<PAGE> 1
As filed with the Securities and Exchange Commission on December 3, 1998
Registration No. 333-64723
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
---------------
AMENDMENT NO. 1
to
FORM S-3
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
---------------
AMERICAN REALTY TRUST, INC.
(Exact name of Registrant as specified in its Charter)
GEORGIA 54-0697989
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
10670 NORTH CENTRAL EXPRESSWAY
SUITE 300
DALLAS, TEXAS 75231
(214) 692-4700
(Address, including zip code, and telephone
number, including area code, of Registrant's principal executive offices)
---------------
ROBERT A. WALDMAN
AMERICAN REALTY TRUST, INC.
10670 NORTH CENTRAL EXPRESSWAY
SUITE 300
DALLAS, TEXAS 75231
(214) 692-4700
(Name, address, including zip code, and telephone
number, including area code, of agent for service)
---------------
The Commission is requested to send copies of all communications to:
THOMAS R. POPPLEWELL ROBERT A. WALDMAN
Andrews & Kurth L.L.P. American Realty Trust, Inc.
1717 Main Street 10670 North Central Expressway
Suite 3700 Suite 300
Dallas, Texas 75201 Dallas, Texas 75231
(214) 659-4480 (214) 692-4700
Approximate date of commencement of proposed sale to the public: FROM TIME
TO TIME AFTER THE EFFECTIVE DATE OF THIS REGISTRATION STATEMENT PURSUANT TO RULE
415.
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. / /
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or
reinvestment plans, please check the following box. /X/
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering.
/ /
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / /
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box./ /
CALCULATION OF REGISTRATION FEE
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PROPOSED
TITLE OF EACH CLASS PROPOSED MAXIMUM
OF SECURITIES TO BE AMOUNT TO BE MAXIMUM OFFERING AGGREGATE OFFERING AMOUNT OF
REGISTERED REGISTERED PRICE PER UNIT(1) PRICE(1) REGISTRATION FEE
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Preferred Stock, $2.00 par value...................... 355,655 Shares $10.00 $3,556,550 $1,049.18
- ------------------------------------------------------ ---------------- -------------------- -------------------- -----------------
Common Stock, $0.01 par value......................... (2)
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(1) Estimated solely for the purpose of computing the registration fee.
(2) The number of shares of Common Stock of the Registrant to be registered is
such currently indeterminate number of shares of Common Stock as may be
required for issuance upon conversion of the Preferred Stock being
registered hereunder. Such shares of Common Stock will, if issued, be
issued for no additional consideration and therefore no registration fee is
required.
(3) The Registrant has previously paid the $1,049.18 registration fee in
connection with this filing.
================================================================================
The Registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the Registrant shall
file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until this Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
<PAGE> 2
Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor may
offers to buy be accepted prior to the time the registration statement becomes
effective. This prospectus shall not constitute an offer to sell or the
solicitation of an offer to buy nor shall there be any sale of these securities
in any State in which such offer, solicitation or sale would be unlawful prior
to registration or qualification under the securities laws of any such State.
SUBJECT TO COMPLETION; DATED DECEMBER 3, 1998
355,655 SHARES
AMERICAN REALTY TRUST, INC.
SERIES F CUMULATIVE CONVERTIBLE PREFERRED STOCK
COMMON STOCK
-----------------------
This Prospectus, as appropriately amended or supplemented, may be used from
time to time principally by Henry W. Simon ("Simon"), John A. Doyle ("Doyle"),
The Richard and Betty Green Family Trust (the "Green Trust"), Lend Lease
Portfolio Management, Inc. ("LLPM"), Summit Venture, L.P. ("Summit"), and Sutter
Opportunity Fund, LLC ("Sutter", and together with Simon, Doyle, the Trust, LLPM
and Summit, the "Selling Security Holders") who have received shares of Series F
Cumulative Convertible Preferred Stock, par value $2.00 per share and a stated
liquidation value ("Liquidation Value") of $10.00 per share (individually, an
"ART Preferred Share" and collectively the "ART Preferred Shares"), of American
Realty Trust, Inc. ("ART") and who wish to offer and sell such ART Preferred
Shares in transactions in which they and any broker-dealer through whom such
shares are sold may be deemed to be "underwriters" within the meaning of the
Securities Act of 1933, as amended (the "Securities Act"), as more fully
described herein. Simon, Doyle and the Green Trust received their ART Preferred
Shares as consideration for ART's acquisition of their respective shares of
stock in Garden Capital, Inc., Garden Capital Management, Inc. and Garden
Capital Realty, Inc. pursuant to a merger transaction. LLPM, Summit and Sutter
received their ART Preferred Shares as consideration for ART's acquisition of
their respective shares of beneficial interest of EQK Realty Investors I
pursuant to a merger transaction. ART will not receive any of the proceeds from
any such sales. Any commissions paid or concessions allowed to any
broker-dealer, and, if any broker-dealer purchases such shares as principal, any
profits received on the resale of such shares, may be deemed to be underwriting
discounts and commissions under the Securities Act. Printing, certain legal and
accounting, filing and other similar expenses of this offering will be paid by
ART. The Selling Security Holders will generally bear all other expenses of this
offering, including brokerage fees and any underwriting discounts or
commissions.
This Prospectus relates only to the resale of ART Preferred Shares by the
Selling Shareholders but also describes the shares of ART's common stock, par
value $0.01 per share (the "ART Common Shares") issuable upon conversion of the
ART Preferred Shares, as described herein.
As of November 16, 1998 there were 3,350,000 ART Preferred Shares
outstanding, [_____ of which are registered and available for unrestricted
trading on the New York Stock Exchange ("NYSE"). The ART Preferred Shares
offered hereby have been approved for trading on the NYSE. On _______, the
closing price of the ART Preferred Shares on the NYSE was $____ per share as
published in The Wall Street Journal on ________.]
ART has filed a registration statement on Form S-3 (the "Registration
Statement") under the Securities Act of 1933, as amended (the "Securities Act"),
with the Securities and Exchange Commission (the "Commission") covering up to
355,655 ART Preferred Shares and the ART Common Shares issuable on conversion
thereof. This Prospectus constitutes the Prospectus of ART filed as part of the
Registration Statement with respect to such ART Preferred Shares and ART Common
Shares.
SEE "RISK FACTORS" BEGINNING ON PAGE 4 FOR A DISCUSSION OF MATERIAL RISKS
THAT SHOULD BE CONSIDERED CAREFULLY BY PROSPECTIVE INVESTORS IN THE ART
PREFERRED SHARES OFFERED HEREBY.
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 3, 1998.
<PAGE> 3
CERTAIN STATEMENTS UNDER CAPTION "RISK FACTORS" CONSTITUTE "FORWARD-LOOKING
STATEMENTS" WITHIN THE MEANING OF THE PRIVATE SECURITIES LITIGATION REFORM ACT
OF 1995 (THE "REFORM ACT"). SUCH FORWARD-LOOKING STATEMENTS INVOLVE KNOWN AND
UNKNOWN RISKS, UNCERTAINTIES AND OTHER FACTORS WHICH MAY CAUSE THE ACTUAL
RESULTS, PERFORMANCE OR ACHIEVEMENTS OF ART TO BE MATERIALLY DIFFERENT FROM ANY
FUTURE RESULTS, PERFORMANCE OR ACHIEVEMENTS EXPRESSED OR IMPLIED BY SUCH
FORWARD-LOOKING STATEMENTS. SUCH FACTORS INCLUDE, AMONG OTHERS, THE FOLLOWING:
GENERAL ECONOMIC AND BUSINESS CONDITIONS, WHICH WILL, AMONG OTHER THINGS, AFFECT
THE SUPPLY AND DEMAND FOR COMMERCIAL REAL ESTATE, AVAILABILITY AND CREDIT
WORTHINESS OF PROSPECTIVE TENANTS, LEASE RATES AND THE AVAILABILITY OF
FINANCING; ADVERSE CHANGES IN THE REAL ESTATE MARKETS INCLUDING, AMONG OTHER
THINGS, COMPETITION WITH OTHER COMPANIES, RISKS ASSOCIATED WITH REAL ESTATE
ACQUISITIONS; GOVERNMENTAL ACTIONS AND INITIATIVES; ENVIRONMENTAL/SAFETY
REQUIREMENTS; AND OTHER CHANGES AND FACTORS REFERENCED IN THIS PROSPECTUS AND
THE DOCUMENTS INCORPORATED HEREIN BY REFERENCE. WITH RESPECT TO ART, SUCH
FACTORS MAY ALSO INCLUDE: DIFFICULTY OF LOCATING SUITABLE REAL ESTATE
INVESTMENTS; ILLIQUIDITY OF REAL ESTATE INVESTMENTS; RISKS REGARDING THE ASSETS
OR OTHER PROPERTIES OWNED OR CONTROLLED BY ART; LIMITED CONTROL OF ENTITIES IN
WHICH INVESTMENTS ARE MADE; AND RISKS OF INVESTMENTS IN ART PREFERRED SHARES,
INCLUDING THE INABILITY TO ENFORCE REMEDIES. SEE "RISK FACTORS" HEREIN.
------------------
AVAILABLE INFORMATION
ART is subject to the informational requirements of the Securities Exchange
Act of 1934, as amended (the "Exchange Act") and, in accordance therewith, file
reports and other information with the Securities and Exchange Commission (the
"Commission"). Reports and proxy and information statements filed by ART with
the Commission pursuant to the informational requirements of the Exchange Act
may be inspected and copied at the public reference facilities maintained by the
Commission at 450 Fifth Street, N.W., Washington, D.C. 20549, and at the
following regional offices of the Commission: New York Regional Office, 7 World
Trade Center, 13th Floor, New York, New York 10048; and Chicago Regional Office,
500 West Madison Street, Suite 1400, Chicago, Illinois 60661-2511. Copies of
such material may be obtained from the Public Reference Section of the
Commission at 450 Fifth Street, N.W., Washington, D.C. 20549 at prescribed
rates. The Commission maintains a Web site that contains reports, proxy and
information statements and other information regarding registrants, including
ART, that file electronically with the Commission. The address of such Web site
is "http://www.sec.gov". In addition, reports, proxy statements and other
information concerning ART (symbol: "ARB") can be inspected and copied at the
offices of the New York Stock Exchange, Inc., 20 Broad Street, New York, New
York 10005-2601, on which the ART Common Shares and the ART Preferred Shares are
currently listed.
ART has filed the Registration Statement with the Commission under the
Securities Act with respect to the ART Preferred Shares and the ART Common
Shares. 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 with
respect to ART, the ART Preferred Shares and the ART Common Shares, reference is
made to the Registration Statement and to the exhibits thereto and the documents
incorporated by reference herein. Statements contained herein concerning the
provisions of certain documents are not necessarily complete and, in each
instance, reference is made to the copy of such document filed as an exhibit to
the Registration Statement or otherwise filed with the Commission. Each such
statement is qualified in its entirety by such reference. The Registration
Statement and the exhibits thereto may be inspected without charge at the office
of the Commission, 450 Fifth Street, N.W., Washington, D.C. 20549, and copies
thereof may be obtained from the Commission upon payment of the prescribed fees.
No person has been authorized to give any information or make any
representation other than those set forth or incorporated by reference herein
and, if given or made, such information must not be relied upon as having been
authorized by ART or any of its affiliates. This Prospectus does not constitute
an offer to, or a solicitation of, any person in any jurisdiction in which such
offer or solicitation is unlawful.
INCORPORATION OF CERTAIN INFORMATION BY REFERENCE
This Prospectus incorporates by reference documents not presented herein or
delivered herewith. ART will provide without charge to each person to whom a
copy of this Prospectus is delivered, upon the written or oral request of any
such person, a copy of any document described below (other than exhibits).
Requests for such copies should be directed
<PAGE> 4
to American Realty Trust, Inc., 10670 North Central Expressway, Suite 300,
Dallas, Texas 75231, Attention: Investor Relations, telephone number: (214)
692-4700.
The following documents, heretofore filed by ART with the Commission
pursuant to the Exchange Act, are hereby incorporated by reference, except as
superseded or modified herein:
1. ART's Annual Report on Form 10-K for the fiscal year ended December 31,
1997, as filed with the Commission on March 30, 1998, as amended by ART's Annual
Report on Form 10-K/A, as filed with the Commission on November 24, 1998.
2. ART's Quarterly Report on Form 10-Q for the fiscal quarter ended March
31, 1998, as filed with the Commission on May 14, 1998, as amended by ART's
Quarterly Report on Form 10-Q/A, as filed with the Commission on November 24,
1998.
3. ART's Quarterly Report on Form 10-Q for the fiscal quarter ended June 30,
1998, as filed with the Commission on August 14, 1998, as amended by ART's
Quarterly Report on Form 10-Q/A, as filed with the Commission on November 24,
1998.
4. ART's Quarterly Report on Form 10-Q for the fiscal quarter ended
September 30, 1998, as filed with the Commission on November 16, 1998.
5. ART's Current Report on Form 8-K dated May 1, 1998, as filed with the
Commission on June 25, 1998, as amended by ART's Current Report on Form 8-KA, as
filed with the Commission on July 16, 1998.
6. The Annual Report on Form 10-K for Continental Mortgage and Equity Trust
("CMET") for the year ended December 31, 1997, as filed with the Commission on
March 20, 1998.
7. CMET's Quarterly Report on Form 10-Q for the fiscal quarter ended March
31, 1998, as filed with the Commission on May 14, 1998.
8. CMET's Quarterly Report on Form 10-Q for the fiscal quarter ended June
30, 1998, as filed with the Commission on August 11, 1998.
9. CMET's Quarterly Report on Form 10-Q for the fiscal quarter ended
September 30, 1998, as filed with the Commission on November 12, 1998.
10. CMET's Current Report on Form 8-K dated April 3, 1998, as filed with the
Commission on June 25, 1998.
11. CMET's Current Report on Form 8-K dated September 1, 1998, as filed with
the Commission on September 28, 1998.
12. The Annual Report on Form 10-K for Income Opportunity Realty Investors,
Inc. ("IORI") for the year ended December 31, 1997, as filed with the Commission
on March 20, 1998.
13. IORI's Quarterly Report on Form 10-Q for the fiscal quarter ended March
31, 1998, as filed with the Commission on May 4, 1998.
14. IORI's Quarterly Report on Form 10-Q for the fiscal quarter ended June
30, 1998, as filed with the Commission on August 5, 1998.
15. IORI's Quarterly Report on Form 10-Q for the fiscal quarter ended
September 30, 1998, as filed with the Commission on November 9, 1998.
16. IORI's Current Report on Form 8-K dated November 19, 1997, as filed with
the Commission on December 3, 1997, as amended by IORI's Current Report on Form
8-K/A, as filed with the Commission on January 14, 1998, and as further amended
by IORI's Current Report on Form 8-K/A, as filed with the Commission on August
5, 1998.
17. IORI's Current Report on Form 8-K dated December 30, 1997, as filed with
the Commission on January 9, 1998.
18. The Annual Report on Form 10-K for Transcontinental Realty Investors,
Inc. ("TCI") for the year ended December 31, 1997, as filed with the Commission
on March 20, 1998.
19. TCI's Quarterly Report on Form 10-Q for the fiscal quarter ended March
31, 1998, as filed with the Commission on May 4, 1998.
<PAGE> 5
20. TCI's Quarterly Report on Form 10-Q for the fiscal quarter ended June
30, 1998, as filed with the Commission on August 5, 1998.
21. TCI's Current Report on Form 8-K dated December 22, 1997, as filed with
the Commission on January 9, 1998, as amended by TCI's Current Report on Form
8-K/A, as filed with the Commission on June 29, 1998.
22. TCI's Current Report on Form 8-K dated May 29, 1998, as filed with the
Commission on July 2, 1998, as amended by TCI's Current Report on Form 8-K/A, as
filed with the Commission on September 23, 1998.
23. TCI's Current Report on Form 8-K dated June 26, 1998, as filed with the
Commission on July 21, 1998, as amended by TCI's Current Report on Form 8-K/A,
as filed with the Commission on October 16, 1998.
24. TCI's Current Report on Form 8-K dated September 21, 1998, as filed with
the Commission on September 28, 1998.
25. The Annual Report on Form 10-K for National Realty, L.P. ("NRLP") for
the year ended December 31, 1997, as filed with the Commission on March 26,
1998, as amended by NRLP's Annual Report on Form 10-K/A, as filed with the
Commission on November 24, 1998.
26. NRLP's Quarterly Report on Form 10-Q for the fiscal quarter ended March
31, 1998, as filed with the Commission May 14, 1998.
27. NRLP's Quarterly Report on Form 10-Q for the fiscal quarter ended June
30, 1998, as filed with the Commission on August 14, 1998.
28. NRLP's Quarterly Report on Form 10-Q for the fiscal quarter ended
September 30, 1998, as filed with the Commission on November 16, 1998.
29. The description of the Common Stock contained in ART's Registration
Statement under Section 12 of the Exchange Act and all amendments and reports
filed for the purpose of updating that description.
30. ART's Amendment No. 2 to the Registration Statement on Form S-4, as
filed with the Commission on September 3, 1998, and all amendments and reports
filed with the Commission in respect thereof.
Each document filed by ART subsequent to the date of this Prospectus
pursuant to Section 13(a), 13(c), 14 or 15(d) of the Exchange Act and prior to
termination of the offering of all securities to which this Prospectus relates
shall be deemed to be incorporated by reference in this Prospectus and shall be
part hereof from the date of filing of such document.
Any statement contained 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 herein or in any
other subsequently filed document that is also incorporated or deemed to be
incorporated by reference herein, modifies or supersedes such statement. Any
such statement so modified or superseded shall not be deemed, except as so
modified or superseded, to constitute a part of this Prospectus. Subject to the
foregoing, all information appearing in this Prospectus is qualified in its
entirety by the information appearing in the documents incorporated herein by
reference.
