<PAGE> 1
As filed pursuant to Rule 424(b)(2)
under the Securities Act of 1933
Registration No. 333-16787
PROSPECTUS SUPPLEMENT
(To Prospectus Dated August 5, 1997)
1,000,000 SHARES
THE PRICE REIT, INC.
COMMON STOCK
($.01 PAR VALUE)
All of the 1,000,000 shares of Common Stock, $.01 par value per share (the
"Common Stock"), of The Price REIT, Inc. (the "Company") offered hereby are
being offered by the Company.
The Company's Common Stock is listed on the New York Stock Exchange ("NYSE")
under the trading symbol "RET." On August 4, 1997, the last reported sale price
of the Company's Common Stock as reported on the NYSE Composite Tape was
$38.375. See "Price Range of Common Stock and Distributions." To help ensure
that the Company qualifies as a real estate investment trust, the transfer of
Common Stock is restricted and ownership by any person is limited to 9.8% of the
outstanding shares of its capital stock, subject to certain exceptions. See
"Description of Stock -- Restrictions on Transfer" in the accompanying
Prospectus.
SEE "RISK FACTORS" BEGINNING ON PAGE S-14 FOR A DISCUSSION OF CERTAIN FACTORS
THAT SHOULD BE CONSIDERED BY PROSPECTIVE INVESTORS IN THE COMMON STOCK OFFERED
HEREBY.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS SUPPLEMENT OR THE ACCOMPANYING
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
<TABLE>
<S> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------
PRICE TO UNDERWRITING PROCEEDS TO
PUBLIC(1) DISCOUNT(1)(2) COMPANY
Per Share...................................... $37.50 $0.00 $37.50
Total.......................................... $37,500,000 $0 $37,500,000
- -----------------------------------------------------------------------------------------------------
</TABLE>
(1) Plus a service charge of $.05 per share payable by the purchaser to Salomon
Brothers Inc.
(2) The Company has agreed to indemnify the Underwriter against certain
liabilities, including liabilities under the Securities Act of 1933, as
amended. See "Underwriting."
The shares of Common Stock are offered subject to receipt and acceptance by the
Underwriter, to prior sale and to the Underwriter's right to reject any order in
whole or in part and to withdraw, cancel or modify the offer without notice. It
is expected that delivery of the shares of Common Stock will be made at the
office of Salomon Brothers Inc, Seven World Trade Center, New York, New York, or
through the facilities of The Depository Trust Company, on or about August 11,
1997.
- -------------------------------------------------------
SALOMON BROTHERS INC
- --------------------------------------------------------------------------------
The date of this Prospectus Supplement is August 5, 1997.
<PAGE> 2
TABLE OF CONTENTS
PROSPECTUS SUPPLEMENT
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Available Information................................................................. S-3
Prospectus Supplement Summary......................................................... S-4
The Company......................................................................... S-4
Recent Developments................................................................. S-5
The Properties...................................................................... S-7
The Offering........................................................................ S-11
Distribution Policy................................................................. S-11
Summary Selected Financial Data..................................................... S-12
Risk Factors.......................................................................... S-14
Use of Proceeds....................................................................... S-15
Capitalization........................................................................ S-16
Price Range of Common Stock and Distributions......................................... S-16
Underwriting.......................................................................... S-17
Legal Matters......................................................................... S-18
Experts............................................................................... S-18
PROSPECTUS
Available Information................................................................. 2
Incorporation of Certain Documents by Reference....................................... 2
The Company........................................................................... 4
Tax Status of the Company............................................................. 4
Use of Proceeds....................................................................... 4
Earnings to Fixed Charges Ratios...................................................... 4
Description of Debt Securities........................................................ 5
Description of Stock.................................................................. 14
Description of Warrants............................................................... 19
Federal Income Tax Considerations..................................................... 20
Plan of Distribution.................................................................. 26
Experts............................................................................... 28
Legal Matters......................................................................... 28
</TABLE>
------------------------
CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE COMMON STOCK,
INCLUDING STABILIZING AND SYNDICATE COVERING TRANSACTIONS AND THE IMPOSITION OF
A PENALTY BID. FOR A DESCRIPTION OF THESE ACTIVITIES, SEE "UNDERWRITING."
S-2
<PAGE> 3
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and other applicable
legal or NYSE requirements, pursuant to which the Company files reports, proxy
statements and other information with the Securities and Exchange Commission
(the "Commission"). Such reports, proxy statements and other information filed
by the Company under the Exchange Act may be examined without charge at, or
copies obtained upon payment of prescribed fees from, the Public Reference
Section of the Commission at Judiciary Plaza Office Building, 450 Fifth Street,
N.W., Washington, D.C. 20549 and will also be available for inspection and
copying at the regional offices of the Commission located at 7 World Trade
Center, 13th Floor, New York, New York 10048 and at Citicorp Center, Suite 1400,
500 West Madison Street, Chicago, Illinois 60661, and at the New York Stock
Exchange, Inc., 20 Broad Street, New York, New York 10005. Electronic filings
made through the Electronic Data Gathering, Analysis and Retrieval System are
publicly available through the Commission's Web site (http://www.sec.gov).
S-3
<PAGE> 4
PROSPECTUS SUPPLEMENT SUMMARY
THE FOLLOWING INFORMATION CONTAINED IN THIS PROSPECTUS SUPPLEMENT SUMMARY
IS QUALIFIED IN ITS ENTIRETY BY THE DETAILED INFORMATION APPEARING ELSEWHERE IN
THIS PROSPECTUS SUPPLEMENT OR THE ACCOMPANYING PROSPECTUS OR INCORPORATED HEREIN
OR THEREIN BY REFERENCE. CERTAIN TERMS USED BUT NOT DEFINED HEREIN ARE AS
DEFINED IN THE ACCOMPANYING PROSPECTUS. THE PROPERTY INFORMATION PRESENTED
HEREIN AS OF JUNE 30, 1997 INCLUDES THE COMPANY'S PROPERTY IN CERRITOS,
CALIFORNIA, WHICH THE COMPANY SOLD ON JULY 9, 1997.
THE COMPANY
The Price REIT, Inc. (the "Company") is a self-administered and
self-managed equity real estate investment trust (a "REIT") which is focused on
the acquisition, development, management and redevelopment of destination retail
shopping center properties known as "power centers." After the Company's recent
sale of its Cerritos, California property, the Company currently owns or has
interests in 31 properties, consisting of 26 power and community centers, one
stand alone retail warehouse, two projects under development and two undeveloped
land parcels (the "Properties") located in ten states containing approximately
6.1 million square feet of gross leasable space with approximately 403 tenants.
The overall occupancy rate of the power and community centers was approximately
98.4% at June 30, 1997.
Power centers are typically open-air centers ranging in size from 200,000
to 700,000 square feet of gross leasable area, and are usually comprised of one
or more national retail anchor tenants, often in a warehouse format. Anchor
retail tenants typically occupy between 60% and 90% of the total square footage
in a power center. The tenant mix in a power center is designed to draw
consumers from up to a 15-mile radius, creating a shopping "destination." The
majority of the Company's anchor tenants are retail warehouses, which are
consumer-oriented facilities with at least 25,000 to 100,000 square feet of
gross leasable area offering a variety of products for business use, personal
use or resale. The retail warehouse format of merchandise display, direct
manufacturer purchasing, low mark-ups and rapid inventory turnover is designed
to provide substantial consumer savings compared to other sources of similar
merchandise.
Each of the Company's power centers is anchored by one or more national
retail tenants such as Home Depot, Costco, HomeBase, The Sports Authority,
Burlington Coat Factory, Target, Staples, T.J. Maxx, Circuit City, Toys 'R' Us
or Sears Homelife. The Company typically seeks to structure tenant leases as
"triple net" leases, under the terms of which the tenant is responsible for its
pro rata share of costs and expenses associated with the ongoing operation of
the property, including but not limited to real property taxes and assessments,
repairs and maintenance, and insurance. The anchor tenants generally have
primary lease terms of ten to twenty years and smaller tenants typically have
primary lease terms of five to ten years. The Company's leases generally provide
for contractual rent increases over the life of the lease based on a fixed
amount or consumer price indices, and, in certain cases, percentage rent,
calculated as a percentage of a tenant's gross sales above a predetermined
threshold.
The Company's strategy is to continue to acquire, develop, own and manage
power centers anchored by national retail tenants who enter into long term
triple net leases. The Company's business objective is to increase its funds
from operations per share through the acquisition and development of additional
properties, contractual rent increases and percentage rent, reletting of
existing space at higher rents and expansion or remodeling of existing
properties.
The Company intends to pursue opportunities for acquisitions with expansion
potential and to develop additional power centers and community centers and
stand-alone retail warehouses. The Company conducts its development activities,
including site planning, construction management and leasing, primarily through
its in-house personnel.
The Company operates in a manner to qualify as a REIT under Sections
856-860 of the Internal Revenue Code of 1986, as amended (the "Code"). Under
those sections of the Code, the Company must distribute at least 95% of its
taxable income and meet certain other asset and income tests. As a result,
pretax income of the Company flows through to its stockholders who are taxed on
the income on their individual income tax returns eliminating the double
taxation (at the corporate and stockholder levels) that generally results from
investment in a corporation.
The Company's principal executive office is located at 7979 Ivanhoe Avenue,
Suite 524, La Jolla, California 92037, and its telephone number is (619)
551-2320. The Company's administrative office is located at 145 South Fairfax
Avenue, Fourth Floor, Los Angeles, California 90036, and its telephone number is
(213) 937-8200.
S-4
<PAGE> 5
RECENT DEVELOPMENTS
SECOND QUARTER RESULTS
On July 24, 1997 the Company announced that its second quarter net income
was $5.7 million, an increase of 39% from $4.1 million for the same period in
1996, and that its second quarter funds from operations were $9.7 million, an
increase of 34% from $7.2 million for the same period in 1996. In addition, net
income for the six months ended June 30, 1997 was $11.1 million, an increase of
35% from $8.2 million for the same period in 1996, and the Company's funds from
operations for the six months ended June 30, 1997 were $18.4 million, an
increase of 29% from $14.3 million for the same period in 1996. The weighted
average number of shares for the three and six month periods ended June 30, 1997
were 10,678,000 and 10,488,000, respectively, and the weighted average number of
shares for the three and six month periods ended June 30, 1996 were 8,353,000
and 8,334,000, respectively. For additional information regarding the Company's
second quarter results see the Company's Current Report on Form 8-K, dated July
25, 1997, incorporated by reference into the accompanying Prospectus.
RECENT ACQUISITIONS, PROPERTY DEVELOPMENT AND DISPOSITION
- CERRITOS DISPOSITION. On July 9, 1997, the Company sold its Cerritos,
California property for $17.4 million in a transaction designed to enable
the sale to qualify as a tax-deferred exchange under Section 1031 of the
Code. If the Company completes the transaction as a tax-deferred exchange
by identifying and acquiring one or more replacement properties within the
time limits prescribed by the Code, the Company will not currently
recognize gain on the sale of the Cerritos property. No assurance can be
given, however, that the sale of the Cerritos property will be completed
as a tax-deferred exchange. The sale of the center resulted in a book gain
of approximately $4.2 million.
- VIRGINIA ACQUISITION. On May 14, 1997, the Company acquired Smoketown
Stations Center located in Woodbridge, Virginia. Smoketown Stations Center
contains 483,000 rentable square feet and is anchored by Lowe's Home
Center, Shoppers Food Warehouse, Kids 'R' Us, Zany Brainy, Super Trak
Auto, Best Buy, PetsMart and Super Crown Books and is 95.8% leased. The
purchase price of this property was $46.5 million.
- AUSTIN ACQUISITION. On April 1, 1997, the Company acquired Arboretum
Crossing located in Austin, Texas. Arboretum Crossing contains 182,000
rentable square feet and is anchored by Circuit City, Babies 'R' Us, Cost
Plus, Designer Shoe Warehouse, Just for Feet and Mikasa and is 98% leased.
The purchase price of this property was $23.4 million.
- GREENSBORO ACQUISITION. On March 31, 1997, the Company acquired Wendover
Ridge Retail Center located in Greensboro, North Carolina. Wendover Ridge
contains 41,000 rentable square feet and is anchored by Staples and
David's Bridal and is 100% leased. The purchase price of this property was
$4.98 million.
- DALLAS ACQUISITION. On March 28, 1997, the Company acquired City Place
Market located in Dallas, Texas. City Place Market contains 84,000
rentable square feet and is anchored by Office Max and Ross Dress for Less
and is 100% leased. The purchase price of the property was $8.75 million.
- RICHARDSON ACQUISITION. On March 20, 1997, the Company acquired
Richardson Plaza Shopping Center located in Richardson, Texas. Richardson
Plaza contains 116,000 rentable square feet and is anchored by Office Max
and Bally's Total Fitness and is 100% leased. The purchase price of the
property was $8.5 million.
- GARLAND ACQUISITION. On March 19, 1997 the Company acquired the
Broadmoor Village Shopping Center located in Garland, Texas. Broadmoor
Village contains 62,000 rentable square feet and is anchored by Drug
Emporium, Office Depot and Blockbuster Music and is 100% leased. The
purchase price of this property was $4.75 million.
- KANSAS ACQUISITION. On January 16, 1997, the Company acquired Westgate
Market located in Wichita, Kansas. Westgate Market contains 134,000
rentable square feet and is anchored by Best Buy, T.J. Maxx and Michael's
and is 100% leased. The purchase price of this property was $9.8 million.
S-5
<PAGE> 6
- NEW YORK DEVELOPMENT. On July 15, 1996, the Company announced the
commencement of construction of a 270,000 square foot retail center in
Long Island, New York. The development, estimated to cost approximately
$23 million, is pursuant to a joint venture of the Company and King Kullen
Grocery Company, a Long Island grocery chain. Based on executed leases,
the center will be anchored by King Kullen and national tenants such as
Borders Books & Music, HomePlace, The Sports Authority and Babies 'R' Us
(Toys 'R' Us). In addition, Target plans to open a 125,000 square foot
store on a contiguous parcel of land. As of June 30, 1997, one tenant
(Borders) has opened for business. The center is in its final construction
phase and the Company expects that it will be substantially completed by
the end of the third quarter of 1997, although no assurance can be given
that it will be completed on schedule. See "Risk Factors -- General Real
Estate Investment Risks -- Risks of Development Activities."
