PROSPECTUS SUPPLEMENT
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(To Prospectus dated December 31, 1997)
2,049,587 Shares
SECURITY CAPITAL PACIFIC TRUST
Common Shares of Beneficial Interest
(par value $1.00 per share)
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Security Capital Pacific Trust ("PTR") is an internally managed
equity real estate investment trust ("REIT") whose objective is to be the
preeminent real estate operating company focusing on the development,
acquisition, operation and long-term ownership of multifamily communities
in its target markets. PTR has elected to be taxed as a REIT for federal
income tax purposes and pays regular quarterly distributions to its
shareholders.
All of the common shares of beneficial interest of PTR, par value
$1.00 per share (the "Common Shares"), offered hereby are being offered by
PTR (the "Offering"). See "Underwriting."
The Common Shares are listed on the New York Stock Exchange (the
"NYSE") under the symbol "PTR." On April 23, 1998, the last reported sale
price of the Common Shares on the NYSE was $22.6875 per Common Share.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS SUPPLEMENT OR THE PROSPECTUS TO WHICH IT RELATES.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
Merrill Lynch, Pierce, Fenner & Smith Incorporated (the
"Underwriter") has agreed to purchase the Common Shares from PTR at a price
of $21.4964 per share, resulting in aggregate proceeds to PTR of
$44,058,742, before payment of expenses by PTR estimated to be $50,000,
subject to the terms and conditions set forth in the Underwriting
Agreement. The Underwriter intends to deposit the Common Shares, valued at
the last reported sales price, with the trustee of the Equity Investor Fund
Cohen & Steers Realty Majors Portfolio (A Unit Investment Trust) (the
"Trust") in exchange for units in the Trust. See "Underwriting." The units
of the Trust will be sold to investors at a price based upon the net asset
value of the securities in the Trust. For purposes of this calculation, the
value of the Common Shares as of the evaluation time for units of the Trust
on April 23, 1998 was $22.6875 per Common Share.
PTR has agreed to indemnify the Underwriter against certain
liabilities, including liabilities under the Securities Act of 1933. See
"Underwriting."
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The Common Shares are offered by the Underwriter subject to prior
sale, when, as and if issued to and accepted by it, subject to certain
conditions. The Underwriter reserves the right to withdraw, cancel or
modify such offer and to reject orders in whole or in part. It is expected
that delivery of the Common Shares will be made in New York, New York on or
about April 29, 1998.
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Merrill Lynch & Co.
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The date of this Prospectus Supplement is
April 23, 1998.
CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN
TRANSACTIONS THAT STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE
COMMON SHARES. SUCH TRANSACTIONS MAY INCLUDE STABILIZING AND SHORT-COVERING
TRANSACTIONS IN THE COMMON SHARES IN CONNECTION WITH THE OFFERING. FOR A
DESCRIPTION OF THESE ACTIVITIES, SEE "UNDERWRITING."
No dealer, salesperson or other individual has been authorized to
give any information or to make any representations other than those
contained or incorporated by reference in this Prospectus Supplement and
the accompanying Prospectus and, if given or made, such information or
representations must not be relied upon as having been authorized by PTR or
the Underwriter. This Prospectus Supplement and the accompanying Prospectus
do not constitute an offer to sell, or a solicitation of an offer to buy,
the shares in any jurisdiction where, or to any person to whom, it is
unlawful to make such an offer or solicitation. Neither delivery of this
Prospectus Supplement and the accompanying Prospectus nor any sale made
hereunder shall, under any circumstances, create any implication that there
has been no change in the facts set forth in this Prospectus Supplement and
the accompanying Prospectus or in the affairs of PTR since the date hereof.
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TABLE OF CONTENTS
Prospectus Supplement Page
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Forward-Looking Statements...............................................S-2
Security Capital Pacific Trust...........................................S-3
Recent Developments......................................................S-3
Use of Proceeds..........................................................S-5
Price Range of Common Shares
and Distributions.................................................S-5
Federal Income Tax Considerations........................................S-6
Underwriting.............................................................S-7
Validity of Common Shares................................................S-8
Experts..................................................................S-8
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Prospectus
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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
Legal Matters.............................................................33
Available Information.....................................................33
Incorporation by Reference................................................33
FORWARD-LOOKING STATEMENTS
This Prospectus Supplement and certain documents incorporated by
reference herein contain forward-looking statements under the federal
securities laws. These 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.
