As filed with the Securities and Exchange Commission on January 18, 2000
File No. 333 -__________
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM S-3
REGISTRATION STATEMENT
UNDER THE
SECURITIES ACT OF 1933
CORNERSTONE REALTY INCOME TRUST, INC.
(Exact name of registrant as specified in its charter)
Virginia 54-1589139
(State of Incorporation) (I.R.S. Employer)
Identification No.)
306 East Main Street
Richmond, Virginia 23219
(804) 643-1761
(Address, including zip code, and telephone number, including area
code, of registrant's principal executive offices)
With Copies to:
Glade M. Knight Leslie A. Grandis
Cornerstone Realty Income Trust, Inc. McGuire, Woods, Battle & Boothe LLP
306 East Main Street One James Center
Richmond, Virginia 23219 Richmond, Virginia 23219
(804) 643-1761 (804) 775-1000
(Address, including zip code, and telephone number,
including area code, of agent for service)
Approximate date of commencement of proposed sale to the public: From time to
time after the effective date of this registration statement.
If the only securities being registered on this Form are being offered pursuant
to dividend or interest reinvestment plans, please check the following box. [ ]
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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 interest
reinvestment plans, 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
<TABLE>
<CAPTION>
Title of each class Amount to be Proposed maximum Proposed Amount of
of securities Registered offering price per unit maximum Registration
------------- ---------- ----------------------- aggregate Fee
offering price ---
--------------
<S> <C> <C> <C> <C>
Common Shares 185,887 $ 9.59375(1) $1,783,353.40 $470.81
</TABLE>
(1) Calculated pursuant to Rule 457(c) of the Securities Act of 1933, based
on the average of the high and low prices reported on the New York
Stock Exchange on January 14, 2000.
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 THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
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CORNERSTONE REALTY INCOME TRUST
PROSPECTUS
185,887 COMMON SHARES
The selling securityholder named in this Prospectus may offer up to
185,887 common shares. The purchase price of any shares offered by the selling
securityholder will be the market price of a common share at that time unless
otherwise indicated in an accompanying prospectus supplement. The Company will
not receive any proceeds from the sale of any of the securities offered by the
selling securityholder. See "Selling Securityholders" at page 27.
SEE "RISK FACTORS" BEGINNING ON PAGE 8 FOR A DISCUSSION OF CERTAIN
FACTORS THAT YOU SHOULD CONSIDER BEFORE YOU INVEST IN THE COMMON SHARES BEING
SOLD WITH THIS PROSPECTUS.
Our common shares are listed on the New York Stock Exchange under the
symbol "TCR." On January 14, 2000, the last reported sale price of our common
shares was $9.4375 per share.
The selling securityholder and any agents or broker-dealers that
participate with the selling securityholder in the distribution of common shares
may be deemed to be "underwriters" under the Securities Act of 1933. See "Plan
of Distribution" beginning on page 28.
THE SECURITIES AND EXCHANGE COMMISSION HAS NOT APPROVED OR DISAPPROVED
OF THESE SECURITIES, OR DETERMINED IF THIS PROSPECTUS IS TRUTHFUL OR COMPLETE.
NOR HAS ANY STATE SECURITIES COMMISSION APPROVED OR DISAPPROVED OF THESE
SECURITIES, OR DETERMINED IF THIS PROSPECTUS IS TRUTHFUL OR COMPLETE. IT IS
ILLEGAL FOR ANY PERSON TO TELL YOU OTHERWISE.
Prospectus dated January 18, 2000
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NEITHER WE NOR THE SELLING SECURITYHOLDER HAVE AUTHORIZED ANY PERSON TO MAKE A
STATEMENT THAT DIFFERS FROM THIS PROSPECTUS. IF ANY PERSON DOES MAKE A STATEMENT
THAT DIFFERS FROM THIS PROSPECTUS, YOU SHOULD NOT RELY ON IT. THIS PROSPECTUS IS
NOT AN OFFER TO SELL, NOR IS IT SEEKING AN OFFER TO BUY, THESE SECURITIES IN ANY
STATE WHERE THE OFFER OR SALE IS NOT PERMITTED. THE INFORMATION IN THIS
PROSPECTUS IS COMPLETE AND ACCURATE AS OF ITS DATE, BUT THE INFORMATION MAY
CHANGE AFTER THAT DATE.
AVAILABLE INFORMATION
Cornerstone Realty Income Trust, Inc. (the "Company") is subject to the
information requirements of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), and in accordance therewith files annual, quarterly and current
reports, proxy statements and other information with the Securities and Exchange
Commission (the "Commission"). Such reports, proxy statements and information
may be inspected and copied, at prescribed rates, at the Public Reference Room
of the Commission at 450 Fifth Street, N.W., Washington, D.C. 25049. Information
may be obtained on the operation of the Public Reference Room by calling the
Commission at 1-800-SEC-0330. Such reports, proxy statements and other
information, when available, also may be accessed through the Internet site
maintained by the Commission (http://www.sec.gov). In addition, the Company's
common shares, no par value, are listed on the New York Stock Exchange ("NYSE"),
and such material can also be inspected and copied at the offices of the NYSE,
20 Broad Street, New York, New York 10005.
The Company has filed with the Commission a registration statement on
Form S-3 (the "Registration Statement") under the Securities Act of 1933, as
amended (the "Securities Act"), with respect to the securities registered
hereby. This prospectus, which constitutes a part of the Registration Statement,
does not contain all of the information set forth in the Registration Statement
and in the exhibits and schedules thereto. For further information with respect
to the Company and the common shares, reference is hereby made to such
Registration Statement, exhibits and schedules. The Registration Statement may
be inspected without charge at, or copies obtained upon payment of prescribed
fees from, the Commission. Any statements contained herein concerning a
provision of any document 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.
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INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The Company hereby incorporates by reference into this registration
statement the following documents which have been filed with the Commission:
(a) the Company's Annual Report on Form 10-K for the fiscal year ended
December 31, 1998 (including Amendment No. 1 thereto filed on Form 10-K/A);
(b) the following reports filed with the Commission pursuant to Section
13(a) or 15(d) of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), which include all reports filed since the end of the fiscal year ended
December 31, 1998, including:
o Current Report on Form 8-K, filed January 29, 1998, relating to a
property acquisition.
o Current Report on Form 8-K/A, filed March 30, 1998, containing
financial statements relating to a property acquisition.
o Current Report on Form 8-K, filed June 12, 1998, relating to two
property acquisitions and containing financial statements relating to
the two property acquisitions.
o Current Report on Form 8-K, filed June 17, 1998, relating to a property
acquisition.
o Current Report on Form 8-K, filed July 17, 1998, relating to a property
acquisition.
o Current Report on Form 8-K/A, filed August 13, 1998, containing
financial statements relating to a property acquisition.
o Current Report on Form 8-K, filed August 26, 1998, relating to a
property acquisition.
o Current Report on Form 8-K/A, filed September 14, 1998, containing
financial statements relating to a property acquisition.
o Current Report on Form 8-K, filed December 28, 1998, relating to a
property acquisition and containing financial statements relating to
the property acquisition.
o Quarterly Report on Form 10-Q for the period ended March 31, 1999.
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o Current Report on Form 8-K, filed April 5, 1999, relating to the
agreement for the merger of Apple Residential Income Trust into a
subsidiary of the Company.
o Current Report on Form 8-K, filed April 9, 1999, relating to certain
property acquisitions.
o Current Report on Form 8-K, filed August 6, 1999, relating to the
merger of Apple Residential Income Trust, Inc. into a subsidiary of the
Company.
o Current Report on Form 8-K, filed August 12, 1999, relating to the
amendment of certain loan documents.
o Quarterly Report on Form 10-Q for the period ended June 30, 1999.
o Current Report on Form 8-K, filed October 13, 1999, relating to the
Company's announcement of a common share repurchase program and the
closing of a $73.5 million secured fixed-rate borrowing.
o Current Report on Form 8-K, filed November 3, 1999, containing
additional information on the Company's closing of its $73.5 million
secured borrowing.
o Quarterly Report on Form 10-Q for the period ended September 30, 1999.
o Current Report on Form 8-K, filed January 18, 2000, containing certain
pro forma financial statements.
(c) all documents subsequently filed by the Company pursuant to
Sections 13(a), 13(c), 14 and 15(d) of the Exchange Act, prior to the filing of
a post-effective amendment which indicates that all securities offered hereby
have been sold or which deregisters all such securities then remaining unsold,
shall be deemed to be incorporated by reference in this Registration Statement
and to be part hereof from the respective dates of filing of such documents.
The Company will furnish without charge upon written or oral request to
each person to whom a copy of this Prospectus is delivered, including any
beneficial owner, a copy of any or all of the documents specifically
incorporated herein by reference (not including the exhibits to such documents,
unless such exhibits are specifically incorporated by reference in such
documents). Requests should be made to: Cornerstone Realty Income Trust, Inc.,
Investor Relations, 306 East Main Street, Richmond, Virginia 23219. The
Company's telephone number is (804) 643-1761.
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THE COMPANY
Unless the context otherwise requires, the term "Company" shall mean
Cornerstone Realty Income Trust, Inc., and those entities owned or controlled by
Cornerstone Realty Income Trust, Inc.
The Company is a self-administered and self-managed real estate
investment trust ("REIT") that began operations in 1993. At December 31, 1999,
the Company owned or had an ownership interest in 87 multifamily communities
with 20,965 apartment units (collectively, the "Properties"). The Properties are
located in 20 markets in North Carolina, Texas, Virginia, Georgia and South
Carolina.
The Company was formed in Virginia in 1992. The Company's executive
offices are located at 306 East Main Street, Richmond, Virginia 23219, and its
telephone number is (804) 643-1761. The Company maintains six regional offices.
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RISK FACTORS
Before you invest in our securities, you should be aware that there are
various risks, including those described below. You should consider carefully
these risk factors, together with all other information included in this
prospectus, before you decide to purchase our securities.