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TABLE OF CONTENTS
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PAGE
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AVAILABLE INFORMATION.............................................................................................i
INCORPORATION OF CERTAIN INFORMATION BY REFERENCE.................................................................i
SUMMARY OF TERMS..................................................................................................1
General.....................................................................................................1
Description of ART..........................................................................................1
Business of ART.............................................................................................1
New York Stock Exchange Listing of ART Preferred Shares.....................................................1
Description of ART Preferred Shares.........................................................................2
Resale Restrictions; Market and Trading Information.........................................................3
RISK FACTORS......................................................................................................4
ART Preferred Shares........................................................................................4
Correlation between the Value of the ART Preferred Shares and the Success of ART's Business.................5
RATIO OF EARNINGS TO FIXED CHARGES...............................................................................10
USE OF PROCEEDS..................................................................................................10
SELLING SECURITY HOLDERS.........................................................................................10
PLAN OF DISTRIBUTION.............................................................................................10
DESCRIPTION OF ART...............................................................................................11
THE BUSINESS OF ART..............................................................................................13
DESCRIPTION OF THE CAPITAL STOCK OF ART..........................................................................14
General....................................................................................................14
ART Preferred Shares.......................................................................................14
ART Common Shares..........................................................................................15
Special Stock..............................................................................................15
LEGAL MATTERS....................................................................................................19
EXPERTS..........................................................................................................19
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<PAGE> 7
SUMMARY OF TERMS
The following summary is qualified in its entirety by reference to the
detailed information appearing elsewhere herein or in the documents incorporated
herein by reference. Certain capitalized terms used herein may be defined
elsewhere in this Prospectus. Capitalized terms that are used but not defined
herein, will have the meanings assigned to such terms in this Prospectus.
GENERAL
This Prospectus relates to the sale of ART Preferred Shares by Selling
Security Holders who have received ART Preferred Shares in connection with
acquisitions by ART of securities or assets held by such persons or their
transferees and who wish to offer and sell such ART Preferred Shares in
transactions in which they and any broker-dealer through whom such shares are
sold may be deemed to be "underwriters" within the meaning of the Securities
Act.
DESCRIPTION OF ART
ART, a Georgia corporation, is the successor to a District of Columbia
business trust organized pursuant to a declaration of trust dated July 14, 1961.
The business trust merged into ART on June 24, 1988. ART elected to be treated
as a real estate investment trust ("REIT") under Sections 856 through 860 of the
Internal Revenue Code of 1986, as amended (the "Code"), during the period from
June 1, 1989 through December 31, 1990. ART allowed its REIT status to lapse in
1991.
ART's principal offices are located at 10670 North Central Expressway,
Suite 300, Dallas, Texas 75231. ART's telephone number is (214) 692-4700. See
"Description of ART."
BUSINESS OF ART
ART's primary business is investing in equity interests in real estate
(including equity securities of real estate- related entities), leases, joint
venture development projects and partnerships and financing real estate and real
estate activities through investments in mortgage loans, including first,
wraparound and junior mortgage loans. ART has invested in private and open
market purchases in the equity securities of Continental Mortgage and Equity
Trust ("CMET"), Income Opportunity Realty Investors, Inc. ("IORI"),
Transcontinental Realty Investors, Inc. ("TCI") and National Realty, L.P.
("NRLP"), each, an affiliate of ART.
ART's board of directors (the "ART Board") has broad authority under ART's
governing documents to make all types of real estate investments, including
mortgage loans and equity real estate investments, as well as investments in the
securities of other entities, whether or not such entities are engaged in real
estate related activities.
Although the ART Board is directly responsible for managing ART's affairs
and for setting the policies which guide it, the day-to-day operations of ART
are performed by Basic Capital Management, Inc. ("BCM"). BCM is a contractual
advisor under the supervision of the ART Board. The duties of BCM include, among
other things, locating, investigating, evaluating and recommending real estate
and mortgage note investment and sales opportunities, as well as financing and
refinancing sources for ART. BCM also serves as a consultant in connection with
ART's business plan and investment policy decisions made by the ART Board.
ART's business is not seasonal. ART has decided to pursue a balanced
investment policy, seeking both current income and capital appreciation. ART's
plan of operation is to continue, to the extent its liquidity permits, to make
equity investments in lower risk real estate such as apartment complexes and
residential development projects or equity securities of real estate-related
entities and to continue to service and hold for investment mortgage loans. ART
also intends to pursue higher risk, higher reward investments, such as
undeveloped land where it can obtain financing of a significant portion of a
property's purchase price. In addition, ART will continue to seek selected
dispositions of certain of its assets where the prices obtainable for such
assets justify their disposition and will pursue its rights vigorously with
respect to mortgage notes receivable that are in default. For a detailed
description of ART's business, see "The Business of ART."
NEW YORK STOCK EXCHANGE LISTING OF ART PREFERRED SHARES
As of November 16, 1998 there were 3,350,000 ART Preferred Shares
outstanding,[ _____ of which are registered and available for unrestricted
trading on the NYSE. The ART Preferred Shares offered hereby have been approved
for trading on the NYSE. On _______, the closing price of the ART Preferred
Shares on the NYSE was $____ per share as published in The Wall Street Journal
on ________.]
1
<PAGE> 8
DESCRIPTION OF ART PREFERRED SHARES
The ART Board has designated and authorized the issuance of 15,000,000 ART
Preferred Shares with a par value of $2.00 per share and a preference on
liquidation equal to the Liquidation Value ($10.00 per share) plus the amount of
any accrued and unpaid dividends. The Liquidation Value plus such amount is
referred to as the "Adjusted Liquidation Value." The ART Preferred Shares are
non-voting except (i) as provided by law, (ii) with respect to an amendment to
ART's articles of incorporation or bylaws that would materially alter or change
the existing terms of the ART Preferred Shares, and (iii) at any time or times
when all or any portion of the dividends on the ART Preferred Shares for any six
quarterly dividends, whether or not consecutive, shall be in arrears and unpaid.
In the latter event, the number of directors constituting the ART Board shall be
increased by two and the holders of ART Preferred Shares, voting separately as a
class, shall be entitled to elect two directors to fill such newly created
directorships with each holder being entitled to one vote in such election for
each share of ART Preferred Shares held. ART is not obligated to maintain a
sinking fund with respect to the ART Preferred Shares.
The ART Preferred Shares are convertible, at the option of the holder, into
fully paid and nonassessable ART Common Shares at any time and from time to
time, in whole or in part, after the earliest to occur of (i) the August 15,
2003; (ii) the first business day, if any, occurring after a Quarterly Dividend
Payment Date (as defined below) on which dividends equal to or in excess of 5%
of the Liquidation Value (i.e., $0.50 per ART Preferred Share) are accrued and
unpaid, or (iii) ART becomes obligated to mail a statement, signed by an officer
of ART, to the holders of record of each of the ART Preferred Shares because of
a proposal by ART, to merge or consolidate with or into any other corporation
(unless ART is the surviving entity and holders of ART Common Shares continue to
hold such ART Common Shares without modification and without receipt of any
additional consideration), or to sell, lease, or convey all or substantially all
its property or business, or to liquidate, dissolve or wind up. The ART
Preferred Shares are convertible into that number of shares of ART Common Shares
obtained by multiplying the number of ART Preferred Shares being converted by
$10.00, then adding all accrued and unpaid dividends, then dividing such sum by
(in most instances) 90% of the simple average of the daily closing price of the
ART Common Shares for the 20 business days ending on the last business day of
the calendar week immediately preceding the date of conversion on the principal
stock exchange on which such ART Common Shares are then listed (the "Conversion
Price"). Notwithstanding the foregoing, ART, at its option, may elect to redeem
any ART Preferred Shares sought to be so converted by paying the holder of such
ART Preferred Shares cash in an amount equal to the Conversion Price.
The ART Preferred Shares bear a cumulative, compounded dividend per share
equal to 10% per annum of the Accumulated Liquidation Value, payable quarterly
on the 15th day of the month following the end of each calendar quarter (each, a
"Quarterly Dividend Payment Date"), and commencing accrual on the date of
issuance to and including the date on which the redemption price of such shares
is paid, whether or not such dividends have been declared and whether or not
there are profits, surplus or other funds of ART legally available for the
payment of such dividends. Dividends on the ART Preferred Shares are in
preference to and with priority over dividends upon the ART Common Shares.
Except as described in the following sentence, the ART Preferred Shares rank on
a parity as to dividends and upon liquidation, dissolution or winding up with
all other Special Stock (as defined herein under "Description of Capital Stock
of ART") issued by ART. ART will not issue any shares of Special Stock of any
series which are superior to the ART Preferred Shares as to dividends or rights
upon liquidation, dissolution or winding up of the corporation as long as any
ART Preferred Shares are issued and outstanding, without the prior written
consent of the holders of at least 662/3% of such ART Preferred Shares then
outstanding voting separately as a class. As of November 16, 1998, ART had
outstanding 3,350,000 ART Preferred Shares, 16,681 shares of Series C 10%
Cumulative Preferred Stock, and 1,000 shares of Series G 10% Cumulative
Convertible Preferred Stock. The Series C Shares were called for redemption on
November 24, 1998.
ART may redeem any or all of the ART Preferred Shares at any time and from
time to time, at its option, for cash upon no less than 20 days nor more than 30
days prior notice thereof. The redemption price of ART Preferred Shares to be
redeemed shall be an amount per share equal to (i) 104% of the Adjusted
Liquidation Value of such shares during the period from August 16, 1998 through
August 15, 1999; and (ii)103% of the Adjusted Liquidation Value of such shares
at any time on or after August 16, 1999.
There is no established trading market for the ART Preferred Shares. [While
the ART Preferred Shares have been listed for trading on the NYSE, there can be
no assurance that an active market for the ART Preferred Shares will develop or
be sustained in the future on the NYSE or otherwise.] There is no assurance that
the ART Preferred Shares will have a market value at or near their Adjusted
Liquidation Value. See "Risk Factors -- ART Preferred Shares."
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RESALE RESTRICTIONS; MARKET AND TRADING INFORMATION
The ART Preferred Shares issued to LLPM may not be publicly offered or sold
other than in compliance with Rule 145 promulgated under the Securities Act.
Because the ART Preferred Shares are newly issued, there is not a public
market for the ART Preferred Shares. [While the ART Preferred Shares have been
listed for trading on the NYSE, there can be no assurance that the ART Preferred
Shares will continue to be so listed or that an active market for the ART
Preferred Shares will develop or be sustained in the future on such exchange.
Continued listing of the ART Preferred Shares on the NYSE will depend upon the
satisfaction of the NYSE's continued listing requirements with respect to the
ART Preferred Shares. Accordingly, no assurance can be given as to the liquidity
of, or trading for, the ART Preferred Shares. In addition, there is no assurance
that the ART Preferred Shares will have a market value at or near their
Liquidation Value.] See "Risk Factors -- ART Preferred Shares -- Possible
Subsequent De-listing of the ART Preferred Shares" herein.
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RISK FACTORS
Potential purchasers of the ART Preferred Shares should consider the
following risk factors in connection with a determination of whether or not to
purchase the ART Preferred Shares. These factors are intended to identify the
significant sources of risk affecting an investment in the ART Preferred Shares.
ART PREFERRED SHARES
Possible Subsequent De-listing of the ART Preferred Shares. As of November
16, there were 3,350,000 ART Preferred Shares issued and outstanding; however,
there is currently no established public market for the ART Preferred Shares.
[While the ART Preferred Shares have been listed for trading on the NYSE, there
can be no assurance that an active market for the ART Preferred Shares will
develop or be sustained in the future on such exchange. Continued listing of the
ART Preferred Shares on the NYSE will also depend upon the satisfaction of the
NYSE's listing requirements with respect to the ART Preferred Shares. Although
the NYSE has not established any minimum numerical criteria for the listing of
preferred stock, it has published certain numerical de-listing criteria
therefor. Pursuant to such criteria, the NYSE will consider suspending or
de-listing a series of preferred stock if the aggregate market value of
publicly-held shares of such preferred stock is less than $2,000,000 and the
number of publicly-held shares of such preferred stock is less than 100,000. The
aggregate number and aggregate value of the ART Preferred Shares currently
satisfy the NYSE listing requirements; however, since the ART Preferred Shares
are subject to conversion or redemption as described herein under "Description
of the Capital Stock of ART -- ART Preferred Shares," there can be no assurance
that the ART Preferred Shares will continue to satisfy the NYSE's continued
listing requirements. In addition, no assurance can be given as to the liquidity
of, or trading for, the ART Preferred Shares. The trading price of ART Preferred
Shares is likely to be below their Liquidation Value and there is no assurance
as to the price at which the ART Preferred Shares will actually trade.]
Reliance on ART Board to Declare Dividends on the ART Preferred Shares.
Although dividends will accrue cumulatively on the ART Preferred Shares from the
date of issuance, such dividends will not be paid unless and until they are
declared by the ART Board. Holders of ART Preferred Shares will not have the
authority to direct or compel the ART Board to declare dividends with respect to
the ART Preferred Shares. The ART Preferred Shares are non-voting except (i) as
provided by law, (ii) with respect to an amendment to ART's articles of
incorporation or bylaws that would materially alter or change the existing terms
of the ART Preferred Shares, and (iii) at any time or times when all or any
portion of the dividends on the ART Preferred Shares for any six quarterly
dividends, whether or not consecutive, shall be in arrears and unpaid. In the
latter event, the number of directors constituting the ART Board shall be
increased by two and the holders of ART Preferred Shares, voting separately as a
class, shall be entitled to elect two directors to fill such newly created
directorships with each holder being entitled to one vote in such election for
each share of ART Preferred Shares held.
Risks Associated with Conversion Feature. The ART Preferred Shares are
convertible into ART Common Shares as described herein under "Summary of Terms
- -- Description of ART Preferred Shares" and "Description of the Capital Stock of
ART -- ART Preferred Shares." The Articles of Amendment of ART's Articles of
Incorporation that authorize the ART Preferred Shares provide that a number of
authorized ART Common Shares sufficient to provide for the conversion of the
outstanding ART Preferred Shares as described herein shall at all times be
reserved for such conversion. However, the number of ART Common Shares into
which an ART Preferred Share is convertible is dependent upon the then-current
market price of the ART Common Shares. Therefore, if at the time a holder of ART
Preferred Shares seeks to convert such ART Preferred Shares, ART has failed to
reserve a sufficient number of authorized ART Common Shares to effect such
conversion and assuming that ART does not elect to redeem such ART Preferred
Shares as described herein, such holder would be unable to effect such
conversion. In addition to the ART Preferred Shares, ART has authorized and
issued other preferred stock that may be converted from time to time into ART
Common Shares. See "Description of the Capital Stock of ART." In the future, ART
expects to authorize and issue additional preferred stock or other securities
that may be converted from time to time into ART Common Shares. Certain of the
preferred stock that has been authorized by ART (including the ART Preferred
Shares) is, and securities that may be issued by ART in the future may be,
convertible into a number of ART Common Shares calculated by reference to the
price of ART Common Shares (i.e., the lower the price of the ART Common Shares,
the higher the number of ART Common Shares to be received upon conversion of the
applicable security). At any given time, a decrease in the price of ART Common
Shares below a certain level could result in the number of authorized ART Common
Shares being insufficient to provide for the conversion of all of ART's
convertible securities, including the ART Preferred Shares. So long as
management of ART and affiliates of ART own a majority of the ART Common Shares,
management expects that ART will have the ability to increase the number of
authorized ART Common Shares to a number sufficient to provide for the
conversion of its convertible preferred stock. However, there can be no
assurance that management and affiliates of ART will continue to own a majority
of the ART Common Shares. The actual basis for calculating the number of ART
Common Shares issuable upon conversion of ART's authorized preferred stock is
described under "Description of the Capital Stock of ART."
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Possibility that an Active Trading Market Will Not Exist for the ART Common
Shares when the ART Preferred Shares are Converted. In the event that ART
Preferred Shares are converted into ART Common Shares, there can be no assurance
as to the existence of an active trading market for the ART Common Shares at the
time of such conversion or that the trading price of the ART Common Shares will
not decline substantially after such conversion.
CORRELATION BETWEEN THE VALUE OF THE ART PREFERRED SHARES AND THE SUCCESS OF
ART'S BUSINESS
The value of the ART Preferred Shares at any given time will be
substantially dependent upon the success of ART's business. Set forth below is a
summary of potential risks relating to ART's business.
Recent Operating History. ART has experienced net losses of $2,428,000,
$5,554,000, $2,836,000, $2,426,000, and $4,427,000, respectively, for each of
the fiscal years ended December 31, 1997, 1996, 1995, 1994 and 1993, and ART had
an accumulated deficit at December 31, 1997 of $25,638,000. During the nine
months ended September 30, 1998, ART reported net income of $2,100,000 and an
accumulated deficit of $25,841,000 at September 30, 1998. During the nine months
ended September 30, 1998, ART paid a cumulative dividend of $0.15 with respect
to each ART Common Share. During 1997, ART paid a cumulative dividend of $0.20
with respect to each ART Common Share, and during 1996, ART paid a cumulative
dividend of $0.15 with respect to each ART Common Share. From 1993 through 1995,
ART paid no dividends in respect of the ART Common Shares. There can be no
assurance that ART will be able to pay dividends in respect of the ART Preferred
Shares or the ART Common Shares in the future.
Changes in ART's Policies Without Stockholder Approval. The investment,
financing, borrowing and distribution policies of ART and its policies with
respect to all other activities, growth, debt, capitalization and operations,
will be determined by the ART Board. Although it has no present intention to do
so, the ART Board may amend or revise these policies at any time and from time
to time at its discretion without a vote of the stockholders of ART. A change in
these policies could adversely affect the market price of the ART Preferred
Shares or the ART Common Shares. See "The Business of ART."
Investments in Real Property. Real property investments are subject to
varying degrees of risk and are relatively illiquid. Income from real property
investments and ART's resulting ability to pay dividends to its shareholders may
be adversely affected by a number of factors, including general economic climate
and local real estate conditions (such as oversupply of or reduced demand for
space and changes in market rental rates); the perceptions of prospective
tenants of the safety, convenience and attractiveness of ART's properties; the
ability of ART or the owner of such properties to provide adequate management,
maintenance and insurance; energy and supply shortages; the ability to collect
on a timely basis all rent from tenants and interest from borrowers; the expense
of periodically renovating, repairing and reletting spaces; and increasing
operating costs (including real estate taxes and utilities) which may not be
passed through to tenants. Certain significant expenditures associated with
investments in real estate (such as mortgage payments, real estate taxes,
insurance and maintenance costs) are generally not reduced when circumstances
cause a reduction in rental revenues from the investment. If a property of ART
is mortgaged to secure the payment of indebtedness and if ART or an entity in
which ART invests or to which it lends is unable to meet its mortgage payments,
a loss could be sustained as a result of foreclosure on the property or the
exercise of other remedies by the mortgagee. Real estate values and income from
properties are also affected by such factors as compliance with laws, including
tax laws, interest rate levels and the availability of financing.