Forward-looking statements are not guarantees of future performance and
involve certain credit risks and uncertainties which are difficult to
predict. Actual operating results may be affected by changes in national
and local economic conditions, competitive market conditions, weather,
obtaining governmental approvals and meeting development schedules, and
therefore, may differ materially from what is expressed in this Prospectus
Supplement or in documents incorporated herein by reference.
SECURITY CAPITAL PACIFIC TRUST
PTR is an internally managed equity REIT which was formed in 1963.
PTR's principal focus is to generate long-term, sustainable growth in per
share cash flow while providing outstanding service to its customers. PTR's
objective is to be the preeminent real estate operating company focusing on
the development, acquisition, operation and long-term ownership of
multifamily communities in the growing markets of the United States. See
"Business" in PTR's Annual Report on Form 10-K for the year ended December
31, 1997 (the "Form 10-K").
RECENT DEVELOPMENTS
Note Offering
On March 3, 1998, PTR raised approximately $123.8 million of net
proceeds from an underwritten offering of 7.20% Notes due 2013. PTR used
the proceeds of this offering 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"). Borrowings under the Line and the Chase Agreement were
used for the development and acquisition of multifamily communities and for
working capital purposes.
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Merger
On April 2, 1998, PTR announced that it had entered into an
Agreement and Plan of Merger dated as of April 1, 1998 by and between
Security Capital Atlantic Incorporated ("ATLANTIC") and PTR (the "Merger
Agreement") pursuant to which ATLANTIC will be merged with and into PTR
(the "Merger"), which will be the surviving entity, and that, in
consideration therefor, each outstanding share of ATLANTIC common stock
(the "ATLANTIC Shares") will be converted into the right to receive one
Common Share and each share of ATLANTIC Series A Cumulative Redeemable
Preferred Stock will be converted into the right to receive one share of
PTR Series C Cumulative Redeemable Preferred Stock. In addition, PTR will
assume all of ATLANTIC's outstanding debt ($546.9 million at March 31,
1998) and other liabilities upon the closing of the Merger. Security
Capital Group Incorporated ("Security Capital") owns approximately 49.9% of
the outstanding ATLANTIC Shares and approximately 33.0% of the outstanding
Common Shares. Pursuant to the terms of the Merger Agreement, the Merger
requires the approval of a majority of the outstanding ATLANTIC Shares and
the approval of two-thirds of the outstanding Common Shares. No approval by
the holders of any series of PTR or ATLANTIC preferred shares is required
to consummate the Merger. The Merger Agreement contemplates that the Merger
will constitute a tax-free reorganization under Section 368 of the Internal
Revenue Code of 1986, as amended (the "Code"), and that the Merger will be
accounted for as a purchase. Subject to certain terms and conditions,
Security Capital has agreed to vote its ATLANTIC Shares and Common Shares
in favor of the Merger.
It is expected that the Merger will be completed in August 1998.
Upon the consummation of the Merger, PTR will change its name to Archstone
Communities Trust ("Archstone") and its distribution level is expected to
be adjusted to an annualized level of $1.42 per Common Share, a 4.4%
increase over PTR's current 1997 distribution level of $1.36 per Common
Share. The dividend increase will allow Archstone to maintain essentially
the same 1998 payout ratio PTR had in place prior to the consummation of
the Merger.
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First Quarter Results
The following table sets forth PTR's preliminary unaudited
operating results for the three months ended March 31, 1998 and 1997 (in
thousands, except for per-share data). These operating results are not
necessarily indicative of the results to be expected for the entire year.