OTHER RECENT DEVELOPMENTS
- AMENDMENT TO LINE OF CREDIT. In July 1997, the Company amended its $75
million unsecured line of credit (the "Line of Credit") (i) to modify
certain restrictive covenants, including the secured and unsecured debt
incurrence restrictions, so as to provide additional flexibility to the
Company, (ii) to provide the Company with an option, subject to consent of
its lenders and certain other conditions, to increase the availability
under the Line of Credit to $100 million and (iii) to extend the maturity
to June 2000 with a Company option, subject to consent of its lenders and
certain other conditions, to extend it one additional year to June 2001.
- 1997 SENIOR NOTES ISSUANCE. In June 1997, the Company issued $50 million
aggregate principal amount of the Company's 7 1/8% Senior Notes Due 2004
(the "1997 Notes"). The 1997 Notes are currently rated "BBB-" by Standard
& Poor's Corporation, "Baa3" by Moody's Investor Services, Inc., "BBB" by
Fitch Investors Service, L.P. and "2" by the NAIC. The Company used the
net proceeds of approximately $49.3 million for repayment of indebtedness
under the Line of Credit.
- 1997 COMMON STOCK OFFERING. In January 1997, the Company issued and sold
1,600,000 shares of Common Stock at a price to the public of $37.625 per
share. The Company used the net proceeds of approximately $56.8 million to
fund acquisition and development activities and to repay indebtedness
under the Line of Credit.
- DIVIDEND INCREASE. In the first quarter of 1997 the Company increased
its quarterly dividend on its Common Stock from $.70 per share to $.725
per share.
- ACQUISITION OF ASSETS OF THE DEVELOPMENT COMPANY. Effective January 1,
1997, the Company acquired the assets and assumed the liabilities of the
Development Company and elected certain of the officers of the Development
Company to serve as officers of the Company. The Company acquired the
assets pursuant to a distribution to the Company as owner of 100% of the
non-voting preferred stock of the Development Company.
- 1996 SHELF REGISTRATION STATEMENT. On November 25, 1996, the Company
filed a shelf registration statement on Form S-3 (File No. 333-16787) (the
"1996 Shelf Registration Statement") for up to $175 million of debt
securities, preferred stock, common stock and warrants (collectively, the
"Securities"). The 1996 Shelf Registration Statement was declared
effective by the Commission on December 23, 1996. Following the Offering,
the Company will have the ability to issue up to approximately $27.5
million of Securities pursuant to the 1996 Shelf Registration Statement.
S-6
<PAGE> 7
THE PROPERTIES
After the Company's recent sale of its Cerritos, California property, the
Company currently owns or has interests in 31 properties, consisting of 26 power
and community centers, one stand-alone retail warehouse, two projects under
development and two vacant land parcels for future development. The Properties
have approximately 6.1 million square feet of gross leasable area with
approximately 403 tenants. Fourteen of the Properties have a Home Depot or
Costco warehouse or both located on them. Home Depot and Costco Companies, Inc.
(formerly Price/Costco, Inc.) accounted for 15.5% and 8.7%, respectively, of
annualized minimum base rental income as of June 30, 1997. The power centers are
generally leased to tenants under noncancelable leases with remaining terms
ranging up to 25 years. The leases are typically triple net leases. Most of the
leases also provide for future rent increases by automatic fixed rate increases
or increases based on consumer price indices. Additionally, certain of the
leases contain provisions for percentage participation in retail sales of the
tenant in excess of a minimum amount. At June 30, 1997, Costco accounted for
greater than 10% of the total annualized minimum base rental income in seven of
the eight properties in which it is a tenant, and Home Depot accounted for
greater than 10% of the total annualized minimum base rental income in all nine
of the Properties in which it is a tenant.
[PRICE REIT PORTFOLIO MAP Showing locations of Price REIT properties in the
following states: Arizona, California, Connecticut, Illinois, Kansas, Maryland,
New York, North Carolina, Oklahoma and Virginia.]
The power centers and community centers were approximately 98.4% occupied
at June 30, 1997. The Company's shopping centers generally contain major
national and regional tenants which feature quality consumer items with value
pricing that generally perform well in most economic environments. Approximately
40% of the Company's annualized minimum base rental income as of June 30, 1997
was derived from rents paid by tenants with investment-grade credit ratings as
determined by Standard & Poor's Corporation or Moody's Investors Service, Inc.
S-7
<PAGE> 8
The above map and following schedule represent the real estate investment
portfolio of the Company as of June 30, 1997:
<TABLE>
<CAPTION>
GROSS
LEASABLE OUTSTANDING
LAND AREA ANNUALIZED MORTGAGES
YEAR AREA (SQ. FT.) NO. OF PERCENT BASE RENT(2) PAYABLE SELECTED MAJOR
LOCATION COMPLETED(1) (ACRES) (THOUSANDS) TENANTS LEASED (THOUSANDS) (THOUSANDS) TENANTS
- -------------------- ------------ ------- ----------- ------- ------- ------------ ----------- ------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
PROPERTY:
Alhambra, CA 1988 18.4 201 10 100.0% $ 2,109 None Costco, Levitz
Austin, TX 1997 18.2 182 10 98.1% $ 2,581 None Babies 'R' Us,
Circuit City, Cost
Plus, Designer
Shoe Warehouse,
Just For Feet,
Mikasa
Carmichael, CA 1994 18.5 215 13 98.0% 2,229 None Home Depot, The
Sports Authority,
Longs Drugs
Cerritos, CA(3) 1987 16.3 172 11 97.7% 1,834 None Home Depot, AMC
Theaters, L.A.
Fitness
Chula Vista, CA 1988 31.3 371 22 99.8% 2,642 None Costco, HomeBase,
Levitz, Pep Boys
Copiague, NY(4) 1990 15.4 190 5 100.0% 2,057 None Home Depot, Office
Max, Jack LaLanne
(Bally's Total
Fitness)
Corona, CA 1989 54.4 487 48 98.4% 5,163 None Costco, Home
Depot, Levitz,
Ross Dress for
Less, Bally's
Total Fitness,
Office Max
Dallas, TX 1995 6.8 84 6 100.0% 914 None Office Max, Ross
Dress for Less
Fairfax, VA 1993 37.0 323 6 100.0% 3,717 None Costco, Home
Depot, The Sports
Authority
Garland, TX 1991 6.3 62 3 100.0% 524 None Office Depot, Drug
(Dallas) Emporium
Glendale, AZ 1989 40.5 340 22 100.0% 3,142 None Costco, HomeBase,
Levitz
Glendale, AZ 1995 7.1 55 18 100.0% 514 (6) Sears Homelife,
(Talavi)(5) Michael's
Greensboro, NC 1996 4.4 41 6 100.0% 560 None Staples, David's
Bridal
Houston, TX 1993 40.0 426 17 100.0% 2,714 None Sears Homelife,
Oshmans Super
Sport, Best Buy,
Bed, Bath &
Beyond, Stein
Mart, Builder's
Square, Sony
Theaters
La Mirada, CA 1993 31.2 279 49 96.3% 3,377 None Toys 'R' Us/Kids
'R' Us, Sav-On
Drugs, L.A.
Fitness, Krikorian
Theatres, U.S.
Post Office
Mesquite, TX 1992 15.0 210 8 100.0% 1,480 None Sears Homelife,
(Dallas) Best Buy, General
Cinema, PetsMart
North Haven, CT 1988 31.7 332 19 100.0% 2,810 None BJ's Wholesale
Club(7), Home
Depot, Xpect Drug,
T.J. Maxx
North Phoenix, AZ 1997 17.0 216 9 100.0% 1,520 None Burlington Coat
Factory, Computer
City, Staples,
Petco, Michael's
Oklahoma City, OK 1994 19.8 234 10 93.0% 1,744 $11,648 Home Depot, Best
Buy, HomePlace
</TABLE>
S-8
<PAGE> 9
<TABLE>
<CAPTION>
GROSS
LEASABLE OUTSTANDING
LAND AREA ANNUALIZED MORTGAGES
YEAR AREA (SQ. FT.) NO. OF PERCENT BASE RENT(2) PAYABLE SELECTED MAJOR
LOCATION COMPLETED(1) (ACRES) (THOUSANDS) TENANTS LEASED (THOUSANDS) (THOUSANDS) TENANTS
- -------------------- ------------ ------- ----------- ------- ------- ------------ ----------- ------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Oxnard, CA 1990 14.4 172 4 100.0% 1,073 None Target, Ralphs
(Food-4-Less), 24
Hour Fitness
Phoenix, AZ 1989 26.6 335 11 96.9% 2,134 None Costco, HomeBase,
PetsMart
Phoenix, AZ 1973 6.7 95 11 85.2% 330 None Home Depot, Stool
(Hayden Plaza & Dinette,
North)(5)(8) AutoZone
Richardson, TX 1994 11.7 116 7 100.0% 924 None Office Max,
(Dallas) Bally's Total
Fitness
Tempe, AZ(5) 1994 21.1 192 26 96.8% 2,097 (6) HomeBase, The
Sports Authority,
L.A. Fitness,
PetsMart, Staples
White Marsh, MD 1991 25.3 210 7 99.0% 1,355 None Costco, The Sports
Authority, Pep
Boys,
PetsMart
Wichita, KS 1995 13.5 134 9 100.0% 1,136 None Best Buy, T.J.
Maxx, Michael's
Woodbridge, VA 1996 54.0 483 45 95.8% 5,014 None Lowe's, Shoppers
Food Warehouse,
Best Buy, Kids 'R'
Us, Zany Brainy,
PetsMart, Super
Trak Auto, Super
Crown
STAND ALONE RETAIL WAREHOUSE:
Santa Ana, CA 1995 12.0 134 1 100.0% 1,765 None Home Depot
UNDER DEVELOPMENT:
Houston (I10/Fry), n/a 23.3 n/a n/a n/a n/a None
TX(5)
Long Island, NY(9) n/a 32.2 23 1 100.0% 473 None Borders Books
VACANT LAND FOR DEVELOPMENT:
Goodyear, AZ(5) n/a 20.0 n/a n/a n/a n/a None
Houston, TX(10) n/a 9.7 n/a n/a n/a n/a None
----- ----- --- ----- ------- ------
TOTAL/AVERAGE 699.8 6,314 414 98.4% $ 57,932 $11,648
===== ===== === ===== ======= ======
</TABLE>
- ---------------
(1) Represents the year in which the Property was completed or the year in
which the most recent significant expansion or renovation was completed,
which in certain instances precedes the date the Property was acquired by
the Company.
(2) Total annualized contract base rents excluding (i) percentage rents, (ii)
additional rent payable by tenants such as common area maintenance, real
estate taxes and other expense reimbursements and (iii) future contractual
rent escalations or cost of living increases.
(3) The Cerritos, California property was sold on July 9, 1997. The Company
currently intends to acquire one or more replacement properties in order to
complete the transaction as a tax-deferred exchange. See "Recent
Developments -- Recent Acquisitions, Property Development and Disposition."
(4) Reflects the sale of a portion of the property (approximately 9.2 acres) to
Target, pursuant to an executed agreement, and the related demolition of
certain buildings on such parcel. Target has advised the Company that it
intends to construct a new store on the parcel.
(5) Reflects the Company's 50% ownership interest in the above properties,
except for the number of tenants (if applicable) which is shown at 100%.
(6) The first phase of the Tempe property and the third phase of the
Glendale-Talavi property secure a loan of $13.5 million, of which the
Company has a 50% partnership share ($6.75 million).
(7) Sublessee of Costco.
(8) The center's shop tenant leases are being terminated in preparation for
major redevelopment.
(9) Reflects the Company's 90% ownership interest in the above property, except
for the number of tenants which is shown at 100%. The Company expects that
the center will be substantially completed by the end of the third quarter
of 1997.
(10) This vacant land is adjacent and contiguous to the Company's center located
in Houston, Texas.
S-9
<PAGE> 10
LEASE EXPIRATION SCHEDULE
The following table shows tenant lease expirations for leases in place as
of June 30, 1997 at the Company's power and community centers and stand-alone
retail warehouse, beginning with the remainder of 1997 and assuming that none of
the tenants exercises any renewal options. The following table includes the
Cerritos, California property which was sold on July 9, 1997.
<TABLE>
<CAPTION>
GROSS LEASED AREA ANNUALIZED BASE RENTAL INCOME(2)
TOTAL NUMBER OF ------------------------ -----------------------------------
NUMBER OF ANCHOR APPROXIMATE PERCENT PERCENT AVERAGE
LEASES TENANT LEASES GLA OF OF PER
LEASES EXPIRING IN: EXPIRING EXPIRING(1) SQ. FT. TOTAL AMOUNT TOTAL SQ. FT.
- -------------------------- --------- ------------- ------------ ------- ----------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
1997(3)................... 19 1 54,837 0.88% 648,465 1.12% $11.83
1998...................... 39 1 127,731 2.06% 1,486,685 2.57% 11.64
1999...................... 48 2 197,581 3.18% 2,089,016 3.61% 10.57
2000...................... 52 3 206,942 3.33% 2,514,117 4.34% 12.15
2001...................... 39 4 300,815 4.84% 2,339,679 4.04% 7.78
2002...................... 21 0 79,200 1.28% 1,154,893 1.99% 14.58
2003...................... 21 6 482,403 7.77% 4,115,407 7.10% 8.53
2004...................... 16 4 184,456 2.97% 1,935,059 3.34% 10.49
2005...................... 26 6 261,947 4.22% 2,709,416 4.68% 10.34
2006...................... 23 6 669,855 10.78% 4,901,975 8.46% 7.32
2007...................... 18 9 464,605 7.48% 3,939,584 6.80% 8.48
Thereafter................ 92 51 3,180,733 51.21% 30,098,044 51.95% 9.46
--
--- --------- ------ ----------- ------ -----
Total/Average............. 414 93 6,211,105(4) 100.00% $57,932,340 100.00% $ 9.33
=== == ========= ====== =========== ====== =====
</TABLE>
- ---------------
(1) Anchor tenant leases represent leases for space with a minimum of 20,000
square feet.