Some of the information in this prospectus may contain forward-looking
statements. Such statements can be identified by the use of forward-looking
terminology such as "may," "will," "expect," "anticipate," "estimate,"
"continue" or other similar words. These statements discuss future expectations,
contain projections of results of operations or of financial condition or state
other "forward-looking" information. When considering such forward-looking
statements, you should keep in mind the risk factors and other cautionary
statements in this prospectus. The risk factors noted in this section and other
factors noted throughout this prospectus could cause our actual results to
differ materially from those contained in any forward-looking statement
In addition to the risks normally associated with investment in
apartment communities, investment in our Company may involve the following
risks:
o The availability of attractive investment opportunities may fluctuate
as we face competition from other companies with similar objectives.
o There can be no assurance that we will continue to grow at the rate
experienced to date, and there can be no assurance we will have access
to suitable equity or debt financing necessary for our operations and
growth.
o We are dependent on our executive officers. While we believe that we
could find replacements for them if necessary, the loss of their
services could have an adverse effect on us. Furthermore, Glade M.
Knight, our chairman and chief executive officer, is involved in other
ventures that compete for his time.
o Our current unsecured line of credit bears interest at a variable rate.
We are therefore subject to the risks associated with market interest
rate increases.
o The limitations on common share ownership in our bylaws, the staggered
terms for the board of directors, and the provisions governing
"Affiliated Transactions" in the Virginia Stock Corporation Act may
each have the effect of deterring the acquisition of, or a change of
control in, our company.
o We are not aware of any material adverse environmental conditions,
liabilities or compliance concerns affecting any of our apartment
communities. Nonetheless, we may, under various federal, state and
local environmental laws, be liable or may incur unexpected costs if
any hazardous or toxic substances are discovered on, under or in our
properties.
o The market price of the common shares will largely depend on factors
beyond our control, including interest rates, conditions in the
financial and stock markets, the general state of the economy, and
perceptions about future economic, political and other developments.
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DESCRIPTION OF CAPITAL STOCK OF THE COMPANY
COMMON SHARES
The Company has 100,000,000 authorized common shares, no par value, of
which 38,712,112 were issued and outstanding as of December 31, 1999. Each
common share is fully paid and nonassessable upon payment therefor and issuance.
Distribution Rights. The holders of common shares are entitled to
receive such distributions as are declared by our Board of Directors.
Voting Rights. Except as described below under "Series A Convertible
Preferred Shares--Voting Rights," common shares will have the sole voting power
to elect directors. Each common share is entitled to one vote on all matters
submitted to a vote of common shareholders, including the election of directors.
There is no cumulative voting. Currently, the Board of Directors is divided into
three classes, as nearly equal in size as possible. The terms of one class of
directors expire each year.
Liquidation Rights. Upon any dissolution, liquidation or winding up of
the Company, the holders of common shares are entitled to receive pro rata all
of the Company's assets and funds remaining after payment of, or provision for,
creditors and after provision for any preferred shares which are superior to the
common shares.
Preemptive Rights. Holders of common shares have no preemptive right to
purchase or subscribe for any shares of capital stock of the Company.
Repurchase of Common Shares and Restrictions on Transfer. In order that
we may meet certain requirements under the Internal Revenue Code applicable to
real estate investment trusts, the Company's bylaws prohibit any person from
acquiring or holding, directly or indirectly, ownership of a number of common
shares in excess of 9.8% of all the outstanding common shares. Common shares
owned by a person in excess of such amounts are referred to in the bylaws as
"Excess Shares." For this purpose the term "Ownership" is defined in accordance
with certain ownership rules of the Internal Revenue Code. Accordingly, common
shares owned or deemed to be owned by a person who individually owns less than
9.8% of the common shares outstanding nevertheless may be Excess Shares.
Holders of Excess Shares are not entitled to voting rights, dividends
or distributions with respect to the Excess Shares. If, after the purported
transfer or other event resulting in an exchange of common shares for Excess
Shares and before discovery by Cornerstone of such exchange, dividends or
distributions are paid with respect to common shares that were exchanged for
Excess Shares, then such dividends or distributions are to be repaid to
Cornerstone upon demand.
The bylaws also provide that in the event any person acquires Excess
Shares, such Excess Shares may be redeemed by us at the discretion of the Board
of Directors. Except as set forth below, the redemption price for redeemed
Excess Shares will be the lesser of (i) the price paid for the Excess Shares (or
if no notice of such purchase price is given, at
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a price to be determined by the Board of Directors, in its sole discretion, but
no lower than the lowest market price for the common shares during the year
prior to the date Cornerstone exercises its purchase option) and (ii) the fair
market value of such Excess Shares, which will be the fair market value of the
common shares as determined in good faith by the Board of Directors or, if the
common shares are listed on a national securities exchange, the closing price
(average of closing bid and asked prices if the common shares are quoted on the
NASDAQ National Market System) on the last business day prior to the redemption
date. To redeem Excess Shares, the Board of Directors must give a notice of
redemption to the holder of the Excess Shares not less than one week prior to
the date fixed by the Board of Directors for redemption. The holder may sell
such Excess Shares before the date fixed for redemption. If he does not, the
redemption price for such Excess Shares will be paid on the redemption date
fixed by the Board of Directors and included in such notice.
Under the bylaws, any acquisition of common shares of the Company that
would result in the Company's disqualification as a REIT under the Internal
Revenue Code is void to the fullest extent permitted by law, and the Board of
Directors is authorized to refuse to transfer common shares to a person if, as a
result of the acquisition, that person would own Excess Shares.
The ownership limitations described above may have the effect of
precluding changes in control of the Company, or preventing a transaction in
which some or all common shareholders might receive a premium for sale of a
large or control block of common shares.
Transfer Agent and Registrar. The transfer agent and registrar for the
common shares is First Union National Bank of North Carolina, Charlotte, North
Carolina.
SERIES A CONVERTIBLE PREFERRED SHARES
The Company has 12,700,000 authorized Series A convertible Preferred
Shares, no par value, of which 12,650,046 were issued and outstanding as of
December 31, 1999. Each Series A Convertible Preferred Share is fully paid and
non-assessable upon payment therefor and issuance.
Designation, Number and Rank. The Series A Convertible Preferred
Shares, with respect to distribution rights and rights upon voluntary or
involuntary liquidation, dissolution or winding up of the Company, rank (a)
senior to all common shares and to all equity securities ranking junior to the
Series A Convertible Preferred Shares, (b) on parity with all equity securities
issued by the Company the terms of which specifically provide that such equity
securities rank on a parity with the Series A Convertible Preferred Shares, and
(c) junior to all other equity securities issued by the Company. The Company
retains the power and authority to issue preferred shares which rank senior to
or on parity with the Series A Convertible Preferred Shares as to distributions
or as to rights in liquidation, but only if, at the time of and, after giving
effect to the issuance of such shares that the sum of (i) the aggregate
liquidation preferences of all preferred shares which rank senior to the Series
A Convertible Preferred Shares, and (ii) the
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aggregate liquidation preference of the Series A Convertible Preferred Shares
does not exceed 20% of the Company's total assets, as disclosed on the balance
sheet of the Company's most recently filed with the SEC.
Distributions. Holders of outstanding Series A Convertible Preferred
Shares are entitled to receive, if, when and as declared by the Company's Board,
quarterly cash distributions at an annual rate per share of $2.125 during 1999
increasing to $2.25 during 2000 and to $2.375 during 2001and thereafter.
Dividends will be cumulative and will accrue from and after the date of issue
thereof, whether or not such distributions are declared or there are funds of
the Company legally available for payment of such distributions for any given
distribution period.
When distributions for the Series A Convertible Preferred Shares and
any other preferred shares ranking on parity with the Series A Convertible
Preferred Shares are not paid in full (or a sum sufficient for such full payment
is not so set apart), such distributions will be declared pro rata so that the
amount of distributions declared per share will in all cases bear to each other
the same ratio that accrued distributions per share on the Series A Convertible
Preferred Shares and other preferred shares bear to each other.
Unless full cumulative distributions on all outstanding Series A
Convertible Preferred Shares and all preferred shares on parity with such shares
have been paid and all mandatory sinking fund payments required pursuant to the
terms of any outstanding preferred shares ranking senior to or on parity with
the Series A Convertible Preferred Shares as to rights in liquidation shall have
been paid then (i) no distribution (other than distributions payable solely in
shares ranking junior to the Series A Convertible Preferred Shares) will be
declared or paid upon or any sum set apart for the payment of distributions
upon, any shares ranking junior to the Series A Convertible Preferred Shares as
to distributions; (ii) no other distribution will be made with respect to any
shares of the Company ranking junior to the Series A Convertible Preferred
Shares as to rights in liquidation; (iii) no shares of the Company ranking
junior to the Series A Convertible Preferred Shares as to distributions or
rights in liquidation will be purchased, redeemed or otherwise acquired for
value by the Company or by any subsidiary of the Company; and (iv) no monies
will be paid into, set apart or made available for a sinking or other like fund
for the purchase, redemption or other acquisition for value by the Company or
any of its subsidiaries of any shares of the Company ranking junior to the
Series A Convertible Preferred Shares as to distributions or rights in
liquidation.
Dividends accrued but unpaid will bear no interest, and holders of
Series A Convertible Preferred Shares will not be entitled to distributions in
excess of the full cumulative distributions to which they are entitled.
No distributions on the Series A Convertible Preferred Shares will be
declared or funds set apart for the payment thereof it at such time the Company
is party to any agreement related to its indebtedness which prohibits such
declaration, payment or setting apart for payment or such action would
constitute a default under any such agreement or if such declaration is
restricted or prohibited by law.
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Voting Rights. Except as described below or to the extent provided by
law, holders of Series A Convertible Preferred Shares are not entitled to (i)
vote at any meeting of shareholders for election of directors or for any other
purpose or (ii) receive notice of, or otherwise participate, in any meeting of
shareholders of the Company at which they are not entitled to vote.