Three Months Ended
March 31,
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1998 1997
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Total revenues...................................... $95,611 $83,494
Net earnings attributable to Common Shares.......... $40,071 $40,576
Net earnings attributable to Common Shares per share:
Basic...................................... $0.43 $0.53
Diluted.................................... $0.42 $0.51
Weighted-average Common Shares outstanding:
Basic EPS................................ 92,783 75,872
Diluted EPS ............................. 99,970 84,326
Common Share cash distributions paid.............. $31,495 $24,712
Reconciliation of net earnings attributable to
Common Shares to Funds From Operations attributable
to Common Shares:
Net earnings attributable to Common Shares $40,071 $40,576
Add (Deduct):
Depreciation on real estate investments.... 16,258 12,049
Gain on disposition of depreciated real
estate................................... (15,484) (25,335)
Other, net............................... (432) 1,255
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Funds From Operations attributable to Common
Shares(1)....................................... $40,413 $28,545
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Cash Flow Summary:
Net cash provided by operating activities.. $34,151 $22,725
Net cash used by investing activities.....($36,227) ($114,035)
Net cash provided by financing activities.. $2,459 $93,650
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(1) Funds From Operations is defined as net earnings computed in
accordance with GAAP, excluding real estate depreciation, gains (or
losses) from depreciated real estate, provisions for possible losses,
non-cash interest income from Homestead Notes, extraordinary items,
and significant non-recurring items. PTR believes that Funds From
Operations is helpful to the reader as a measure of the performance
of an equity REIT because, along with cash flow from operating,
investing and financing activities, it provides the reader with an
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indication of the ability of PTR to incur and service debt, to make
capital expenditures and to fund other cash needs. The Funds From
Operations measure presented by PTR, while consistent with the NAREIT
definition, will not be comparable to similarly titled measures of
other REITs which do not compute Funds From Operations in a manner
consistent with PTR. Funds From Operations should not be considered
as an alternative to net earnings or any other GAAP measurement of
performance as an indicator of PTR's operating performance or as an
alternative to cash flows from operating, investing, or financing
activities as a measure of liquidity. Funds From Operations is not
intended to represent cash made available to shareholders. Cash
distributions paid to common shareholders are summarized above.
USE OF PROCEEDS
The net proceeds to PTR from the sale of the Common Shares offered
hereby are expected to be approximately $44,008,742, all of which are
expected to be used to repay borrowings under the Line and the Chase
Agreement. The Line bears interest at the greater of prime (8.50% at April
15, 1998) or the federal funds rate plus 0.50% (5.875% at April 15, 1998)
or, at PTR's option, LIBOR plus 0.75% (6.4375% at April 15, 1998). The
spread over LIBOR can vary from LIBOR plus 0.50% to LIBOR plus 1.50% based
upon the rating of PTR's unsecured senior debt. The Line is scheduled to
mature in August 1999 (which maturity date can 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 April 15, 1998, $150.0 million of borrowings was outstanding
under the Line and $28.6 million of borrowings was outstanding under the
Chase Agreement. PTR expects to make additional borrowings under the Line
and the Chase Agreement following the Offering. Borrowings under the Line
and the Chase Agreement are used for the development or acquisition of
multifamily communities and for working capital purposes.
PRICE RANGE OF COMMON SHARES AND DISTRIBUTIONS
The Common Shares are listed on the NYSE under the symbol "PTR".
The following table sets forth the high and low sales prices of the Common
Shares as reported in the NYSE Composite Tape and cash distributions per
Common Share for the periods indicated.
Cash
High Low Distributions
1996 ------ ------- --------------
First Quarter..................... $22-1/4 $19 1/4 $0.310
Second Quarter.................... $22-3/8 $20 1/2 $0.310
Third Quarter..................... $22-5/8 $20 1/4 $0.310
Fourth Quarter.................... $23-5/8 $19 $0.310
1997
First Quarter..................... $25-1/8 $21 $0.325
Second Quarter ................... $24-1/4 $21-1/2 $0.325
Third Quarter..................... $24-3/8 $21-5/8 $0.325
Fourth Quarter.................... $25-1/8 $21-7/8 $0.325
1998
First Quarter..................... $24-1/2 $22-1/8 $0.340
Second Quarter (through April 23). $24-1/16 $22-7/16 --
In addition to the quarterly cash distributions shown above, the
following distributions were made to PTR's shareholders:
(i) PTR made a special distribution of 0.125694 shares of common stock
of Homestead Village Incorporated ("Homestead") and warrants to
purchase 0.084326 shares of Homestead common stock per Common
Share (the "Homestead Distribution") to holders of Common Shares
on November 12, 1996. The securities distributed in the Homestead
Distribution had a market value of $3.032 per Common Share based
on the closing prices of such securities on the American Stock
Exchange on November 11, 1996, the day prior to the distribution
date. The Homestead Distribution resulted in an adjustment of
$3.125 per Common Share ($21.875 before and $18.750 after) on the
NYSE on November 12, 1996.