(2) Information is presented as of June 30, 1997.
(3) Information for 1997 relates to leases expiring in the remaining six
calendar months after June 30, 1997.
(4) Excludes vacant space as of June 30, 1997, which totaled approximately
103,000 square feet.
S-10
<PAGE> 11
THE OFFERING
<TABLE>
<S> <C>
Common Stock offered.................................... 1,000,000 shares
Common Stock to be outstanding after the Offering....... 11,685,503 shares(1)
Use of Proceeds by the Company.......................... Proceeds of the Offering will be
used primarily to fund future
acquisition and development
activities and to repay
indebtedness under its Line of
Credit. See "Use of Proceeds."
NYSE Symbol............................................. "RET"
</TABLE>
- ---------------
(1) Excludes (a) an aggregate of approximately 752,000 shares of Common Stock
reserved for issuance pursuant to stock option agreements that the Company
has entered into with certain of its officers, directors and key employees
and (b) shares of Common Stock issuable pursuant to the Company's dividend
reinvestment plan during July 1997. See "Description of Stock -- General" in
the accompanying Prospectus.
DISTRIBUTION POLICY
The Company currently intends to continue making regular quarterly
distributions on its Common Stock and to distribute amounts sufficient to
maintain its status as a REIT. Distributions are reviewed quarterly by the Board
of Directors and future distributions will depend upon factors deemed relevant
by the Board of Directors including operating performance, cash flow
requirements and other needs. Although the Company intends to continue to make
quarterly distributions to its stockholders, no assurance can be given as to the
amounts to be distributed in the future. See "Price Range of Common Stock and
Distributions."
S-11
<PAGE> 12
SUMMARY SELECTED FINANCIAL DATA
The following selected financial data for the five years ended December 31,
1996 are derived from the audited consolidated financial statements of the
Company. The financial data for the six month periods ended June 30, 1997 and
1996 are derived from unaudited financial statements. The unaudited financial
statements include all adjustments, consisting of normal recurring accruals,
which the Company considers necessary for a fair presentation of the financial
position and results of operations for these periods. Operating results for the
six months ended June 30, 1997 are not necessarily indicative of the results
that may be expected for the entire year ending December 31, 1997. The data
should be read in conjunction with the consolidated financial statements, notes
thereto, Management's Discussion and Analysis of Financial Condition and Result
of Operations and other financial information incorporated by reference into the
accompanying Prospectus. Additionally, certain unaudited information regarding
the Company's financial data for the three and six month periods ended June 30,
1997 is set forth above under "Recent Developments -- Second Quarter Results"
and in the Company's Current Report on Form 8-K, dated July 25, 1997,
incorporated by reference in the accompanying Prospectus.
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
JUNE 30, YEAR ENDED DECEMBER 31,
----------------- -------------------------------------------
1997 1996 1996 1995 1994 1993 1992
-------- ------- ------- ------- ------- ------- -------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C> <C> <C>
OPERATING STATEMENT DATA:
Total revenues............................................... $ 32,579 $26,315 $54,325 $43,523 $39,925 $27,794 $18,815
Interest expense............................................. 6,665 5,961 12,071 6,939 4,085 4,257 3,203
Net income................................................... 11,120 8,193 16,919 16,386 16,904 9,128 4,118
Dividends.................................................... 15,488 11,680 24,336 22,038 20,859 12,128 6,610
Per Share:
Net Income................................................. 1.06 0.98 1.98 1.98 2.07 1.84 1.41
Dividends(1)............................................... 1.45 1.40 2.80 2.67 2.56 2.38 2.26
Average shares outstanding................................... 10,488 8,334 8,560 8,259 8,165 4,957 2,928
OTHER DATA:
Funds From Operations(2)..................................... 18,422 14,303 29,456 26,582 26,271 15,529 8,077
Ratio of earnings to fixed charges(3)........................ 2.36x 2.33x 2.31x 3.17x 4.73x 3.07x 2.28x
Total rentable square footage of
Properties at end of period(4)............................. 6,314 4,948 5,188 4,628 3,662 3,317 2,196
Number of Properties at end of period(4)..................... 32 22 24 19 14 12 8
Occupancy rate at end of period.............................. 98% 98% 98% 98% 98% 98% 98%
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31,
JUNE 30, ----------------------------------------------------
1997 1996 1995 1994 1993 1992
---------- -------- -------- -------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Rental property, net..................................... $493,303 $380,482 $351,585 $287,259 $284,721 $186,479
Total assets............................................. 535,461 428,071 382,478 312,419 292,195 190,010
Total debt............................................... 236,633 184,908 157,832 86,750 65,000 76,980
Minority interest........................................ 1,741 1,707 -- -- -- 42,628
Total stockholders' equity............................... 289,963 236,982 221,238 224,600 226,261 68,731
</TABLE>
- ---------------
(1) Prior to August 1993, the Company's outstanding stock consisted entirely of
Series A Common Stock. The per share dividends for 1992 and 1993 therefore
represent dividends paid to holders of Series A Common Stock. In 1993, the
Company effected a public offering of shares of Series B Common Stock (which
are now designated simply as "Common Stock"). The per share dividends for
1994, 1995, 1996 and the six-month periods ended June 30, 1996 and June 30,
1997 represent dividends paid to holders of Common Stock. Dividends for the
fourth quarter of 1993, the full years of 1994 and 1995, and the first
quarter of 1996 for holders of Series A Common Stock (which was converted
S-12
<PAGE> 13
into Common Stock in May 1996) were approximately 95% of that paid to the
holders of Common Stock for the same periods. The Company's outstanding
stock currently consists entirely of Common Stock.
(2) Most industry analysts and equity REITs, including the Company, consider
Funds From Operations ("FFO") an appropriate supplemental measure of
operating performance of an equity REIT. In general, FFO adjusts net income
for non-cash charges such as depreciation, certain amortization expenses and
most non-recurring gains or losses. However, FFO does not represent cash
generated from operating activities in accordance with generally accepted
account principles ("GAAP") and should not be considered an alternative to
net income as an indication of the results of the Company's performance or
to cash flows as a measure of liquidity. In May 1995, the National
Association of Real Estate Investment Trusts ("NAREIT") modified the
definition of FFO, among other things, to eliminate amortization of deferred
financing costs and depreciation of non-real estate items added back to net
income when computing FFO. The Company implemented the new method of
calculating FFO under the NAREIT provisions on the NAREIT-suggested adoption
date of January 1, 1996. The Company has recalculated and presented FFO for
the periods in the table above, including periods prior to 1996, under the
new definition.
(3) The ratio of earnings to fixed charges is computed by dividing earnings by
fixed charges. For this purpose, earnings consist of pre-tax income from
continuing operations plus fixed charges. Fixed charges consist of interest
expense and the amortization of debt discount and issuance costs.
(4) The Mesquite, Texas property which was acquired by the Company in July 1996
is included in the total rentable square footage of Properties and number of
Properties for the six months ended June 30, 1996.
S-13
<PAGE> 14
RISK FACTORS
This Prospectus Supplement and the accompanying Prospectus, including the
documents incorporated by reference in the accompanying Prospectus, contain
forward-looking statements within the meaning of Section 27A of the Securities
Act of 1933, as amended (the "Securities Act"). Also, documents subsequently
filed by the Company with the Securities and Exchange Commission and
incorporated into the accompanying Prospectus by reference will contain
forward-looking statements. Actual results could differ materially from those
projected in the forward-looking statements as a result of the risk factors set
forth below and the matters set forth or incorporated in this Prospectus
Supplement and the accompanying Prospectus generally. The Company cautions the
reader, however, that this list of factors may not be exhaustive, particularly
with respect to future filings. Prospective investors should carefully consider,
among other factors, the matters described below before purchasing shares of
Common Stock in this offering (the "Offering").
GENERAL REAL ESTATE INVESTMENT RISKS
Economic Performance and Value of Centers Depending on Many Factors. Real
property investments are subject to varying degrees of risk. The economic
performance and values of real estate can be affected by many factors, including
changes in the national, regional and local economic climate, local conditions
such as an oversupply of space or a reduction in demand for real estate in the
area, the attractiveness of the properties to tenants, competition from other
available space, the ability of the owner to provide adequate maintenance and
insurance and increased operating costs.
Dependence on Rental Income from Real Property. Since substantially all of
the Company's income is derived from rental income from real property, the
Company's income and funds for distribution would be adversely affected if a
significant number of the Company's tenants were unable to meet their
obligations to the Company or if the Company were unable to lease a significant
amount of space in its properties on economically favorable lease terms. There
can be no assurance that any tenant whose lease expires in the future will renew
such lease or that the Company will be able to re-lease space on economically
advantageous terms.
Environmental Risks. Under various federal, state and local laws,
ordinances and regulations, the Company may be considered an owner or operator
of real property or may have arranged for the disposal or treatment of hazardous
or toxic substances and, therefore, may become liable for the costs of removal
or remediation of certain hazardous substances released on or in its property or
disposed of by it, as well as certain other potential costs which could relate
to hazardous or toxic substances (including governmental fines and injuries to
persons and property). Such liability may be imposed whether or not the Company
knew of, or was responsible for, the presence of such hazardous or toxic
substances.
Risks of Development Activities. The Company intends to continue to
actively pursue shopping center development projects, including the expansion of
existing centers. Such projects generally require the expenditure of capital as
well as various forms of government and other approvals, the receipt of which
cannot be assured. Consequently, there can be no assurance that any such
projects will be completed or that such projects will prove to be profitable.
Competition for Acquisition of Real Estate. There is competition in the
acquisition of properties and some of the Company's competitors are larger and
have greater financial resources than the Company. This competition may result
in a higher cost for properties the Company wishes to acquire.
Insurance. The Company carries comprehensive liability, fire, extended
coverage and rental loss insurance covering all of the Properties, with policy
specifications and insured limits which the Company believes are adequate and
appropriate under the circumstances. Additionally, the Company carries
earthquake insurance for its Properties in California which it believes is
adequate and appropriate for such Properties. Such insurance does not insure the
entire value of the Properties in California. Should a loss in excess of insured
limits occur, the Company could lose its capital invested in the property, as
well as the anticipated future revenues from the property and the Company would
remain obligated for any mortgage debt or other financial obligations related to
the property. Any such loss would adversely affect the Company.
S-14
<PAGE> 15
RELIANCE ON MAJOR TENANTS
As of June 30, 1997, the Company's real estate portfolio generated total
annualized minimum base rental income of approximately $57.9 million. The
Company's three largest tenants, Home Depot, Costco and HomeBase, accounted for
approximately 15.5%, 8.7% and 5.0%, respectively, of annualized minimum base
rental income as of June 30, 1997, and the Company's seven largest tenants
accounted for approximately 40.2% of annualized minimum base rental income. The
loss of any one of the Company's principal tenants would have a material adverse
impact on the Company's results of operations. The performance of the Company's
tenants is affected by economic conditions in the regions and markets in which
they compete.
CONTROL BY DIRECTORS AND EXECUTIVE OFFICERS
Following the consummation of the Offering, directors and executive
officers of the Company will beneficially own approximately 6% of the Company's
Common Stock. Accordingly, such persons should continue to have substantial
influence over the Company and on the outcome of matters submitted to the
Company's shareholders for approval.
LIMITATIONS ON ACQUISITION AND CHANGE IN CONTROL
With certain limited exceptions, the Company's amended and restated
Articles of Incorporation prohibit ownership of more than 9.8% of the
outstanding Common Stock by any person. Such restriction is likely to have the
effect of precluding acquisition of control of the Company by a third party
without consent of the Board of Directors of the Company even if a change in
control were in the interest of shareholders.
NO LIMITATION IN ORGANIZATIONAL DOCUMENTS ON INCURRENCE OF DEBT
The Company intends to continue to maintain a conservative debt
capitalization with a ratio of debt to Total Market Capitalization (the sum of
the aggregate market value of the Company's Common Stock, the liquidation
preference on any preferred shares outstanding, and the Company's total
indebtedness, including the Company's proportionate share of indebtedness from
its unconsolidated joint venture properties) of less than 40%, but the
organizational documents of the Company do not contain any limitation on the
amount or percentage of indebtedness the Company may incur. Each of the
indenture and the Company's Line of Credit under which the Company has
outstanding certain indebtedness contains limits on the Company's ability to
incur indebtedness. Nevertheless, the Company could become more highly
leveraged, resulting in an increase in debt service that could adversely affect
the Company's ability to make expected distributions to shareholders and in an
increased risk of default on its obligations.
ADVERSE IMPACT ON DISTRIBUTIONS OF FAILURE TO QUALIFY AS A REIT
Since the Company's commencement of operations in 1991, the Company has
operated in a manner to qualify as a REIT under the Code, and the Company
intends to continue to operate in such a manner so as to permit the Company to
qualify as a REIT under the Code. Although the Company believes that it will
continue to operate in such a manner, no assurance can be given that the Company
will remain qualified as a REIT. If in any taxable year the Company were to fail
to qualify as a REIT, the Company would not be allowed a deduction for
distributions to shareholders in computing taxable income and would be subject
to Federal income tax (including any applicable alternative minimum tax) on its
taxable income at regular corporate rates.
