratio of earnings to fixed charges.... 2.9 4.0 2.6 3.2 2.5 2.7 0.7
Ratio of earnings to combined fixed
charges and Preferred Share
dividends............................ 2.9 3.4 1.6 1.9 1.7 1.7 0.6
</TABLE>
- --------
(1) Earnings from operations for 1997 includes a one-time charge of $71.7
million associated with costs incurred in acquiring the management
companies from an affiliate. Excluding this charge, the ratio of earnings
to fixed charges would be 1.9 and the ratio of earnings to combined fixed
charges and Preferred Share dividends would be 1.5.
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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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(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).
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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
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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 Securities and Exchange Commission (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
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receivable acquired, and the amount of any securities offering proceeds
received (to the extent that such proceeds were not used to acquire real
estate assets or mortgages receivable or used to reduce Debt), by PTR or any
Subsidiary since the end of such calendar quarter, including those proceeds
obtained in connection with the incurrence of such additional Debt (Section
1004).
In addition to the foregoing limitation on the incurrence of Debt, PTR will
not, and will not permit any Subsidiary to, incur any Debt secured by any
mortgage, lien, charge, pledge, encumbrance or security interest of any kind
upon any of the property of PTR or any Subsidiary if, immediately after giving
effect to the incurrence of such additional Debt and the application of the
proceeds thereof, the aggregate principal amount of all outstanding Debt of
PTR and its Subsidiaries on a consolidated basis which is secured by any
mortgage, lien, charge, pledge, encumbrance or security interest on property
of PTR or any Subsidiary is greater than 40% of PTR's Total Assets (Section
1004).
In addition to the foregoing limitations on the incurrence of Debt, PTR will
not, and will not permit any Subsidiary to, incur any Debt if the ratio of
Consolidated Income Available for Debt Service (as defined below) to the
Annual Service Charge (as defined below) for the four consecutive fiscal
quarters most recently ended prior to the date on which such additional Debt
is to be incurred shall have been less than 1.5:1, 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 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. At December 9, 1997, PTR had
5,483,093 of its Series A Preferred Shares issued and outstanding and held of
record by approximately 70 shareholders and 4,200,000 of its Series B
Preferred Shares issued and outstanding and held of record by approximately
280 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 Incorporated ("Security Capital
Group") and certain of its affiliates beneficially own in excess of 10% of the
outstanding Common Shares, in
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any such vote by holders of Preferred Shares of 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 December
9, 1997 approximately 92,532,266 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 the Code, its legislative history,
administrative pronouncements, judicial decisions and Treasury regulations,
subsequent changes to any of which may affect the tax consequences described
herein, possibly on a retroactive basis. The following summary 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
General
In any year in which PTR qualifies as a REIT, in general it will not be
subject to federal income tax on that portion of its REIT taxable income or
capital gain which is distributed to shareholders. PTR may, however, be
subject to tax at normal corporate rates upon any taxable income or capital
gain not distributed.