Nature of Investments Made by ART May Involve High Risk; Illiquidity of
Real Estate Investments. ART may make investments in real estate-related assets
and businesses which have experienced severe financial difficulties, which
difficulties may never be overcome. Since such investments may involve a high
degree of risk, poor performance by any such investments could severely affect
the financial condition and results of operations of ART.
The illiquid nature of ART's real estate investments may limit the ability
of ART to modify its portfolio in response to changes in economic or other
conditions. Such illiquidity may result from the absence of an established
market for ART's investments as well as legal or contractual restrictions on
their resale by ART.
Difficulty of Locating Suitable Investments; Competition. Identifying,
completing and realizing on real estate investments has from time to time been
highly competitive, and involves a high degree of uncertainty. ART competes for
investments with many public and private real estate investment vehicles,
including financial institutions (such as mortgage banks, pension funds and real
estate investment trusts) and other institutional investors, as well as
individuals. There can be no assurance that ART will continue to be able to
locate and complete investments which satisfy ART's objectives or realize upon
their value or that it will be able to fully invest its available capital.
Many of those with whom ART competes for investments and its services are
far larger than ART, may have greater financial resources than ART and may have
management personnel with more experience than the officers of ART.
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General Investment Risks Associated With Acquisition Activities. From time
to time, ART will acquire existing properties to the extent that they can be
acquired on advantageous terms and meet ART's investment criteria. Acquisitions
of properties entail general investment risks associated with any real estate
investment, including the risk that investments will fail to perform as
expected, that estimates of the cost of improvements to bring an acquired
property up to standards established for the intended market position may prove
inaccurate and the occupancy rates and rents achieved may be less than
anticipated.
Dependence on Rental Income from Real Property. ART's cash flow, results of
operations and value of its assets would be adversely affected if a significant
number of tenants of ART's properties failed to meet their lease obligations or
if ART or the owner of a property in which ART has an interest were unable to
lease a significant amount of space on economically favorable terms. In the
event of a default by a lessee, the owner may experience delays in enforcing its
rights as lessor and may incur substantial costs in protecting its investment.
The bankruptcy or insolvency of a major tenant may have an adverse effect on a
property. At any time, a tenant may also seek protection under the bankruptcy
laws, which could result in rejection and termination of such tenant's lease and
thereby cause a reduction in the cash flow of the property. If a tenant rejects
its lease, the owner's claim for breach of the lease would (absent collateral
securing the claim) be treated as a general unsecured claim. Generally, the
amount of the claim would be capped at the amount owed for unpaid pre-petition
lease payments unrelated to the rejection, plus the greater of one year's lease
payments or 15% of the remaining lease payments payable under the lease (but not
to exceed the amount of three years' lease payments). No assurance can be given
that the properties in which ART has an interest will not experience significant
tenant defaults in the future.
Properties that Serve as Collateral for ART's Mortgage Notes Receivable. A
substantial portion of ART's assets have been invested in mortgage notes
receivable, principally those secured by income producing real estate. The
income producing real estate properties have included apartment complexes,
hotels, office buildings and shopping centers. Those properties are located in
the Mountain, Southeast and Southwest regions of the United States. Certain
geographic regions of the United States from time to time will experience weaker
regional economic conditions and housing markets, and, consequently, will
experience higher rates of loss and delinquency on mortgage loans generally. Any
concentration of loan assets in such a region may present risk considerations in
addition to those generally present for similar mortgage-backed or asset-backed
securities without such concentration.
Market values of apartment complexes can be affected significantly by the
supply and demand in the geographic market for such properties securing the loan
and, therefore, may be subject to adverse economic conditions. Market values on
apartment complexes may vary as a result of economic events or governmental
regulations outside the control of the borrower or lender. Governmental
regulations such as rent control laws may impact the future cash flow of the
apartment complex.
Like any income producing property, the income generated by a hotel
property is subject to several factors such as local, regional and national
economic conditions and competition. However, because such income is primarily
generated by room occupancy and such occupancy is usually for short periods of
time, the level of such income may respond more quickly to conditions such as
those described above. Such sensitivity to competition may require more frequent
improvements and renovations than other properties. To the extent a hotel is
affiliated to, or associated with, a regional, national, or international chain,
changes in the public perception of such chain may have an impact on the income
generated by the related property. The hotel industry is also generally
seasonal. This will result in fluctuation in the income generated by hotel
properties.
The market value of properties such as office buildings and shopping
centers are subject to risks that, upon expiration, leases for space in the
office buildings and shopping centers may not be renewed, the space may not be
released, or the terms of renewal or re-lease (including the cost of required
renovations or concessions to tenants) may be less favorable than current lease
terms.
Operating Risks of ART's Properties. The properties in which ART has an
interest are subject to operating risks common to the particular property type,
any and all of which may adversely affect occupancy or rental rates. Such
properties are subject to increases in operating expenses such as cleaning;
electricity; heating, ventilation and air-conditioning; elevator repair and
maintenance; insurance and administrative costs; and other general costs
associated with security, landscaping, repairs and maintenance. While commercial
tenants are often obligated to pay a portion of these escalating costs, there
can be no assurance that they will agree to pay such costs or that the portion
that they agree to pay will fully cover such costs. If operating expenses
increase, the local rental market may limit the extent to which rents may be
increased to meet increased expenses without decreasing occupancy rates. To the
extent rents cannot be increased or costs controlled, the cash flow of ART and
its financial condition may be adversely affected.
Possible Inability to Meet Payments on Debt Financing. ART's debt-to-equity
ratio, inclusive of margin debt, was 4.97 to 1 as of December 31, 1997, and 6.60
to 1 as of September 30, 1998. Under certain circumstances, ART's cash flow may
be insufficient to meet required payments of principal, interest on its debt and
dividend distributions. If a
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property is mortgaged to secure payment of indebtedness and ART is unable to
meet mortgage payments, the lender could foreclose upon the property, appoint a
receiver and receive an assignment of rents and leases or pursue other remedies,
all with a consequent loss of income and asset value to ART. If ART defaults on
secured indebtedness, the lender may foreclose and ART could lose its entire
investment in the security for such loan. Because ART may engage in portfolio
financings where several investments are cross-collateralized, multiple
investments may be subject to the risk of loss. As a result, ART could lose its
interests in performing investments in the event such investments are cross-
collateralized with poorly performing or nonperforming investments. In addition,
recourse debt may subject other assets of ART to risk of loss. Any such losses
would adversely affect ART's ability to make distributions in respect of the ART
Preferred Shares. Distributions in respect of the ART Preferred Shares will be
subordinate in right of payment to ART's debt obligations which, as of September
30, 1998, have an aggregate outstanding principal balance of approximately
$426.3 million. Substantially all of ART's mortgage notes receivable, real
estate, equity security holdings in CMET, IORI, TCI and NRLP and its trading
portfolio of equity securities has been pledged to secure ART's outstanding
indebtedness. Such borrowings increase ART's risk of loss because they represent
a prior claim on ART's assets and require fixed payments regardless of
profitability. If ART defaults on such secured indebtedness, the lender may
foreclose on ART's assets securing such indebtedness, and ART could lose its
investment in the pledged assets.
Possible Inability to Refinance Existing Indebtedness. ART may not be able
to refinance existing indebtedness or the terms of such refinancing may not be
as favorable as the terms of current indebtedness and ART may not be able to
finance necessary capital expenditures for renovations and other improvements on
favorable terms or at all. If ART were unable to refinance its indebtedness on
acceptable terms, or at all, ART might be forced to dispose of one or more of
its properties on disadvantageous terms, which might result in losses to ART and
might adversely affect the cash available for distributions to its shareholders.
If interest rates or other factors at the time of the refinancing result in
higher interest rates upon refinancing, ART's interest expense would increase,
which would affect ART's ability to make distributions to its shareholders.
Substantially all of ART's real estate equity investments utilize a leveraged
capital structure, in which case a third party lender would be entitled to cash
flow generated by such investments prior to ART receiving a return. As a result
of such leverage, in addition to the risks described above, ART would be subject
to the risk that existing debt (which in most cases will not have been fully
amortized at maturity) will not be able to be refinanced or that the terms of
such refinancings will not be as favorable to ART and the risk that necessary
capital expenditures for such purposes as renovations and other improvements
will not be able to be financed on favorable terms or at all. While such
leverage may increase returns or the funds available for investment by ART, it
also will increase the risk of loss on a leveraged investment. The
organizational documents of ART do not contain any limitation on the amount of
indebtedness ART may incur. Accordingly, ART could become even more highly
leveraged than it currently is, thus resulting in an increase in debt service
that could increase the risk of default on ART's indebtedness.
Existing Debt Maturities. As of December 31, 1997, approximately $89.0
million of ART's outstanding indebtedness became due within the next twelve
months. ART had the option of extending the maturity dates with respect to $18.3
million of such amount to April and June 1999. In April 1998, ART paid off $5.0
million of such debt and refinanced the remaining $13.3 million with the same
lender, increasing the loan's principal balance by $1.7 million, and extended
the maturity date of such loan to April 2000. On an additional $19.5 million
loan, the lender has extended such loan's maturity date to February 2000. In
March 1998, ART made a $10.2 million paydown on this loan. In addition, through
September 30, 1998, ART paid off a total of $29.5 million of the remainder of
such maturing debt. ART anticipates that only a portion of the principal of its
indebtedness outstanding from time to time will be repaid prior to maturity. ART
may not have sufficient funds to repay such indebtedness at maturity; it may
therefore be necessary for ART to refinance debt through additional debt
financing or equity offerings. The lender on a loan with a principal balance of
$20.7 million at September 30, 1998, has declared events of non-monetary default
to have occurred and has demanded repayment of the amounts owed to it. If ART is
unable to refinance any of the foregoing indebtedness on acceptable terms, ART
may be forced to dispose of properties on disadvantageous terms, which could
result in losses to ART and adversely affect the amount of cash available for
further investment, to make payments on its outstanding indebtedness or to make
distributions in respect of the ART Preferred Shares.
Rising Interest Rates on Variable Rate Debt. As of September 30, 1998,
approximately 15% and 85% of ART's indebtedness is subject to variable interest
rates and fixed interest rates, respectively. ART may incur indebtedness in the
future that also bears interest at a variable rate or may be required to
refinance its debt at higher rates. Accordingly, increases in variable interest
rates could increase ART's interest expense and adversely effect the financial
condition and results of operations of ART. In the event that ART's financial
condition and results of operations are adversely affected, the value of the ART
Preferred Shares will likely decline.
Covenants. Various debt obligations may require ART to comply with a number
of customary financial and other covenants on an ongoing basis. Failure to
comply with such covenants may limit ART's ability to borrow funds or may cause
a default under its then-existing indebtedness. Various ART debt obligations
contain specific covenants, which provide that if ART should be declared in
default of any of its debt obligations, and such default is not cured in the
time allowed, then the debt obligations containing such covenant would also be
declared in default, as a result of which, among other consequences, all such
debt would become due and payable.
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Lack of Control and Other Risks of Equity Investments in and with Third
Parties. ART may invest in shares or other equity interests of real estate
investment trusts or other entities that invest in real estate assets. In such
cases, ART will be relying on the assets, investments and management of the real
estate investment trust or other entity in which it is investing. Such entities
and their properties will be subject to the other risks affecting the ownership
and operation of real estate set forth herein.
ART may also co-invest with third parties through partnerships, joint
ventures or other entities, acquiring non-controlling interests in or sharing
responsibility for managing the affairs of a property, partnership, joint
venture or other entity and, therefore, will not be in a position to exercise
sole decision-making authority regarding the property, partnership, joint
venture or other entity.
Investments in partnerships, joint ventures, or other entities may, under
certain circumstances, involve risks which would not be present were a third
party not involved, including the possibility that ART's partners or
co-venturers might become bankrupt or otherwise fail to fund their share of
required capital contributions, that such partners or co-venturers might at any
time have economic or other business interests or goals which are inconsistent
with the business interests or goals of ART, and that such partners or
co-venturers may be in a position to take action contrary to the instructions or
the requests of ART and contrary to ART's policies or objectives. Such
investments may also have the potential risk of impasse on decisions, such as a
sale, because neither ART nor the partner or co-venturer would have full control
over the partnership or joint venture. Consequently, actions by such partner or
co-venturer might result in subjecting properties owned by the partnership or
joint venture to additional risk. In addition, ART may in certain circumstances
be liable for the actions of its third-party partners or co-venturers.
Investments in Non-Recourse Mortgage Loans. To the extent ART invests in
mortgage loans, such mortgage loans may or may not be recourse obligations of
the borrower and generally will not be insured or guaranteed by governmental
agencies or otherwise. In the event of a default under such obligations, ART may
have to foreclose its mortgage or protect its investment by acquiring title to a
property and thereafter making substantial improvements or repairs in order to
maximize the property's investment potential. Borrowers may contest enforcement
of foreclosure or other remedies, seek bankruptcy protection against such
enforcement and/or bring claims for lender liability in response to actions to
enforce mortgage obligations. Relatively high "loan-to-value" ratios and
declines in the value of the mortgaged property may prevent ART from realizing
an amount equal to its mortgage loan upon foreclosure.
ART may participate in loans originated by other financing institutions. As
a participant, ART may not have the sole authority to declare a default under
the mortgage or to control the management or disposition of the related property
or any foreclosure proceedings in respect thereof.
Any investments in junior mortgage loans which are subordinate to liens of
senior mortgages would involve additional risks, including the lack of control
over the collateral and any related foreclosure proceeding. In the event of a
default on a senior mortgage, ART may make payments to prevent foreclosure on
the senior mortgage without necessarily improving ART's position with respect to
the subject real property. In such event, ART would be entitled to share in the
proceeds only after satisfaction of the amounts due to the holder of the senior
mortgage.
Limitations on Remedies. Although ART will have certain contractual
remedies upon the default by borrowers under certain debt instruments, such as
foreclosing on the underlying real estate or collecting rents generated
therefrom, certain legal requirements (including the risks of lender liability)
may limit the ability of ART to effectively exercise such remedies.
The right of a mortgage lender to convert its loan position into an equity
interest may be limited or prevented by certain common law or statutory
prohibitions.
Possibility of Uninsured Loss on Uninsurable or Economically Uninsurable
Properties. ART carries comprehensive liability, fire, extended coverage and
rental loss insurance with respect to all of the improved real property that it
owns, with policy specifications, insured limits and deductibles customarily
carried for similar properties. There are, however, certain types of losses
(such as losses arising from acts of war or relating to pollution) that are not
generally insured because they are either uninsurable or not economically
insurable. Should an uninsured loss or a loss in excess of insured limits occur,
ART could lose its capital invested in a property, as well as the anticipated
future revenue from such property and would continue to be obligated on any
mortgage indebtedness or other obligations related to the property. Any such
loss could adversely affect the financial condition and results of operations of
ART.
With respect to those properties in which ART holds an interest through a
mortgage, as well as those properties owned by entities to whom ART makes
unsecured loans, the borrowers will most likely be obligated to maintain
insurance on such properties and to arrange for ART to be covered as a named
insured on such policies. The face amount and scope of such insurance coverage
may be less comprehensive than ART would carry if it held the fee interest in
such property. Accordingly, in such circumstances, or in the event that the
borrowers fail to maintain required
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coverage, uninsured or underinsured losses may occur, which could have an
adverse impact on ART's cash flow or financial condition.
Costs of Compliance with the Americans with Disabilities Act and Similar
Laws. Under the Americans with Disabilities Act of 1980 (the "ADA"), places of
public accommodations and commercial facilities are required to meet certain
federal requirements related to access and use by disabled persons. Compliance
with ADA requirements could require both structural and non-structural changes
to the properties in which ART invests and noncompliance could result in
imposition of fines by the United States government or an award of damages to
private litigants. Although management of ART believes that its properties are
substantially in compliance with present requirements of the ADA, ART may incur
additional costs of compliance in the future. A number of additional Federal,
state and local laws exist which impose further burdens or restrictions on
owners with respect to access by disabled persons and may require modifications
to properties in which ART invests, or restrict certain further renovations
thereof. The ultimate amount of the cost of compliance with the ADA or other
such laws is not currently ascertainable. While such costs are not expected to
have a material effect on ART, they could be substantial. If required changes
involve greater expense than ART currently anticipates, ART's financial
condition and results of operations could be adversely affected.
Potential Environmental Liability Affecting ART. Under various Federal,
state and local environmental laws, ordinances and regulations, an owner of real
estate may be liable for the costs of removal or remediation of certain
hazardous or toxic substances on such property. These laws often impose
environmental liability without regard to whether the owner knew of, or was
responsible for, the presence of such hazardous or toxic substances. The
presence of such substances, or the failure properly to remediate such
substances, may adversely affect the owner's ability to sell or rent the
property or to borrow using the property as collateral. Persons who arrange for
the disposal or treatment of hazardous or toxic substances may also be liable
for the costs of removal or remediation of such substances at a disposal or
treatment facility, whether or not such facility is owned or operated by such
person. Certain laws impose liability for release of asbestos- containing
materials ("ACMs") into the air and third parties may seek recovery from owners
or operators of real properties for personal injury associated with ACMs. In
connection with the ownership (directly or indirectly through its lending
activities), operation, management and development of real properties, ART may
be considered an owner or operator of such properties or as having arranged for
the disposal or treatment of hazardous or toxic substances and, therefore,
potentially liable for removal or remediation costs, as well as for certain
other related costs, including governmental fines and injuries to persons and
property.
ART's management is not aware of any environmental matters affecting its
properties or investments that would have a material adverse effect on ART's
business, assets or results of operations.
No assurance can be given that existing environmental assessments with
respect to any of ART's properties reveal all environmental liabilities, that
any prior owner of a property did not create any material environmental
condition not known to ART, or that a material environmental condition does not
otherwise exist with respect to any one or more properties of ART.