USE OF PROCEEDS
The proceeds to the Company from the sale of Common Stock offered hereby
are $37.5 million. The Company will use the proceeds of this Offering primarily
to fund future acquisition and development activities and to repay outstanding
indebtedness under its Line of Credit. Pending such uses, which the Company
anticipates will occur concurrently with or shortly following the consummation
of the Offering, the Company may invest such net proceeds in short-term
income-producing investments such as investment grade commercial paper,
government securities or money market funds that invest in government
securities.
The weighted average interest rate on the indebtedness expected to be
repaid with the net proceeds of this Offering was a variable rate equal to LIBOR
plus 1.25% and the maturity date of such indebtedness was June 2000. As of
August 5, 1997, the Company's outstanding balance under its Line of Credit was
approximately $21 million, all of which is expected to be repaid with the
proceeds of this Offering.
S-15
<PAGE> 16
CAPITALIZATION
The following table sets forth as of June 30, 1997 the actual
capitalization of the Company and as adjusted to reflect the issuance and sale
of the shares of Common Stock in the Offering.
<TABLE>
<CAPTION>
JUNE 30, 1997
------------------------
ACTUAL AS ADJUSTED
-------- -----------
(IN THOUSANDS)
<S> <C> <C>
DEBT:
Unsecured line of credit............................................ $ 21,000 $ --
Senior Notes payable due 2000....................................... 99,329 99,329
Senior Notes payable due 2006....................................... 54,876 54,876
Senior Notes payable due 2004....................................... 49,780 49,780
Secured notes payable............................................... 11,648 11,648
STOCKHOLDERS' EQUITY:
Preferred Stock, $0.01 par value; 2,000,000 shares authorized, no
shares issued or outstanding..................................... -- --
Common Stock, $0.01 par value; 25,000,000 shares authorized,
10,685,503 and 11,685,503 shares issued and outstanding(1)....... 107 117
Additional paid-in capital.......................................... 316,852 354,342
Accumulated deficit................................................. (26,996) (26,996)
-------- -----------
Total stockholders' equity....................................... 289,963 327,463
-------- -----------
Total capitalization........................................ $526,596 $ 543,096
======== =========
</TABLE>
- ---------------
(1) Does not include approximately 752,000 shares of Common Stock reserved for
issuance pursuant to stock option agreements that the Company has entered
into with certain of its officers and directors. See "Description of
Stock -- General" in the accompanying Prospectus.
PRICE RANGE OF COMMON STOCK AND DISTRIBUTIONS
The following table sets forth the quarterly high and low composite closing
sales prices per share of Common Stock reported on the NYSE for the periods
indicated, as well as the quarterly distributions declared per share of Common
Stock.
<TABLE>
<CAPTION>
CASH
DISTRIBUTION/
QUARTERLY PERIOD ENDING HIGH LOW SHARE
-------------------------------------------------------- ---- ---- -------------
<S> <C> <C> <C>
March 31, 1995.......................................... 30 3/4 28 1/4 .66
June 30, 1995........................................... 30 1/4 27 5/8 .66
September 30, 1995...................................... 32 1/4 29 3/8 .67
December 31, 1995....................................... 31 27 3/4 .68
March 31, 1996.......................................... 31 1/8 28 1/2 .70
June 30, 1996........................................... 32 3/8 28 3/4 .70
September 30, 1996...................................... 32 5/8 31 .70
December 31, 1996....................................... 38 1/2 31 5/8 .70
March 31, 1997.......................................... 38 1/4 36 1/8 .72 1/2
June 30, 1997........................................... 38 5/8 36 3/8 .72 1/2
September 30, 1997 (through August 4, 1997)............. 38 3/8 36 3/4
</TABLE>
Future distributions by the Company will be at the discretion of the Board
of Directors and will depend on the Company's financial condition, its capital
requirements, the annual distribution requirements under the REIT provisions of
the Code and such other factors as the Board of Directors deems relevant. There
can be no assurance that any such distributions will be made by the Company.
S-16
<PAGE> 17
On August 4, 1997, the last reported sale price of the Company's Common
Stock on the NYSE was $38.375 per share. As of August 1, 1997, the Company's
transfer agent reported 1,178 holders of record of the Company's Common Stock.
The transfer agent and registrar of the Common Stock is ChaseMellon Shareholder
Services.
UNDERWRITING
Subject to the terms and conditions set forth in an underwriting agreement
(the "Underwriting Agreement"), the Company has agreed to sell to Salomon
Brothers Inc (the "Underwriter"), and the Underwriter has agreed to purchase
from the Company, 1,000,000 shares of Common Stock. In the Underwriting
Agreement, the Underwriter has agreed, subject to the terms and conditions set
forth therein, to purchase all of the shares of Common Stock offered hereby if
any are purchased.
The Underwriter has advised the Company that it proposes initially to offer
such shares of Common Stock to the public at the public offering price set forth
on the cover page of this Prospectus Supplement. After the initial public
offering, the public offering price may be changed.
Each of the Company and its executive officers and directors has agreed,
subject to certain exceptions (including the issuance of shares of Common Stock
pursuant to the Company's 1993 Stock Option Plan, the Company's 1996 Directors'
Stock Option Plan and the Company's dividend reinvestment plan), that, without
the prior written consent of Salomon Brothers Inc, it will not, directly or
indirectly, offer, sell, enter into any agreement to sell, or otherwise dispose
of, any shares of Common Stock for a period of 90 days after the date of this
Prospectus Supplement.
The Company has agreed to indemnify the Underwriter against, or contribute
to payments that the Underwriter may be required to make in respect of, certain
liabilities, including liabilities under the Securities Act of 1933, as amended
(the "Securities Act"). The Underwriter has agreed to pay the expenses of the
Company in connection with the Offering, estimated at approximately $125,000.
The Underwriter may engage in stabilizing transactions, syndicate covering
transactions and penalty bids in accordance with Rule 104 under the Exchange
Act. Stabilizing transactions permit bids to purchase the Common Stock so long
as the stabilizing bids do not exceed a specified maximum. Syndicate covering
transactions involve purchases of the Common Stock in the open market following
completion of this offering to cover all or a portion of a syndicate short
position created by the Underwriter selling more shares of Common Stock in
connection with this offering than it is committed to purchase from the Company.
In addition, the Underwriter may impose "penalty bids" under contractual
arrangements between the Underwriter and dealers participating in this offering
whereby they may reclaim from a dealer participating in the offering the selling
concession with respect to shares of Common Stock that are distributed in this
offering but subsequently purchased for the account of the Underwriter in the
open market. Such stabilizing transactions, syndicate covering transactions and
penalty bids may result in the maintenance of the price of the Common Stock at a
level above that which might otherwise prevail in the open market. None of the
transactions described in this paragraph is required and, if any are undertaken,
they may be discontinued at any time.
S-17
<PAGE> 18
LEGAL MATTERS
Certain legal matters related to the Offering will be passed upon for the
Company by Gibson, Dunn & Crutcher LLP, Los Angeles, California and certain
legal matters will be passed upon for the Underwriter by Latham & Watkins, Los
Angeles, California. The validity of the Common Stock offered hereby will be
passed upon for the Company by Ballard Spahr Andrews & Ingersoll, Baltimore,
Maryland. Gibson, Dunn & Crutcher LLP and Latham & Watkins will rely on Ballard
Spahr Andrews & Ingersoll as to certain matters of Maryland law.
EXPERTS
The consolidated financial statements and financial statement schedule
included in the Company's Annual Report on Form 10-K for the year ended December
31, 1996, incorporated by reference in the accompanying Prospectus, have been
audited by Ernst & Young LLP, independent auditors, as set forth in their report
thereon included therein and incorporated in the accompanying Prospectus by
reference. Such consolidated financial statements have been incorporated in the
accompanying Prospectus by reference in reliance upon such report given upon the
authority of such firm as experts in accounting and auditing.
With respect to the unaudited condensed consolidated interim financial
information for the three-month periods ended March 31, 1997 and March 31, 1996,
incorporated by reference in the accompanying Prospectus, Ernst & Young LLP have
reported that they have applied limited procedures in accordance with
professional standards for a review of such information. However, their separate
report included in the Company's Quarterly Report on Form 10-Q for the quarter
ended March 31, 1997, and incorporated in the accompanying Prospectus by
reference, states that they did not audit and they do not express an opinion on
that interim financial information. Accordingly, the degree of reliance on their
report on such information should be restricted considering the limited nature
of the review procedures applied. The independent auditors are not subject to
the liability provisions of Section 11 of the Securities Act for their report on
the unaudited interim financial information because that report is not a
"report" or a "part" of the Registration Statement prepared or certified by the
auditors within the meaning of Sections 7 and 11 of the Securities Act.
S-18
<PAGE> 19
PROSPECTUS
$65,021,500
THE PRICE REIT, INC.
DEBT SECURITIES, PREFERRED STOCK,
COMMON STOCK AND WARRANTS
------------------------
The Price REIT, Inc. (the "Company") may from time to time offer (i)
unsecured debt securities, which may be either senior debt securities ("Senior
Securities") or subordinated debt securities ("Subordinated Securities," and
together with the Senior Securities, the "Debt Securities"), (ii) shares of its
preferred stock, $.01 par value per share (the "Preferred Stock"), (iii) shares
of its common stock, $.01 par value per share (the "Common Stock"), or (iv)
warrants to purchase Preferred Stock or Common Stock (the "Warrants") with an
aggregate public offering price of up to $65,021,500 on terms to be determined
at the time of the offering. The Debt Securities, Preferred Stock, Common Stock
and Warrants (collectively, the "Offered Securities") may be offered, separately
or together, in separate amounts, at prices and on terms to be set forth in a
supplement to the Prospectus (each a "Prospectus Supplement").
The specific terms of the Offered Securities in respect of which this
Prospectus is being delivered will be set forth in the applicable Prospectus
Supplement and will include, where applicable (i) in the case of Debt
Securities, the specific title, aggregate principal amount, ranking, purchase
price, maturity, interest rate (which may be fixed or variable) and the time of
payment of interest (if any), authorized denominations, terms (if any) for the
subordination, redemption or conversion thereof, and terms (if any) for a
sinking fund; (ii) in the case of Preferred Stock, the specific title and stated
value, any dividend, liquidation, redemption, conversion, voting and other
rights, and any initial public offering price; (iii) in the case of Common
Stock, the specific title and stated value and any initial public offering price
and, if the Common Stock is issued in series, the specific title and any
dividend, liquidation, redemption, conversion, voting and other rights
applicable to that series; and (iv) in the case of Warrants, the duration,
offering price, exercise price and detachability, as well as the terms of which
and the securities for which such Warrants may be exercised. In addition, such
specific terms may include limitations on direct or beneficial ownership and
restrictions on transfer of the Offered Securities, in each case as may be
appropriate to preserve the status of the Company as a real estate investment
trust ("REIT") for federal income purposes. See "Federal Income Tax
Considerations."
The applicable Prospectus Supplement will also contain information, where
applicable, about certain United States federal income tax considerations
relating to, and any listing on a securities exchange of, the Offered Securities
covered by such Prospectus Supplement.
The Offered Securities may be offered directly, through agents designated
from time to time by the Company, or to or through underwriters or dealers. If
any agents or underwriters are involved in the sale of any of the Offered
Securities, their names, and any applicable purchase price, fee, commission or
discount arrangement between or among them, will be set forth or will be
calculable from the information set forth in the applicable Prospectus
Supplement. See "Plan of Distribution." No Offered Securities may be sold
without delivery of the applicable Prospectus Supplement describing the method
and terms of the offering of such Offered Securities.
------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS SUPPLEMENT OR THE PROSPECTUS TO WHICH IT
RELATES ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
------------------------
THE DATE OF THIS PROSPECTUS IS AUGUST 5, 1997.
<PAGE> 20
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith files reports, proxy statements and other information with the
Securities and Exchange Commission (the "Commission"). The Registration
Statement, and exhibits and schedules forming a part thereof and the reports,
proxy statements and other information filed by the Company with the Commission
in accordance with the Exchange Act can be inspected and copied at the
Commission's Public Reference Section, 450 Fifth Street, N.W., Washington, D.C.,
20549, and at the following regional offices of the Commission: Seven World
Trade Center, 13th Floor, New York, New York 10048 and Citicorp Center, 500 West
Madison Street, Suite 1400, Chicago, Illinois 60661-2511. Copies of such
material can be obtained from the Public Reference Section of the Commission,
450 Fifth Street, N.W., Washington, D.C. 20549, at prescribed rates. Electronic
filings made through the Electronic Data Gathering, Analysis and Retrieval
System are publicly available through the Commission's Website
(http://www.sec.gov). In addition, the Common Stock is listed on the New York
Stock Exchange and similar information concerning the Company can be inspected
and copied at the offices of the New York Stock Exchange, Inc., 20 Broad Street,
New York, New York 10005.
The Company has filed with the Commission a registration statement (the
"Registration Statement") (of which this Prospectus is a part) under the
Securities Act of 1933, as amended (the "Securities Act"), with respect to the
Offered Securities. This Prospectus does not contain all of the information set
forth in the Registration Statement, certain portions of which have been omitted
as permitted by the rules and regulations of the Commission. Statements
contained in this Prospectus as to the contents of any contract or other
documents are not necessarily complete, and in each instance reference is made
to the copy of such contract or other document filed as an exhibit to the
Registration Statement, each such statement being qualified in all respects by
such reference and the exhibits and schedules thereto. For further information
regarding the Company and the Offered Securities, reference is hereby made to
the Registration Statement and such exhibits and schedules which may be obtained
from the Commission at its principal office in Washington, D.C., upon payment of
the fees prescribed by the Commission.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The documents listed below have been filed by the Company under the
Exchange Act with the Commission and are incorporated herein by reference:
a. Annual Report on Form 10-K for the year ended December 31, 1996;
b. Quarterly Report on Form 10-Q for the quarter ended March 31,
1997;
c. Current Reports on Form 8-K, filed January 21, 1997, April 16,
1997, May 28, 1997, June 18, 1997 and July 25, 1997, Current Reports on
Form 8-K/A, filed May 9, 1997 and July 24, 1997;
d. The following sections of the Company's Proxy Statement relating to
its Annual Meeting of Stockholders held on May 28, 1997: Election of
Directors, Securities Ownership of Certain Beneficial Owners and
Management, Executive Compensation and Other Information, Certain
Relationships and Related Transactions and Section 16(a) Beneficial
Ownership Reporting Compliance; and
e. The description of the Registrant's Common Stock contained in the
Company's Registration Statement on Form 8-A (File No. 1-13432) dated
October 25, 1994 and any amendments or reports filed for the purpose of
updating such description.