Notwithstanding its qualification as a REIT, PTR may also be subject to
taxation in certain other circumstances. If PTR should fail to satisfy either
the 75% or the 95% gross income test (as discussed below), and nonetheless
maintains its qualification as a REIT because certain other requirements are
met, it will be subject to a 100% tax on the greater of the amount by which
PTR fails to satisfy either the 75% test or the 95% test, multiplied by a
fraction intended to reflect PTR's profitability. PTR will also be subject to
a tax of 100% on net income from any "prohibited transaction", as described
below, and if PTR has (i) net income from the sale or other disposition of
"foreclosure property" which is held primarily for sale to customers in the
ordinary course of business or (ii) other non-qualifying income from
foreclosure property, it will be subject to tax on such income from
foreclosure property at the highest corporate rate. In addition, if PTR should
fail to distribute during each calendar year at least the sum of (i) 85% of
its REIT ordinary income for such year, (ii) 95% of its REIT capital gain net
income for such year and (iii) any undistributed taxable income from prior
years, PTR would be subject to a 4% excise tax on the excess of such required
distribution over the amounts actually distributed. For taxable years
beginning after August 5, 1997, the Taxpayer Relief Act of 1997 (the "1997
Act") permits a REIT, with respect to undistributed net long-term capital
gains it received during the taxable year, to designate in a notice mailed to
shareholders within 60 days of the end of the taxable year (or in a notice
mailed with its annual report for the taxable year) such amount of such gains
which its shareholders are to include in their taxable income as long-term
capital gains. Thus, if PTR made this designation, the shareholders of PTR
would include in their income as long-term capital gains their proportionate
share of the undistributed net capital gains as designated by PTR and PTR
would have to pay the tax on such gains within 30 days of the close of its
taxable year. Each shareholder of PTR would be deemed to have paid such
shareholder's share of the tax paid by PTR on such gains, which tax would be
credited or refunded to the shareholder. A shareholder would increase his tax
basis in his PTR stock by the difference between the amount of income to the
holder resulting from the designation less the holder's credit or refund for
the tax paid by PTR. PTR may also be subject to the corporate "alternative
minimum tax", as well as tax in certain situations and on certain transactions
not presently contemplated. PTR will use the calendar year both for federal
income tax purposes and for financial reporting purposes.
In order to qualify as a REIT, PTR must meet, among others, the following
requirements:
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Share Ownership Test
PTR's shares of stock must be held by a minimum of 100 persons for at least
335 days in each taxable year (or a proportional number of days in any short
taxable year). In addition, at all times during the second half of each
taxable year, no more than 50% in value of the stock of PTR may be owned,
directly or indirectly and by applying certain constructive ownership rules,
by five or fewer individuals, which for this purpose includes certain tax-
exempt entities. Any stock held by a qualified domestic pension or other
retirement trust will be treated as held directly by its beneficiaries in
proportion to their actuarial interest in such trust rather than by such
trust. Pursuant to the constructive ownership rules, Security Capital's
ownership of shares is attributed to its shareholders for purposes of the 50%
test. Under the 1997 Act, for taxable years beginning after August 5, 1997, if
PTR complies with the Treasury regulations for ascertaining its actual
ownership and did not know, or exercising reasonable diligence would not have
reason to know, that more than 50% in value of its outstanding shares of stock
were held, actually or constructively, by five or fewer individuals, then PTR
will be treated as meeting such requirement.
In order to ensure compliance with the 50% test, PTR has placed certain
restrictions on the transfer of the shares of its stock to prevent additional
concentration of ownership. Moreover, to evidence compliance with these
requirements under United States Treasury Department ("Treasury") regulations,
PTR must maintain records which disclose the actual ownership of its
outstanding shares of stock. In fulfilling its obligations to maintain
records, PTR must and will demand written statements each year from the record
holders of designated percentages of shares of its stock disclosing the actual
owners of such shares (as prescribed by Treasury regulations). A list of those
persons failing or refusing to comply with such demand must be maintained as a
part of PTR's records. A shareholder failing or refusing to comply with PTR's
written demand must submit with his or her tax returns a similar statement
disclosing the actual ownership of shares of PTR's stock and certain other
information. In addition, PTR's Charter provides restrictions regarding the
transfer of shares of its stock that are intended to assist PTR in continuing
to satisfy the share ownership requirements. See "Description of Common
Shares--Restriction on Size of Holdings". PTR intends to enforce the 9.8%
limitation on ownership of shares of its stock to assure that its
qualification as a REIT will not be compromised.