Noncompliance with Other Laws. Real estate properties are also subject to
various Federal, state and local regulatory requirements, such as state and
local fire and life safety requirements. Failure to comply with these
requirements could result in the imposition of fines by governmental authorities
or awards of damages to private litigants. ART believes that its properties are
currently in material compliance with all such regulatory requirements. However,
there can be no assurance that these requirements will not be changed or that
new requirements will not be imposed which would require significant
unanticipated expenditures by ART and could have an adverse effect on ART's
results of operations.
Changes in Laws. Increases in real estate taxes, income taxes and service
or other taxes generally are not passed through to tenants under existing leases
and may adversely affect ART's cash flow from operations and its ability to make
distributions to shareholders. Similarly, changes in laws increasing the
potential liability for environmental conditions existing on properties or
increasing the restrictions on discharges or other conditions may result in
significant unanticipated expenditures, which would adversely affect ART's funds
from operations and thus its ability to make payments on its outstanding
indebtedness and to make distributions to its shareholders.
Dependence on Key Personnel. ART will be dependent on the efforts of its
executive officers and the executive officers of BCM, an affiliate of and
advisor to ART. While ART believes that it and BCM could find replacements for
these key personnel, the loss of their services may have a temporary adverse
effect on the operations of ART. Only Randall M. Paulson, the President of BCM,
has an employment agreement with BCM. None of the other officers has entered or
is expected to enter into employment agreements with ART or BCM.
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<PAGE> 16
RATIO OF EARNINGS TO FIXED CHARGES
The following table summarizes the ratio of ART's earnings to combined
fixed charges and preferred stock dividends for each of the five fiscal years of
ART ended December 31, 1997:
<TABLE>
<CAPTION>
Year Ended December 31,
1997 1996 1995 1994 1993
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
RATIO OF EARNINGS TO COMBINED FIXED
CHARGES AND PREFERRED STOCK DIVIDENDS * * * * *
</TABLE>
* Earnings were inadequate to cover fixed charges and preferred stock dividends
by $8,474,000, $4,819,000, $189,000, $1,390,000 and $4,923,000 in 1997, 1996,
1995, 1994 and 1993, respectively.
USE OF PROCEEDS
ART will not receive any of the proceeds from the sale of the ART Preferred
Shares by the Selling Security Holders.
SELLING SECURITY HOLDERS
Simon, Doyle, the Trust, LLPM, Summit and Sutter are the "Selling
Security Holders". None of the Selling Security Holders has had any position,
office, or other material relationship with ART, ART's predecessors or ART's
affiliates within the three years preceding this Prospectus.
Because this offering of ART Preferred Shares is not being underwritten
on a firm commitment basis, no estimate can be given as to the number or
percentage of ART Preferred Shares which will be held by the Selling Security
Holders upon termination of this offering. See "Plan of Distribution."
The following table shows the names of the Selling Security Holders and
the number of ART Preferred Shares being offered by each of them. After
completion of the offering, assuming all of the ART Preferred Shares being
offered hereby are sold and assuming that the Selling Security Holders do not
acquire additional ART Preferred Shares, the Selling Security Holders will own
the number of ART Preferred Shares set forth below.
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------
Number of ART Number of ART Preferred
Selling Security Holder Preferred Shares Being Offered Shares Owned After This Offering
----------------------- ------------------------------ --------------------------------
<S> <C> <C>
Simon Up to 100,000 --
Doyle Up to 50,000 --
The Trust Up to 100,000 --
LLPM Up to 50,566 --
Summit Up to 27,507 --
Sutter Up to 27,582 --
- -----------------------------------------------------------------------------------------------------------------
</TABLE>
PLAN OF DISTRIBUTION
This Prospectus, as appropriately amended or supplemented, may be used
from time to time principally by persons who have received ART Preferred Shares
in connection with acquisitions by ART of securities and assets held by such
persons, or their transferees, and who wish to offer and sell such ART Preferred
Shares (such persons are herein referred to as "Selling Security Holders") in
transactions in which they and any broker-dealer through whom such shares are
sold may be deemed to be Underwriters within the meaning of the Securities Act.
ART will receive none of the proceeds from any such sales. There presently are
no arrangements or understandings, formal or informal, pertaining to the
distribution of the ART Preferred Shares described herein. Upon ART being
notified by a Selling Security Holder that any material arrangement has been
entered into with a broker-dealer for the sale of shares of ART Preferred Shares
bought through a block trade, special offering, exchange distribution or
secondary distribution, a supplemented Prospectus will be filed, pursuant to
Rule 424(b) under the Securities Act, setting forth (i) the name of each Selling
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<PAGE> 17
Security Holder and the participating broker-dealer(s), (ii) the number of
shares involved, (iii) the price at which the shares were sold, (iv) the
commissions paid or the discounts allowed to such broker-dealer(s), where
applicable, (v) that such broker-dealer(s) did not conduct any investigation to
verify the information set out in this Prospectus and (vi) other facts material
to the transaction.
[Selling Security Holders may sell the ART Preferred Shares being
offered hereby from time to time in transactions (which may involve crosses and
block transactions) on the New York Stock Exchange ("NYSE"), in negotiated
transactions or otherwise, at market prices prevailing at the time of the sale
or at negotiated prices. Selling Security Holders may sell some or all of the
shares in transactions involving broker-dealers, who may act solely as agent
and/or may acquire shares as principal. Broker-dealers participating in such
transactions as agent may receive commissions from Selling Security Holders
(and, if they act as agent for the purchaser of such shares, from such
purchaser), such commissions computed in appropriate cases in accordance with
the applicable rules of the NYSE, which commissions may be at negotiated rates
where permissible under such rules. Participating broker-dealers may agree with
Selling Security Holders to sell a specified number of shares at a stipulated
price per share and, to the extent such broker-dealer is unable to do so acting
as an agent for the Selling Security Holder, to purchase as principal any unsold
shares at the price required to fulfill the broker-dealer's commitment to
Selling Security Holders. In addition or alternatively, shares may be sold by
Selling Security Holders and/or by or through other broker-dealers in special
offerings, exchange distributions or secondary distributions pursuant to and in
compliance with the governing rules of the NYSE, and in connection therewith
commissions in excess of the customary commission prescribed by such governing
rules may be paid to participating broker-dealers, or, in the case of certain
secondary distributions, a discount or concession from the offering price may be
allowed to participating broker-dealers in excess of the customary commission.
Broker-dealers who acquire shares as principal may thereafter resell such shares
from time to time in transactions (which may involve crosses and block
transactions and which may involve sales to or through other broker-dealers,
including transactions of the nature described in the preceding two sentences)
on the NYSE, in negotiated transactions or otherwise, at market prices
prevailing at the time of sale or at negotiated prices, and in connection with
such resales may pay to or receive commissions from the purchaser of such
shares.]
ART may agree to indemnify each Selling Security Holder as an
Underwriter under the Securities Act against certain liabilities, including
liabilities arising under the Securities Act. Each Selling Security Holder may
indemnify any broker-dealer that participates in transactions involving sales of
the shares against certain liabilities, including liabilities arising under the
Securities Act.
The Selling Security Holders may resell the shares offered hereby only
if such securities are qualified for sale under applicable state securities or
"blue sky" laws or exemptions from such registration and qualification
requirements are available.
DESCRIPTION OF ART
ART, a Georgia corporation, is the successor to a District of Columbia
business trust organized pursuant to a declaration of trust dated July 14, 1961.
The business trust merged into ART on June 24, 1988. ART invests in equity
interests in real estate (including equity securities of real estate-related
entities), leases, joint venture development projects and partnerships and
finances real estate and real estate activities through investments in mortgage
loans. ART has invested in private and open market purchases in the equity
securities of CMET, IORI, TCI and NRLP.
The ART Board has broad authority under ART's governing documents to
make all types of real estate investments, including mortgage loans and equity
real estate investments, as well as investments in the securities of other
entities, whether or not such entities are engaged in real estate-related
activities.
Although the ART Board is directly responsible for managing the affairs
of ART and for setting the policies which guide it, the day-to-day operations of
ART are performed by BCM, an affiliate of and advisor to ART. BCM is a
contractual advisor under the supervision of the ART Board. The duties of BCM
include, among other things, locating, investigating, evaluating and
recommending real estate and mortgage note investment and sales opportunities,
as well as financing and refinancing sources for ART. BCM also serves as a
consultant in connection with ART's business plan and investment policy
decisions made by the ART Board.
BCM, an affiliate of and advisor to ART, is a company owned by a trust
for the benefit of the children of Gene E. Phillips, the Chairman of the Board
and a Director of ART until November 16, 1992. Gene E. Phillips served as a
director of BCM until December 22, 1989 and as Chief Executive Officer of BCM
until September 1, 1992. Gene E. Phillips currently serves as a representative
of the trust that owns BCM for the benefit of his children and, in such
capacity, Gene E. Phillips has substantial contact with the management of BCM
and input with respect to BCM's performance of advisory services to ART. Ryan T.
Phillips, the son of Gene E. Phillips and a Director of ART until June 4, 1996,
is also a director of BCM and a trustee of the trust which owns BCM for the
benefit of the children of Gene E. Phillips. As of November 16, 1998, BCM owned
5,700,572 ART Common Shares, representing approximately 53.0%
11
<PAGE> 18
of the ART Common Shares then outstanding. BCM has been providing advisory
services to ART since February 6, 1989. BCM also serves as advisor to CMET, IORI
and TCI. Karl L. Blaha, Randall M. Paulson, Bruce A. Endendyk, Steven K. Johnson
and Thomas A. Holland, executive officers of ART, are also executive officers of
CMET, IORI and TCI. Karl L. Blaha also serves as a Director of ART and as the
sole director of SAMI, the managing general partner of Syntek Asset Management,
L.P. ("SAMLP"), the general partner of NRLP and National Operating, L.P.
("NOLP"), the operating partnership of NRLP. Gene E. Phillips is also a general
partner of SAMLP and served as a director and Chief Executive Officer of SAMI
until May 15, 1996. SAMI is a company owned by BCM. BCM performs certain
administrative functions for NRLP and NOLP on a cost reimbursement basis.
Gene E. Phillips is the former chairman of Southmark Corporation
('Southmark"), a real estate syndicator and parent of San Jacinto Savings
Association ("San Jacinto"). As a result of a deadlock on Southmark's Board of
Directors, Mr. Phillips, among others, reached an agreement whereby he resigned
his positions with Southmark and certain of Southmark's subsidiaries and
affiliates in January 1989. Southmark filed a voluntary petition in bankruptcy
under Chapter 11 of the United States Bankruptcy Code in July 1989. In November
1990, San Jacinto was placed under conservatorship of the Resolution Trust
Corporation (the "RTC") by federal banking authorities. In December 1990, San
Jacinto was converted into a Federal Association and placed in receivership. Mr.
Phillips has been named as a defendant in a number of lawsuits brought by the
RTC and private plaintiffs in which the allegations made against Mr. Phillips
included breach of fiduciary duty and other misconduct, which allegations were
denied by Mr. Phillips. These actions have been dismissed or settled. Mr.
Phillips reviews proposals for the acquisition or disposition of assets and
provides advice to BCM's management on financing transactions and other material
business matters relating to the entities advised by BCM. However, Mr. Phillips
is not an officer or director of BCM or any of the entities BCM advises.
Since February 1, 1990, affiliates of BCM have provided property
management services to ART. Currently, Carmel Realty Services, Ltd. ("Carmel,
Ltd.") provides such property management services. Carmel, Ltd. subcontracts
with other entities for the provision of the property-level management services
to ART at various rates. The general partner of Carmel, Ltd. is BCM. The limited
partners of Carmel, Ltd. are (i) First Equity which is 50% owned by BCM, (ii)
Gene E. Phillips, and (iii) a trust for the benefit of the children of Gene E.
Phillips. Carmel, Ltd. subcontracts the property-level management of ART's
hotels, shopping centers, office buildings and the Denver Merchandise Mart to
Carmel Realty, Inc. ("Carmel Realty") which is a company owned by First Equity.
Carmel Realty is entitled to receive property and construction management fees
and leasing commissions in accordance with the terms of its property-level
management agreement with Carmel, Ltd.
Affiliates of BCM are also entitled to receive real estate brokerage
commissions in accordance with the terms of the advisory agreement between ART
and BCM.
ART has no employees itself, but Pizza World Supreme, Inc., a
wholly-owned food service subsidiary of ART has approximately 790 employees as
of June 30, 1998. Employees of BCM render services to ART.
ART's principal offices are located at 10670 North Central Expressway,
Suite 300, Dallas, Texas 75231. ART's telephone number is (214) 692-4700.
EXECUTIVE COMPENSATION OF ART
ART itself has no employees, payroll or employee benefit plans and pays
no compensation to executive officers of ART. The Directors and executive
officers of ART who are also officers or employees of BCM are compensated by
BCM. Such affiliated Directors and executive officers of ART perform a variety
of services for BCM and the amount of their compensation is determined solely by
BCM. BCM does not allocate the cash compensation of its officers among the
various entities for which it serves as advisor.
The only direct remuneration paid by ART is to those Directors who are
not officers or employees of BCM or its affiliated companies (the "Independent
Directors"). Until April 1, 1998, ART compensated such Independent Directors at
a rate of $5,000 per year, plus $500 per meeting attended and $300 per Audit
Committee meeting attended. During 1997, $48,673 was paid to Independent
Directors in total Directors' fees for all meetings, as follows: Dale A.
Crenwelge, $15,400; Al Gonzalez, $13,100; and Cliff Harris, $5,333. Effective
April 1, 1998, ART compensates Independent Directors at the rate of $20,000 per
year, plus $300 per Committee meeting attended. In addition, the Chairman of the
Audit Committee receives an annual fee of $500.
In September 1997, the ART Board, including all of the Independent
Directors, approved ART's 1997 Stock Option Plan (the "Plan"). The Plan was
approved by the ART stockholders at ART's annual meeting on January 19, 1998.
The Plan is intended principally as an incentive for and as a means of
encouraging ownership of ART Common Shares, by eligible persons, including
certain Directors and officers of ART. Options may be granted either as
incentive stock options (which qualify for certain favorable tax treatment), or
as non-qualified stock options. Incentive stock options cannot be granted to,
among others, persons who are not employees of ART, or of any parent or
subsidiary of ART, or
12
<PAGE> 19
to persons who fail to satisfy certain criteria concerning ownership of less
than 10% of the shares of ART. The Plan is administered by the Stock Option
Committee, which currently consists of the three Independent Directors of ART.
The exercise price per share of an option will not be less than 100% of the fair
market value per share on the date of grant thereof. ART receives no
consideration for the grant of an option. As of October 30, 1998, there were
272,750 stock options outstanding under the Plan.
THE BUSINESS OF ART
ART, a Georgia corporation, is the successor to a District of Columbia
business trust. ART elected to be treated as a REIT under Sections 856 through
860 of the Code, during the period July 1, 1987 through December 31, 1990. ART
allowed its REIT tax status to lapse in 1991.
ART's primary business is investing in equity interests in real estate
(including equity securities of real estate- related entities), leases, joint
venture development projects and partnerships and financing real estate and real
estate activities through investments in mortgage loans, including first,
wraparound and junior mortgage loans. The ART Board has broad authority under
ART's governing documents to make all types of real estate investments,
including mortgage loans and equity real estate investments, as well as
investments in the securities of other entities, whether or not such entities
are engaged in real estate-related activities. ART does not have a policy
limiting the amount or percentage of assets that may be invested in any
particular property or type of property or in any geographic area. ART's
governing documents do not contain any limitation on the amount or percentage of
indebtedness ART may incur.
ART, through its wholly owned subsidiary Pizza World Supreme, Inc.
("PWSI"), also operates and franchises pizza parlors featuring pizza delivery,
carry-out and dine-in under the trademark "Me-N-Ed's" in California and Texas.
The first Me-N-Ed's pizza parlor opened in 1962. At September 30, 1998, there
were 57 Me-N-Ed's pizza parlors in operation, consisting of 51 owned and six
franchised pizza parlors, seven of the owned pizza parlors were in Texas and the
remainder in California.
ART's businesses are not seasonal. With regard to real estate
investments, ART is seeking both current income and capital appreciation. ART's
plan of operation is to continue, to the extent its liquidity permits, to make
equity investments in income producing real estate such as apartment complexes
and commercial properties or equity securities of real estate-related entities
and to continue to service and hold for investment its mortgage notes. ART also
intends to pursue higher risk, higher reward investments, such as developed,
partially developed and undeveloped land where it can obtain financing of
substantially all of a property's purchase price. ART intends to seek selected
dispositions of certain of its assets, in particular certain of its land
holdings, where the prices obtainable for such assets justify their disposition.
ART intends to continue to service and hold for investment its mortgage notes.
ART also intends to pursue its rights vigorously with respect to mortgage notes
receivable that are in default.
ART may purchase or lease properties for long-term investment, develop
or redevelop its properties or sell such properties, in whole or in part, when
circumstances warrant. ART currently participates and may continue to
participate with other entities in property ownership, through joint ventures or
other types of co-ownership. Equity investments may be subject to existing
mortgage financing and other indebtedness that have priority over ART's equity
interest.
ART may repurchase or otherwise reacquire ART Common Shares, Special
Stock (as defined under "Description of the Capital Stock of ART -- General") or
other securities and may also invest in securities of other entities engaged in
real estate activities or securities of other issuers. ART may invest in the
securities of other issuers in connection with acquisitions of indirect
interests in real estate (normally general or limited partnership interests in
special purpose partnerships owning one or more properties). ART may in the
future acquire all or substantially all of the securities or assets of real
estate investment trusts, management companies or similar entities where such
investments would be consistent with its investment policies. ART may also
invest in securities of other issuers from time to time for the purpose of
exercising control. It is not intended that ART's investments in securities will
require it to register as an "investment company" under the Investment Company
Act of 1940, as amended, and it is intended that ART would divest securities
before any such registration would be required.
The ART Board may devote available assets to particular investments or
types of investments, without restriction on the amount or percentage of ART's
assets that may be so devoted to a single investment or to any particular type
of investment, and without limit on the percentage of securities of any one
issuer that ART may acquire. ART's investment objectives and policies may be
changed at any time by the ART Board without the approval of ART's stockholders.
See "Risk Factors -- Correlation between the Value of the ART Preferred Shares
and the Success of ART's Business -- Changes in ART's Policies Without
Stockholder Approval."