Whenever distributions due to the holders of Series A Convertible
Preferred Shares or to any class or series of preferred shares which ranks on
parity therewith as to distributions are six or more quarters in arrears, then
the Company's Board will automatically be increased by two and at any annual
meeting or properly called special meeting, holders of Series A Convertible
Preferred Shares will have the right to nominate and elect these two additional
directors. These two directors will continue to serve until all current
distributions and all distributions in arrears have been paid in full or
declared and set aside for payment. The right of the holders of Series A
Convertible Preferred Shares to nominate and elect these two directors will
cease when all current distributions and all distributions in arrears have been
paid in full or declared and set aside for payment.
The affirmative vote of a majority of the outstanding Series A
Convertible Preferred Shares, voting as separate group, will be required (i)
whenever such a vote is required under the Virginia Stock Corporation Act or
(ii) for the adoption of any amendment, alteration or repeal of any provision of
the Series A Convertible Preferred Shares or of any provision of the Articles of
Incorporation that adversely changes any preferences, limitations, privileges,
voting power or relative rights of the Series A Convertible Preferred Shares or
the holders thereof; provided, however, that the authorization of, or the
increase in the authorized number of shares of, any class of shares ranking
senior to or on a parity with the Series A Convertible Preferred Shares is not
such an adverse change.
Redemption. Series A Convertible Preferred Shares will not be
redeemable by the Company for five years after the first issuance of such
shares. At any time after the fifth anniversary of such issuance, the Company
may, at its option, redeem all or any portion of the outstanding Series A
Convertible Preferred Shares for an amount equal to, at the election of the
Company, (i) the liquidation payment owed as described below plus accrued but
unpaid distributions or (ii) such number of common shares of the Company equal
to (A) the liquidation price described below plus accrued but unpaid
distributions, divided by (B) the conversion price as described below. Notice of
any such redemption must be provided not less than 30 nor more than 60 days
before the redemption date. If fewer than all of the Series A Convertible
Preferred Shares outstanding are to be redeemed, the redemption will be pro
rated among the holders of Series A Convertible Preferred Shares based upon the
number of such shares registered in their names. The Company may not redeem any
of the Series A Convertible Preferred Shares if the full cumulative
distributions to holders of such shares have not been paid.
The Company may also acquire shares of Series A Convertible Preferred
Shares other than by redemption for such consideration as is acceptable to the
holders thereof, provided that if all past and current distributions on the
Series A Convertible Preferred
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Shares have not been paid in full or declared and set aside for payment, the
Company may not acquire any Series A Convertible Preferred Shares except in
accordance with a purchase or exchange offer made on the same terms to all
holders of outstanding Series A Convertible Preferred Shares.
Liquidation. Upon any voluntary or involuntary liquidation, dissolution
or winding up of the affairs of the Company, the holders of outstanding Series A
Convertible Preferred Shares will be entitled to be paid $25 per share in cash,
plus an amount equal to all unpaid distributions accrued thereon, after which
payment, the holders of the Series A Convertible Preferred Shares will have no
right or claim to the remaining assets of the Company. Neither the consolidation
nor merger of the Company with or into any other entity, nor the sale, lease or
other disposition of substantially all of the Company's properties and assets,
will, without further corporate action, be deemed a liquidation, dissolution or
winding up of the affairs of the Company.
If the assets of the Company legally available for distribution to its
shareholders are insufficient to pay the holders of the Series A Convertible
Preferred Shares the full amounts to which they are entitled, such assets will
be distributed ratably to the holders of Series A Convertible Preferred Shares
and the holders of preferred shares, if any, ranking on a parity with the Series
A Convertible Preferred Shares as to rights in liquidation in proportion to the
full amount to which they are respectively entitled.
The Company will give written notice of any liquidation, dissolution or
winding up of the Company not less than 30 nor more than 60 days before the
payment date related thereof.
Conversion. Each holder of outstanding Series A Convertible Preferred
Shares will have the right, upon notice properly given to the Company, to
convert any or all such shares into such number of the Company's common shares
equal to $25 divided by the conversion price times the number of Series A
Convertible Preferred Shares converted. The initial conversion price will be
$15.80, subject to adjustment described below. Any holder of Series A
Convertible Preferred Shares called for redemption may convert such shares at
any time prior to the close of business on the last full business day prior to
the redemption date. Common shares issued upon conversion will be rounded to the
nearest thousandth of a share, and no cash will be paid in lieu of fractional
shares.
The issuance of common shares in exchange of Series A Convertible
Preferred Shares will be done by the Company without charge for expenses or for
any tax in respect of the issuance of such common shares, but the Company will
not be required to pay any tax which may be payable in respect of any transfer
involved in the issuance and delivery of common shares in any name other than
that of the holder of record on the books of the Company of the Series A
Convertible Preferred Shares converted.
Holders of Series A Convertible Preferred Shares on any distribution
record date will still be entitled to receive all previously accrued
distributions payable on such shares notwithstanding the conversion of such
shares after any such distribution record date.
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If the Company (i) pays a distribution on its outstanding common shares
in common shares or subdivide or otherwise split its outstanding common shares
into a larger number of shares, (ii) combines its outstanding shares into a
smaller number of shares, or (iii) reclassifies its common shares, the
Conversion Price will be adjusted so that the holder of any Series A Convertible
Preferred Shares surrendered for conversion after the applicable record date
will be entitled to receive the same aggregate number of common shares that such
holder would have owned or have been entitled to receive after the happening of
such event had the Series A Convertible Preferred Shares been converted
immediately prior to such record date.
If the Company shall issue rights, warrants or options to all holders
of common shares entitling them to subscribe for or purchase common shares at a
price which is less than the current market value of common shares, the
Conversion Price will be adjusted to a price determined by multiplying (i) the
current conversion price and (ii) a fraction, the numerator of which will be the
sum of (w) the number of common shares outstanding and (x) the number of common
shares which the aggregate purchase price of all such rights, warrants and
options would purchase at the then current market value, and the denominator of
which will be the sum of (y) the number of common shares outstanding and (z) the
number of additional shares offered for subscription pursuant to such rights,
warrants or options.
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FEDERAL INCOME TAX CONSIDERATIONS
GENERAL
The following summary of material federal income tax considerations
that may be relevant to a holder of common shares is based on current law and is
not intended as tax advice. The statements of law and legal conclusions set
forth in this summary represents the opinion of McGuire, Woods, Battle & Boothe
LLP, special tax counsel to the Company. The following discussion, which is not
exhaustive of all possible tax considerations, does not include a detailed
discussion of any state, local or foreign tax considerations. Nor does it
discuss all of the aspects of federal income taxation that may be relevant to a
prospective shareholder in light of his or her particular circumstances or to
certain types of shareholders (including insurance companies, tax-exempt
entities, financial institutions or broker-dealers, foreign corporations and
persons who are not citizens or residents of the United States) who are subject
to special treatment under the federal income tax laws.
The statements in this discussion are based on current provisions of
the Internal Revenue Code, existing, temporary and currently proposed Treasury
Regulations under the Code, the legislative history of the Code, existing
administrative rulings and practices of the IRS and judicial decisions. No
assurance can be given that legislative, judicial or administrative changes will
not affect the accuracy of any statements in this prospectus with respect to
transactions entered into or contemplated prior to the effective date of the
changes.
THIS DISCUSSION IS NOT INTENDED AS A SUBSTITUTE FOR CAREFUL TAX PLANNING. EACH
PROSPECTIVE PURCHASER OF COMMON SHARES IS ADVISED TO CONSULT WITH HIS OR HER OWN
TAX ADVISOR REGARDING THE SPECIFIC TAX CONSEQUENCES TO HIM OR HER OF THE
PURCHASE, OWNERSHIP AND DISPOSITION OF COMMON SHARES IN AN ENTITY ELECTING TO BE
TAXED AS A REIT, INCLUDING THE FEDERAL, STATE, LOCAL, FOREIGN AND OTHER TAX
CONSEQUENCES OF THE PURCHASE, OWNERSHIP, DISPOSITION AND ELECTION, AND OF
POTENTIAL CHANGES IN APPLICABLE TAX LAWS.
The Company elected to be treated as a REIT for federal income tax
purposes commencing with our taxable year ended December 31, 1993. Based on
assumptions and representations summarized below, McGuire, Woods, Battle &
Boothe LLP, our legal counsel, is of the opinion that beginning with our taxable
year ended December 31, 1993:
o we are organized in conformity with the requirements for
qualification and taxation as a REIT under the Code, and
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o our proposed method of operations described in this prospectus
will enable us to continue to satisfy the requirements for
qualification as a REIT.
The rules governing REITs are highly technical and require ongoing
compliance with a variety of tests that depend, among other things, on future
operating results. McGuire, Woods, Battle & Boothe LLP will not monitor our
compliance with these requirements. While we expect to satisfy these tests, and
will use our best efforts to do so, we cannot ensure we will qualify as a REIT
for any particular year, or that the applicable law will not change and
adversely affect us and our shareholders. The following is a summary of the
material federal income tax considerations affecting us as a REIT and our
shareholders:
REIT QUALIFICATION
In order to maintain our REIT qualification, we must meet the following
criteria:
o We must be organized as an entity that would, if we did not
maintain our REIT status, be taxable as a regular corporation;
o We must be managed by one or more directors;
o Our taxable year must be the calendar year;
o Our beneficial ownership must be evidenced by transferable shares;
o Our capital stock must be held by at least 100 persons during at
least 335 days of a taxable year of 12 months or during a
proportionate part of a taxable year of less than 12 months; and
o Not more than 50% of the value of our shares of capital stock may
be held, directly or indirectly, applying constructive ownership
rules, by five or fewer individuals at any time during the last
half of each our taxable years.
To protect against violations of these requirements, our bylaws provide
restrictions on transfers of our common shares, as well as provisions that
automatically convert shares of stock into nonvoting, non-dividend paying excess
stock to the extent that the ownership otherwise might jeopardize our REIT
status.