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
There are currently three separate percentage tests relating to the sources
of PTR's gross income which must be satisfied for each taxable year. The three
tests are as follows:
1. The 75% Test. At least 75% of PTR's gross income for the taxable year
must be "qualifying income". Qualifying income generally includes: (i) rents
from real property (except as modified below); (ii) interest on obligations
collateralized by mortgages on, or interests in, real property; (iii) gains
from the sale or other disposition of interests in real property and real
estate mortgages, other than gain from property held primarily for sale to
customers in the ordinary course of PTR's trade or business ("dealer
property"); (iv) dividends or other distributions on shares in other REITs, as
well as gain from the sale of such shares; (v) abatements and refunds of real
property taxes; (vi) income from the operation, and gain from the sale, of
property acquired at or in lieu of a foreclosure of the mortgage
collateralized by such property ("foreclosure property"); and (vii) commitment
fees received for agreeing to make loans collateralized by mortgages on real
property or to purchase or lease real property.
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Rents received from a resident will not, however, qualify as rents from real
property in satisfying the 75% test (or the 95% gross income test described
below) if PTR, or an owner of 10% or more of PTR, directly or constructively
owns 10% or more of such resident. In addition, if rent attributable to
personal property leased in connection with a lease of real property is
greater than 15% of the total rent received under the lease, then the portion
of rent attributable to such personal property will not qualify as rents from
real property. Moreover, an amount received or accrued will not qualify as
rents from real property (or as interest income) for purposes of the 75% and
95% gross income tests if it is based in whole or in part on the income or
profits of any person, although an amount received or accrued generally will
not be excluded from "rents from real property" solely by reason of being
based on a fixed percentage or percentages of receipts or sales. Finally, for
rents received to qualify as rents from real property, PTR generally must not
operate or manage the property or furnish or render services to residents,
other than through an "independent contractor" from whom PTR derives no
income, except that the "independent contractor" requirement does not apply to
the extent that the services provided by PTR are "usually or customarily
rendered" in connection with the rental of multifamily units for occupancy
only, or are not otherwise considered "rendered to the occupant for his
convenience". For taxable years beginning after August 5, 1997, a REIT is
permitted to render a de minimis amount of impermissible services to tenants,
or in connection with the management of property, and still treat amounts
received with respect to that property as rent from real property. The amount
received or accrued by the REIT during the taxable year for the impermissible
services with respect to a property may not exceed one percent of all amounts
received or accrued by the REIT directly or indirectly from the property. The
amount received for any service (or management operation) for this purpose
shall be deemed to be not less than 150% of the direct cost of the REIT in
furnishing or rendering the service (or providing the management or
operation).
2. The 95% Test. 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 the above-described qualifying income, or from dividends,
interest or gains from the sale or disposition of stock or other securities
that are not dealer property. Dividends (other than on REIT shares) and
interest on any obligations not collateralized by an interest in real property
are included for purposes of the 95% test, but not for purposes of the 75%
test.
For purposes of determining whether PTR complies with the 75% and 95% income
tests, gross income does not include income from prohibited transactions. A
"prohibited transaction" is a sale of dealer property (excluding foreclosure
property) unless such property is held by PTR for at least four years and
certain other requirements (relating to the number of properties sold in a
year, their tax bases, and the cost of improvements made thereto) are
satisfied. See "--Taxation of PTR--General".
Even if PTR fails to satisfy one or both of the 75% or 95% gross income
tests for any taxable year, it may still qualify as a REIT for such year if it
is entitled to relief under certain provisions of the Code. These relief
provisions will generally be available if: (i) PTR's failure to comply was due
to reasonable cause and not to willful neglect; (ii) PTR reports the nature
and amount of each item of its income included in the tests on a schedule
attached to its tax return; and (iii) any incorrect information on this
schedule is not due to fraud with intent to evade tax. If these relief
provisions apply, however, PTR will nonetheless be subject to a special tax
upon the greater of the amount by which it fails either the 75% or 95% gross
income test for that year.
3. The 30% Test. PTR must 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 involuntary
conversions); (ii) stock or securities held for less than one year; and (iii)
property in a prohibited transaction. PTR does not anticipate that it will
have any substantial difficulty in complying with this test. The 30% gross
income test has been repealed by the 1997 Act for taxable years beginning
after August 5, 1997.