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<PAGE> 20
To the extent that the ART Board determines to seek additional capital,
ART may raise such capital through additional equity offerings, debt financing
or retention of cash flow, or a combination of these methods. If the ART Board
determines to raise additional equity capital, it may, without stockholder
approval, issue additional ART Common Shares or Special Stock up to the amount
of its authorized capital in any manner (and on such terms and for such
consideration) as it deems appropriate, including in exchange for property. Such
securities may be senior to the outstanding ART Common Shares and may include
additional series of Special Stock (which may be convertible into ART Common
Shares). Existing stockholders of ART will have no preemptive right to purchase
shares in any subsequent offering of securities by ART, and any such offering
could cause a dilution of a stockholder's investment in ART.
To the extent that the ART Board determines to obtain additional debt
financing, ART intends to do so generally through mortgages on properties. Such
mortgages may be recourse, non-recourse or cross-collateralized. ART does not
have a policy limiting the number or amount of mortgages that may be placed on
any particular property, but mortgage financing instruments usually limit
additional indebtedness on such properties. ART may also borrow funds through
bank borrowings, publicly and privately placed debt instruments, or purchase
money obligations to the sellers of properties, any of which indebtedness may be
unsecured or may be secured by any or all of the assets of ART or any existing
or new property-owning entity in which ART holds an interest and may have full
or limited recourse to all or any portion of the assets of ART, or any such
existing or new property-owning entity.
ART may seek to obtain unsecured or secured lines of credit or may
determine to issue debt securities (which may be convertible into capital stock
or be accompanied by warrants to purchase capital stock), or to sell or
securitize its receivables. The proceeds from any borrowings may be used to
finance acquisitions, to develop or redevelop properties, to refinance existing
indebtedness or for working capital or capital improvements. ART also may
determine to finance acquisitions through the exchange of properties or issuance
of additional ART Preferred Shares, ART Common Shares, Special Stock or other
securities.
ART has made and may in the future make loans to joint ventures or
other entities in which it participates. ART does not intend to engage in (i)
trading, underwriting or agency distribution or sale of securities of other
issuers and (ii) the active trade of loans and investments, other than in
connection with acquisitions of additional interests in CMET, IORI, TCI and
NRLP.
Except as required under the Exchange Act, and the rules and
regulations of the NYSE, ART is not required to make annual or other reports to
its securityholders.
The specific composition of ART's real estate and mortgage notes
receivable portfolios from time to time depends largely on the judgment of ART's
management as to changing investment opportunities and the level of risk
associated with specific investments or types of investments. ART's management
intends to continue to maintain real estate and mortgage notes receivable
portfolios diversified by location and type of property. In addition to its
equity investments in real estate and mortgage notes, ART has also invested in
private and open market purchases of the equity securities of CMET, IORI, TCI
and NRLP.
DESCRIPTION OF THE CAPITAL STOCK OF ART
GENERAL
ART is authorized by its Articles of Incorporation, as amended, to
issue up to 100,000,000 ART Common Shares and 20,000,000 shares of a special
class of stock, $2.00 par value per share (the "Special Stock"), which may be
designated by the ART Board from time to time. The ART Preferred Shares are a
series of the Special Stock.
ART PREFERRED SHARES
On August 13, 1997, the ART Board designated and authorized the
issuance of a total of 7,500,000 ART Preferred Shares with a par value of $2.00
per share and a preference on liquidation of $10.00 per share plus payment of
accrued and unpaid dividends. On October 23, 1998, the ART Board authorized the
issuance of an additional 7,500,000 ART Preferred Shares, thereby increasing the
total number of authorized and issued ART Preferred Shares to 15,000,000. The
ART Preferred Shares are non-voting except (i) as provided by law, (ii) with
respect to an amendment to ART's articles of incorporation or bylaws that would
materially alter or change the existing terms of the ART Preferred Shares, and
(iii) at any time or times when all or any portion of the dividends on the ART
Preferred Shares for any six quarterly dividends, whether or not consecutive,
shall be in arrears and unpaid. In the latter event, the number of directors
constituting the board of directors of ART shall be increased by two and the
holders of ART Preferred Shares, voting separately as a class, shall be entitled
to elect two directors to fill such newly created directorships with each holder
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<PAGE> 21
being entitled to one vote in such election for each share of ART Preferred
Shares held. ART is not obligated to maintain a sinking fund with respect to the
ART Preferred Shares.
The ART Preferred Shares are convertible, at the option of the holder,
into ART Common Shares at any time and from time to time, in whole or in part,
after the earliest to occur of (i) August 15, 2003; (ii) the first business day,
if any, occurring after a Quarterly Dividend Payment Date (as defined below), on
which an amount equal to or in excess of 5% of the $10.00 liquidation value
(i.e., $.50 per ART Preferred Share) is accrued and unpaid, or (iii) when ART
becomes obligated to mail a statement, signed by an officer of ART, to the
holders of record of each of the ART Preferred Shares because of a proposal by
ART at any time before all of the ART Preferred Shares have been redeemed by or
converted into ART Common Shares, to merge or consolidate with or into any other
corporation (unless ART is the surviving entity and holders of ART Common Shares
continue to hold such ART Common Shares without modification and without receipt
of any additional consideration), or to sell, lease, or convey all or
substantially all its property or business, or to liquidate, dissolve or wind
up. The ART Preferred Shares are convertible into that number of shares of ART
Common Shares obtained by multiplying the number of shares being converted by
$10.00, then adding all accrued and unpaid dividends, then dividing such sums by
(in most instances) 90% of the simple average of the daily closing price of the
ART Common Shares for the 20 business days ending on the last business day of
the calendar week immediately preceding the date of conversion on the principal
stock exchange on which such ART Common Shares are then listed (the "Conversion
Price"). Notwithstanding the foregoing, ART, at its option, may elect to redeem
any ART Preferred Shares sought to be so converted by paying the holder of such
ART Preferred Shares cash in an amount equal to the Conversion Price.
The ART Preferred Shares bear a cumulative, compounded dividend per
share equal to 10% per annum of the Adjusted Liquidation Value, payable on each
Quarterly Dividend Payment Date, and commencing accrual on the date of issuance
to and including the date on which the redemption price of such shares is paid,
whether or not such dividends have been declared and whether or not there are
profits, surplus or other funds of ART legally available for the payment of such
dividends. Dividends on the ART Preferred Shares are in preference to and with
priority over dividends upon the ART Common Shares. Except as provided in the
following sentence, the ART Preferred Shares rank on a parity as to dividends
and upon liquidation, dissolution or winding up with all other Special Stock
issued by ART. ART will not issue any shares of Special Stock of any series
which are superior to the ART Preferred Shares as to dividends or rights upon
liquidation, dissolution or winding up of the Corporation as long as any ART
Preferred Shares are issued and outstanding, without the prior written consent
of the holders of at least 662/3 %of such shares of the ART Preferred Shares
then outstanding voting separately as a class. As of November 16, 1998, the
outstanding Special Stock of ART consisted of 3,350,000 ART Preferred Shares,
16,681 shares of its Series C 10% Cumulative Preferred Stock (as described
below), and 1,000 shares of its Series G Cumulative Convertible Preferred Stock
(as described below).
In addition to ART's redemption right in connection with conversions of
ART Preferred Shares as described above, ART may redeem any or all of the ART
Preferred Shares at any time and from time to time, at its option, for cash upon
no less than 20 days nor more than 30 days prior notice thereof. The redemption
price of the ART Preferred Shares shall be an amount per share equal to (i) 104%
of the Adjusted Liquidation Value during the period from August 16, 1998 through
August 15, 1999; and (ii)103% of the Adjusted Liquidation Value at any time on
or after August 16, 1999. Each ART Preferred Share will be convertible, at the
option of the holder, into fully paid and nonassessable ART Common Shares.
The ART Preferred Shares constitute a new issue of securities with no
established trading market. [While the ART Preferred Shares have been listed for
trading on the NYSE, there can be no assurance that an active market for the ART
Preferred Shares will develop or be sustained in the future on the NYSE]. See
"Risk Factors -- ART Preferred Shares -- Possible Subsequent De-listing of the
ART Preferred Shares."
ART COMMON SHARES
All of the ART Common Shares are entitled to share equally in dividends
from funds legally available therefor, when declared by the ART Board, and upon
liquidation or dissolution of ART, whether voluntary or involuntary (subject to
any prior rights of holders of the Special Stock), and to share equally in the
assets of ART available for distributions to shareholders. Each holder of ART
Common Shares is entitled to one vote for each share held on all matters
submitted to the shareholders. There is no cumulative voting, redemption right,
sinking fund provision or right of conversion with respect to the ART Common
Shares. The holders of ART Common Shares do not have any preemptive rights to
acquire additional ART Common Shares when issued. All outstanding ART Common
Shares are fully paid and nonassessable. As of November 16, 1998, 10,756,308 ART
Common Shares were outstanding.
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<PAGE> 22
SPECIAL STOCK
The following is a description of certain general terms and provisions
of the Special Stock, including the ART Preferred Shares, the Series C Preferred
Stock, the Series D Preferred Stock, the Series E Preferred Stock, the Series G
Preferred Stock and the Series H Preferred Stock.
Article 5 of the Articles of Incorporation of ART, as amended,
authorizes the issuance of up to 20,000,000 shares of Special Stock in one or
more series with such preferences, limitations and rights as the ART Board
determines. In particular, the ART Board may fix and determine, among other
things, the dividend payable with respect to such shares of Special Stock
(including whether and in what manner such dividend shall be accumulated);
whether such shares shall be redeemable, and if so, the prices, terms and
conditions of such redemption; the amount payable on such shares in the event of
voluntary or involuntary liquidation; the nature of any purchase, retirement or
sinking fund provisions; the nature of any conversion rights with respect to
such shares; and the extent of the voting rights, if any, of such shares.
Certain provisions of the Special Stock may, under certain circumstances,
adversely affect the rights or interests of holders of ART Common Shares. For
example, the ART Board could, without shareholder approval, issue a series of
Special Stock with voting and conversion rights which could adversely affect the
voting power of the common shareholders. In addition, the Special Stock may be
issued under certain circumstances as a defensive device to thwart an attempted
hostile takeover of ART.
Through the date of this Prospectus/Proxy Statement, ART has amended
its Articles of Incorporation to designate eight series of the Special Stock as
described below. Each series of Special Stock now outstanding ranks on a parity
as to dividends and upon liquidation, dissolution or winding up with all other
shares of Special Stock.
Series A Preferred Stock; Terminated Rights Plan. On April 11, 1990,
the ART Board designated 500,000 shares of the Series A Cumulative Participating
Preferred Stock (the "Series A Preferred Stock"), adopted a preferred share
purchase rights plan and approved the distribution to shareholders of a dividend
of one preferred share purchase right on each outstanding ART Common Share (the
"Rights"). On February 27, 1997, ART filed articles of amendment to its articles
of incorporation reducing the number of authorized shares of Series A Preferred
Stock to zero and eliminating such designation.
Series B Preferred Stock. On April 3, 1996, the ART Board designated
4,000 shares of Series B Preferred Stock with a par value of $2.00 per share and
a preference on liquidation of $100 per share plus payment of accrued and unpaid
dividends. On May 27, 1998, ART filed articles of amendment to its articles of
incorporation reducing the number of authorized shares of Series B Preferred
Stock to zero and eliminating such designation.
Series C Preferred Stock. On May 23, 1996, the ART Board designated
16,681 shares of Series C Preferred Stock with a par value of $2.00 per share
and a preference on liquidation of $100 per share plus all accrued and unpaid
dividends. The Series C Preferred Stock is non-voting except as required by the
Georgia Business Code. The Georgia Business Code grants the holders of the
outstanding shares of a class the authority to vote as a separate voting group
on a proposed amendment if that amendment would effect a detrimental
reclassification of the existing shares, create a new class with preferences
over the existing shares, or cancel or otherwise affect the rights to
distributions and dividends.
ART is not required to maintain a sinking fund for such stock.
Each share of Series C Preferred Stock is convertible, but only during
a 90-day period beginning on November 25, 1998, into the number of ART Common
Shares obtained by multiplying the number of shares of Series C Preferred Stock
being converted by $100 and dividing the result by (in most instances) 90% of
the then-recent average trading price for the ART Common Shares.
The Series C Preferred Stock bears a cumulative dividend per share of
$10.00 per annum, payable quarterly in equal installments of $2.50. Dividends on
the Series C Preferred Stock are in preference to and with priority over
dividends upon the ART Common Shares. The Series C Preferred Stock ranks on a
parity as to dividends and upon liquidation, dissolution or winding up with all
other shares of Special Stock, including the ART Preferred Shares. The dividends
for the first twelve months were paid in additional shares of Series C Preferred
Stock.
ART has redeemed all of the outstanding shares of Series C Preferred
Stock at their liquidation value of $100 per share plus all accrued and unpaid
dividends on November 24, 1998. As of October 30, 1998, there were 16,681 shares
of Series C Preferred Stock issued and outstanding.
Series D Preferred Stock. The ART Board designated 91,000 shares of
Series D Cumulative Preferred Stock (the "Series D Preferred Stock") on August
2, 1996, with a par value of $2.00 per share and a preference on liquidation of
$20.00 per share plus payment of accrued and unpaid dividends. The Series D
Preferred Stock is non-voting except as required by law and is not convertible.
ART is not required to maintain a sinking fund for such stock.
Each Share of Series D Preferred Stock has a cumulative dividend per
share of 9.50% per annum of the $20.00 liquidation preference, payable quarterly
in equal installments of $0.475. Dividends on the Series D Preferred Stock are
16
<PAGE> 23
in preference to and with priority over dividends upon the ART Common Shares.
The Series D Preferred Stock ranks on a parity as to dividends and upon
liquidation, dissolution or winding up with all other shares of Special Stock.
ART may from time to time after June 1, 2001 redeem any or all of the
Series D Preferred Stock upon payment of the liquidation value of $20.00 per
share plus all accrued and unpaid dividends. There is no restriction on the
repurchase or redemption of the Series D Preferred Stock by ART while there is
any arrearage in payment of dividends except that at the time of such repurchase
or redemption ART must pay all accrued and unpaid dividends on the shares being
redeemed. As of September 15, 1998, there were no shares of Series D Preferred
Stock issued or outstanding.
The Series D Preferred Stock is reserved for issuance upon the
conversion Class A units held by the limited partners of Ocean Beach Partners
L.P.
Series E Preferred Stock. On December 3, 1996, the ART Board designated
80,000 shares of Series E Cumulative Convertible Preferred Stock (the "Series E
Preferred Stock") with a par value of $2.00 per share and a preference on
liquidation of $100 per share plus payment of all accrued and unpaid dividends.
The Series E Preferred Stock is non-voting except as required by law. ART is not
required to maintain a sinking fund for such stock.
Each share of Series E Preferred Stock is convertible into that number
of ART Common Shares obtained by multiplying the number of shares being
converted by $100, then adding all accrued and unpaid dividends on such shares,
then dividing such sum by (in most instances) 80% of the ART Common Share's
then-recent average trading price for the 20 business days ending on the last
business day of the calendar week immediately preceding the date of conversion
on the principal stock exchange on which such ART Common Shares are then listed
or admitted to trading as determined by ART. The schedule pursuant to which
shares of Series E Preferred Stock may be so converted is as follows: up to
30,000 shares of the Series E Preferred Stock may be converted beginning as of
November 4, 1998 and thereafter; up to an additional 10,000 shares of the Series
E Preferred Stock may be converted beginning as of November 4, 1999; and up to
an additional 40,000 shares of the Series E Preferred Stock may be converted
beginning as of November 4, 2001.
The Series E Preferred Stock bears a cumulative dividend per share
equal to $10.00 per annum, payable quarterly in equal installments of $2.50 for
the period from date of issuance to November 4, 1999, and $11.00 per annum
($2.75 per quarter) thereafter. Dividends on the Series E Preferred Stock are in
preference to and with priority over dividends upon the ART Common Shares. The
Series E Preferred Stock ranks on a parity as to dividends and upon liquidation,
dissolution or winding up with all other shares of Special Stock.
ART may redeem any or all of the shares of Series E Preferred Stock
from time to time upon payment of $100.00 per share plus all accrued and unpaid
dividends. There is no restriction on the repurchase or redemption of the Series
E Preferred Stock by ART while there is any arrearage in payment of dividends
except that at the time of such repurchase or redemption ART must pay all
accrued and unpaid dividends on the shares being redeemed. As of October 30,
1998, there were no shares of Series E Preferred Stock issued or outstanding.
The Series E Preferred Stock is reserved for issuance upon the
conversion of Class A units held by the limited partners in the Valley Ranch
Limited Partnership.
Series G Preferred Stock. On September 18, 1997, the ART Board
designated 11,000 shares of Series G Cumulative Convertible Preferred Stock (the
"Series G Preferred Stock") with a par value of $2.00 per share and a preference
on liquidation of $100 per share plus all accrued and unpaid dividends. On May
27, 1998, ART filed articles of amendment to its articles of incorporation
increasing the number of authorized shares of Series G Preferred Stock from
11,000 to 12,000. The Series G Preferred Stock is non-voting except as required
by the Georgia Business Code. The Georgia Business Code grants the holders of
the outstanding shares of a class the authority to vote as a separate voting
group on a proposed amendment if that amendment would effect a detrimental
reclassification of the existing shares, create a new class with preferences
over the existing shares, or cancel or otherwise affect the rights to
distributions and dividends. ART is not required to maintain a sinking fund for
such stock.
Each share of Series G Preferred Stock is convertible, but only after
October 6, 2000, into that number of ART Common Shares obtained by multiplying
the number of shares of Series G Preferred Stock being converted by $100 and
then dividing such sum by (in most instances) 90% of the simple average of the
daily closing price of the ART Common Shares for the 20 trading days ending on
the last trading day of the calendar week immediately preceding the conversion
on the market where the ART Common Shares are then regularly traded. The right
of conversion shall terminate upon receipt of the notice of redemption from ART
and on the earlier of (i) the commencement of any liquidation, dissolution or
winding up of ART or (ii) the adoption of any resolution authorizing the
commencement thereof. ART may elect to redeem the shares of Series G Preferred
Stock sought to be converted instead of issuing ART Common Shares.