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(ii) After the closing of the acquisition of the former PTR property
manager and PTR REIT manager from Security Capital on September 9, 1997
(the "1997 Merger"), Security Capital issued pro rata directly to holders
of Common Shares and Series A preferred shares (other than Security
Capital) $102.0 million of warrants to acquire 3,644,430 shares of Class B
common stock of Security Capital. PTR common shareholders received 0.052646
warrants for each Common Share held and Series A preferred shareholders
received 0.070909 warrants for each Series A preferred share held. Each
warrant can be exercised for one share of Security Capital Class B common
stock at an exercise price of $28 per share through September 18, 1998.
Security Capital issued these warrants to PTR shareholders as an incentive
to vote in favor of the 1997 Merger and to raise additional equity capital
at a relatively low cost, in addition to other benefits. The warrants are
traded on the NYSE and the April 23, 1998 closing price was $3.3125.
As of April 15, 1998, PTR had 93,019,851 Common Shares
outstanding, approximately 3,000 record holders of Common Shares and
approximately 22,500 beneficial holders of Common Shares.
See "Market for Registrant's Common Equity and Related Stockholder
Matters" in the Form 10-K for a discussion of distributions.
FEDERAL INCOME TAX CONSIDERATIONS
Federal Income Tax Considerations Relating to the Merger
The following is a summary of the material U.S. federal income tax
consequences of the Merger . To the extent this summary discusses matters
of law, it is based upon the opinion of Mayer, Brown & Platt. This summary
is based upon the current provisions of the Code, its legislative history,
Treasury regulations, administrative pronouncements and judicial decisions,
all of which are subject to change, possibly with retroactive effect. This
summary does not purport to be a complete discussion of all U.S. federal
income tax consequences relating to the Merger. This summary does not
address the tax consequences of the Merger under the state, local or
non-U.S. tax laws. In addition, this summary may not apply, in whole or in
part, to particular categories of prospective PTR shareholders, such as
financial institutions, broker-dealers, life insurance companies,
tax-exempt organizations, investment companies, foreign taxpayers,
individuals who received Common Shares pursuant to stock options,
restricted stock programs or in other compensatory transactions, and other
special status taxpayers. Finally, a tax ruling from the Internal Revenue
Service (the "IRS") has not been requested. This summary is included for
general information only. All prospective PTR shareholders are urged to
consult their own tax advisors to determine the specific tax consequences
of the Merger, including any state, local and non-U.S. tax consequences.
In connection with the Merger, Mayer, Brown & Platt will deliver
its opinion that, based upon certain representations of ATLANTIC and PTR,
the Merger will be treated for federal income tax purposes as a
reorganization within the meaning of Section 368(a) of the Code. However,
no ruling from the IRS will be sought with respect to the federal income
tax consequences of the Merger, and there can be no complete assurance that
the IRS will agree with the conclusions set forth herein. The discussion
below assumes that the Merger will be treated as a reorganization within
the meaning of Section 368(a) of the Code.
No gain or loss will be recognized by ATLANTIC or PTR or a holder
of Common Shares as a result of the Merger. Furthermore, the tax basis and
holding period of the Common Shares owned by a holder will not change as a
result of the Merger.
In connection with the Merger, Mayer, Brown & Platt will also
deliver its opinion that, based upon certain representations of ATLANTIC
and PTR, the consummation of the Merger will not jeopardize the status of
PTR as a REIT under the Code. PTR intends to operate in a manner which
permits it to satisfy the requirements for taxation as a REIT under
applicable provisions of the Code, but no assurance can be given that these
requirements will be met.