Annual Distribution Requirements
In order to qualify as a REIT, PTR is required to make distributions (other
than capital gain dividends) to its shareholders each year in an amount at
least equal to (i) the sum of (a) 95% of PTR's REIT taxable income (computed
without regard to the dividends paid deduction and the REIT's 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.
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For taxable years beginning after August 5, 1997, the 1997 Act (i) expands the
class of non-cash income that is excluded from the distribution requirement to
include income from the cancellation of indebtedness and (ii) extends the
treatment of original issue discount ("OID") (over cash and the fair market
value of property received on the instrument) as such non-cash income to OID
instruments generally and for REITs, like PTR, that use an accrual method of
accounting. Such distributions must be paid in the taxable year to which they
relate, or in the following taxable year if declared before PTR timely files
its tax return for such year and if paid on or before the first regular
dividend payment after such declaration. To the extent that PTR does not
distribute all of its net capital gain or distributes at least 95%, but less
than 100%, of its REIT taxable income, as adjusted, it will be subject to tax
on the undistributed amount at regular capital gains or ordinary corporate tax
rates, as the case may be. For taxable years beginning after August 5, 1997,
the 1997 Act permits a REIT, with respect to undistributed net long-term
capital gains it received during the taxable year, to designate in a notice
mailed to shareholders within 60 days of the end of the taxable year (or in a
notice mailed with its annual report for the taxable year) such amount of such
gains which its shareholders are to include in their taxable income as long-
term capital gains. Thus, if PTR made this designation, the shareholders of
PTR would include in their income as long-term capital gains their
proportionate share of the undistributed net capital gains as designated by
PTR and PTR would have to pay the tax on such gains within 30 days of the
close of its taxable year. Each shareholder of PTR would be deemed to have
paid such shareholder's share of the tax paid by PTR on such gains, which tax
would be credited or refunded to the shareholder. A shareholder would increase
his tax basis in his PTR stock by the difference between the amount of income
to the holder resulting from the designation less the holder's credit or
refund for the tax paid by PTR.
PTR intends to make timely distributions sufficient to satisfy the annual
distribution requirements. It is possible that PTR may not have sufficient
cash or other liquid assets to meet the 95% distribution requirement, due to
timing differences between the actual receipt of income and actual payment of
expenses on the one hand, and the inclusion of such income and deduction of
such expenses in computing PTR's REIT taxable income on the other hand. To
avoid any problem with the 95% distribution requirement, PTR will closely
monitor the relationship between its REIT taxable income and cash flow and, if
necessary, intends to borrow funds in order to satisfy the distribution
requirement. However, there can be no assurance that such borrowing would be
available at such time.
If PTR fails to meet the 95% distribution requirement as a result of an
adjustment to PTR's tax return by the Internal Revenue Service (the "IRS"),
PTR may retroactively cure the failure by paying a "deficiency dividend" (plus
applicable penalties and interest) within a specified period.
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
Taxation of Taxable Domestic Shareholders
As long as PTR qualifies as a REIT, distributions made to PTR's taxable
domestic shareholders out of current or accumulated earnings and profits (and
not designated as capital gain dividends) will be taken into account by them
as ordinary income and will not be eligible for the dividends-received
deduction for
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corporations. Distributions (and for tax years beginning after August 5, 1997,
undistributed amounts) that are designated as capital gain dividends will be
taxed as long-term capital gains (to the extent they do not exceed PTR's
actual net capital gain for the taxable year) without regard to the period for
which the shareholder has held its shares. However, corporate shareholders may
be required to treat up to 20% of certain capital gain dividends as ordinary
income. To the extent that PTR makes distributions in excess of current and
accumulated earnings and profits, these distributions are treated first as a
tax-free return of capital to the shareholder, reducing the tax basis of a
shareholder's shares by the amount of such distribution (but not below zero),
with distributions in excess of the shareholder's tax basis taxable as capital
gains (if the shares are held as a capital asset). In addition, any dividend
declared by PTR in October, November or December of any year and payable to a
shareholder of record on a specific date in any such month shall be treated as
both paid by PTR and received by the shareholder on December 31 of such year,
provided that the dividend is actually paid by PTR during January of the
following calendar year. Shareholders may not include in their individual
income tax returns any net operating losses or capital losses of PTR. Federal
income tax rules may also require that certain minimum tax adjustments and
preferences be apportioned to PTR shareholders.