To monitor our compliance with the share ownership requirements, we are
required to and will maintain records disclosing the actual ownership of common
shares. To do so, we will demand written statements each year from the record
holders of certain percentages of shares in which the record holders are to
disclose the actual owners of the shares. A list of those persons failing or
refusing to comply with this demand will be maintained as part of our records.
Shareholders who fail or refuse to comply with the demand must submit a
statement with their tax returns disclosing the actual ownership of the shares
and other information.
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We expect to satisfy each of the requirements discussed above. We also
expect to satisfy the requirements that are separately described below
concerning the nature and amounts of our income and assets and the levels of
required annual distributions.
SOURCES OF GROSS INCOME
In order to qualify as a REIT for a particular year, we also must meet
two tests governing the sources of our income. These tests are designed to
ensure that a REIT derives its income principally from passive real estate
investments. In evaluating a REIT's income, the REIT will be treated as
receiving its proportionate share of the income produced by any partnership in
which the REIT holds an interest as a partner, and that income will retain the
character that it has in the hands of the partnership. The Code allows us to own
and operate a number of our properties through wholly-owned subsidiaries which
are "qualified REIT subsidiaries." The Code provides that a qualified REIT
subsidiary is not treated as a separate corporation, and all of its assets,
liabilities and items of income, deduction and credit are treated as assets,
liabilities and items of the REIT.
75% GROSS INCOME TEST
At least 75% of a REIT's gross income for each taxable year must be
derived from specified classes of income that principally are real estate
related. The permitted categories of principal importance to us are:
o rents from real property;
o interest on loans secured by real property;
o gain from the sale of real property or loans secured by real
property (excluding gain from the sale of property held primarily
for sale to customers in the ordinary course of a company's trade
or business, referred to below as "dealer property");
o income from the operation and gain from the sale of property
acquired in connection with the foreclosure of a mortgage securing
that property ("foreclosure property");
o distributions on, or gain from the sale of, shares of other
qualifying REITs;
o abatements and refunds of real property taxes; and
o "qualified temporary investment income" (described below).
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In evaluating our compliance with the 75% gross income test, as well as
the 95% gross income test described below, gross income does not include gross
income from "prohibited transactions." In general, a prohibited transaction is
one involving a sale of dealer property, not including foreclosure property and
dealer property held by us for at least four years.
We expect that substantially all of our operating gross income will be
considered rent from real property. Rent from real property is qualifying income
for purposes of the gross income tests only if certain conditions are satisfied.
Rent from real property includes charges for services customarily rendered to
tenants, and rent attributable to personal property leased together with the
real property so long as the personal property rent is less than 15% of the
total rent. We do not expect to earn material amounts in these categories. Rent
from real property generally does not include rent based on the income or
profits derived from the property. We do not intend to lease property and
receive rentals based on the tenant's net income or profit. However, rent based
on a percentage of gross income is permitted as rent from real property and we
will have leases where rent is based on a percentage of gross income.
Also excluded from "rents from real property" is rent received from a
person or corporation in which we (or any of its 10% or greater owners) directly
or indirectly through the constructive ownership rules contained in section 318
of the Code, owns a 10% or greater interest. A third exclusion covers amounts
received with respect to real property if we furnish services to the tenants or
manage or operate the property, other than through an "independent contractor"
from whom we do not derive any income. The obligation to operate through an
independent contractor generally does not apply, however, if the services
provided by us are usually or customarily rendered in connection with the rental
of space for occupancy only and are not considered rendered primarily for the
convenience of the tenant. Further, if the value of the non-customary service
income with respect to a property (valued at no less than 150% of our direct
cost of performing the services) is 1% or less of the total income derived from
the property, then all rental income from that property except the non-customary
service income will qualify as rents from real property.
Upon the ultimate sale of any of our properties, any gains realized
also are expected to constitute qualifying income, as gain from the sale of real
property (not involving a prohibited transaction).
95% GROSS INCOME TEST
In addition to earning 75% of its gross income from the sources listed
above, at least an additional 20% of our gross income for each taxable year must
come either from those sources, or from dividends, interest or gains from the
sale or other disposition of stock or other securities that do not constitute
dealer property. This test permits a REIT to earn a significant portion of its
income from traditional "passive" investment sources that are not necessarily
real estate related. The term " interest" (under both the 75% and 95% tests)
does not include amounts that are based on the income or profits of any person,
unless the computation is based only on a fixed percentage of receipts or sales.
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FAILING THE 75% OR 95% TESTS; REASONABLE CAUSE
As a result of the 75% and 95% tests, REITs generally are not permitted
to earn more than 5% of their gross income from active sources such as brokerage
commissions or other fees for services rendered. We may receive this type
income. This type of income will not qualify for the 75% test or 95% test but is
not expected to be significant and this income, together with other
non-qualifying income, is expected to be at all times less than 5% of our annual
gross income. While we do not anticipate we will earn substantial amounts of
non-qualifying income, if non-qualifying income exceeds 5% of our gross income,
we could lose our status as a REIT. We may in the future establish subsidiaries
in which we will hold less than 10% of the voting stock. The gross income
generated by these subsidiaries would not be included in our gross income.
However, dividends from subsidiaries to us would be included in our gross income
and qualify for the 95% income test.
If we fail to meet either the 75% or 95% income tests during a taxable
year, we may still qualify as a REIT for that year if
o we report the source and nature of each item of our gross income
in our federal income tax return for that year;
o the inclusion of any incorrect information in our return is not
due to fraud with intent to evade tax; and
o the failure to meet the tests is due to reasonable cause and not
to willful neglect.
However, in that case we would be subject to a 100% tax based on the
greater of the amount by which we fail either the 75% or 95% income tests for
the year, multiplied by a fraction intended to reflect our profitability.
CHARACTER OF ASSETS OWNED
On the last day of each calendar quarter, we also must meet two tests
concerning the nature of our investments. First, at least 75% of the value of
our total assets generally must consist of real estate assets, cash, cash items
and government securities. For this purpose, real estate assets include
interests in real property, interests in loans secured by mortgages on real
property or by interests in real property, shares in other REITs and certain
options, but excluding mineral, oil or gas royalty interests. The temporary
investment of new capital in debt instruments also qualifies under this 75%
asset test, but only for the one-year period beginning on the date we receive
the new capital.
Second, although the balance of our assets generally may be invested
without restriction, we will not be permitted to own (1) securities of any one
non-governmental issuer that represent more than 5% of the value of our total
assets or (2) more than 10% of the outstanding voting securities of any single
issuer. A REIT, however, may own
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100% of the stock of a qualified REIT subsidiary, in which case the assets,
liabilities and items of income, deduction and credit of the subsidiary are
treated as those of the REIT. In evaluating a REIT's assets, if the REIT invests
in a partnership, it is deemed to own its proportionate share of the assets of
the partnership. We expect to satisfy these asset tests.
ANNUAL DISTRIBUTIONS TO SHAREHOLDERS
To maintain REIT status, we generally must distribute to our
shareholders in each taxable year at least 95% of our net ordinary income. More
precisely, we must distribute an amount equal to (1) 95% of the sum of (a) our
REIT taxable income before deduction of dividends paid and excluding any net
capital gain and (b) any net income from foreclosure property less the tax on
the income, minus (2) limited categories of excess noncash income (including,
cancellation of indebtedness and original issue discount income).
REIT taxable income is defined to be the taxable income of the REIT,
computed as if it were an ordinary corporation, with modifications. For example,
the deduction for dividends paid is allowed, but neither net income from
foreclosure property, nor net income from prohibited transactions, is included.
In addition, the REIT may carry over, but not carry back, a net operating loss
for 20 years following the year in which it was incurred.
A REIT may satisfy the 95% distribution test with dividends paid during
the taxable year and with dividends paid after the end of the taxable year if
the dividends fall within one of the following categories:
o Dividends paid in January that were declared during the last
calendar quarter of the prior year and were payable to
shareholders of record on a date during the last calendar quarter
of that prior year are treated as paid in the prior year for
ourselves and our shareholders.
o Dividends declared before the due date of our tax return for the
taxable year (including extensions) also will be treated as paid
in the prior year for ourselves if they are paid (1) within 12
months of the end of the taxable year and (2) no later than our
next regular distribution payment.
Dividends that are paid after the close of a taxable year that do not
qualify under the rule governing payments made in January (described above) will
be taxable to the shareholders in the year paid, even though we may take them
into account for a prior year. A nondeductible excise tax equal to 4% will be
imposed on a company for each calendar year to the extent that dividends
declared and distributed or deemed distributed before December 31 are less than
the sum of (a) 85% of a company's "ordinary income" plus (b) 95% of a company's
capital gain net income plus (c) any undistributed income from prior periods.
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Dividends that are paid after the close of a taxable year that do not
qualify under the rule governing payments made in January described above will
be taxable to our shareholders in the year paid, even though we may be able to
take them into account for a prior year. We will incur a nondeductible excise
tax equal to 4% will for each calendar year to the extent that dividends
declared and distributed or deemed distributed before December 31 are less than
the sum of (a) 85% of our "ordinary income plus (b) 95% of our capital gain net
income plus (c) any undistributed income from prior periods.
We will be taxed at regular corporate rates to the extent we retain any
portion of our taxable income. It is possible that we may not have sufficient
cash or other liquid assets to meet the distribution requirement. This could
arise because of competing demands for our funds, or because of timing
differences between tax reporting and cash receipts and disbursements. Although
we do not anticipate any difficulty in meeting this requirement, no assurance
can be given that necessary funds will be available. In the event this occurs,
we may arrange for short-term, or possibly long-term, borrowings to permit the
payment of required dividends and meet the 95% distribution requirement.
If we fail to meet the 95% distribution requirement because of an
adjustment to our taxable income by the IRS, we may be able to retroactively
cure the failure by paying a deficiency dividend, as well as applicable interest
and penalties, within a specified period.
TAXATION AS A REIT
As a REIT, we generally will not be subject to corporate income tax to
the extent we currently distribute our REIT taxable income to our shareholders.