All documents filed by the Company pursuant to Sections 13(a), 13(c), 14
and 15(d) of the Exchange Act subsequent to the date of this Prospectus and
prior to the termination of the offering of the Offered Securities shall be
deemed to be incorporated by reference in this Prospectus and to be part hereof
from the date of filing such documents.
Any statement contained herein or in a document incorporated or deemed to
be incorporated by reference herein shall be deemed to be modified or superseded
for purposes of this Prospectus to the extent that a statement contained herein
(or in the applicable Prospectus Supplement) or in any other subsequently filed
document which also is or is deemed to be incorporated by reference herein
modifies or supersedes such
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statement. Any such statement so modified or superseded shall not be deemed,
except as so modified or superseded, to constitute a part of this Prospectus.
Copies of all documents which are incorporated herein by reference (not
including the exhibits to such information, unless such exhibits are
specifically incorporated by reference in such information) will be provided
without charge to each person, including any beneficial owner, to whom this
Prospectus is delivered upon written or oral request. Requests should be
directed to the Secretary, The Price REIT, Inc., 7979 Ivanhoe Avenue, Suite 524,
La Jolla, California 92037, (619) 551-2320.
CERTAIN PERSONS PARTICIPATING IN AN OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE OFFERED
SECURITIES, INCLUDING STABILIZING AND SYNDICATE COVERING TRANSACTIONS AND THE
IMPOSITION OF A PENALTY BID. FOR A DESCRIPTION OF THESE ACTIVITIES, SEE "PLAN OF
DISTRIBUTION."
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<PAGE> 22
THE COMPANY
The Price REIT, Inc. (the "Company") is a self-administered and
self-managed equity real estate investment trust ("REIT") which is focused on
the acquisition, development, management and redevelopment of destination retail
shopping center properties known as "power centers." After the Company's recent
sale of its Cerritos, California property, the Company currently owns or has
interests in 31 properties, consisting of 26 power and community centers, one
stand alone retail warehouse, two projects under development and two undeveloped
land parcels (the "Properties") located in ten states containing approximately
6.1 million square feet of gross leasable space with approximately 403 tenants.
The overall occupancy rate of the power and community centers was approximately
98.4% at June 30, 1997.
Power centers are typically open-air centers ranging in size from 200,000
to 700,000 square feet of gross leasable area, and are usually comprised of one
or more national retail anchors, often in a warehouse format. Anchor retail
tenants typically occupy between 60% and 90% of the total square footage in a
power center. The tenant mix in a power center is designed to draw consumers
from up to a 15-mile radius, creating a shopping "destination." The majority of
the Company's anchor tenants are retail warehouses, which are consumer-oriented
facilities with at least 25,000 to 100,000 square feet of gross leasable area
offering a variety of products for business use, personal use or resale. The
retail warehouse format of merchandise display, direct manufacturer purchasing,
low mark-ups and rapid inventory turnover is designed to provide substantial
consumer savings compared to other sources of similar merchandise.
Each of the Company's power centers is anchored by one or more national
retail tenants such as Home Depot, Costco, HomeBase, The Sports Authority,
Burlington Coat Factory, Target, Staples, T.J. Maxx, Circuit City, Toys 'R' Us
or Sears Homelife. The Company typically seeks to structure tenant leases as
"triple net" leases, under the terms of which the tenant is responsible for its
pro rata share of costs and expenses associated with the ongoing operation of
the property, including but not limited to real property taxes and assessments,
repairs and maintenance, and insurance. The anchor tenants generally have
primary lease terms of 10 to 20 years and smaller tenants typically have primary
lease terms of five to 10 years. The Company's leases generally provide for
contractual rent increases over the life of the lease based on a fixed amount or
consumer price indices, and, in certain cases, percentage rent, calculated as a
percentage of a tenant's gross sales above a predetermined threshold. The
Company's principal executive office is located at 7979 Ivanhoe Avenue, Suite
524, La Jolla, California 92037, and its telephone number is (619) 551-2320.
TAX STATUS OF THE COMPANY
The Company has elected to be taxed as a REIT under Sections 856 through
860 of the Internal Revenue Code of 1986, as amended, commencing with its
taxable year ended December 31, 1991. As a REIT, the Company generally is not
subject to Federal income tax on net income that it distributes to its
stockholders. Even though the Company qualifies for taxation as a REIT, the
Company may be subject to certain Federal, state and local taxes on its income
and property. See "Federal Income Tax Considerations."
USE OF PROCEEDS
Unless otherwise indicated in the accompanying Prospectus Supplement, the
Company intends to use the proceeds for general corporate purposes including,
without limitation, the acquisition and development of additional properties and
the repayment of debt. The proceeds from the sale of the Offered Securities
initially may be temporarily invested in short-term securities.
EARNINGS TO FIXED CHARGES RATIOS
The Company's ratios of earnings to fixed charges for the six-month period
ended June 30, 1997 and the years ended December 31, 1996, 1995, 1994, 1993 and
1992 were 2.36x, 2.31x, 3.17x, 4.73x, 3.07x and 2.28x, respectively. The ratio
of earnings to fixed charges is computed by dividing earnings by fixed charges.
For this purpose, earnings consist of pre-tax income from continuing operations
plus fixed charges. Fixed
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charges consist of interest expense and the amortization of debt discount and
issuance costs. To date, the Company has not issued any Preferred Stock;
therefore, the ratios of earnings to combined fixed charges and preferred stock
dividend requirements are the same as the ratios of earnings to fixed charges
presented above.
DESCRIPTION OF DEBT SECURITIES
The following sets forth certain general terms and provisions of the
Indenture under which the Debt Securities are to be issued. The particular terms
of the Debt Securities will be set forth in a Prospectus Supplement relating to
such Debt Securities.
The Debt Securities are to be issued under an Indenture, as amended or
supplemented from time to time (the "Indenture"), between the Company and a
Trustee chosen by the Company and qualified to act as such under the Trust
Indenture Act of 1939 as amended (the "TIA") (together with any other trustee(s)
appointed in a supplemental indenture with respect to a particular series, the
"Trustee"). The Indenture has been filed as an exhibit to the Registration
Statement of which this Prospectus is a part and will be available for
inspection at the corporate trust office of the Trustee, or as described above
under "Available Information." The Indenture is subject to, and governed by, the
TIA. The Company will execute the Indenture if and when the Company issues the
Debt Securities. The statements made hereunder relating to the Indenture and the
Debt Securities to be issued hereunder are summaries of certain provisions
thereof and do not purport to be complete and are subject to, and are qualified
in their entirety by reference to, all provisions of the Indenture and such Debt
Securities. All section references appearing herein are to sections of the
Indenture, and capitalized terms used but not defined herein shall have the
respective meanings set forth in the Indenture.
GENERAL
The Debt Securities will be direct, unsecured obligations of the Company.
Except for any series of Debt Securities which is specifically subordinated to
other indebtedness of the Company, the Debt Securities will rank equally with
all other unsecured and unsubordinated indebtedness of the Company. Under the
Indenture, the Debt Securities may be issued without limit as to aggregate
principal amount, in one or more series, in each case as established from time
to time in or pursuant to authority granted by a resolution of the Board of
Directors of the Company or as established in one or more indentures
supplemental to the Indenture. All Debt Securities of one series need not be
issued at the same time and, unless otherwise provided, a series may be
reopened, without the consent of the Holders of the Debt Securities of such
series, for issuances of additional Debt Securities of such series (Section
301).
The Indenture provides that there may be more than one Trustee thereunder,
each with respect to one or more series of Debt Securities. Any Trustee under
the Indenture may resign or be removed with respect to one or more series of
Debt Securities, and a successor Trustee may be appointed to act with respect to
such series (Section 608). In the event that two or more persons are acting as
Trustee with respect to different series of Debt Securities, each such Trustee
shall be a trustee of a trust under the Indenture separate and apart from the
trust administered by any other Trustee (Section 609), and, except as otherwise
indicated herein, any action described herein to be taken by the Trustee may be
taken by each such Trustee with respect to, and only with respect to, the one or
more series of Debt Securities for which it is Trustee under the Indenture.
TERMS
Reference is made to the Prospectus Supplement relating to the series of
Debt Securities being offered for the specific terms thereof, including:
(1) the title of such Debt Securities;
(2) the aggregate principal amount of such Debt Securities and any
limit on such aggregate principal amount;
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<PAGE> 24
(3) the percentage of the principal amount at which such Debt
Securities will be issued and, if other than the principal amount thereof,
the portion of the principal amount thereof payable upon declaration of
acceleration of the maturity thereof, or (if applicable) the portion of the
principal amount of such Debt Securities which is convertible into Common
Stock or Preferred Stock, or the method by which any such portion shall be
determined;
(4) the date or dates, or the method for determining such date or
dates, on which the principal of such Debt Securities will be payable;
(5) the rate or rates (which may be fixed or variable), or the method
by which such rate or rates shall be determined, at which such Debt
Securities will bear interest, if any;
(6) the date or dates, or the method for determining such date or
dates, from which any such interest will accrue, the Interest Payment Dates
on which any such interest will be payable, the Regular Record Dates for
such Interest Payment Dates, or the method by which such Dates shall be
determined, the Person to whom such interest shall be payable, and the
basis upon which interest shall be calculated if other than that of a
360-day year of twelve 30-day months;
(7) the place or places where (i) the principal of (and premium, if
any) and interest, if any, on such Debt Securities will be payable, (ii)
such Debt Securities may be surrendered for conversion or registration of
transfer, exchange or conversion and (iii) notices or demands to or upon
the Company in respect of such Debt Securities and the Indenture may be
served;
(8) the period or periods within which, or the date or dates on which,
the price or prices at which and the terms and conditions upon which such
Debt Securities may be redeemed, as a whole or in part, at the option of
the Company, if the Company is to have such an option;
(9) the obligation, if any, of the Company to redeem, repay or
repurchase such Debt Securities pursuant to any sinking fund or analogous
provisions or at the option of a Holder thereof, and the period or periods
within which, or the date or dates on which, the price or prices at which
and the terms and conditions upon which such Debt Securities are required
to be redeemed, repaid or purchased, as a whole or in part, pursuant to
such obligation;
(10) if other than U.S. dollars, the currency or currencies in which
such Debt Securities are denominated and/or payable, which may be a foreign
currency or units of two or more foreign currencies or a composite currency
or currencies, and the terms and conditions relating thereto;
(11) whether the amount of payments of principal of (and premium, if
any) or interest, if any, on such Debt Securities may be determined with
reference to an index, formula or other method (which index, formula or
method may, but need not be, based on a currency, currencies, currency unit
or units or composite currency or currencies) and the manner in which such
amounts shall be determined;
(12) any additions to, modifications of or deletions from the terms of
such Debt Securities with respect to the Events of Default or covenants or
other provisions set forth in the Indenture;
(13) whether such Debt Securities will be issued in certificated or
book-entry from;
(14) whether such Debt Securities will be in registered or bearer form
and, if in registered form, the denominations thereof if other than $1,000
and any integral multiple thereof and, if in bearer form, the denominations
thereof and terms and conditions relating thereto;
(15) the applicability, if any, of the defeasance and covenant
defeasance provisions of Article XIV of the Indenture;
(16) if such Debt Securities are to be issued upon the exercise of
debt warrants, the time, manner and place for such Debt Securities to be
authenticated and delivered;
(17) the terms, if any, upon which such Debt Securities may be
convertible into Common Stock or Preferred Stock of the Company and the
terms and conditions upon which such conversion will be effected,
including, without limitation, the initial conversion price or rate, the
conversion period and, in
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connection with the preservation of the Company's status as a REIT,
limitations on the ownership of the Common Stock or Preferred Stock into
which such Debt Securities are convertible;
(18) the terms and conditions, if any, upon which such Debt Securities
may be subordinated to other indebtedness of the Company;
(19) whether and under what circumstances the Company will pay
Additional Amounts as contemplated in the Indenture on such Debt Securities
in respect of any tax, assessment or governmental charge and, if so,
whether the Company will have the option to redeem such Debt Securities in
lieu of making such payment; and
(20) any other terms of such Debt Securities not inconsistent with the
provisions of the Indenture (Section 301).
The Debt Securities may provide for less than the entire principal amount
thereof to be payable upon declaration of acceleration of the maturity thereof
("Original Issue Discount Securities"). Special U.S. federal income tax,
accounting and other considerations applicable to the Original Issue Discount
Securities will be described in the applicable Prospectus Supplement.
The Indenture does not contain any provisions that would limit the ability
of the Company to incur indebtedness or that would afford Holders of Debt
Securities protection in the event of a highly leveraged or similar transaction
involving the Company. However, restrictions on ownership and transfers of the
Common Stock and Preferred Stock, designed to preserve the Company's status as a
REIT, may prevent or hinder a change of control. Reference is made to the
applicable Prospectus Supplement for information with respect to any deletions
from, modifications of or additions to the Events of Default or covenants of the
Company that are described below, including any addition of a covenant or other
provision providing event risk or similar protection.
DENOMINATIONS, INTEREST, REGISTRATION AND TRANSFER
Unless otherwise described in the applicable Prospectus Supplement, the
Debt Securities of any series will be issuable in denominations of $1,000 and
integral multiples thereof (Section 302).
Unless otherwise specified in the applicable Prospectus Supplement, the
principal of (and premium, if any) and interest on any series of Debt Securities
will be payable at the corporate trust office of the Trustee, provided that, at
the option of the Company, payment of interest may be made by check mailed to
the address of the Person entitled thereto as it appears in the Security
Register or by wire transfer of funds to such Person at an account maintained
within the United States (Sections 301, 305, 307 and 1002).