In general, any loss upon a sale or exchange of shares by a shareholder who
has held such shares for six months or less (after applying certain holding
period rules) will be treated as a long-term capital loss, to the extent of
distributions from PTR required to be treated by such shareholder as long-term
capital gains.
The 1997 Act made certain changes to the Code with respect to taxation of
long-term capital gains earned by taxpayers other than a corporation. In
general, for sales made after May 6, 1997, the maximum tax rate for individual
taxpayers on net long-term capital gains (i.e., the excess of net long-term
capital gain over net short-term capital loss) is lowered to 20% for most
assets. This 20% rate applies to sales on or after July 29, 1997 only if the
asset was held for more than 18 months at the time of disposition. Capital
gains on the disposition of assets on or after July 29, 1997 held for more
than one year and up to 18 months at the time of disposition will be taxed as
"mid-term gain" at a maximum rate of 28%. Also, so called "unrecaptured
section 1250 gain" is subject to a maximum federal income tax rate of 25%.
"Unrecaptured section 1250 gain" generally includes the long-term capital gain
realized on (i) the sale after May 6, 1997 of a real property asset described
in Section 1250 of the Code or (ii) the sale after July 28, 1997 of a real
property asset described in Section 1250 of the Code which the taxpayer has
held for more than 18 months, but in each case not in excess of the amount of
depreciation (less the gain, if any, treated as ordinary income under Code
Section 1250) taken on such asset. A rate of 18% instead of 20% will apply
after December 31, 2000 for assets held for more than 5 years. However, the
18% rate applies only to assets acquired after December 31, 2000 unless the
taxpayer elects to treat an asset held prior to such date as sold for fair
market value on January 1, 2001. In the case of individuals whose ordinary
income is taxed at a 15% rate, the 20% rate is reduced to 10% and the 10% rate
for assets held for more than 5 years is reduced to 8%.
Certain aspects of the new legislation are currently unclear, including how
the reduced rates will apply to gains earned by REITs such as PTR. Until the
IRS issues some guidance, it is unclear whether or how the 20% or 10% rates
will apply to distributions of long-term capital gains by PTR. The 1997 Act
gives the IRS authority to apply the 1997 Act's new rules on taxation of
capital gains to sales by pass-thru entities, including REITs. It is possible
that the IRS could provide in such regulations that REIT capital gain
dividends must be determined by looking through to the assets sold by the REIT
and treated by REIT shareholders as "long-term capital gain", "mid-term gain"
and "unrecaptured section 1250 gain" to the extent of such respective gain
realized by the REIT. No regulations have yet been issued. Such regulations,
if and when issued, may have a retroactive affect.
Shareholders of PTR should consult their tax advisor with regard to (i) the
application of the changes made by the 1997 Act with respect to taxation of
capital gains and capital gain dividends and (ii) to state, local and foreign
taxes on capital gains.
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
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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.
Taxation of Tax-Exempt Shareholders
The IRS has issued a revenue ruling in which it held that amounts
distributed by a REIT to a tax-exempt employees' pension trust do not
constitute unrelated business taxable income ("UBTI"). Subject to the
discussion below regarding a "pension-held REIT", based upon the ruling, the
analysis therein and the statutory framework of the Code, distributions by PTR
to a shareholder that is a tax-exempt entity should also not constitute UBTI,
provided that the tax-exempt entity has not financed the acquisition of its
shares with "acquisition indebtedness" within the meaning of the Code, and
that the shares are not otherwise used in an unrelated trade or business of
the tax-exempt entity, and that PTR, consistent with its present intent, does
not hold a residual interest in a real estate mortgage investment conduit.