This treatment effectively eliminates the double taxation imposed on investments
in most corporations. We generally will be taxed only on the portion of our
taxable income which we retain, including any undistributed net capital gain,
because we will be entitled to a deduction for dividends paid to shareholders
during the taxable year. A dividends paid deduction is not available for
dividends that are considered preferential within any given class of shares or
as between classes except to the extent a class is entitled to a preference. We
do not anticipate we will pay any preferential dividends.
Even as a REIT, we will be subject to tax in the following
circumstances:
o any income or gain from foreclosure property will be taxed at the
highest corporate rate;
o a tax of 100% applies to any net income from prohibited
transactions, which are, in general, sales or other dispositions
of property held primarily for sale to customers in the ordinary
course of business;
o if we fail to meet either the 75% or 95% source of income tests, a
100% tax would be imposed equal to the amount obtained by
multiplying (1) the greater of the amount, if any, by which we
failed either the 75% income
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test or the 95% income test, times (2) the ratio of our REIT
taxable income to our gross income (excluding capital gain and
other items);
o items of tax preference, excluding items specifically allocable to
our shareholders, will be subject to the alternative minimum tax;
o if we fail to distribute with respect to each calendar year at
least the sum of (1) 85% of our REIT ordinary income for the year,
(2) 95% of our REIT capital gain net income for the year, and (3)
any undistributed taxable income from prior years, we would be
subject to a 4% excise tax on the excess of the required
distribution over the amounts actually distributed; and
o under regulations that are to be promulgated, we also may be taxed
at the highest regular corporate tax rate on any built-in gain
attributable to assets we acquire in tax-free corporate
transactions, to the extent the gain is recognized during the
first ten years after we acquire the assets.
FAILURE TO QUALIFY AS A REIT
If we fail to qualify as a REIT and are not successful in seeking
relief, we will be taxed at regular corporate rates on all of our taxable
income. Distributions to our shareholders would not be deductible in computing
that taxable income, and we would no longer be required to make distributions.
Any corporate level taxes generally would reduce the amount of cash available
for distribution to our shareholders and, because our shareholders would
continue to be taxed on any distributions they receive, the net after tax yield
to our shareholders likely would be substantially reduced.
As a result, our failure to qualify as a REIT during any taxable year
could have a material adverse effect upon us and our shareholders. If we lose
our REIT status, unless we are able to obtain relief, we will not be eligible to
elect REIT status again until the fifth taxable year which begins after the
taxable year during which our election was terminated.
TAXATION OF SHAREHOLDERS
In general, distributions will be taxable to shareholders as ordinary
income to the extent of our earnings and profits. Specifically, dividends and
distributions will be treated as follows:
o Dividends declared during the last quarter of a calendar year and
actually paid during January of the immediately following calendar
year are generally treated as if received by the shareholders on
December 31 of the calendar year during which they were declared.
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o Distributions paid to shareholders will not constitute passive
activity income, and as a result generally cannot be offset by
losses from passive activities of a shareholder who is subject to
the passive activity rules.
o Distributions we designate as capital gains dividends generally
will be taxed as long term capital gains to shareholders to the
extent that the distributions do not exceed our actual net capital
gain for the taxable year. Corporate shareholders may be required
to treat up to 20% of any capital gains dividends as ordinary
income.
o If we elect to retain and pay income tax on any net long-term
capital gain, our shareholders would include in their income as
long-term capital gain their proportionate share of net long-term
capital gain. Our shareholders would receive a credit for the
shareholder's proportionate share of the tax paid by us on
retained capital gains and an increase in basis in their shares in
an amount equal to the difference between the undistributed
long-term capital gains and the amount of tax we paid.
o Any distributions we make, whether characterized as ordinary
income or as capital gains, are not eligible for the dividends
received deduction for corporations.
o Shareholders are not permitted to deduct our losses or loss
carry-forwards.
We may generate cash in excess of our net earnings. If we distribute
cash to our shareholders in excess of our current and accumulated earnings and
profits, other than as a capital gain dividend, the excess cash will be deemed
to be a return of capital to each shareholder to the extent of the adjusted tax
basis of the shareholder's shares. Distributions in excess of the adjusted tax
basis will be treated as gain from the sale or exchange of the shares. A
shareholder who has received a distribution in excess of our current and
accumulated earnings and profits may, upon the sale of the shares, realize a
higher taxable gain or a smaller loss because the basis of the shares as reduced
will be used for purposes of computing the amount of the gain or loss.
Generally, gain or loss realized by a shareholder upon the sale of
common shares will be reportable as capital gain or loss. If a shareholder
receives a long-term capital gain dividend and has held the shares for six
months or less, any loss incurred on the sale or exchange of the shares is
treated as a long-term capital loss to the extent of the corresponding long-term
capital gain dividend received.
In any year in which we fail to qualify as a REIT, our shareholders
generally will continue to be treated in the same fashion described above,
except that none of our dividends will be eligible for treatment as capital
gains dividends, corporate shareholders will qualify for the dividends received
deduction and the shareholders will not be required to report any share of our
tax preference items.
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BACKUP WITHHOLDING
We will report to our shareholders and the IRS the amount of dividends
paid during each calendar year and the amount of tax withheld, if any. If a
shareholder is subject to backup withholding, we will be required to deduct and
withhold from any dividends payable to that shareholder a tax of 31%. These
rules may apply in the following circumstances:
o when a shareholder fails to supply a correct taxpayer
identification number,
o when the IRS notifies us that the shareholder is subject to the
rules or has furnished an incorrect taxpayer identification
number, or
o in the case of corporations or others within exempt categories,
when they fail to demonstrate that fact when required.
A shareholder that does not provide a correct taxpayer identification
number may also be subject to penalties imposed by the IRS. Any amount withheld
as backup withholding may be credited against the shareholder's federal income
tax liability. We also may be required to withhold a portion of capital gain
distributions made to shareholders who fail to certify their non-foreign status.
The United States Treasury has recently issued final regulations
regarding the withholding and information reporting rules discussed above. In
general, the final regulations do not alter the substantive withholding and
information reporting requirements but unify current certification procedures
and clarify reliance standards. The final regulations are generally effective
for payments made on or after January 1, 2001, subject to transition rules.
Prospective investors should consult their own tax advisors concerning the
adoption of the final regulations and the potential effect on their ownership of
common shares.
TAXATION OF TAX EXEMPT ENTITIES
In general, a tax exempt entity that is a shareholder will not be
subject to tax on distributions with respect to our shares or gain realized on
the sale of our shares. In Revenue Ruling 66-106, the IRS confirmed that a
REIT's distributions to a tax exempt employees' pension trust did not constitute
unrelated business taxable income ("UBTI"). A tax exempt entity may be subject
to UBTI, however, to the extent that it has financed the acquisition of its
shares with acquisition indebtedness within the meaning of the Code. The Revenue
Reconciliation Act of 1993 has modified the rules for tax exempt employees'
pension and profit sharing trusts which qualify under section 401(a) of the Code
and are exempt from tax under section 501(a) of the Code for tax years beginning
after December 31, 1993. In determining the number of shareholders a REIT has
for purposes of the "50% test" described above, any stock held by a qualified
trust will be treated as held directly by its beneficiaries in proportion to
their actuarial interests in the trust and will not be treated as held by the
trust.
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A qualified trust owning more than 10% of a REIT may be required to
treat a percentage of dividends from the REIT as UBTI. The percentage is
determined by dividing the REIT's gross income, less direct expenses related
thereto, derived from an unrelated trade or business for the year (determined as
if the REIT were a qualified trust) by the gross income of the REIT for the year
in which the dividends are paid. However, if this percentage is less than 5%,
dividends are not treated as UBTI. These UBTI rules apply only if the REIT
qualifies as a REIT because of the change in the 50% test discussed above and if
the trust is predominantly held by qualified trusts. A REIT is predominantly
held by qualified trusts if at least one pension trust owns more than 25% of the
value of the REIT or a group of pension trusts each owning more than 10% of the
value of the REIT collectively own more than 50% of the value of the REIT.
For social clubs, voluntary employee benefit associations, supplemental
unemployment benefit trusts and qualified group legal services plans exempt from
federal income taxation under sections 501(c)(7), (c)(9), (c)(17) and (c)(20) of
the Code, respectively, income from an investment our securities will constitute
UBTI unless the organization is able to deduct an amount properly set aside or
placed in reserve for certain purposes so as to offset the unrelated business
taxable income generated by the investment our securities. These prospective
investors should consult their own tax advisors concerning the set aside and
reserve requirements.
TAXATION OF FOREIGN INVESTORS
The rules governing federal income taxation of nonresident alien
individuals, foreign corporations, foreign partnerships and other foreign
shareholders are complex. Prospective Non-U.S. Shareholders should consult with
their own tax advisors to determine the impact of federal, state and local
income tax laws with regard to an investment in common shares, including any
reporting requirements, as well as the tax treatment of an investment under the
laws of their home country.
STATE AND LOCAL TAXES
We may be subject to state or local taxation in various state or local
jurisdictions, including those in which we transact business. In addition, our
shareholders may also be subject to state or local taxation. Consequently,
prospective shareholders should consult their own tax advisors regarding the
effect of state and local tax laws on an investment in our securities.
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SELLING SECURITYHOLDERS
This Prospectus relates to the resale of 185,887 common shares (the
"Resale Securities") by the Selling Securityholder named herein (the "Selling
Securityholder").
The Resale Securities may be offered from time to time by the Selling
Securityholder. The following table provides the name of the Selling
Securityholder and the number of common shares beneficially owned and offered
hereby. Because the Selling Securityholder may offer all or some of the Resale
Securities, no estimate can be given as to the amount of shares that will be
held by the Selling Securityholder after completion of the offering.
<TABLE>
<CAPTION>
Name of Selling Number of Number of Shares
Securityholder (1) Shares Beneficially Owned Offered Hereby
------------------ ------------------------- --------------
<S> <C> <C>
State Street, LLC 185,887 185,887
</TABLE>
(1) A "Selling Securityholder" shall also include any person or entity that
receives Resale Securities as a result of (i) their pro rata distribution
by an entity to its equity holders, (ii) a gift, or (iii) a pledge. Any
Selling Securityholder who is not specifically named in the foregoing
table will be named in a supplement to the Prospectus if such a supplement
is required by the rules and regulations of the Securities and Exchange
Commission at the time such Selling Securityholder offers any Resale
Securities.