The Series G Preferred Stock bears a cumulative dividend per share
equal to $10.00 per annum, payable in arrears in quarterly equal installments of
$2.50 on each Quarterly Dividend Payment Date, and commencing accrual on
17
<PAGE> 24
the date of issuance to and including the date on which the redemption price of
such shares is paid. Dividends on the Series G Preferred Stock are in preference
to and with priority over dividends upon the ART Common Shares. The Series G
Preferred Stock ranks on a parity as to dividends and upon liquidation,
dissolution or winding up with all other shares of Special Stock.
ART may redeem any or all of the shares of the Series G Preferred Stock
at any time and from time to time, at its option, for cash upon no less than
twenty (20) days nor more than thirty (30) days prior notice thereof. The
redemption price of the shares of the Series G Preferred Stock shall be an
amount per share equal to the $100 liquidation value plus all accrued and unpaid
dividends on such shares through the redemption date. The right of ART to redeem
shares of Series G Preferred Stock remains effective notwithstanding prior
receipt by ART of notice by any holder of Series G Preferred Stock of such
holder's intent to convert shares of Series G Preferred Stock. As of October 30,
1998 there were 1,000 issued and outstanding shares of Series G Preferred Stock.
11,000 shares of Series G Preferred Stock have been reserved for
issuance upon the conversion of Class A units held by the limited partners in
Grapevine American, Ltd.
Series H Preferred Stock. On June 26, 1998, the ART Board designated
231,750 shares of Series H Cumulative Convertible Preferred Stock (the "Series H
Preferred Stock") with a par value of $2.00 per share and a preference on
liquidation of $10 per share plus all accrued and unpaid dividends. The Series H
Preferred Stock is non-voting except as required by the Georgia Business Code.
The Georgia Business Code grants the holders of the outstanding shares of a
class the authority to vote as a separate voting group on a proposed amendment
if that amendment would effect a detrimental reclassification of the existing
shares, create a new class with preferences over the existing shares, or cancel
or otherwise affect the rights to distributions and dividends. ART is not
required to maintain a sinking fund for such stock.
Each share of Series H Preferred Stock is convertible at the option of
the holders thereof in the following amounts at any time on or after the
respective dates (i) 25,000 shares on or after December 31, 2000, (ii) 25,000
shares on or after June 30, 2002, (iii) 25,000 shares on or after June 30, 2003,
(iv) 25,000 shares on or after December 31, 2005, and (v) all remaining
outstanding shares on or after December 31, 2006 into that number of ART Common
Shares obtained by multiplying the number of shares of Series H Preferred Stock
being converted by $10 and then dividing such sum by (in most instances) 90% of
the simple average of the daily closing price of the ART Common Shares for the
20 trading days ending on the last trading day of the calendar week immediately
preceding the conversion on the market where the ART Common Shares are then
regularly traded. The right of conversion shall terminate upon receipt of the
notice of redemption from ART and on the earlier of (i) the commencement of any
liquidation, dissolution or winding up of ART or (ii) the adoption of any
resolution authorizing the commencement thereof. ART may elect to redeem the
shares of Series H Preferred Stock sought to be converted instead of issuing
shares of ART Common Stock.
The Series H Preferred Stock bears a cumulative quarterly dividend per
share in an amount equal to (i) 7% per annum during the period from issuance to
June 30, 1999, (ii) 8% per annum during the period from July 1, 1999 to June 30,
2000, (iii) 9% per annum during the period from July 1, 2000 to June 30, 2001,
and (iv) 10% per annum from July 1, 2001 and thereafter, in each case calculated
on the basis of the adjusted liquidation value of the Series H Preferred Stock,
payable in arrears in cash on each Quarterly Dividend Payment Date, and
commencing accrual on the date of issuance to and including the date on which
the redemption price of such shares is paid. Dividends on the Series H Preferred
Stock are in preference to and with priority over dividends upon the ART Common
Shares. The Series H Preferred Stock ranks on a parity as to dividends and upon
liquidation, dissolution or winding up with all other shares of Special Stock.
ART may redeem all or a portion of the shares of the Series H Preferred
Stock issued and outstanding at any time after January 1, 1999 and from time to
time, at its option, for cash upon no less than twenty (20) days nor more than
thirty (30) days prior notice thereof. The redemption price of the shares of the
Series H Preferred Stock shall be an amount per share equal to the sum of (i)
(a) 105% of liquidation value during the period from issuance through December
31, 1999; (b) 104% of liquidation value during the period from January 1, 2000
through December 31, 2000; (c) 103% of liquidation value during the period from
January 1, 2001 through December 31, 2001; (d) 102% of liquidation value during
the period from January 1, 2002 through December 31, 2002; (e) 101% of
liquidation value during the period from January 1, 2003 through December 31,
2003; and (f) 100% of liquidation value from January 1, 2004 and thereafter, and
(ii) all accrued and unpaid dividends on such shares through the redemption
date. The right of ART to redeem shares of Series H Preferred Stock remains
effective notwithstanding prior receipt by ART of notice by any holder of Series
H Preferred Stock of such holder's intent to convert shares of Series H
Preferred Stock. As of October 30, 1998 there were no issued or outstanding
shares of Series H Preferred Stock.
The Series H Preferred Stock is reserved for issuance upon the
conversion of Class A units held by the limited partners in ART Palm, Ltd.
18
<PAGE> 25
The description of the foregoing provisions of each series of the
Special Stock does not purport to be complete and is subject to and qualified in
its entirety by reference to the definitive Articles of Amendment of the
Articles of Incorporation relating to such series of Special Stock.
LEGAL MATTERS
Certain legal matters with respect to the ART Preferred Shares and the
Common Stock into which it is convertible have been passed upon for ART by Holt
Ney Zatcoff & Wasserman, LLP, Atlanta, Georgia.
EXPERTS
The financial statements and schedules incorporated by reference in
this Prospectus have been audited by BDO Seidman, LLP, independent certified
public accountants, to the extent and for the period set forth in their reports
incorporated by reference herein and in the registration statement, and such
reports are incorporated by reference herein in reliance upon the authority of
said firm as experts in auditing and accounting.
19
<PAGE> 26
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS IN CONNECTION WITH THIS OFFERING OTHER THAN THOSE CONTAINED IN
THIS PROSPECTUS AND, IF GIVEN OR MADE, SUCH OTHER INFORMATION AND
REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY ART.
NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER
ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE
AFFAIRS OF ART SINCE THE DATE HEREOF. THIS PROSPECTUS DOES NOT CONSTITUTE AN
OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY ANY SECURITIES OTHER THAN THE
REGISTERED SECURITIES TO WHICH IT RELATES. THIS PROSPECTUS DOES NOT CONSTITUTE
AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY SUCH SECURITIES IN ANY
CIRCUMSTANCES IN WHICH SUCH OFFER OR SOLICITATION IS UNLAWFUL.
- ----------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Explanatory Note.............................................i
Available Information........................................i
Incorporation of Certain Information
by Reference............................................i
Summary of Terms.............................................1
Risk Factors.................................................4
Ratio of Earnings to Fixed Charges..........................10
Use of Proceeds.............................................10
Selling Security Holders....................................10
Plan of Distribution........................................10
Description of ART..........................................11
Executive Compensation of ART...............................12
The Business of ART.........................................13
Description of the Capital Stock of ART.....................14
Legal Matters...............................................19
Experts.....................................................19
</TABLE>
PREFERRED STOCK
COMMON STOCK
AMERICAN REALTY TRUST,
INC.
---------------
PROSPECTUS
---------------
DECEMBER 3, 1998
20
<PAGE> 27
PART II
INFORMATION NOT REQUIRED IN THE PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
Set forth below is an estimate of the amount of fees and expenses to be
incurred in connection with the issuance and distribution of the securities
offered hereby, other than underwriting discounts and commissions.
<TABLE>
<S> <C>
SEC Registration Fee..................................................$ 1,049.18
Blue Sky Fees and Expenses............................................ *
----------
Legal Fees and Expenses............................................... *
----------
Accounting Fees and Expenses.......................................... *
----------
Printing and Engraving Expenses....................................... *
----------
Total.......................................................$ *
==========
</TABLE>
* To be calculated at a later date.
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Article Thirteen of the Articles of Incorporation of ART provides that, to
the fullest extent permitted by Georgia law, as the same exists or may be
hereafter be amended, no director of ART shall be personally liable to ART or
the shareholders of ART for monetary damages for breach of the duty of care as a
director, provided that Article Thirteen does not limit or eliminate liability
arising or based upon (i) a breach of duty involving an appropriation of a
business opportunity of ART; (ii) an act or omission not in good faith or
involving intentional misconduct or a knowing violation of law; or (iii) a
transaction from which the director derived an improper personal benefit. In
addition, a director's liability will not be limited as to any payment of a
dividend or approval of a stock repurchase that is illegal under Section
14-2-640 of the Georgia Business Corporation Code.
Article Thirteen applies only to claims against a director arising out of
his or her role as a director and not, if he or she is also an officer, his or
her role as an officer or in any other capacity. In addition, Article Thirteen
does not reduce the exposure of directors to liability under Federal securities
laws.
The Bylaws of ART require ART to indemnify any person who, by reason of the
fact that he is or was a director of ART, is made or is threatened to be made a
party to an action, including an action brought by ART or its shareholders. The
Bylaws provide that ART will indemnify such person against reasonably incurred
expenses (including, but not limited to, attorneys' fees and disbursements,
court costs, and expert witness fees), and against any judgments, fines and
amounts paid in settlement, provided that ART shall not indemnify such person
under circumstances in which the Georgia Business Corporation Code, as in effect
from time to time, would not allow indemnification.
The Bylaws of ART give the ART Board the power to cause ART to provide to
officers, employees and agents of ART all or any part of the right to
indemnification afforded to directors of ART as set forth in the Bylaws, subject
to the conditions, limitations and obligations therein, upon a resolution to
that effect identifying such officer, employee or agent and specifying the
particular rights provided.
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of ART pursuant
to the foregoing provisions, ART has been informed that in the opinion of the
Commission such indemnification is against public policy as expressed in the
Securities Act and is, therefore, unenforceable.
II-1
<PAGE> 28
ITEM 16. EXHIBITS
<TABLE>
<S> <C>
1.1 -- Underwriting Agreement (2)
2.1 -- Plan of Acquisition, Reorganization, Arrangement, Liquidation
or Succession (2)
3.1 -- Amended and Restated Articles of Amendment of the Articles of
Incorporation of American Realty Trust, Inc. setting forth
the Certificate of Designations, Preferences and Relative
Participating or Optional or Other Special Rights, and
Qualifications, Limitations or Restrictions thereof of
Series F Cumulative Convertible Preferred Stock of American
Realty Trust, Inc. dated as of October 23, 1998 (5)
4.1 -- Instruments defining the rights of security holders (included
in Exhibit 3.1) (5)
5.1 -- Opinion of Holt Ney Zatcoff & Wasserman, LLP as to the
legality of the Preferred Stock being offered (1)
8.1 -- Opinion of Andrews & Kurth L.L.P. regarding tax matters (3)
12.1 -- Statement re: computation of ratios (2)
15.1 -- Letter re: unaudited interim financial information (2)
23.1 -- Consent of BDO Seidman, LLP (American Realty Trust, Inc.) (5)
23.2 -- Consent of BDO Seidman, LLP (Continental Mortgage and Equity
Trust) (5)
23.3 -- Consent of BDO Seidman, LLP (Income Opportunity Realty
Investors, Inc.) (5)
23.4 -- Consent of BDO Seidman, LLP (Transcontinental Realty
Investors, Inc.) (5)
23.5 -- Consent of BDO Seidman, LLP (National Realty, L.P.) (5)
23.6 -- Consent of Holt Ney Zatcoff & Wasserman, LLP (3)
24.1 -- Power of Attorney (6)
25.1 -- Statement of Eligibility of Trustee (2)
26.1 -- Invitation for Competitive Bids (2)
29.1 -- Financial Data Schedule (4)
</TABLE>
- ----------
(1) Incorporated by reference to Post-Effective Amendment No. 1 to the
Registrant's Registration Statement No. 333-21583 filed with the Commission
on September 8, 1997.
(2) Not applicable.
(3) Filed as an Exhibit to the Registrant's Registration Statement on Form S-4
(No. 333-43777), filed with the Commission on January 6, 1998 and
incorporated by reference therein.
(4) Filed as an Exhibit to the Registrant's Quarterly Report on Form 10-Q for
the fiscal quarter ended September 30, 1998, as filed with the Commission
on November 16, 1998 and incorporated by reference therein.
(5) Filed herewith.
(6) Power of Attorney set forth on Page II-4 hereof.
ITEM 17. UNDERTAKINGS
(a) The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made,
a post-effective amendment to this Registration Statement:
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after the
effective date of this Registration Statement (or the most recent
post-effective amendment thereof) which, individually or in the aggregate,
represent a fundamental change in the information set forth in this
Registration Statement. Notwithstanding the foregoing, any increase or
decrease in volume of securities offered (if the total dollar value of
securities would not exceed that which was registered) and any deviation
from the low or high end of the estimated maximum offering range may be
reflected in the form of prospectus filed with the Commission
II-2
<PAGE> 29
pursuant to Rule 424(b) if, in the aggregate, the charges in volume and
price represent no more than a 20% change in the maximum aggregate offering
price set forth in the "Calculation of Registration Fee" table in the
effective Registration Statement;
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in this Registration Statement or any
material change to such information in this Registration Statement;
Provided, however, that paragraphs (a)(1)(i) and (a)(1)(ii) above do not
apply if this Registration Statement is on Form S-3 or Form S-8, and the
information required to be included in a post-effective amendment by those
paragraphs is contained in periodic reports filed by the Registrant pursuant
to Section 13 or Section 15(d) of the Securities Exchange Act of 1934 that
are incorporated by reference in the Registration Statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed
to be a new Registration Statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to
be the initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
(b) The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act, each filing of the
Registrant's annual report pursuant to Section 13(a) or Section 15(d) of the
Exchange Act that is incorporated by reference in this Registration
Statement shall be deemed to be a new Registration Statement relating to the
securities offered therein, and the offering of such securities at that time
shall be deemed to be the initial bona fide offering thereof.
(c) Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to directors, officers and controlling
persons of the Registrant pursuant to the foregoing provisions, or
otherwise, the Registrant has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against public
policy as expressed in the Securities Act and is, therefore, unenforceable.
In the event that a claim for indemnification against such liabilities
(other than the payment by the Registrant of expenses incurred or paid by a
director, officer or controlling person of the Registrant in the successful
defense of any action, suit or proceeding) is asserted by such director,
officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the
matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question of whether such indemnification by it
is against public policy as expressed in the Securities Act and will be
governed by the final adjudication of such issue.
(d) For purposes of determining any liability under the 1933 Act, the
information omitted from the form of prospectus filed as part of this
Registration Statement in reliance upon Rule 430A and contained in the form
of prospectus filed by the Registrant pursuant to Rule 424(b)(1) or (4) or
497(h) under the 1933 Act shall be deemed to be part of this Registration
Statement as of the time it was declared effective.
(e) For the purpose of determining any liability under the 1933 Act, each
post-effective-amendment that contains a form of prospectus shall be deemed
to be a new Registration Statement relating to the securities offered
therein and the offering of such securities at that time shall be deemed to
be the initial bona fide offering thereof.
II-3
<PAGE> 30
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
Registrant certifies that it has reasonable grounds to believe that it meets
all of the requirements for filing on Form S-3 and has duly caused this
Amendment No. 1 to the Registration Statement to be signed on its behalf by
the undersigned, thereunto duly authorized in the City of Dallas, State of
Texas, on the 3rd day of December, 1998.
AMERICAN REALTY TRUST, INC.
By: /s/ KARL L. BLAHA
------------------------------------
Karl L. Blaha,
President (Principal Executive Officer)
POWER OF ATTORNEY
Each person whose signature appears below constitutes and appoints Karl L.
Blaha his true and lawful attorney-in-fact and agent, with full power of
substitution and resubstitution, for him in his name, place and stead, in any
and all capacities, to sign any and all amendments (including post-effective
amendments) to this Amendment No. 1 to the Registration Statement, and to file
the same, with all exhibits thereto and other documents in connection therewith,
with the Securities and Exchange Commission, granting unto said attorney-in-fact
and agent full power and authority to do and perform each and every act and
thing requisite and necessary to be done in and about the premises, as fully as
to all intents and purposes as he might or could do in person, hereby ratifying
and confirming all that said attorney-in-fact and agent, or his substitute or
substitutes, may lawfully do or cause to be done by virtue thereof.
Pursuant to the requirements of the Securities Act of 1933, this Amendment
No. 1 to the Registration Statement has been signed by the following persons in
the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ KARL L. BLAHA President (Principal Executive December 3, 1998
- ------------------------------------ Officer) and Director
Karl L. Blaha
/s/ ROY E. BODE Director December 3, 1998
- ------------------------------------
Roy E. Bode
/s/ AL GONZALEZ Director December 3, 1998
- ------------------------------------
Al Gonzalez
Director December 3, 1998
- ------------------------------------
Cliff Harris
/s/ THOMAS A. HOLLAND Executive Vice President and December 3, 1998
- ------------------------------------ Chief Financial Officer (Principal
Thomas A. Holland Accounting Officer)
</TABLE>
*By: /s/ KARL L. BLAHA
--------------------------------
Karl L. Blaha
Attorney-in-Fact
II-4
<PAGE> 31
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
- ------- -----------
<S> <C>
1.1 -- Underwriting Agreement (2)
2.1 -- Plan of Acquisition, Reorganization, Arrangement, Liquidation
or Succession (2)
3.1 -- Amended and Restated Articles of Amendment of the Articles of
Incorporation of American Realty Trust, Inc. setting forth
the Certificate of Designations, Preferences and Relative
Participating or Optional or Other Special Rights, and
Qualifications, Limitations or Restrictions thereof of
Series F Cumulative Convertible Preferred Stock of American
Realty Trust, Inc. dated as of October 23, 1998 (5)
4.1 -- Instruments defining the rights of security holders (included
in Exhibit 3.1) (5)
5.1 -- Opinion of Holt Ney Zatcoff & Wasserman, LLP as to the
legality of the Preferred Stock being offered (1)
8.1 -- Opinion of Andrews & Kurth L.L.P. regarding tax matters (3)
12.1 -- Statement re: computation of ratios (2)
15.1 -- Letter re: unaudited interim financial information (2)
23.1 -- Consent of BDO Seidman, LLP (American Realty Trust, Inc.) (5)
23.2 -- Consent of BDO Seidman, LLP (Continental Mortgage and Equity
Trust) (5)
23.3 -- Consent of BDO Seidman, LLP (Income Opportunity Realty
Investors, Inc.) (5)
23.4 -- Consent of BDO Seidman, LLP (Transcontinental Realty
Investors, Inc.) (5)
23.5 -- Consent of BDO Seidman, LLP (National Realty, L.P.) (5)
23.6 -- Consent of Holt Ney Zatcoff & Wasserman, LLP (3)
24.1 -- Power of Attorney (6)
25.1 -- Statement of Eligibility of Trustee (2)
26.1 -- Invitation for Competitive Bids (2)
29.1 -- Financial Data Schedule (4)
</TABLE>
- ----------
(1) Incorporated by reference to Post-Effective Amendment No. 1 to the
Registrant's Registration Statement No. 333-21583 filed with the Commission
on September 8, 1997.