All amounts paid by the Company to a paying agent or a Trustee for the
payment of the principal of or any premium or interest on any Debt Security
which remain unclaimed at the end of two years after the principal, premium or
interest has become due and payable will be repaid to the Company, and the
holder of the Debt Security thereafter may look only to the Company for payment
thereof.
Any interest not punctually paid or duly provided for on any Interest
Payment Date with respect to a Debt Security ("Defaulted Interest") will
forthwith cease to be payable to the Holder on the applicable Regular Record
Date and may either be paid to the person in whose name such Debt Security is
registered at the close of business on a special record date (the "Special
Record Date") for the payment of such Defaulted Interest to be fixed by the
Trustee, notice whereof shall be given to the Holder of such Debt Security not
less than 10 days prior to such Special Record Date, or may be paid at any time
in any other lawful manner, all as more completely described in the Indenture
(Sections 101 and 307).
Subject to certain limitations imposed upon Debt Securities issued in
book-entry form, the Debt Securities of any series will be exchangeable for
other Debt Securities of the same series, of a like aggregate principal amount
and tenor, of different authorized denominations upon surrender of such Debt
Securities at the corporate trust office of the Trustee. In addition, subject to
certain limitations imposed upon Debt Securities issued in book-entry form, the
Debt Securities of any series may be surrendered for conversion or registration
of transfer thereof at the corporate trust office of the Trustee referred to
above. Every Debt
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<PAGE> 26
Security surrendered for conversion, registration of transfer or exchange shall
be duly endorsed or accompanied by a written instrument of transfer. No service
charge will be made for any registration of transfer or exchange of any Debt
Securities, but the Company may require payment of a sum sufficient to cover any
tax or other governmental charge payable in connection therewith (Section 305).
If the applicable Prospectus Supplement refers to any transfer agent (in
addition to the Trustee) initially designated by the Company with respect to any
series of Debt Securities, the Company may at any time rescind the designation
of any such transfer agent or approve a change in the location through which any
such transfer agent acts, except that the Company will be required to maintain a
transfer agent in each Place of Payment for such series. The Company may at any
time designate additional transfer agents with respect to any series of Debt
Securities (Section 1002).
Neither the Company nor the Trustee shall be required to (i) issue,
register the transfer of or exchange Debt Securities of any series during a
period beginning at the opening of business 15 days before any selection of Debt
Securities of that series to be redeemed and ending at the close of business of
the day of mailing of the relevant notice of redemption; (ii) register the
transfer of or exchange any Debt Security, or portion thereof, called for
redemption, except the unredeemed portion of any Debt Security being redeemed in
part; or (iii) issue, register the transfer of or exchange any Debt Security
which has been surrendered for repayment at the option of the Holder, except
that portion, if any, of such Debt Security which is not to be so repaid
(Section 305).
MERGER, CONSOLIDATION OR SALE
The Company may consolidate with, or sell, lease or convey all or
substantially all of its assets to, or merge with or into, any other trust or
corporation, provided (a) either the Company shall be the continuing entity, or
the successor (if other than the Company) formed by or resulting from any such
consolidation or merger or which shall have received the transfer of such assets
and is a corporation organized under the laws of any domestic jurisdiction and
shall expressly assume payment of the principal of (and premium, if any) and
interest on all of the Debt Securities and the due and punctual performance and
observance of all of the covenants and conditions contained in the Indenture;
(b) immediately after giving effect to such transaction and treating any
indebtedness which becomes an obligation of the Company or any Subsidiary as a
result thereof as having been incurred by the Company or such Subsidiary at the
time of such transaction, no Event of Default under the Indenture, and no event
which, after notice or the lapse of time, or both, would become such an Event of
Default, shall have occurred and be continuing; and (c) an officer's certificate
and legal opinion covering such conditions shall be delivered to the Trustee
(Sections 801 and 803).
CERTAIN COVENANTS
Existence. Except as permitted under "Merger, Consolidation or Sale," the
Indenture will require the Company to do or cause to be done all things
necessary to preserve and keep in full force and effect its existence, rights
(declaration and statutory) and franchises; provided, however, that the Company
shall not be required to preserve any right or franchise if it determines that
the preservation thereof is no longer desirable in the conduct of its business
and that the loss thereof is not disadvantageous in any material respect to the
Holders of the Debt Securities (Section 1004).
Maintenance of Properties. The Indenture will require the Company to cause
all of its material properties used or useful in the conduct of its business or
the business of any subsidiary to be maintained and kept in good condition,
repair and working order and supplied with all necessary equipment and will
cause to be made all necessary repairs, renewals, replacements, betterments and
improvements thereof, all as in the judgment of the Company may be necessary so
that the business carried on in connection therewith may be properly and
advantageously conducted at all times; provided, however, that the Company and
its subsidiaries shall not be prevented from selling or otherwise disposing of
their properties for value in the ordinary course of business. (Section 1007).
Insurance. The Indenture will require the Company to cause each of its and
its subsidiaries' insurable properties to be insured against loss of damage with
insurers of recognized responsibility and, if described in
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<PAGE> 27
the applicable Prospectus Supplement, in specified amounts and with insurers
having a specified rating from a recognized insurance rating service. (Section
1008).
Payment of Taxes and Other Claims. The Indenture will require the Company
to pay or discharge or cause to be paid or discharged, before the same shall
become delinquent, (i) all taxes, assessments and governmental charges levied or
imposed upon it or any subsidiary or upon the income, profits or property of the
Company or any subsidiary and (ii) all lawful claims for labor, materials and
supplies which, if unpaid, might by law become a lien upon the property of the
Company or any subsidiary; provided, however, that the Company shall not be
required to pay or discharge or cause to be paid or discharged any tax,
assessment, charge or claim whose amount, applicability is being contested in
good faith. (Section 1009).
Provision of Financial Information. Whether or not the Company is subject
to Section 13 or 15(d) of the Exchange Act, the Company will, to the extent
permitted under the Exchange Act, file with the Commission the annual reports,
quarterly reports and other documents which the Company would have been required
to file with the Commission pursuant to such Section 13 or 15(d) (the "Financial
Statements") if the Company were so subject, such documents to be filed with the
Commission on or prior to the respective dates (the "Required Filing Dates") by
which the Company would have been required so to file such documents if the
Company were so subject. The Company will also in any event (x) file with the
Trustee copies of the annual reports, quarterly reports and other documents
which the Company would have been required to file with the Commission pursuant
to Section 13 or 15(d) of the Exchange Act if the Company were subject to such
Sections and (y) if filing such documents by the Company with the Commission is
not permitted under the Exchange Act, promptly upon written request and payment
of the reasonable cost of duplication and delivery, supply copies of such
documents to any prospective Holder (Section 1005).
Additional Covenants. Reference is made to the applicable Prospectus
Supplement for information with respect to any additional covenants specific to
a particular series of Debt Securities.
EVENTS OF DEFAULT, NOTICE AND WAIVER
Unless otherwise provided in the Prospectus Supplement, the Indenture
provides that the following events are "Events of Default" with respect to any
series of Debt Securities issued thereunder: (a) default for 30 days in the
payment of any interest on any Debt Security of such series; (b) default in the
payment of any principal of (or premium, if any on) any Debt Security of such
series when due; (c) default in making any sinking fund payment as required for
any Debt Security of such series; (d) default in the performance of any other
covenant or warranty of the Company contained in the Indenture with respect to
any Debt Security of such series, continued for 60 days after written notice as
provided in the Indenture; (e) default in the payment of indebtedness of the
Company outstanding in an aggregate principal amount in excess of $5,000,000 or
any mortgage, indenture, note, bond, capitalized lease or other instrument under
which such indebtedness is issued or by which such indebtedness is secured, such
default having continued after the expiration of any applicable grace period and
having resulted in the acceleration of the maturity of such indebtedness; (f)
certain events of bankruptcy, insolvency or reorganization, or court appointment
of a receiver, liquidator or trustee of the Company or any Significant
Subsidiary or the property of either; (g) the acquisition by any Person
(including any affiliates of such Person) of 20% or more of the Company's Common
Stock, unless the Company's Board of Directors shall have first approved of such
acquisition; and (h) any other Event of Default provided with respect to a
particular series of Debt Securities (Section 501). The term "Significant
Subsidiary" means each significant subsidiary (as defined in Regulation S-X
promulgated under the Securities Act) of the Company. (Section 101).
If an Event of Default under the Indenture with respect to Debt Securities
of any series at the time Outstanding occurs, and is continuing, then in every
such case the Trustee or the Holders of not less than 25% in principal amount of
the Outstanding Debt Securities of that series may declare the principal amount
(or, if the Debt Securities of that series are Original Issue Discount
Securities or Indexed Securities, such portion of the principal amount as may be
specified in the terms thereof) of all of the Debt Securities of that series to
be due and payable immediately by written notice thereof to the Company (and to
the Trustee if given by the Holders). However, any time after such a declaration
of acceleration with respect to Debt Securities of such
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series has been made, but before a judgment or decree for payment of the money
due has been obtained by the Trustee, the Holders of not less than a majority in
principal amount of Outstanding Debt Securities of such series may rescind and
annul such declaration and its consequences if (a) the Company shall have paid
or deposited with the Trustee all required payments of the principal of (and
premium, if any) and interest on the Debt Securities of such series plus certain
fees, expenses, disbursements and advances of the Trustee and (b) all Events of
Default, other than the nonpayment of accelerated principal or interest with
respect to Debt Securities of such series have been cured or waived as provided
in the Indenture (Section 502). The Indenture also provides that the Holders of
not less than a majority in principal amount of the Outstanding Debt Securities
of any series may waive any past default with respect to such series and its
consequences, except a default (x) in the payment of the principal of (or
premium, if any) or interest on any Debt Security of such series or (y) in
respect of a covenant or provision contained in the Indenture that cannot be
modified or amended without the consent of the Holder of each Outstanding Debt
Security affected thereby (Section 513).
The Trustee is required to give notice to the Holders of Debt Securities
within 90 days of a default under the Indenture; provided, however, that the
Trustee may withhold notice to the Holders of any series of Debt Securities of
any default with respect to such series (except a default in the payment of the
principal of (or premium, if any) or interest on any Debt Security of such
series or in the payment of any sinking fund installment in respect of any Debt
Security of such series) if the Responsible Officers of the Trustee consider
such withholding to be in the interest of such Holders (Section 601).
The Indenture provides that no Holders of Debt Securities of any series may
institute any proceedings, judicial or otherwise, with respect to the Indenture
or for any remedy thereunder, except in the case of failure of the Trustee, for
60 days, to act after it has received a written request to institute proceedings
in respect of an Event of Default from the Holders of not less than 25% in
principal amount of the Outstanding Debt Securities of that series, as well as
an offer of reasonable indemnity (Section 507). This provision will not prevent,
however, any Holder of Debt Securities from instituting suit for the enforcement
of payment of the principal of (and premium, if any) and interest on such Debt
Securities at the respective due date thereof (Section 508).
Subject to provisions in the Indenture relating to its duties in case of
default, the Trustee is under no obligation to exercise any of its rights or
powers under the Indenture at the request or direction of any Holders of Debt
Securities of any series then Outstanding under the Indenture, unless such
Holders shall have offered to the Trustee reasonable security or indemnity
(Section 602). The Holders of not less than 25% in principal amount of the
Outstanding Debt Securities of any series shall have the right to direct the
time, method and place of conducting any proceeding for any remedy available to
the Trustee, or of exercising any trust or power conferred upon the Trustee.
However, the Trustee may refuse to follow any direction which is in conflict
with any law or the Indenture, which may involve the Trustee in personal
liability or which may be unduly prejudicial to the Holders of Debt Securities
of such series not joining therein (Section 512).
Within 120 days after the close of each fiscal year, the Company must
deliver to the Trustee a certificate, signed by one of several specified
officers, stating whether or not such officer has knowledge of any default under
the Indenture and, if so, specifying each such default and the nature and status
thereof (Section 1006).
MODIFICATION OF THE INDENTURE
Modifications and amendments of provisions of the Indenture applicable to
any series may be made only with consent of the Holders of not less than a
majority in principal amount of all Outstanding Debt Securities which are
affected by such modification or amendment; provided, however, that no such
modification or amendment may, without the consent of the Holder of each such
Debt Security affected thereby, (a) change the Stated Maturity of the principal
of, or any installment of interest (or premium, if any) on, any such Debt
Security; (b) reduce the principal amount of, or the rate or amount of interest
on, or any premium payable on redemption of, any such Debt Security, or reduce
the amount of principal of an Original Issue Discount Security that would be due
and payable upon declaration of acceleration of the maturity thereof or would be
provable in bankruptcy, or adversely affect any right of repayment of the Holder
of any such Debt Security;
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(c) change the Place of Payment, or the coin or currency, for payment of
principal of, premium, if any, or interest on any such Debt Security; (d) impair
the right to institute suit for the enforcement of any payment on or with
respect to any such Debt Security on or after the Stated Maturity thereof; (e)
reduce the above-stated percentage of Outstanding Debt Securities of any series
necessary to modify or amend the Indenture, to waive compliance certain
provisions thereof or certain defaults and consequences thereunder or to reduce
the quorum or voting requirements set forth in the Indenture; or (f) modify any
of the foregoing provisions or any of the provisions relating to the waiver of
certain past defaults or certain covenants, except to increase the required
percentage to effect such action or to provide that certain other provisions may
not be modified or waived without the consent of the Holder of such Debt
Security (Section 902).
The Holders of not less than a majority in principal amount of Outstanding
Debt Securities of a particular series of any series have the right to waive
compliance by the Company with certain covenants in the Indenture relating to
such series (Section 1011).