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PLAN OF DISTRIBUTION
This Prospectus relates to the resale of the Resale Securities by the
Selling Securityholder.
The Company is registering the Resale Securities on behalf of the
Selling Securityholder. As used herein, "Selling Securityholder" includes any
person or entity that receives Resale Securities as a result of (i) their pro
rata distribution by an entity to its equity holders, (ii) a gift, or (iii) a
pledge. All costs, expenses and fees (estimated to be $25,471) in connection
with the registration of the Resale Securities offered hereby will be borne by
the Company. Brokerage commissions and similar selling expenses, if any,
attributable to the sale of Resale Securities will be borne by the Selling
Securityholder. Sales of Resale Securities may be effected by the Selling
Securityholder from time to time in one or more types of transactions (which may
include block transactions) on the NYSE, in the over-the-counter market, in
negotiated transactions, through put or call options transactions relating to
the Resale Securities, through short sales of Resale Securities, or a
combination of such methods of sale, at market prices prevailing at the time of
sale, or at negotiated prices. Such transactions may or may not involve brokers
or dealers. The Selling Securityholder has not advised the Company that it has
entered into any agreements, understandings or arrangements with any
underwriters or broker-dealers regarding the sale of their securities, or that
there is an underwriter or coordinating broker acting in connection with the
proposed sale of Resale Securities by the Selling Securityholder.
The Selling Securityholder may effect such transactions by selling
Resale Securities directly to purchasers or to or through broker-dealers, which
may act as agents or principals. Such broker-dealers may receive compensation in
the form of discounts, concessions, or commissions from the Selling
Securityholder and/or the purchasers of Resale Securities for whom such
broker-dealers may act as agents or to whom they sell as principal, or both
(which compensation as to a particular broker-dealer might be in excess of
customary commissions).
The Selling Securityholder and any broker-dealers that act in
connection with the sale of Resale Securities might be deemed to be
"underwriters" within the meaning of Section 2(11) of the Securities Act, and
any commissions received by such broker-dealers and any profit on the resale of
the Resale Securities sold by them while acting as principals might be deemed to
be underwriting discounts or commissions under the Securities Act. The Company
has agreed to indemnify the Selling Securityholder against certain liabilities,
including liabilities arising under the Securities Act. The Selling
Securityholder may agree to indemnify any agent, dealer or broker-dealer that
participates in transactions involving sales of the Resale Securities against
certain liabilities, including liabilities arising under the Securities Act.
Because the Selling Securityholder may be deemed to be an "underwriter"
within the meaning of Section 2(11) of the Securities Act, the Selling
Securityholder will be subject to the prospectus delivery requirements of the
Securities Act, which may include
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delivery through the facilities of the NYSE pursuant to Rule 153 under the
Securities Act. The Company has informed the Selling Securityholder that the
anti-manipulative provisions of Regulation M promulgated under the Exchange Act
may apply to their sales in the market.
The Selling Securityholder also may resell all or a portion of the
Resale Securities in open market transactions in reliance upon Rule 144 under
the Securities Act, provided it meets the criteria and conform to the
requirements of such Rule.
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EXPERTS
Ernst & Young LLP, independent auditors, have audited the Company's
consolidated financial statements and schedule included in its Annual Report on
Form 10-K for the year ended December 31, 1998, as set forth in their report,
which is incorporated by reference in this prospectus and elsewhere in the
registration statement. The Company's financial statements and schedule are
incorporated by reference in reliance on Ernst & Young LLP's report, given on
their authority as experts in accounting and auditing.
The Statements of Income and Direct Operating Expenses of properties
purchased by the Company referred to below, incorporated herein by reference in
this prospectus and registration statement, have been incorporated herein in
reliance on the following reports of L.P. Martin & Company, P.C., independent
certified public accountants, also incorporated herein by reference, and upon
the authority of that firm as experts in accounting and auditing: (1) a report
dated February 5, 1998 with respect to the statement of income and direct
operating expenses exclusive of items not comparable to the proposed future
operations of the property Sterling Point Apartments for the twelve-month period
ended December 31, 1997, (2) a report dated April 8, 1998 with respect to the
statement of income and direct operating expenses exclusive of items not
comparable to the proposed future operations of the property Hampton Pointe
Apartments for the twelve-month period ended February 28, 1998, (3) a reported
dated April 8, 1998 with respect to the statement of income and direct operating
expenses exclusive of items not comparable to the proposed future operations of
the property Edgewood Knoll Apartments for the twelve-month period ended
February 28, 1998, (4) a report dated June 25, 1998 with respect to the
statement of income and direct operating expenses exclusive of items not
comparable to the proposed future operations of the property The Timbers
Apartments for the twelve-month period ended April 30, 1998, (5) a reported
dated August 6, 1998 with respect to the statement of income and direct
operating expenses exclusive of items not comparable to the proposed future
operations of the property The Gables Apartments for the twelve-month period
ended May 31, 1998, and (6) a report dated November 5, 1998 with respect to the
statement of income and direct operating expenses exclusive of items not
comparable to the proposed future operations of the property Cape Landing
Apartments for the twelve-month period ended September 30, 1998.
LEGAL MATTERS
Certain legal matters have been passed upon for the Company by McGuire,
Woods, Battle & Boothe LLP.
29
<PAGE>
- --------------------------------------------------------------------------------
No dealer, salesman or other person has been authorized to give any
information or to make any representations other than those contained in this
prospectus in connection with the offering made by this prospectus, and, if
given or made, any other information or representations must not be relied upon.
This prospectus doe snot constitute an offer in any state in which an offer may
not legally be made. The deliver of this prospectus at any time does not imply
that information contained in this prospectus has not changed as of any time
after its date.
--------------------
TABLE OF CONTENTS
Page
The Company...................................... 7
Risk Factors..................................... 8
Description of Capital Stock of the Company...... 9
Federal Income Tax Considerations................ 15
Selling Securityholders.......................... 26
Plan of Distribution............................. 27
Experts.......................................... 29
Legal Matters.................................... 29
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
CORNERSTONE REALTY INCOME TRUST, INC.
-----------------------
PROSPECTUS
-----------------------
January 18, 2000
- --------------------------------------------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth estimates of the various expenses to be
paid by Cornerstone Realty Income Trust, Inc. (the "Company") in connection with
the registration of the offering of the Resale Securities.
Securities and Exchange Commission Registration Fee......... $ 471
Fees and Expenses of Counsel................................ 15,000
Miscellaneous............................................... 10,000
TOTAL................................................. $ 25,471
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Virginia law and our Articles of Incorporation provide that our
directors and officers shall have no liability to the Company or its
shareholders in certain actions by or in the right of the Company unless such
officer or director has engaged in willful misconduct or a knowing violation of
the criminal law or of any federal or state securities laws. Generally,
claimants must look solely to the Company's property for satisfaction of claims
arising in connection with the affairs of the Company.
The Articles of Incorporation provide that the Company shall indemnify
any present or former director or officer against any expense or liability in an
action brought against such person if the directors (excluding the indemnified
party) determine in good faith that the director or officer was acting in good
faith within what he reasonably believed to be the scope of his authority and
for a purpose which he reasonably believed to be in the best interests of the
Company or its shareholders, and that the liability was not the result of
misconduct, bad faith, negligence, reckless disregard of duties or violation of
the criminal law. Indemnification is not allowed for any liability imposed by
judgment, and associated costs, including attorneys' fees, arising from or out
of a violation of federal or state securities laws associated with the public
offering of the common shares unless (i) there has been a successful
adjudication on the merits of each count involving alleged securities law
violations as to the particular indemnitee, or (ii) such claims have been
dismissed with prejudice on the merits by a court of competent jurisdiction as
to the particular indemnitee, or (iii) a court of competent jurisdiction
approves a settlement of the claims against a particular indemnitee.
Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers or persons controlling the
Company pursuant to the foregoing provisions, the Company has been informed that
in the opinion of the Securities and Exchange Commission such indemnification is
against public policy as expressed in the Act and is therefore unenforceable.
II-1
<PAGE>
ITEM 16. EXHIBITS
<TABLE>
<CAPTION>
Exhibit No. Description
- ----------- -----------
<S> <C>
3.1 Amended and Restated Articles of Incorporation of the Company,
as amended (Incorporated herein by reference to Exhibit 3.1
included in the Company's Reports on Form 8-K dated May 12,
1998 and July 23, 1999; File No. 1-12875).
3.2 Bylaws of the Company (Amended Through July 15, 1999)
(Incorporated herein by reference to Exhibit 3.3 included in
the Company's Report on Form 8-K dated July 23, 1999; File No.
1-12875).
5 Opinion of McGuire, Woods, Battle & Boothe LLP re legality (Filed herewith)
8 Opinion of McGuire, Woods, Battle & Boothe LLP re tax matters (Filed herewith)
23.1 Consent of McGuire, Woods, Battle & Boothe LLP (included as part of Exhibits 5 and 8)
23.2 Consent of Ernst & Young LLP (Filed herewith)
23.3 Consent of L.P. Martin & Company, P.C. (Filed herewith)
24.1 Power of Attorney of Glenn W. Bunting, Jr. (Filed herewith)
24.2 Power of Attorney of Glade M. Knight (Filed herewith)
24.3 Power of Attorney of Penelope W. Kyle (Filed herewith)
24.4 Power of Attorney of Stanley J. Olander, Jr. (Filed herewith)
24.5 Power of Attorney of Henry J. Taubenfeld (Filed herewith)
24.6 Power of Attorney of Martin Zuckerbrod (Filed herewith)
</TABLE>
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 the Registration Statement:
(i) To include any prospectus required by Section 10(a)(3)
of the Securities Act;
(ii) To reflect in the prospectus any facts or events arising
after the effective date of the 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 the
Registration Statement. Notwithstanding the foregoing,
any increase or decrease in volume of securities offered
(if the total dollar value of securities offered 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 pursuant to Rule
424(b) if, in the aggregate, the changes in volume and
price represent no more than a 20% change in the maximum
II-2
<PAGE>
aggregate offering price set forth in the "Calculation
of Registration Fee" table in the effective Registration
Statement; and
(iii) To include any material information with respect to the
plan of distribution not previously disclosed in the
Registration Statement or any material change to such
information in the Registration Statement.