(2) Not applicable.
(3) Filed as an Exhibit to the Registrant's Registration Statement on Form S-4
(No. 333-43777), filed with the Commission on January 6, 1998 and
incorporated by reference therein.
(4) Filed as an Exhibit to the Registrant's Quarterly Report on Form 10-Q for
the fiscal quarter ended September 30, 1998, as filed with the Commission
on November 16, 1998 and incorporated by reference therein.
(5) Filed herewith.
(6) Power of Attorney set forth on Page II-4 hereof.
<PAGE> 1
EXHIBIT 3.1
AMENDED AND RESTATED ARTICLES OF AMENDMENT
OF THE ARTICLES OF INCORPORATION OF
AMERICAN REALTY TRUST, INC.
setting forth the
CERTIFICATE OF DESIGNATIONS, PREFERENCES AND RELATIVE PARTICIPATING
OR OPTIONAL OR OTHER SPECIAL RIGHTS, AND QUALIFICATIONS, LIMITATIONS
OR RESTRICTIONS THEREOF
of
SERIES F CUMULATIVE CONVERTIBLE PREFERRED STOCK
of
AMERICAN REALTY TRUST, INC.
(Pursuant to Section 14-2-1006 of the
Georgia Business Corporation Code)
--------------------------
American Realty Trust, Inc., a corporation organized and existing under
the Georgia Business Corporation Code (hereinafter called the "Corporation"),
hereby certifies:
THAT, pursuant to the authority conferred upon the board of Directors
(the "Board of Directors") by the articles of incorporation, as amended
("Articles of Incorporation") of the Corporation, and pursuant to Section
14-2-1003 of the Georgia Business Corporation Code, the Board of Directors have
recommended by unanimous written consent dated August 3, 1998, and the holders
of a majority of the issued and outstanding shares of Series F Cumulative
Convertible Preferred Stock have duly adopted certain amended and restated
recitals and resolutions providing for the certificate of designations,
preferences and relative participating, optional or other special rights and
qualifications, limitations or other restrictions thereof, of a series of
special stock of the Corporation, specifically the Series F Cumulative
Convertible Preferred Stock, which amended and restated recitals and resolutions
are as follows:
WHEREAS, Article Five of the Articles of Incorporation authorizes the
Corporation to issue not more than 100,000,000 shares of common voting stock,
$0.01 par value per share (the "Common Stock"), and 20,000,000 shares of a
special class of stock, $2.00 par value per share (the "Special Stock"), which
Special Stock may be issued from time to time in one or more series and shall be
<PAGE> 2
designated as the Board of Directors may determine to have such voting powers,
preferences, limitations and relative rights with respect to the shares of each
series of the class of Special Stock of the Corporation as expressly provided in
a resolution or resolutions providing for the issuance of such series adopted by
the Board of Directors which is vested with the authority in respect thereof;
WHEREAS, 16,681 shares of such Special Stock have been previously
designated as the Series C 10% Cumulative Preferred Stock prior to the date
hereof, all of which have been issued and are outstanding;
WHEREAS, 91,000 shares of such Special Stock have been previously
designated as the Series D Cumulative Preferred Stock prior to the date hereof,
none of which has been issued or is outstanding;
WHEREAS, 80,000 shares of such Special Stock have been previously
designated as the Series E Cumulative Convertible Preferred Stock prior to the
date hereof, none of which has been issued or is outstanding;
WHEREAS, 7,500,000 shares of such Special Stock have been previously
designated as the Series F Cumulative Convertible Preferred Stock prior to the
date hereof, 3,350,000 shares of which have been issued and are currently
outstanding;
WHEREAS, 12,000 shares of such Special Stock have been previously
designated as the Series G Cumulative Convertible Preferred Stock prior to the
date hereof, 1,000 shares of which have been issued and are outstanding;
WHEREAS, 231,750 shares of such Special Stock have been previously
designated as the Series H Cumulative Convertible Preferred Stock prior to the
date hereof, none of which has been issued or is outstanding; and
WHEREAS, the Board of Directors now desires to amend and restate the
Articles of Amendment of the Articles of Incorporation of the Corporation
setting forth the certificate of designations, preferences and relative
participating or optional or other special rights, and qualifications,
limitations or restrictions of the Corporation's Series F Cumulative Convertible
Preferred Stock to (i) increase the number of authorized shares of such series
to 15,000,000, and (ii) modify the voting rights with respect to such series in
order to satisfy the listing criteria of the New York Stock Exchange, all as set
forth herein.
NOW, THEREFORE, BE IT RESOLVED, that pursuant to the authority granted
to the Board of Directors by Article Five of the Articles of Incorporation, and
with the unanimous consent and approval of the holders of a majority of the
issued and outstanding shares of Series F Cumulative Convertible Preferred
Stock, the Board of Directors hereby amends and restates the Articles of
Amendment to the Articles of Incorporation setting forth the certificate of
designations, preferences
-2-
<PAGE> 3
and relative participating or optional or other special rights, and
qualifications, limitations or restrictions of the Corporation's Series F
Cumulative Convertible Preferred Stock as follows:
1. Designation and Amount. The shares of such series shall be designated
as "Series F Cumulative Convertible Preferred Stock" (the "Series F
Preferred Stock") and each share of the Series F Preferred Stock shall
have a par value of $2.00 per share and a preference on liquidation as
specified in Section 6 below. The number of shares constituting the
Series F Preferred Stock shall be 15,000,000. Such number of shares may
be increased or decreased by the Board of Directors by filing articles
of amendment as provided in the Georgia Business Corporation Code;
provided, that no decrease shall reduce the number of shares of Series
F Preferred Stock to a number less than the number of shares then
outstanding plus the number of shares reserved for issuance upon the
exercise of outstanding options, rights or warrants; provided further,
that no increase in the authorized amount of shares constituting Series
F Preferred Stock shall be made without the prior written consent of
the holders of a majority of shares of Series F Preferred Stock then
outstanding voting separately as a class.
2. Dividends and Distributions.
(A) The holders of shares of Series F Preferred Stock shall be
entitled to receive, when, as, and if declared by the Board of
Directors and to the extent permitted under the Georgia
Business Corporation Code, out of funds legally available for
the purpose and in preference to and with priority over
dividends upon all Junior Securities, quarterly cumulative
dividends payable in arrears in cash on the fifteenth day
following the end of each calendar quarter (each such date
being referred to herein as a "Quarterly Dividend Payment
Date"), commencing on October 15, 1998, in an amount per share
(rounded to the next highest cent) equal to 10% per annum of
the Adjusted Liquidation Value, as determined immediately
prior to the beginning of such calendar quarter assuming each
year consists of 360 days and each quarter consists of 90
days. The term "Adjusted Liquidation Value" shall mean
Liquidation Value (as defined in Section 6) plus all accrued
and unpaid dividends through the applicable date. The
foregoing is intended to provide a 10% cumulative return,
compounded on a quarterly basis, on the Liquidation Value from
August 16, 1998.
(B) Dividends shall commence accruing cumulatively on outstanding
shares of the Series F Preferred Stock from August 16, 1998 to
and including the date on which the Redemption Price (as
defined in Section 9(A), below) of such shares is paid,
whether or not such dividends have been declared and whether
or not there are profits, surplus or other funds of the
Corporation legally available for the payment of such
dividends. Dividends for the first Quarterly Dividend Payment
Date shall accrue and shall be payable for a period of 45
days. Dividends payable on each Quarterly Dividend Payment
Date shall be dividends accrued and unpaid through the last
Business Day (as defined in Section 3(A) below) of the
immediately preceding calendar month. The Board of Directors
may fix a record date for the determination
-3-
<PAGE> 4
of holders of shares of Series F Preferred Stock entitled to
receive payment of a dividend or distribution declared thereon
other than a quarterly dividend paid on the Quarterly Dividend
Payment Date immediately after such dividend accrued; which
record date shall be not more than 50 days prior to the date
fixed for the payment thereof.
(C) So long as any shares of the Series F Preferred Stock are
outstanding, the Corporation will not make, directly or
indirectly, any distribution (as such term is defined in the
Georgia Business Corporation Code) in respect of Junior
Securities unless on the date specified for measuring
distributions in Section 14-2-640(e) of the Georgia Business
Corporation Code (a) all accrued dividends on the Series F
Preferred Stock for all past quarterly dividend periods have
been paid in full and the full amount of accrued dividends for
the then current quarterly dividend period has been paid or
declared and a sum sufficient for the payment thereof set
apart and (b) after giving effect to such distribution (i) the
Corporation would not be rendered unable to pay its debts as
they become due in the usual course of business and (ii) the
Corporation's total assets would not be less than the sum of
its total liabilities plus the amount that would be needed, if
the Corporation were to be dissolved at the time of the
distribution, to satisfy the preferential rights upon
dissolution of the holders of the Series F Preferred Stock as
provided in these Articles of Amendment. Dividends shall not
be paid (in full or in part) or declared and set apart for
payment (in full or in part) on any series of Special Stock
(including the Series F Preferred Stock) for any dividend
period unless all dividends, in the case dividends are being
paid in full on the Series F Preferred Stock, or a ratable
portion of all dividends (i.e., so that the amount paid on
each share of each series of Special Stock as a percentage of
total accrued and unpaid dividends for all periods with
respect to each such share is equal), in the case dividends
are not being paid in full on the Series F Preferred Stock,
have been or are, contemporaneously, paid and declared and set
apart for payment on all outstanding series of Special Stock
(including the Series F Preferred Stock) entitled thereto for
each dividend period terminating on the same or earlier date.
If at any time the Corporation pays less than the total amount
of dividends then accrued with respect to the Series F
Preferred Stock, such payment will be distributed ratably
among the then holders of Series F Preferred Stock so that an
equal amount is paid with respect to each outstanding share.
3. Conversion Rights.
(A) The Series F Preferred Stock may be converted at any time and
from time to time in whole or in part after the earliest to
occur of (i) August 15, 2003, (ii) the first Business Day, if
any, occurring after a Quarterly Dividend Payment Date on
which dividends equal to or in excess of 5% of the Liquidation
Value (i.e., $0.50 per share) are accrued and unpaid, or (iii)
the Corporation becomes obligated to mail a statement pursuant
to subsection (G)(iv) below, at the option of the holders
thereof,
-4-
<PAGE> 5
in accordance with subsection (D) below at the Conversion
Price (as defined below in subsection (D)) into fully paid and
nonassessable Common Stock of the Corporation by dividing (i)
the Adjusted Liquidation Value for such share of Series F
Preferred Stock as of the date of conversion by (ii) the
Conversion Price; provided, however, that as to any shares of
Series F Preferred Stock which shall have been called for
redemption, the right of conversion shall terminate at the
close of business on the second full Business Day (unless
otherwise provided, "Business Day" herein shall mean any day
other than a Saturday, a Sunday or a day on which banking
institutions in Dallas, Texas are authorized or obligated by
law or executive order to remain closed) prior to the date
fixed for redemption. Notwithstanding anything to the contrary
herein provided, the Corporation may elect to redeem the
shares of Series F Preferred Stock sought to be converted
hereunder instead of issuing shares of Common Stock in
replacement thereof in accordance with the provisions of
Section 3(D), below.
(B) For purposes of this Section 3, the term "Conversion Price"
shall be and mean the amount obtained (rounded upward to the
next highest cent) by multiplying (i) 0.9 by (ii) the simple
average of the daily closing price of the Common Stock for the
twenty Business Days ending on the last Business Day of the
calender week immediately preceding the date of conversion on
the New York Stock Exchange or, if the shares of Common Stock
are not then being traded on the New York Stock Exchange, then
on the principal stock exchange (including without limitation
NASDAQ NMS or NASDAQ Small Cap) on which such Common Stock is
then listed or admitted to trading as determined by the
Corporation (the "Principal Stock Exchange") or, if the Common
Stock is not then listed or admitted to trading on a Principal
Stock Exchange, the average of the last reported closing bid
and asked prices on such days in the over-the-counter market
or, if no such prices are available, the fair market value per
share of the Common Stock, as determined by the Board of
Directors of the Corporation in its sole discretion. The
Conversion Price shall not be subject to any adjustment as a
result of the issuance of any additional shares of Common
Stock by the Corporation for any purpose, except for stock
splits (whether accomplished by stock dividend or otherwise).
For purposes of calculating the Conversion Price, the term
"Business Day" shall mean a day on which the exchange looked
to for purposes of determining the Conversion Price is open
for business or, if no such exchange, the term "Business Day"
shall have the meaning given such term in Section 3(A), above.
(C) Upon any conversion, fractional shares of Common Stock shall
not be issued but any fractions shall be adjusted by the
delivery of one additional share of Common Stock in lieu of
any cash. Any accrued but unpaid dividends shall be
convertible into shares of Common Stock as provided for in
this Section. The Corporation shall pay all issue taxes, if
any, incurred in respect to the issuance of Common Stock on
conversion, provided, however, that the Corporation shall not
be required to pay any transfer or other taxes incurred by
reason of the issuance of such Common Stock in
-5-
<PAGE> 6
names other than those in which the Series F Preferred Stock
surrendered for conversion may stand.
(D) Any conversion of Series F Preferred Stock into Common Stock
shall be made by the surrender to the Corporation, at the
office of the Corporation set forth in Section 12 hereof or at
the office of the transfer agent for such shares, of the
certificate or certificates representing the Series F
Preferred Stock to be converted, duly endorsed or assigned
(unless such endorsement or assignment be waived by the
Corporation), together with a written request for conversion.
The Corporation shall either (i) issue as of the date of
receipt by the Corporation of such surrender shares of Common
Stock calculated as provided above and evidenced by a stock
certificate delivered to the holder as soon as practicable
after the date of such surrender or (ii) within two Business
Days after the date of such surrender advise the holder of the
Series F Preferred Stock that the Corporation is exercising
its option to redeem the Series F Preferred Stock pursuant to
Section 3(A), above, in which case the Corporation shall have
thirty (30) days from the date of such surrender to pay to the
holder cash in an amount equal to the Conversion Price for
each share of Series F Preferred Stock so redeemed. The date
of surrender of any Series F Preferred Stock shall be the date
of receipt by the Corporation or its agent of such surrendered
shares of Series F Preferred Stock.
(E) A number of authorized shares of Common Stock sufficient to
provide for the conversion of the Series F Preferred Stock
outstanding upon the basis hereinbefore provided shall at all
times be reserved for such conversion. If the Corporation
shall propose to issue any securities or to make any change in
its capital structure which would change the number of shares
of Common Stock into which each share of Series F Preferred
Stock shall be convertible as herein provided, the Corporation
shall at the same time also make proper provision so that
thereafter there shall be a sufficient number of shares of
Common Stock authorized and reserved for conversion of the
outstanding Series F Preferred Stock on the new basis.
(F) The term "Common Stock" shall mean stock of the class
designated as Common Stock of the Corporation on the date the
Series F Preferred Stock is created or stock of any class or
classes resulting from any reclassification or
reclassifications thereof, the right of which to share in
distributions of both earnings and assets is without
limitation in the Articles of Incorporation of the Corporation
as to any fixed amount or percentage and which are not subject
to redemption; provided, that if at any time there shall be
more than one such resulting class, the shares of each such
class then issuable on conversion of the Series F Preferred
Stock shall be substantially in the proportion which the total
number of shares of stock of each such class resulting from
all such reclassifications bears to the total number of shares
of stock of all such classes resulting from all such
reclassifications.
-6-
<PAGE> 7
(G) In case the Corporation shall propose at any time before all
shares of the Series F Preferred Stock have been redeemed by
or converted into Common Stock of the Corporation:
(i) to pay any dividend on the Common Stock
outstanding payable in Common Stock or to make any other
distribution, other than cash dividends to the holders of the
Common Stock outstanding; or
(ii) to offer for subscription to the holders of the
Common Stock outstanding any additional shares of any class or
any other rights or option; or
(iii) to effect any re-classification or
recapitalization of the Common Stock outstanding involving a
change in the Common Stock, other than a subdivision or
combination of the Common Stock outstanding; or
(iv) to merge or consolidate with or into any other
corporation (unless the Corporation is the surviving entity
and holders of Common Stock continue to hold such Common Stock
without modification and without receipt of any additional
consideration), or to sell, lease, or convey all or
substantially all its property or business, or to liquidate,
dissolve or wind up;
then, in each such case, the Corporation shall mail to the holders of
record of each of the shares of Series F Preferred Stock at their last
known addresses as shown by the Corporation's records a statement,
signed by an officer of the Corporation, with respect to the proposed
action, such statement to be so mailed at least thirty (30) days prior
to the date of the taking of such action or the record date for holders
of the Common Stock for the purposes thereof, whichever is earlier. If
such statement relates to any proposed action referred to in clauses
(iii) or (iv) of this subsection (G), it shall set forth such facts
with respect thereto as shall reasonably be necessary to inform the
holders of the Series F Preferred Stock as to the effect of such action
upon the conversion rights of such holders.