Modifications and amendments of the Indenture may be made by the Company
and the Trustee without the consent of any Holder of Debt Securities for any of
the following purposes: (i) to evidence the succession of another Person to the
Company as obligor under the Indenture; (ii) to add to the covenants of the
Company for the benefit of the Holders of all or any series of Debt Securities
or to surrender any right or power conferred upon the Company in the Indenture;
(iii) to add Events of Default for the benefit of the Holders of all or any
series of Debt Securities; (iv) to add or change any provisions of the Indenture
to facilitate the issuance of Debt Securities in bearer form, or to permit or
facilitate the issuance of Debt Securities in uncertificated form, provided that
such action shall not adversely affect the interests of the Holders of the Debt
Securities of any series in any material respect; (v) to change or eliminate any
provisions of the Indenture, provided that any such change or elimination shall
become effective only when there are not Debt Securities Outstanding of any
series created prior thereto which are entitled to the benefit of such
provision; (vi) to secure the Debt Securities; (vii) to establish the form or
terms of Debt Securities of any series, including the provision and procedures,
if applicable, or the conversion of such Debt Securities into Common Stock or
Preferred Stock; (viii) to provide for the acceptance of appointment by a
successor Trustee or facilitate the administration of the trust under the
Indenture by more than one trustee; (ix) to cure any ambiguity, defect or
inconsistency in the Indenture, provided that such action shall not adversely
affect the interests of Holders of Debt Securities of any series in any material
respect; and (x) to supplement any of the provisions of the Indenture to the
extent necessary to permit or facilitate defeasance and discharge of any series
of such Debt Securities, provided that such action shall not adversely affect
the interests of the Holders of the Debt Securities of any series in any
material respect (Section 901).
The Indenture provides that in determining whether the Holders of the
requisite principal amount of Outstanding Debt Securities of a series have given
any request, demand, authorization, direction, notice, consent or waiver
thereunder or whether a quorum is present at a meeting of Holders of Debt
Securities, (i) the principal amount of an Original Issue Discount Security that
shall be deemed to be outstanding shall be the amount of the principal thereof
that would be due and payable as of the date of such determination upon
declaration of acceleration of the maturity thereof, (ii) the principal amount
of a Debt Security denominated in a Foreign Currency that shall be deemed
outstanding shall be the U.S. dollar equivalent, determined on the issue date
for such Debt Security, of the principal amount (or, in the case of an Original
Issue Discount Security, the U.S. dollar equivalent on the issue date of such
Debt Security of the amount determined as provided in (i) above), (iii) the
principal amount of an Indexed Security that shall be deemed outstanding shall
be the principal face amount of such Indexed Security at original issuance,
unless otherwise provided with respect to such Indexed Security pursuant to
Section 301 of the Indenture and (iv) Debt Securities owned by the Company or
any other obligor upon the Debt Securities or any Affiliate of the Company or of
such other obligor shall be disregarded (Section 101).
The Indenture contains provisions for convening meetings of the Holders of
Debt Securities of a series (Section 1501). A meeting may be called at any time
by the Trustee, and also, upon request, by the Company or the Holders of at
least 10% in principal amount of the Outstanding Debt Securities of such series,
in any such case upon notice given as provided in the Indenture (Section 1502).
Except for any consent that must be given by the Holder of each Debt Security
affected by certain modifications and amendments of the
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Indenture, any resolution presented at a meeting or adjourned meeting duly
reconvened at which a quorum is present may be adopted by the affirmative vote
of the Holders of a majority in principal amount of the Outstanding Debt
Securities of that series; provided, however, that except as referred to above,
any resolution with respect to any request, demand, authorization, direction,
notice, consent, waiver or other action that may be made, given or taken by the
Holders of a specified percentage, which is less than a majority, in principal
amount of the Outstanding Debt Securities of a series may be adopted at a
meeting or adjourned meeting duly reconvened at which a quorum is present by the
affirmative vote of the Holders of such Debt Securities of that series. Any
resolution passed or decision taken at any meeting of Holders of Debt Securities
of any series duly held in accordance with the Indenture will be binding on all
Holders of Debt Securities of that series. The quorum at any meeting called to
adopt a resolution, and at any reconvened meeting, will be Persons holding or
representing a majority in principal amount of the Outstanding Debt Securities
of a series; provided, however, that if any action is to be taken at such
meeting with respect to a consent or waiver which may be given by the Holders of
not less than a specified percentage in principal amount of the Outstanding Debt
Securities of a series, the Persons holding or representing such specified
percentage in principal amount of the outstanding Debt Securities of such series
will constitute a quorum (Section 1504).
Notwithstanding the foregoing provisions, if any action is to be taken at a
meeting of Holders of Debt Securities of any series with respect to any request,
demand, authorization, direction, notice, consent, waiver or other action that
the Indenture expressly provides may be made, given or taken by the Holders of a
specified percentage in principal amount of all Outstanding Debt Securities
affected thereby, or of the Holders of such series and one or more additional
series: (i) there shall be no minimum quorum requirement for such meeting and
(ii) the principal amount of the Outstanding Debt Securities of such series that
vote in favor of such request, demand, authorization, direction, notice,
consent, waiver or other action shall be taken into account in determining
whether such request, demand, authorization, direction, notice, consent, waiver
or other action has been made, given or taken under the Indenture (Section
1504).
DISCHARGE, DEFEASANCE AND COVENANT DEFEASANCE
Unless otherwise provided in the Prospectus Supplement, the Company may
discharge certain obligations to Holders of any series of Debt Securities that
have not already been delivered to the Trustee for cancellation and that either
have become due and payable or will become due and payable within one year (or
are scheduled for redemption within one year) by irrevocably depositing with the
Trustee, in trust, funds in such currency or currencies, currency unit or units
or composite currency or currencies in which such Debt Securities are payable in
an amount sufficient to pay the entire indebtedness on such Debt Securities in
respect of principal (and premium, if any) and interest to the date of such
deposit (if such Debt Securities have become due and payable) or to the Stated
Maturity or Redemption Date, as the case may be (Section 401).
The Indenture provides that, unless otherwise provided in the Prospectus
Supplement, if the provisions of Article Fourteen are made applicable to the
Debt Securities of any series pursuant to Section 301 of the Indenture, the
Company may elect either (a) to defease and be discharged from any and all
obligations with respect to such Debt Securities (except for the obligation to
pay Additional Amounts, if any, upon the occurrence of certain events of tax,
assessment or governmental charge with respect to payments on such Debt
Securities and the obligations to register the transfer or exchange of such Debt
Securities, to replace temporary or mutilated, destroyed, lost or stolen Debt
Securities, to maintain an office or agency in respect of such Debt Securities
and to hold moneys for payment in trust) ("defeasance") (Section 1402) or (b) to
be released from its obligations with respect to such Debt Securities under
Sections 1004 and 1005, inclusive, of the Indenture (being the restrictions
described under "Certain Covenants") or, if provided pursuant to Section 301 of
the Indenture, its obligations with respect to any other covenant, and any
omission to comply with such obligations shall not constitute a default or an
Event of Default with respect to such Debt Securities ("covenant defeasance")
(Section 1403), in either case upon the irrevocable deposit by the Company with
the Trustee, in trust, of any amount, in such currency or currencies, currency
unit or units or composite currency or currencies in which such Debt Securities
are payable at Stated Maturity, or Government Obligations (as defined below), or
both applicable to such Debt Securities which through the scheduled
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payment of principal and interest in accordance with their terms will provide
money in an amount sufficient to pay the principal of (and premium, if any) and
interest on such Debt Securities, and any mandatory sinking fund or analogous
payments thereon, on the scheduled due dates therefor.
Such a trust may only be established if, among other things, the Company
has delivered to the Trustee an Opinion of Counsel (as specified in the
Indenture) to the effect that the Holders of such Debt Securities will not
recognize income, gain or loss for U.S. Federal income tax purposes as a result
of such defeasance or covenant defeasance and will be subject to U.S. Federal
income tax on the same amounts, in the same manner and at the same times as
would have been the case if such defeasance or covenant defeasance had not
occurred, and such Opinion of Counsel, in the case of defeasance, must refer to
and be based upon a ruling of the Internal Revenue Service or a change in
applicable United States federal income tax law occurring after the date of the
Indenture (Section 1404).
"Government Obligations" means securities which are (i) direct obligations
of the United States of America or the government which issued the Foreign
Currency in which the Debt Securities of a particular series are payable, for
the payment of which its full faith and credit is pledged or (ii) obligations of
a Person controlled or supervised by and acting as an agency or instrumentality
of the United States of America or such government which issued the Foreign
Currency in which the Debt Securities of such series are payable, the payment of
which is unconditionally guaranteed as a full faith and credit obligation by the
United States of America or such other government, which, in either case, are
not callable or redeemable at the option of the issuer thereof, and shall also
include a depository receipt issued by a bank or trust company as custodian with
respect to any such Government Obligation or a specific payment of interest on
or principal of any such Government Obligation held by such custodian for the
account of the holder of a depository receipt, provided that (except as required
by law) such custodian is not authorized to make any deduction from the amount
payable to the holder of such depository receipt from any amount received by the
custodian in respect of the Government Obligation or the specific payment of
interest on or principal of the Government Obligation evidenced by such
depository receipt (Section 101).
Unless otherwise provided in the applicable Prospectus Supplement, if after
the Company has deposited funds and/or Government Obligations to effect
defeasance or covenant defeasance with respect to Debt Securities of any series,
(a) the Holder of a Debt Security of such series is entitled to, and does, elect
pursuant to Section 301 of the Indenture or the terms of such Debt Security to
receive payment in a currency, currency unit or composite currency other than
that in which such deposit has been made in respect of such Debt Security, or
(b) a Conversion Event (as defined below) occurs in respect of the currency,
currency unit or composite currency in which such deposit has been made, the
indebtedness represented by such Debt Security shall be deemed to have been, and
will be, fully discharged and satisfied through the payment of the principal of
(and premium, if any) and interest on such Debt Security as they become due out
of the proceeds yielded by converting the amount so deposited in respect of such
Debt Security into the currency, currency unit or composite currency in which
such Debt Security becomes payable as a result of such election or such
cessation of usage based on the applicable market exchange rate (Section 1405).
"Conversion Event" means the cessation of use of (i) a currency, currency unit
or composite currency both by the government of the country which issued such
currency and for the settlement of transactions by a central bank or other
public institutions or within the international banking community, (ii) the ECU
both within the European Monetary System and for the settlement of transactions
by public institutions of or within the European Communities or (iii) any
currency unit or composite currency other than the ECU for the purposes for
which it was established. (Section 101.) Unless otherwise provided in the
applicable Prospectus Supplement, all payments of principal of (and premium, if
any) and interest on any Debt Security that is payable in a Foreign Currency
that cease to be used by its government of issuance shall be made in U.S.
dollars.
In the event the Company effects covenant defeasance with respect to any
Debt Securities and such Debt Securities are declared due and payable because of
the occurrence of any Event of Default other than the Event of Default described
in clause (d) under "Events of Default, Notice and Waiver" with respect to
Sections 1004 and 1005, inclusive, of the Indenture (which Sections would no
longer be applicable to such Debt Securities) or described in clause (h) under
"Events of Default, Notice and Waiver" with respect to any other covenant as to
which there has been covenant defeasance, the amount in such currency, currency
unit or
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composite currency in which such Debt Securities are payable, and Government
Obligations on deposit with the Trustee, will be sufficient to pay amounts due
on such Debt Securities at the time of their Stated Maturity but may not be
sufficient to pay amounts due on such Debt securities at the time of the
acceleration resulting from such Event of Default. However, the Company would
remain liable to make payment of such amounts due at the time of acceleration.
The applicable Prospectus Supplement may further describe the provisions,
if any, permitting such defeasance or covenant defeasance, including any
modifications to the provisions described above, with respect to the Debt
Securities of a particular series.
CONVERSION RIGHTS
The terms and conditions, if any, upon which the Debt Securities are
convertible into Common Stock or Preferred Stock will be set forth in the
applicable Prospectus Supplement relating thereto. Such terms will include
whether such Debt Securities are convertible into Common Stock or Preferred
Stock, the conversion price (or manner of calculation thereof), the conversion
period, provisions as to whether conversion will be at the option of the Holders
of the Company, the events requiring an adjustment of the conversion price and
provisions affecting conversion in the event of the redemption of such Debt
Securities and any restriction on conversion, including restrictions directed at
maintaining the Company's REIT status.
SUBORDINATION
The terms and conditions, if any, upon which the Debt Securities are
subordinated to other indebtedness of the Company will be set forth in the
applicable Prospectus Supplement relating thereto. Such terms will include a
description of the indebtedness ranking senior to the Debt Securities, the
restrictions on payments to the Holders of such Debt Securities while a default
with respect to such senior indebtedness in continuing, the restrictions, if
any, on payments to the Holders of such Debt Securities following an Event of
Default, and provisions requiring Holders of such Debt Securities to remit
certain payments to holders of senior indebtedness.
GLOBAL SECURITIES
The Debt Securities of a series may be issued in whole or in part in the
form of one or more global securities (the "Global Securities") that will be
deposited with, or on behalf of, a depositary (the "Depositary") identified in
the applicable Prospectus Supplement relating to such series. Global Securities
may be issued in either registered or bearer form and in either temporary or
permanent form. The specific terms of the depositary arrangement with respect to
a series of Debt Securities will be described in the applicable Prospectus
Supplement relating to such series.
DESCRIPTION OF STOCK
The summary of the terms of the stock of the Company set forth below does
not purport to be complete and is subject to and qualified in its entirety by
reference to the charter and bylaws of the Company and applicable law. See
"Available Information."
GENERAL
The total number of shares of stock which the Company is authorized to
issue is twenty-seven million (27,000,000) shares, of which two million
(2,000,000) is Preferred Stock, $.01 par value per share, and twenty-five
million (25,000,000) is Common Stock, $.01 par value per share.