Provided, however, that the undertakings set forth in paragraphs (a)(1)
(i) and (a)(1)(ii) do not apply if the information required to be
included in a post-effective amendment by those paragraphs is contained
in periodic reports filed with or furnished to the Commission 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 of 1933, each filing of the
registrant's annual report pursuant to Section 13(a) or Section 15(d) of the
Securities Exchange Act of 1934 (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to Section 15(d) of the
Securities Exchange Act of 1934) that is incorporated by reference in the
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 liability arising under the Securities Act
may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions described under Item 15 above,
or otherwise, the registrant has been advised that in the opinion of the
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 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.
II-3
<PAGE>
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 Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Richmond, State of Virginia, on January 18, 2000.
CORNERSTONE REALTY INCOME TRUST, INC.
By: /s/ Stanley J. Olander, Jr.
-----------------------------
Stanley J. Olander, Jr.
Director, Chief Financial
Officer and Secretary
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the date indicated:
<TABLE>
<CAPTION>
Name Title Date
---- ----- ----
<S> <C> <C>
* Chairman of the Board of January 18,2000
- ------------------------------ Directors, Chief Executive Officer
Glade M. Knight and President
/s/ Stanley J. Olander, Jr.
- ------------------------------ Director, Chief Financial Officer and Secretary January 18, 2000
Stanley J. Olander, Jr.
*
- ------------------------------- Director January 18, 2000
Harry S. Taubenfeld
*
- ------------------------------- Director January 18, 2000
Martin Zuckerbrod
*
- ------------------------------- Director January 18, 2000
Glenn W. Bunting, Jr.
*
- ------------------------------- Director January 18, 2000
Penelope W. Kyle
- ------------------------------- Director January 18, 2000
Leslie A. Grandis
*By: /s/ Stanley J. Olander, Jr.
- -------------------------------
Stanley J. Olander, Jr.
(Attorney-In-Fact)
</TABLE>
II-4
EXHIBIT 5
MCGUIRE WOODS
BATTLE & BOOTHE LLP
One James Center
901 East Cary Street
Richmond, Virginia 23219-4030
Telephone/TDD (804) 775-1000 o Fax (804) 775-1061
January 18, 2000
Board of Directors
Cornerstone Realty Income Trust, Inc.
306 East Main Street
Richmond, Virginia 23219
Ladies and Gentlemen:
We have acted as counsel to Cornerstone Realty Income Trust, Inc. (the
"Company"), a Virginia corporation, in connection with the preparation of a
registration statement on Form S-3 (the "Registration Statement"), pertaining to
the registration for resale by certain selling shareholders of 185,887 common
shares of the Company (the "Common Shares"), to which this opinion is an
exhibit. The Registration Statement is being filed with the Securities and
Exchange Commission under the Securities Act of 1933, as amended (the "Act").
Terms not otherwise defined herein shall have the meanings assigned to them in
the Registration Statement.
We have reviewed originals or copies of (i) the Amended and Restated
Articles of Incorporation (as amended), Bylaws and other corporate documents of
the Company, and (ii) the Registration Statement. In addition, we have reviewed
such other documents and have made such legal and factual inquiries as we have
deemed necessary or advisable for purposes of rendering the opinions set forth
below. Where we have considered it appropriate, as to certain facts we have
relied without investigation or analysis of any underlying data contained
therein, upon representations of officers or other appropriate representatives
of the Company
Based on and subject to the foregoing and the further limitations and
qualifications hereinafter expressed, we are of the opinion that:
(1) The Company is duly organized and validly existing under the laws
of the Commonwealth of Virginia; and
<PAGE>
(2) The Common Shares registered under the Registration Statement
have been duly authorized and, when sold as described in the
Registration Statement, will be validly issued, fully paid and
nonassessable shares.
Our opinions expressed herein are as of the date hereof, and we
undertake no obligation to advise you of any changes in applicable law or any
other matters that may come to our attention after the date hereof that may
affect our opinions expressed herein.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement. In giving this consent, we do not admit that we are in
the category of persons whose consent is required by Section 7 of the Act or the
rules and regulations promulgated thereunder by the Securities and Exchange
Commission.
Very truly yours,
/s/ McGuire, Woods, Battle & Boothe LLP
EXHIBIT 8
MCGUIRE WOODS
BATTLE & BOOTHE LLP
One James Center
901 East Cary Street
Richmond, Virginia 23219-4030
Telephone/TDD (804) 775-1000 o Fax (804) 775-1061
January 18, 2000
Board of Directors
Cornerstone Realty Income Trust, Inc.
306 East Main Street
Richmond, VA 23219
Ladies and Gentlemen:
We have acted as counsel to Cornerstone Realty Income Trust, Inc. (the
"Company"), a Virginia corporation, in connection with the preparation of the
registration statement on Form S-3 to which this opinion is attached as an
exhibit (the "Registration Statement"). The Company filed the Registration
Statement with the Securities and Exchange Commission under the Securities Act
of 1933, as amended (the "Act"), to register under the Act 185,887 Common Shares
of the Company. Terms not otherwise defined herein shall have the meanings
assigned to them in the Registration Statement.
The Company has elected to be treated as a real estate investment trust
("REIT") for federal income tax purposes commencing with its taxable year ended
December_31, 1993. The Company's initial and continuing qualification as a REIT
depends upon the satisfaction of various requirements under the Internal Revenue
Code of 1986, as amended (the "Code"). The satisfaction of those requirements
generally is within the control of the Company's Board of Directors and
officers, who have been engaged to conduct the affairs of the Company under the
supervision of the Board of Directors. This opinion is based upon various
assumptions and is conditioned upon certain representations as to factual
matters made by the Company through a certificate of an officer of the Company
(the Officers Certificate), a copy of which is attached hereto.
After reasonable inquiry of the officers of the Company, we are not
aware of any facts or circumstances contrary to or inconsistent with the
foregoing representations and assumptions. To the extent the representations set
forth in the Officers Certificate are with respect to matters
<PAGE>
set forth in the Code or Treasury Regulations, we have reviewed with the
individual making such representations the relevant provisions of the Code, the
applicable Treasury Regulations and published administrative interpretations
thereof.
We have reviewed originals or copies of (i) the Amended and Restated
Articles of Incorporation (as amended), Bylaws and other corporate documents of
the Company, (ii) certain resolutions of the Board of Directors of the Company,
and (iii) the Registration Statement and the prospectus included therein (the
"Prospectus"). In addition, we have reviewed such other documents and have made
such legal and factual inquiries as we have deemed necessary or advisable for
purposes of rendering the opinions set forth below. We have assumed the
genuineness of all signatures, the authenticity of all documents submitted to us
as originals, the conformity to authentic original documents of all documents
submitted to us as copies, and the accuracy and completeness of all records made
available to us.
We are opining herein only as to the federal income tax laws of the
United States and we express no opinion with respect to the applicability
thereto, or the effect thereon, of other federal laws, the laws of any other
jurisdiction or as to any matters of municipal law or the laws of any other
local agencies within any state.
Based on the foregoing documents, representations, and assumptions
being, and continuing to be, accurate, and subject to the qualifications
hereinafter set forth, we are of the opinion that:
1. The Company qualified as a REIT for its taxable years ended December
31, 1993 through December 31, 1999, and, as of the date hereof, its proposed
method of operation would enable it to continue to meet the requirements for
qualification and taxation as a REIT under the Code;
2. Provided that a shareholder which is an Exempt Organization (i) does
not incur any "acquisition indebtedness" as defined in Section 514(c) of the
Code in connection with its acquisition of Shares and (ii) does not hold the
Shares as stock in trade, inventory, or property held primarily for sale to
customers in the ordinary course of business, dividends paid by the Company to
such shareholder will not constitute unrelated business taxable income under
Section 512 of the Code even if the Company owns "debt-financed property" as
that term is defined in Section 514(b) of the Code; and
3. The statements and legal conclusions contained in the Registration
Statement under the captions and "Federal Income Tax Considerations" describe
the material federal income tax aspects of the offering made by the Registration
Statement applicable to the Company and the shareholders, are correct in all
material respects, and the discussion thereunder does not omit any material
provision with respect to the matters covered.
No opinion is expressed as to any matter not discussed herein.
<PAGE>
Any variation or difference in the facts from those set forth in the
Officers Certificate or the other representations and assumptions described
above may affect the conclusions stated herein. With respect to our opinion
contained in paragraph 1 above, you should note that the continued qualification
and taxation of the Company as a REIT under the Code will depend upon the
Company's ability, through its actual operations, to meet the qualification
tests imposed by Section 856(c)(2), (3), (4) and (5) of the Code. The Companys
ability to satisfy such tests may be affected by, inter alia, the Companys
actual annual operating results, distribution levels, diversity of stock
ownership, and changes in the Companys current method of operation. No
prediction as to those actual operating results is implied by our opinion.
The foregoing opinions are based solely on the provisions of the Code,
the Treasury Regulations promulgated thereunder and the judicial and
administrative rulings, pronouncements and decisions all as they exist as of
this date and all of which are subject to change, which change may be
retroactively applied, or possible differing interpretations that may affect the
conclusions stated herein. To the extent this opinion relies upon recent tax
legislation, and recently promulgated Treasury Regulations, no assurance can be
given as to the interpretations of such recent legislation that will be
reflected in applicable Internal Revenue Service rulings and future Treasury
Regulations, which could be applied retroactively. Any changes to the foregoing
authorities might result in modifications to our opinions contained herein.