However, if any pension or other retirement trust that qualifies under
Section 401(a) of the Code ("qualified pension trust") holds more than 10% by
value of the interests in a "pension-held REIT" at any time during a taxable
year, a portion of the dividends paid to the qualified pension trust by such
REIT may constitute UBTI. For these purposes, a "pension-held REIT" is defined
as a REIT if (i) such REIT would not have qualified as a REIT but for the
provisions of the Code which look through such a qualified pension trust in
determining ownership of stock of the REIT and (ii) at least one qualified
pension trust holds more than 25% by value of the interests of such REIT or
one or more qualified pension trusts (each owning more than a 10% interest by
value in the REIT) hold in the aggregate more than 50% by value of the
interests in such REIT.
Taxation of Foreign Shareholders
PTR will qualify as a "domestically-controlled REIT" so long as less than
50% in value of its shares is held by foreign persons (i.e., nonresident
aliens and foreign corporations, partnerships, trust and estates). It is
currently anticipated that PTR will qualify as a domestically controlled REIT.
Under these circumstances, gain from the sale of the shares by a foreign
person should not be subject to U.S. taxation, unless such gain is effectively
connected with such person's U.S. business or, in the case of an individual
foreign person, such person is present within the U.S. for more than 182 days
in such taxable year.
Distributions of cash generated by PTR's real estate operations (but not by
its sale or exchange of such communities) that are paid to foreign persons
generally will be subject to U.S. withholding tax at a rate of 30%, unless (i)
an applicable tax treaty reduces that tax and the foreign shareholder files
with PTR the required form evidencing such lower rate or (ii) the foreign
shareholder files an IRS Form 4224 with PTR claiming that the distribution is
"effectively connected" income. Recently promulgated Treasury Regulations
revise in certain respects the rules applicable to foreign shareholders with
respect to payments made after December 31, 1998.
Distributions of proceeds attributable to the sale or exchange by PTR of
U.S. real property interests are subject to income and withholding taxes
pursuant to the Foreign Investment in Real Property Tax Act of 1980
("FIRPTA"), and may be subject to branch profits tax in the hands of a
shareholder which is a foreign corporation if it is not entitled to treaty
relief or exemption. PTR is required by applicable Treasury Regulations to
withhold 35% of any distribution to a foreign person that could be designated
by PTR as a capital gain dividend; this amount is creditable against the
foreign shareholder's FIRPTA tax liability.
The federal income taxation of foreign persons is a highly complex matter
that may be affected by many other considerations. Accordingly, foreign
investors in PTR should consult their own tax advisors regarding the income
and withholding tax considerations with respect to their investment in PTR.
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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.
Possible Legislative or Other Actions Affecting Tax Consequences
Prospective shareholders should recognize that the present federal income
tax treatment of an investment in PTR may be modified by legislative, judicial
or administrative action at any time and that any such action may affect
investments and commitments previously made. The rules dealing with federal
income taxation are constantly under review by persons involved in the
legislative process and by the IRS and the Treasury, resulting in revisions of
regulations and revised interpretations of established concepts as well as
statutory changes. Revisions in federal tax laws and interpretations thereof
could adversely affect the tax consequences of an investment in PTR.
State and Local Taxes
PTR and its shareholders may be subject to state or local taxation in
various jurisdictions, including those in which it or they transact business
or reside. The state and local tax treatment of PTR and its shareholders may
not conform to the federal income tax consequences discussed above.