4. Voting Rights and Powers. The holders of shares of Series F Preferred
Stock shall have only the following voting rights:
(A) Except as may otherwise be specifically required by law under
Section 14-2-1004 of the Georgia Business Corporation Code or
otherwise provided herein, the holders of the shares of Series
F Preferred Stock shall not have the right to vote such stock,
directly or indirectly, at any meeting of the shareholders of
the Corporation, and such shares of stock shall not be counted
in determining the total number of outstanding shares to
constitute a quorum at any meeting of shareholders;
(B) In the event that, under the circumstances, the holders of the
Series F Preferred Stock are required by law to vote upon any
matter, the approval of such series shall be
-7-
<PAGE> 8
deemed to have been obtained only upon the affirmative vote of
the holders of a majority of the shares of the Series F
Preferred Stock then outstanding;
(C) Except as set forth herein, or as otherwise provided by the
Articles of Incorporation or by law, holders of the Series F
Preferred Stock shall have no voting rights and their consent
shall not be required for the taking of any corporate action;
(D) Notwithstanding anything herein to the contrary, if and
whenever at any time or times all or any portion of the
dividends on Series F Preferred Stock for any six quarterly
dividends, whether or not consecutive, shall be in arrears and
unpaid, then and in any such event, the number of Directors
constituting the Board of Directors shall be increased by two,
and the holders of Series F Preferred Stock, voting separately
as a class, shall be entitled at the next annual meeting of
shareholders, or at a special meeting of holders of Series F
Preferred Stock called as hereinafter provided, to elect two
Directors to fill such newly created Directorships. Each
holder shall be entitled to one vote in such election for each
share of Series F Preferred Stock held. At such time as all
arrearages in dividends on the Series F Preferred Stock shall
have been paid in full and dividends thereon for the current
quarterly period shall have been paid or declared and a sum
sufficient for the payment thereof set aside, then (i) the
voting rights of holders of Series F Preferred Stock described
in this subsection (D) shall cease (subject always to
revesting of such voting rights in the event of each and every
similar future arrearages in quarterly dividends), (ii) the
term of the Directors then in office as a result of the voting
rights described in this subsection (D) shall terminate and
(iii) the number of Directors shall be reduced by the number
of Directors then in office elected pursuant to this
subsection (D). A vacancy in the class of Directors elected
pursuant to this subsection (D) shall be filled by a Director
chosen by the remaining Directors of the class, unless such
vacancy is filled pursuant to the final sentence of subsection
(G);
(E) At any time when the voting right described in subsection (D)
shall have vested and shall remain in the holders of Series F
Preferred Stock, such voting right may be exercised initially
either at a special meeting of holders of Series F Preferred
Stock or at any annual or special shareholders' meeting called
for the purpose of electing Directors, but thereafter it shall
be exercised only at annual shareholders' meetings. If such
voting right shall not already have been initially exercised,
the Secretary of the Corporation may, and upon the written
request of the holders of record of at least 10% of the shares
of Series F Preferred Stock then outstanding shall, call a
special meeting of the holders of Series F Preferred Stock for
the purpose of electing two Directors pursuant to subsection
(D), and notice thereof shall be given to the holders of
Series F Preferred Stock in the same manner as that required
to be given to holders of the Corporation's Common Stock for
the annual meeting of shareholders. Such meeting shall be held
at the earliest practicable date upon the notice required for
-8-
<PAGE> 9
special meetings of shareholders of the Corporation, or, if
none, at a time and place designated by the Secretary of the
Corporation.
(F) At any meeting held for the purpose of electing Directors at
which the holders of Series F Preferred Stock shall have the
right to elect Directors as provided in subsection (D) above,
the presence in person or by proxy of the holders of at least
thirty-five percent (35%) of the then outstanding shares of
Series F Preferred Stock shall be required and be sufficient
to constitute a quorum of Series F Preferred Stock for the
election of Directors by Series F Preferred Stock, and the
vote of the holders of a majority of such shares so present in
person or by proxy at any such meeting at which there shall be
such a quorum shall be required and be sufficient to elect the
members of the Board of Directors which the holders of Series
F Preferred Stock are entitled to elect as hereinabove
provided. At any such meeting or adjournment thereof, (i) the
absence of a quorum of the holders of Series F Preferred Stock
shall not prevent the election of Directors other than the
Directors to be elected by the holders of Series F Preferred
Stock and (ii) in the case of holders of Series F Preferred
Stock entitled to vote for the election of Directors, a
majority of the holders present in person or by proxy of such
class, if constituting less than a quorum as hereinabove
provided, shall have the power to adjourn the meeting for the
election of the Directors that the holders of such class are
entitled to elect, from time to time until a quorum shall be
present, and notice of such adjourned meeting need not be
given unless otherwise required by law, provided that nothing
herein shall affect the conduct of the meeting with respect to
shareholders of any other class.
(G) Any Director who shall have been elected or appointed pursuant
to Section 4(D) shall hold office for a term expiring (subject
to the earlier termination of the default in quarterly
dividends) at the next annual meeting of shareholders, and
during such term may be removed at any time, either with or
without cause, only by the affirmative vote of the holders of
record of a majority of the shares of Series F Preferred Stock
then outstanding at a special meeting of such shareholders
called for such purpose. Any vacancy created by such removal
may also be filled at such meeting.
(H) So long as any shares of Series F Preferred Stock remain
outstanding, the Corporation shall not, without the vote or
written consent by the holders of record of two-thirds of the
outstanding shares of Series F Preferred Stock, amend its
articles of incorporation or bylaws if such amendment would
materially alter or change the existing terms of the Series F
Preferred Stock.
5. Reacquired Shares. Any shares of Series F Preferred Stock purchased or
otherwise acquired by the Corporation in any manner whatsoever or
surrendered for conversion hereunder shall no longer be deemed to be
outstanding and all rights with respect to such shares of stock,
including the right, if any, to receive notices and to vote, shall
forthwith cease except, in the case of stock surrendered for conversion
hereunder, rights of the holders thereof to receive
-9-
<PAGE> 10
Common Stock in exchange therefor. All shares of Series F Preferred
Stock obtained by the Corporation shall be retired and canceled
promptly after the acquisition thereof. All such shares shall upon
their cancellation become authorized but unissued shares of Special
Stock and may be reissued as part of a new series of Special Stock
subject to the conditions and restrictions on issuance set forth
herein, in the Articles of Incorporation, or in any other Certificates
of Designations creating a series of Special Stock or any similar stock
or as otherwise required by law.
6. Liquidation, Dissolution or Winding Up. The Liquidation Value of the
Series F Preferred Stock shall be $10.00 per share. Upon any
liquidation, dissolution or winding up of the Corporation, and after
paying and providing for the payment of all creditors of the
Corporation, the holders of shares of the Series F Preferred Stock then
outstanding shall be entitled, before any distribution or payment is
made upon any Junior Securities (defined to be and mean the Common
Stock and any other equity security of any kind which the Corporation
at any time has issued, issues or is authorized to issue if the Series
F Preferred Stock has priority over such securities as to dividends or
upon liquidation, dissolution or winding up), to receive a liquidation
preference in an amount in cash equal to the Adjusted Liquidation Value
as of the date of such payment, whether such liquidation is voluntary
or involuntary, and the holders of the Series F Preferred Stock shall
not be entitled to any other or further distributions of the assets.
If, upon any liquidation, dissolution or winding up of the affairs of
the Corporation, the net assets available for distribution shall be
insufficient to permit payment to the holders of all outstanding shares
of all series of Special Stock of the amount to which they respectively
shall be entitled, then the assets of the Corporation to be distributed
to such holders will be distributed ratably among them based upon the
amounts payable on the shares of each such series of Special Stock in
the event of voluntary or involuntary liquidation, dissolution or
winding up, as the case may be, in proportion to the full preferential
amounts, together with any and all arrearages to which they are
respectively entitled. Upon any such liquidation, dissolution or
winding up of the Corporation, after the holders of Special Stock have
been paid in full the amounts to which they are entitled, the remaining
assets of the Corporation may be distributed to holders of Junior
Securities, including Common Stock, of the Corporation. The Corporation
will mail written notice of such liquidation, dissolution or winding
up, not less than twenty (20) nor more than fifty (50) days prior to
the payment date stated therein to each record holder of Series F
Preferred Stock. Neither the consolidation nor merger of the
Corporation into or with any other corporation or corporations, nor the
sale or transfer by the Corporation of less than all or substantially
all of its assets, nor a reduction in the capital stock of the
Corporation, nor the purchase or redemption by the Corporation of any
shares of its Special Stock or Common Stock or any other class of its
stock will be deemed to be a liquidation, dissolution or winding up of
the Corporation within the meaning of this Section 6.
7. Ranking. Except as provided in the following sentence, the Series F
Preferred Stock shall rank on a parity as to dividends and upon
liquidation, dissolution or winding up with all other shares of Special
Stock issued by the Corporation. The Corporation shall not issue any
-10-
<PAGE> 11
shares of Special Stock of any series which are superior to the Series
F Preferred Stock as to dividends or rights upon liquidation,
dissolution or winding up of the Corporation as long as any shares of
the Series F Preferred Stock are issued and outstanding, without the
prior written consent of the holders of at least 662/3% of such shares
of Series F Preferred Stock then outstanding voting separately as a
class.
8. Redemption at the Option of the Holder. The shares of Series F
Preferred Stock shall not be redeemable at the option of a holder of
Series F Preferred Stock.
9. Redemption at the Option of the Corporation.
(A) In addition to the redemption right of the Corporation set
forth in Section 3(A), above, the Corporation shall have the
right to redeem all or a portion of the Series F Preferred
Stock issued and outstanding at any time and from time to
time, at its option, for cash. The redemption price of the
Series F Preferred Stock pursuant to this Section 9 shall be
an amount per share (the "Redemption Price") equal to (i) 105%
of the Adjusted Liquidation Value as of the Redemption Date
(as defined in subsection (B) below) during the period from
August 15, 1997 through August 15, 1998; (ii) 104% of Adjusted
Liquidation Value as of the Redemption Date during the period
from August 16, 1998 through August 15, 1999; and (iii) 103%
of the Adjusted Liquidation Value as of the Redemption Date at
any time on or after August 16, 1999.
(B) The Corporation may redeem all or a portion of any holder's
shares of Series F Preferred Stock by giving such holder not
less than twenty (20) days nor more than thirty (30) days
notice thereof prior to the date on which the Corporation
desires such shares to be redeemed, which date shall be a
Business Day (the "Redemption Date"). Such notice shall be
written and shall be hand delivered or mailed, postage
prepaid, to the holder (the "Redemption Notice"). The
Redemption Notice, once given, shall be irrevocable. If
mailed, such notice shall be deemed to be delivered when
deposited in the United States Mail, postage prepaid,
addressed to the holder of shares of Series F Preferred Stock
at his address as it appears on the stock transfer records of
the Corporation. The Redemption Notice shall state (i) the
total number of shares of Series F Preferred Stock held by
such holder; (ii) the total number of shares of the holder's
Series F Preferred Stock that the Corporation intends to
redeem; (iii) the Redemption Date and the Redemption Price;
and (iv) the place at which the holder(s) may obtain payment
of the applicable Redemption Price upon surrender of the share
certificate(s).
(C) If fewer than all shares of the Series F Preferred Stock at
any time outstanding shall be called for redemption, such
shares shall be redeemed pro rata, by lot drawn or other
manner deemed fair in the sole discretion of the Board of
Directors to redeem one or more such shares without redeeming
all such shares of Series F Preferred
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<PAGE> 12
Stock. If a Redemption Notice shall have been so mailed, at
least two Business Days prior to the Redemption Date the
Corporation shall provide for payment of a sum sufficient to
redeem the applicable number of shares of Series F Preferred
Stock subject to redemption either by (i) setting aside the
sum required to be paid as the Redemption Price by the
Corporation, separate and apart from its other funds, in trust
for the account of the holder(s) of the shares of Series F
Preferred Stock to be redeemed or (ii) depositing such sum in
a bank or trust company (either located in the state where the
principal executive office of the Corporation is maintained,
such bank or trust company having a combined surplus of at
least $20,000,000 according to its latest statement of
condition, or such other bank or trust company as may be
permitted by the Articles of Incorporation, or by law) as a
trust fund, with irrevocable instructions and authority to the
bank or trust company to give or complete the notice of
redemption and to pay, on or after the Redemption Date, the
applicable Redemption Price on surrender of certificates
evidencing the share(s) of Series F Preferred Stock so called
for redemption and, in either event, from and after the
Redemption Date (a) the share(s) of Series F Preferred Stock
shall be deemed to be redeemed, (b) such setting aside or
deposit shall be deemed to constitute full payment for such
shares(s), (c) such share(s) so redeemed shall no longer be
deemed to be outstanding, (d) the holder(s) thereof shall
cease to be a shareholder of the Corporation with respect to
such share(s), and (e) such holder(s) shall have no rights
with respect thereto except the right to receive the
Redemption Price for the applicable shares. Any interest on
the funds so deposited shall be paid to the Corporation. Any
and all such redemption deposits shall be irrevocable except
to the following extent: any funds so deposited which shall
not be required for the redemption of any shares of Series F
Preferred Stock because of any prior sale or purchase by the
Corporation other than through the redemption process,
subsequent to the date of deposit but prior to the Redemption
Date, shall be repaid to the Corporation forthwith and any
balance of the funds so deposited and unclaimed by the
holder(s) of any shares of Series F Preferred Stock entitled
thereto at the expiration of one calendar year from the
Redemption Date shall be repaid to the Corporation upon its
request or demand therefor, and after any such repayment of
the holder(s) of the share(s) so called for redemption shall
look only to the Corporation for payment of the Redemption
Price thereof. All shares of Series F Preferred Stock redeemed
shall be canceled and retired and no shares shall be issued in
place thereof, but such shares shall be restored to the status
of authorized but unissued shares of Special Stock.
(D) Holders whose shares of Series F Preferred Stock have been
redeemed hereunder shall surrender the certificate or
certificates representing such shares, duly endorsed or
assigned (unless such endorsement or assignment be waived by
the Corporation), to the Corporation by mail, courier or
personal delivery at the Corporation's principal executive
office or other location so designated in the Redemption
Notice, and upon the Redemption Date the Redemption Price
shall be payable to the order of the
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<PAGE> 13
person whose name appears on such certificate or certificates
as the owner thereof, and each surrendered certificate shall
be canceled and retired. In the event fewer than all of the
shares represented by such certificates are redeemed, a new
certificate shall be issued representing the unredeemed
shares.
10. Sinking Fund. The Corporation shall not be required to maintain any
so-called "sinking fund" for the retirement on any basis of the Series
F Preferred Stock.
11. Fractional Shares. The Series F Preferred Stock may be issued in
fractions of a share which shall entitle the holder, in proportion to
such holder's fractional shares, to exercise voting rights, receive
dividends, participate in distributions and to have the benefit of all
other rights of holders of shares of Series F Preferred Stock.
12. Notice. Any notice or request made to the Corporation in connection
with the Series F Preferred Stock shall be given, and shall
conclusively be deemed to have been given and received three Business
Days following deposit thereof in writing, in the U.S. mails, certified
mail, return receipt requested, duly stamped and addressed to the
Corporation, to the attention of its General Counsel, at its principal
executive offices (which shall be deemed to be the address most
recently provided to the Securities and Exchange Commission ("SEC") as
its principal executive offices for so long as the Corporation is
required to file reports with the SEC).
IN WITNESS WHEREOF, these Amended and Restated Articles of Amendment
are executed on behalf of the Corporation by its President and attested by its
Secretary as of the 23rd day of October, 1998.
/s/ Karl L. Blaha
-----------------------------------------
Karl L. Blaha
President
Attest:
/s/ Robert A. Waldman
- -----------------------------------
Robert A. Waldman
Secretary
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<PAGE> 1
EXHIBIT 23.1
Consent of Independent Certified Public Accountants
American Realty Trust, Inc.
Dallas, Texas
We hereby consent to incorporation by reference in the Prospectus constituting
a part of this Registration Statement of our report dated March 25, 1998,
relating to the consolidated financial statements and schedules of American
Realty Trust, Inc. appearing in the Company's Annual Report on Form 10-K for
the year ended December 31, 1997.
We also consent to the reference to us under the caption "Experts" in the
Prospectus.
/s/ BDO SEIDMAN, LLP
BDO Seidman, LLP
Dallas, Texas
December 2, 1998
<PAGE> 1
EXHIBIT 23.2
Consent of Independent Certified Public Accountants
We hereby consent to the incorporation by reference in the Prospectus
constituting a part of this Registration Statement of our report dated March 6,
1998, relating to the consolidated financial statements and schedules of
Continental Mortgage and Equity Trust appearing in the Trust's Annual Report on
Form 10-K for the year ended December 31, 1997.
We also consent to the reference to us under the caption "Experts" in the
Prospectus.
/s/ BDO SEIDMAN, LLP
BDO Seidman, LLP
Dallas, Texas
December 2, 1998
<PAGE> 1
EXHIBIT 23.3
Consent of Independent Certified Public Accountants
We hereby consent to the incorporation by reference in the Prospectus
constituting a part of this Registration Statement of our report dated March 6,
1998, relating to the consolidated financial statements and schedules of Income
Opportunity Realty Investors, Inc. appearing in the Company's Annual Report on
Form 10-K for the year ended December 31, 1997.
We also consent to the reference to us under the caption "Experts" in the
Prospectus.
/s/ BDO SEIDMAN, LLP
BDO Seidman, LLP
Dallas, Texas
December 2, 1998
<PAGE> 1
EXHIBIT 23.4
Consent of Independent Certified Public Accountants
We hereby consent to the incorporation by reference in the Prospectus
constituting a part of this Registration Statement of our report dated March
12, 1998, relating to the consolidated financial statements and schedules of
Transcontinental Realty Investors, Inc. appearing in the Company's Annual
Report on Form 10-K for the year ended December 31, 1997.
We also consent to the reference to us under the caption "Experts" in the
Prospectus.
/s/ BDO SEIDMAN, LLP
BDO Seidman, LLP
Dallas, Texas
December 2, 1998
<PAGE> 1
EXHIBIT 23.5
Consent of Independent Certified Public Accountants
We hereby consent to the incorporation by reference in the Prospectus
constituting a part of this Registration Statement of our report dated March 23,
1998, relating to the consolidated financial statements and schedules of
National Realty, L.P. appearing in the Partnership's Annual Report on Form 10-K
for the year ended December 31, 1997.
We also consent to the reference to us under the caption "Experts" in the
Prospectus.
/s/ BDO SEIDMAN, LLP
BDO Seidman, LLP
Dallas, Texas
December 2, 1998