Further, this opinion does not purport to deal with certain types of investors
subject to special treatment under the federal income tax laws.
We hereby consent to the reference to our firm under the captions
"Federal Income Tax Considerations" and "Certain Legal Matters" in the
Registration Statement and to the filing of this opinion as an exhibit to the
Registration Statement. In giving this consent, we do not admit that we are in
the category of persons whose consent is required by Section_7 of the Act or the
rules and regulations promulgated thereunder by the Securities and Exchange
Commission.
Very truly yours,
/s/ McGuire, Woods, Battle & Boothe LLP
EXHIBIT 23.2
CONSENT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" in the
Registration Statement Form (S-3 No. 333-00000) and related Prospectus of
Cornerstone Realty Income Trust, Inc. for the registration of 185,887 shares of
its common stock and to the incorporation by reference therein of our report
dated January 25, 1999, with respect to the consolidated financial statements
and schedule of Cornerstone Realty Income Trust, Inc. included in its Annual
Report (Form 10-K) for the year ended December 31, 1998, filed with the
Securities and Exchange Commission.
/s/ Ernst & Young LLP
Richmond, VA
January 17, 2000
EXHIBIT 23.3
L. P. MARTIN & COMPANY, P.C.
4132 INNSLAKE DRIVE
GLEN ALLEN, VIRGINIA 23060
PHONE: 804-346-2626
FAX: 804-346-9311
CONSENT OF INDEPENDENT AUDITORS
The Board of Directors
Cornerstone Realty Income Trust, Inc.
306 East Main Street
Richmond, Virginia 23219
We hereby consent to the incorporation by reference of the following reports
prepared by us in a Registration Statement on Form S-3 to be filed with the
Securities and Exchange Commission by Cornerstone Realty Income Trust, Inc.:
The following reports pertaining to properties acquired by Cornerstone
Realty Income Trust, Inc.: (1) Our report dated February 5, 1998 with respect to
the statement of income and direct operating expenses exclusive of items not
comparable to the proposed future operations of the property Sterling Point
Apartments for the twelve-month period ended December 31, 1997, (2) our report
dated April 8, 1998 with respect to the statement of income and direct operating
expenses exclusive of items not comparable to the proposed future operations of
the property Hampton Pointe Apartments for the twelve-month period ended
February 28, 1998, (3) our report dated April 8, 1998 with respect to the
statement of income and direct operating expenses exclusive of items not
comparable to the proposed future operations of the property Edgewood Knoll
Apartments for the twelve-month period ended February 28, 1998, (4) our report
dated June 25, 1998 with respect to the statement of income and direct operating
expenses exclusive of items not comparable to the proposed future operations of
the property The Timbers Apartments for the twelve-month period ended April 30,
1998, (5) our report dated August 6, 1998 with respect to the statement of
income and direct operating expenses exclusive of items not comparable to the
proposed future operations of the property The Gables Apartments for the
twelve-month period ended May 31, 1998, and (6) our report dated November 5,
1998 with respect to the statement of income and direct operating expenses
exclusive of items not comparable to the proposed future operations of the
property Cape Landing Apartments for the twelve-month period ended September 30,
1998.
/s/ L. P. Martin & Company, P. C.
Richmond, Virginia
January 17, 2000
EXHIBIT 24.1
POWER OF ATTORNEY
The undersigned director of Cornerstone Realty Income Trust, Inc., a
Virginia corporation (the "Corporation"), hereby constitutes and appoints Glade
M. Knight and Stanley J. Olander, Jr. as the undersigned's true and lawful
attorneys-in-fact, with full power and authority to act, either jointly or
separately, in the name of the undersigned and on behalf of the undersigned in
connection with the registration on Form S-3 of 185,887 common shares of the
Corporation for resale by the holder thereof (the "Securities Matters"). Without
limiting the scope of the foregoing, the undersigned acknowledges and agrees
that each attorney-in-fact named above shall have the authority to take all of
the following actions: (1) to execute, in the name of the undersigned,
registration statements and other documents (including amendments) relating to
the Securities Matters; (2) to file such documents, on behalf of the
undersigned, with the United States Securities and Exchange Commission and with
state securities commissions; and (3) to perform any and all other acts that are
necessary, appropriate or convenient to accomplish, or are related to, the
foregoing.
Effective Date: January 11, 2000 /s/ Glenn W. Bunting, Jr.
--------------------------
Glenn W. Bunting, Jr.
EXHIBIT 24.2
POWER OF ATTORNEY
The undersigned director of Cornerstone Realty Income Trust, Inc., a
Virginia corporation (the "Corporation"), hereby constitutes and appoints Glade
M. Knight and Stanley J. Olander, Jr. as the undersigned's true and lawful
attorneys-in-fact, with full power and authority to act, either jointly or
separately, in the name of the undersigned and on behalf of the undersigned in
connection with the registration on Form S-3 of 185,887 common shares of the
Corporation for resale by the holder thereof (the "Securities Matters"). Without
limiting the scope of the foregoing, the undersigned acknowledges and agrees
that each attorney-in-fact named above shall have the authority to take all of
the following actions: (1) to execute, in the name of the undersigned,
registration statements and other documents (including amendments) relating to
the Securities Matters; (2) to file such documents, on behalf of the
undersigned, with the United States Securities and Exchange Commission and with
state securities commissions; and (3) to perform any and all other acts that are
necessary, appropriate or convenient to accomplish, or are related to, the
foregoing.
Effective Date: January 11, 2000 /s/ Glade M. Knight
--------------------
Glade M. Knight
EXHIBIT 24.3
POWER OF ATTORNEY
The undersigned director of Cornerstone Realty Income Trust, Inc., a
Virginia corporation (the "Corporation"), hereby constitutes and appoints Glade
M. Knight and Stanley J. Olander, Jr. as the undersigned's true and lawful
attorneys-in-fact, with full power and authority to act, either jointly or
separately, in the name of the undersigned and on behalf of the undersigned in
connection with the registration on Form S-3 of 185,887 common shares of the
Corporation for resale by the holder thereof (the "Securities Matters"). Without
limiting the scope of the foregoing, the undersigned acknowledges and agrees
that each attorney-in-fact named above shall have the authority to take all of
the following actions: (1) to execute, in the name of the undersigned,
registration statements and other documents (including amendments) relating to
the Securities Matters; (2) to file such documents, on behalf of the
undersigned, with the United States Securities and Exchange Commission and with
state securities commissions; and (3) to perform any and all other acts that are
necessary, appropriate or convenient to accomplish, or are related to, the
foregoing.
Effective Date: January 11, 2000 /s/ Penelope W. Kyle
---------------------
Penelope W. Kyle
EXHIBIT 24.4
POWER OF ATTORNEY
The undersigned director of Cornerstone Realty Income Trust, Inc., a
Virginia corporation (the "Corporation"), hereby constitutes and appoints Glade
M. Knight and Stanley J. Olander, Jr. as the undersigned's true and lawful
attorneys-in-fact, with full power and authority to act, either jointly or
separately, in the name of the undersigned and on behalf of the undersigned in
connection with the registration on Form S-3 of 185,887 common shares of the
Corporation for resale by the holder thereof (the "Securities Matters"). Without
limiting the scope of the foregoing, the undersigned acknowledges and agrees
that each attorney-in-fact named above shall have the authority to take all of
the following actions: (1) to execute, in the name of the undersigned,
registration statements and other documents (including amendments) relating to
the Securities Matters; (2) to file such documents, on behalf of the
undersigned, with the United States Securities and Exchange Commission and with
state securities commissions; and (3) to perform any and all other acts that are
necessary, appropriate or convenient to accomplish, or are related to, the
foregoing.
Effective Date: January 11, 2000 /s/ Stanley J. Olander, Jr.
----------------------------
Stanley J. Olander, Jr.
EXHIBIT 24.5
POWER OF ATTORNEY
The undersigned director of Cornerstone Realty Income Trust, Inc., a
Virginia corporation (the "Corporation"), hereby constitutes and appoints Glade
M. Knight and Stanley J. Olander, Jr. as the undersigned's true and lawful
attorneys-in-fact, with full power and authority to act, either jointly or
separately, in the name of the undersigned and on behalf of the undersigned in
connection with the registration on Form S-3 of 185,887 common shares of the
Corporation for resale by the holder thereof (the "Securities Matters"). Without
limiting the scope of the foregoing, the undersigned acknowledges and agrees
that each attorney-in-fact named above shall have the authority to take all of
the following actions: (1) to execute, in the name of the undersigned,
registration statements and other documents (including amendments) relating to
the Securities Matters; (2) to file such documents, on behalf of the
undersigned, with the United States Securities and Exchange Commission and with
state securities commissions; and (3) to perform any and all other acts that are
necessary, appropriate or convenient to accomplish, or are related to, the
foregoing.
Effective Date: January 11, 2000 /s/ Harry S.Taubenfeld
------------------
Harry S. Taubenfeld
EXHIBIT 24.6
The undersigned director of Cornerstone Realty Income Trust, Inc., a
Virginia corporation (the "Corporation"), hereby constitutes and appoints Glade
M. Knight and Stanley J. Olander, Jr. as the undersigned's true and lawful
attorneys-in-fact, with full power and authority to act, either jointly or
separately, in the name of the undersigned and on behalf of the undersigned in
connection with the registration on Form S-3 of 185,887 common shares of the
Corporation for resale by the holder thereof (the "Securities Matters"). Without
limiting the scope of the foregoing, the undersigned acknowledges and agrees
that each attorney-in-fact named above shall have the authority to take all of
the following actions: (1) to execute, in the name of the undersigned,
registration statements and other documents (including amendments) relating to
the Securities Matters; (2) to file such documents, on behalf of the
undersigned, with the United States Securities and Exchange Commission and with
state securities commissions; and (3) to perform any and all other acts that are
necessary, appropriate or convenient to accomplish, or are related to, the
foregoing.
Effective Date: January 11, 2000 /s/ Martin Zuckerbrod
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Martin Zuckerbrod