Consequently, prospective shareholders should consult their own tax advisors
regarding the effect of state and local tax laws on an investment in the
Offered Securities of 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
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Securities, underwriters may be deemed to have received compensation from PTR
in the form of underwriting discounts or commissions and may also receive
commissions from purchasers of Offered Securities for whom they may act as
agent. Underwriters may sell Offered Securities to or through dealers, and
such dealers may receive compensation in the form of discounts, concessions or
commissions from the underwriters and/or commissions from the purchasers for
whom they may act as agent.
Any underwriting compensation paid by PTR to underwriters or agents in
connection with the offering of Offered Securities, and any discounts,
concessions or commissions allowed by underwriters to participating dealers,
will be set forth in the applicable Prospectus Supplement. Underwriters,
dealers and agents participating in the distribution of the Offered Securities
may be deemed to be underwriters, and any discounts and commissions received
by them and any profit realized by them on resale of the Offered Securities
may be deemed to be underwriting discounts and commissions, under the
Securities Act. Underwriters, dealers and agents may be entitled, under
agreements entered into with PTR, to indemnification against and contribution
toward certain civil liabilities, including liabilities under the Securities
Act. Any such indemnification agreements will be described in the applicable
Prospectus Supplement.
If so indicated in the applicable Prospectus Supplement, PTR will authorize
dealers acting as PTR's agents to solicit offers by certain institutions to
purchase Offered Securities from PTR at the public offering price set forth in
such Prospectus Supplement pursuant to Delayed Delivery Contracts
("Contracts") providing for payment and delivery on the date or dates stated
in such Prospectus Supplement. Each Contract will be for an amount not less
than, and the aggregate principal amount of Offered Securities sold pursuant
to Contracts shall be not less nor more than, the respective amounts stated in
the applicable Prospectus Supplement. Institutions with whom Contracts, when
authorized, may be made include commercial and savings banks, insurance
companies, pension funds, investment companies, educational and charitable
institutions, and other institutions but will in all cases be subject to the
approval of PTR. Contracts will not be subject to any conditions except (i)
the purchase by an institution of the Offered Securities covered by its
Contracts shall not at the time of delivery be prohibited under the laws of
any jurisdiction in the United 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 the
related schedule incorporated by reference herein, and the combined statements
of revenues and certain expenses for certain multifamily communities for the
years ended December 31, 1996 and 1995, incorporated by reference herein, have
been incorporated by reference herein and in the Registration Statement
(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.
With respect to the unaudited condensed interim financial statements of PTR
for the periods ended March 31, 1997 and 1996, June 30, 1997 and 1996 and
September 30, 1997 and 1996, incorporated by reference herein, the independent
public accountants have reported that they applied limited procedures in
accordance with professional standards for a review of such information.
However, their separate reports included in PTR's quarterly reports on Form
10-Q for the quarters ended March 31, 1997, June 30, 1997 and September 30,
1997, incorporated by reference herein, state that they did not audit, and
they do not express an opinion, on that interim financial information.
Accordingly, the degree of reliance on their reports on such information
should be restricted considering the limited nature of the review procedures
applied. The accountants are not subject to the
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liability provisions of Section 11 of the Securities Act for the reports on
the unaudited interim financial information because such reports are not a
"report" or a "part" of the Registration Statement prepared or certified by
the accountants within the meaning of Sections 7 and 11 of the Securities Act.
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 450 Fifth Street, N.W., Washington, D.C. 20549; Citicorp Center,
500 West Madison Street, Suite 1400, Chicago, Illinois 60661; 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.
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 Quarterly Reports on Form 10-Q for the fiscal quarters ended
March 31, 1997, June 30, 1997 and September 30, 1997;
(c) PTR's Current Reports on Form 8-K filed January 27, 1997, February
20, 1997, March 26, 1997, June 3, 1997, July 21, 1997, September 9, 1997
and September 15, 1997;
(d) The description of the Common Shares contained in PTR's registration
statement on Form 8-A, as amended; and
(e) 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
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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 incorporated 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, 7670 South Chester Street, Englewood, Colorado 80112, telephone number:
(303) 708-5959.
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