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Other Federal Income Tax Considerations
The Internal Revenue Service (the "Service") has issued Notice
97-64, which provides guidance on how REITs and their shareholders are to
apply the new capital gain rates. Notice 97-64 provides generally that PTR
may classify portions of its designated capital gain dividends and deemed
distributions or retained capital gains as (i) a 20% rate gain distribution
(which would be taxed as capital gain in the 20% group), (ii) an
unrecaptured Section 1250 gain distribution (which would be taxed as
capital gain in the 25% group), or (iii) a 28% rate gain distribution
(which would be taxed as capital gain in the 28% group). If no designation
is made, the entire designated capital gain dividend will be treated as a
28% rate capital gain distribution. Notice 97-64 provides that PTR must
determine the maximum amounts that it may designate as 20% and 25% rate
capital gain dividends by performing the computation required by the Code
as if
PTR were an individual whose ordinary income was subject to a
marginal tax rate of at least 28%. See "Federal Income Tax
Considerations--Taxation of PTR's Shareholders--Taxation of Taxable
Domestic Shareholders" in the accompanying Prospectus.
UNDERWRITING
Subject to the terms and conditions contained in the pricing
agreement and the related underwriting agreement (collectively, the
"Underwriting Agreement"), PTR has agreed to sell to the Underwriter, and
the Underwriter has agreed to purchase from PTR, 2,049,587 Common Shares.
The Underwriting Agreement provides that the obligations of the Underwriter
are subject to certain conditions precedent, and that the Underwriter will
be obligated to purchase all of such Common Shares if any are purchased.
The Underwriter intends to deposit the Common Shares offered
hereby with the Trust, a registered unit investment trust under the
Investment Company Act of 1940, as amended, for which the Underwriter acts
as sponsor and depositor, in exchange for units of the Trust. The
Underwriter is an affiliate of the Trust.
In the Underwriting Agreement, the Company has agreed to indemnify
the Underwriter against certain liabilities, including liabilities under
the Securities Act, or to contribute to payments the Underwriter may be
required to make in respect thereof.
In connection with the Offering, the rules of the Securities and
Exchange Commission permit the Underwriter to engage in certain
transactions that stabilize the price of the Common Shares. Such
transactions may consist of bids or purchases for the purpose of pegging,
fixing or maintaining the price of the Common Shares. If the Underwriter
creates a short position in the Common Shares in connection with the
Offering (i.e., if it sells more Common Shares than are set forth on the
cover page of this Prospectus Supplement), the Underwriter may reduce that
short position by purchasing Common Shares in the open market.
In general, purchases of a security for the purpose of
stabilization or to reduce a syndicate short position could cause the price
of the security to be higher than it might otherwise be in the absence of
such purchases.
Neither PTR nor the Underwriter makes any representation or
prediction as to the direction or magnitude of any effect that the
transactions described above may have on the price of the Common Shares. In
addition, neither the Company nor the Underwriter makes any representation
that the Underwriter will engage in such transactions or that such
transactions, once commenced, will not be discontinued without notice.
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From time to time in the ordinary course of its business, the
Underwriter and its affiliates have provided and may in the future provide
investment banking, commercial banking and other financial services to PTR
and its affiliates.
The Common Shares are listed on the NYSE under the symbol "PTR".
PTR has applied for listing of the Common Shares offered hereby on the
NYSE.
VALIDITY OF COMMON SHARES
The validity of the issuance of the Common Shares offered pursuant
to this Prospectus Supplement will be passed upon for PTR by Mayer, Brown &
Platt, Chicago, Illinois, and for the Underwriter by Sullivan & Cromwell,
New York, New York. Sullivan & Cromwell will rely as to all matters of
Maryland law upon the opinion of Neuberger, Quinn, Gielin, Rubin & Gibber,
P.A., Baltimore, Maryland.
EXPERTS
The financial statements of PTR as of December 31, 1997 and 1996,
and for each of the years in the three-year period ended December 31, 1997,
and the related schedule incorporated by reference into the accompanying
Prospectus, have been incorporated by reference into the accompanying
Prospectus and in the Registration Statement of which the accompanying
Prospectus forms a part in reliance upon the reports of KPMG Peat Marwick
LLP, independent certified public accountants, incorporated by reference in
the accompanying Prospectus and upon the authority of said firm as experts
in accounting and auditing.
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