The Common Stock may be issued from time to time in one or more series. The
Board of Directors is authorized to fix the number of any series of Common Stock
and to determine the designation of any such series. The Board of Directors is
also authorized to determine or alter the rights granted to or imposed upon any
wholly unissued series of Common Stock, including the dividend rights, dividend
rate, conversion rights, voting rights, and the liquidation preference, and,
within the limits and restrictions stated in any resolution or
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resolutions of the Board of Directors originally fixing the number of shares
constituting any series, to increase or decrease (but not below the number of
shares then outstanding) the number of shares of any such series subsequent to
the issue of shares of that series. In case the number of shares of any series
shall be so decreased, the shares constituting such decrease shall resume the
status which they had prior to the adoption of the resolution originally fixing
the number of shares of such series. Notwithstanding the foregoing, however, in
no event shall the Common Stock be redeemable, except in connection with the
redemption provisions of Article IX of the Company's Articles of Incorporation,
as amended to date (the "Charter").
As of June 30, 1997, there were approximately 10,685,503 shares of Common
Stock issued and outstanding. Approximately 752,000 shares of Common Stock have
been reserved for issuance pursuant to stock option agreements that the Company
has entered into with certain of its officers and directors.
COMMON STOCK
The holders of the Common Stock are entitled to participate in
distributions when and as authorized and declared by the Board of Directors. The
Company currently pays regular quarterly dividends to holders of Common Stock.
Holders of the Common Stock are entitled to one vote per share of Common Stock
on all matters submitted to a vote of the stockholders of the Company. In voting
for directors, a stockholder of the Company is entitled to cumulate votes if
such stockholder gives notice, prior to commencement of the voting, of an
intention to do so. If any one stockholder has given such notice, then all
stockholders entitled to vote may cumulate votes. As noted above, however, in
the event that the Board of Directors determines to issue Common Stock in one or
more series, prior to issuance, the Board of Directors is authorized to fix the
number, designate and determine and establish various rights applicable to that
series.
All issued and outstanding shares of Common Stock being offered hereby will
be validly issued, fully paid and nonassessable. Holders of the Common Stock
currently issued and outstanding and holders of the shares of Common Stock
offered hereby do not have any preference, conversion, exchange or preemptive
rights.
Any shares of Common Stock sold in an offering will be freely tradeable
without restriction or registration under the Securities Act of 1933, as amended
(the "Securities Act"), unless acquired by an affiliate of the Company, subject
to the restrictions on transfer set forth below. Shares of Common Stock held by
affiliates or acquired in transactions not registered in reliance on the private
offering exemption under the Securities Act cannot be resold unless registered
under the Securities Act or sold pursuant to an exemption from registration,
such as Rule 144 promulgated under the Securities Act.
The transfer agent and registrar for the Company's Common Stock is
ChaseMellon Shareholder Services, Los Angeles, California.
The Company's Common Stock is currently traded on the New York Stock
Exchange under the symbol "RET."
PREFERRED STOCK
The Preferred Stock may be issued from time to time in one or more series.
The Board of Directors is authorized to fix the number of shares of any series
of Preferred Stock and to determine the designation of any such series. The
Board of Directors is also authorized to determine or alter the rights granted
to or imposed upon any wholly unissued series of Preferred Stock including the
dividend rights, dividend rate, conversion rights, voting rights, and the
liquidation preference, and, within the limits and restrictions stated in any
resolution or resolutions of the Board of Directors originally fixing the number
of shares constituting any series, to increase or decrease (but not below the
number of shares then outstanding) the number of shares of any such series
subsequent to the issue of shares of that series. In case the number of shares
of any series shall be so decreased, the shares constituting such decrease shall
resume the status which they had prior to the adoption of the resolution
originally fixing the number of shares of such series. Notwithstanding the
foregoing, however, in no event shall the Preferred Stock be redeemable, except
in connection with the redemption
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provisions of Article IX of the Charter. The issuance of Preferred Stock may
have the effect of delaying, deferring or preventing a change in control of the
Company.
Preferred Stock, upon issuance against full payment of the purchase price
therefor, will be fully paid and nonassessable. The specific terms of a
particular series of Preferred Stock will be described in the Prospectus
Supplement relating to that series, including a Prospectus Supplement providing
that Preferred Stock may be issuable upon the exercise of Warrants issued by the
Company. The description of Preferred Stock set forth below and the description
of the terms of a particular series of Preferred Stock set forth in a Prospectus
Supplement do not purport to be complete and are qualified in their entirety by
reference to the articles supplementary relating to that series.
The rights, preferences, privileges and restrictions of the Preferred Stock
of each series will be fixed by the articles supplementary relating to such
series. A Prospectus Supplement, relating to each series, will specify the terms
of the Preferred Stock as follows:
(1) the title and stated value of such Preferred Stock;
(2) the number of shares of such Preferred Stock offered, the
liquidation preference per share and the offering price of such Preferred
Stock;
(3) the dividend rate(s), period(s), and/or payment date(s) or
method(s) of calculation thereof applicable to such Preferred Stock;
(4) whether such Preferred Stock is cumulative or not and, if
cumulative, the date from which dividends on such Preferred Stock shall
accumulate;
(5) the procedures for any auction and remarketing, if any, for such
Preferred Stock;
(6) the provision for a sinking fund, if any, for such Preferred
Stock;
(7) the provision for redemption, if applicable, of such Preferred
Stock;
(8) any listing of such Preferred Stock on any securities exchange;
(9) the terms and conditions, if applicable, upon which such Preferred
Stock will be converted into Common Stock of the Company, including the
conversion price (or manner of calculation thereof);
(10) a discussion of any material federal income tax considerations
applicable to such Preferred Stock;
(11) any limitations on direct or beneficial ownership and
restrictions on transfer, in each case as may be appropriate to preserve
the status of the Company as a REIT;
(12) the relative ranking and preferences of such Preferred Stock as
to dividend rights and rights upon liquidation, dissolution or winding up
of the affairs of the Company;
(13) any limitations on issuance of any class or series of preferred
stock ranking senior to or on a parity with such series of Preferred Stock
as to dividend rights and rights upon liquidation. dissolution or winding
up of the affairs of the Company;
(14) any other specific terms, preferences, rights, limitations or
restrictions of such Preferred Stock; and
(15) any voting rights of such Preferred Stock.
Unless otherwise specified in the Prospectus Supplement, the Preferred
Stock will, with respect to dividend rights and rights upon liquidation,
dissolution or winding up of the Company, rank (i) senior to the Common Stock of
the Company, and to all equity securities ranking junior to such Preferred Stock
with respect to dividend rights or rights upon liquidation, dissolution or
winding up of the Company; (ii) on a 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 Preferred Stock with respect to dividends rights or
rights upon liquidation, dissolution or winding up of the Company; and (iii)
junior to all equity securities issued by the Company the
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terms of which specifically provide that such equity securities rank senior to
the Preferred Stock with respect to dividend rights or rights upon liquidation,
dissolution or winding up of the Company.
The terms and conditions, if any, upon which shares of a series of
Preferred Stock are convertible into Common Stock will be set forth in the
applicable Prospectus Supplement relating thereto. Such terms will include the
number of shares of Common Stock into which the Preferred Stock is convertible,
the conversion price (or manner of calculation thereof), the conversion period,
provisions as to whether conversion will be at the option of the holders of the
Preferred Stock or the Company, the events requiring an adjustment of the
conversion price and provisions affecting conversion in the event of the
redemption of such Preferred Stock.
RESTRICTIONS ON TRANSFER
For the Company to qualify as a REIT under the Code in any taxable year,
not more than 50% of its outstanding equity securities may be owned directly or
indirectly by five or fewer individuals, and its equity securities must be owned
by 100 or more persons during at least 335 days of a taxable year of 12 months
or during a proportionate part of a shorter taxable year (except the first
year). In order to ensure that the Company will meet these requirements, the
Charter provides that the Board of Directors has the power to redeem or prohibit
the transfer of a sufficient number of shares of stock, selected in a manner
deemed appropriate, to maintain or bring the ownership of shares into conformity
with such requirements. In connection with the foregoing, if the Board of
Directors shall, at any time and in good faith, be of the opinion that (i)
direct or indirect ownership of more than 9.8% in value of the outstanding
shares of stock of the Company has or may become concentrated in the hands of
one beneficial owner (including any "group," as that term is used in Section
13(d) of the Exchange Act) or (ii) direct or indirect ownership of the
outstanding shares of stock has or may result in the Company's shares being held
by less than 100 persons (either occurrence, a "Disqualifying Event"), the
Charter states that the Board of Directors has the power (a) to redeem from any
stockholders of the Company a number of shares of stock sufficient, in the
opinion of the Board, to maintain or bring the direct or indirect ownership of
shares of such owner to a level of not more than 9.8% in value of the
outstanding shares of stock of the Company and (b) to refuse to transfer or
issue shares of stock of the Company to any person whose acquisition of such
shares, in the opinion of the Board of Directors, would cause a Disqualifying
Event. The Charter further states that notice of such action by the Board of
Directors shall be sent to each person whose shares of stock of the Company
shall be redeemed or whose transfer or receipt of shares of stock of the Company
shall be refused specifying the date of each redemption (if applicable) and the
number of shares as affected. The purchase price for any shares of stock of the
Company so redeemed, as provided in the Charter, is equal to the fair market
value of such shares reflected in the closing sales price for the shares, if
then listed on a national securities exchange or the Nasdaq National Market
System, or, if the shares are not then listed on a national securities exchange
or the Nasdaq National Market System, the closing bid quotation for the shares
on the Nasdaq Automated Quotations System or any similar system then in use, or,
if such quotation is not available, the fair market value as determined by the
Board of Directors in good faith, on the last business day immediately preceding
the day on which a notice of such redemption is sent by the Board of Directors.
The Common Stock is presently listed on the New York Stock Exchange. From and
after the date fixed for purchase by the Board, the holder of any shares of
stock so called for purchase shall cease to be entitled to distributions, voting
rights and other benefits with respect to such shares except the right to
payment of the purchase price for the shares.
Further, the Charter states that any transfer of shares of stock that would
cause a Disqualifying Event shall be deemed void. If such provision is deemed
invalid, the Charter provides that any shares of stock whose transfer would
cause a Disqualifying Event shall be deemed transferred by operation of law to
the Company as trustee of a trust for the benefit of those persons to whom the
shares can ultimately be transferred without causing a Disqualifying Event.
According to the Charter, shares held in trust shall cease to be entitled to
distribution, voting rights and other benefits with respect to such shares
(except for the right to payment for transfer as described below) during the
time that they are held in trust. An interest in the trust may be transferred by
the person whose attempted purchase would have caused a Disqualifying Event, at
a price not in excess of the price paid by that person for the shares. Upon such
a transfer, the trustees shall distribute the shares held in trust to the
transferee, provided that such shares in the hands of such transferee would not
cause
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a Disqualifying Event. The foregoing provisions of the Charter may have certain
anti-takeover effects. Although the provisions do not apply to a cash tender for
all of the outstanding shares of the Company, the provisions do impair the
ability of any person to accumulate a controlling portion of the Company's
shares or conduct a proxy contest.
CERTAIN PROVISIONS OF MARYLAND LAW
Certain sections of the Maryland General Corporation Law ("MGCL") contain
provisions which may tend to impede or delay a takeover of the Company. Section
3-602 of the MGCL provides that a Maryland corporation may not engage in any
"Business Combination" (defined to include a variety of transactions, including
mergers, as set forth below) with an "Interested Stockholder" (generally defined
as a beneficial owner of 10% or more of a corporation's voting power) for five
years following the date such person became an Interested Stockholder unless,
among other exceptions, (i) before such person becomes an Interested
Stockholder, the board of directors of the corporation exempted or approved the
business combinations; or (ii) the Interested Stockholder became an Interested
Stockholder at any time in the prior five years solely through inadvertence, and
the Interested Stockholder divests itself of a sufficient amount of the
corporation's voting stock so that it no longer is the beneficial owner of 10%
or more of the corporation's voting stock.
Unless exempted by the statute, in addition to any vote otherwise required,
the MGCL provides that a Business Combination with an Interested Stockholder
that is not prohibited by the provisions of Section 3-602 must be recommended by
the board of directors and approved by the affirmative vote of at least 80% of
the voting stock of the corporation, and must also be approved by two-thirds of
the voting stock, excluding voting stock held by the Interested Stockholder who
will be a party to the Business Combination or by an affiliate or associate
thereof.
A corporation may elect not to be governed by Section 3-602 if the
stockholders adopt an amendment to the corporation's charter by a vote of at
least 80% of the voting stock of the corporation, and two-thirds of the votes
entitled to be cast by persons who are not Interested Stockholders of the
corporation or affiliates or associates thereof. Such an amendment, however,
shall not be effective until 18 months after the vote of stockholders and may
not apply to any Business Combination of the corporation with an Interested
Stockholder who became an Interested Stockholder on or before the date of the
vote.
The MGCL provides that during such five-year period the corporation and
certain of its subsidiaries may not merge, consolidate, or undertake a share
exchange with an Interested Stockholder or any affiliate of the Interested
Stockholder, unless the merger, consolidation or share exchange does not alter
the contract rights of the stock or change or convert outstanding shares of
stock of the corporation or its subsidiaries. In addition, the corporation and
certain of its subsidiaries may not engage in certain other transactions with an
interested Stockholder or any affiliate thereof.
In addition to the provisions of Section 3-602 and related Sections, the
MGCL also contains provisions which may have certain anti- takeover effects
through the restriction of voting rights of Control Shares. Section 3-702
provides that Control Shares of a Maryland corporation (defined as shares of
stock in respect of which an Acquiring Person (as defined in Section 3-701 of
the MGCL) is entitled to direct the exercise of voting power in electing
directors within one of the following ranges, (i) one-fifth or more but less
than one-third, (ii) one- third or more but less than a majority or (iii) a
majority or more of all voting power, and for which such voting power approval
has not been previously obtained) acquired in a Control Share Acquisition have
no voting rights except to the extent approved by two-thirds of all the votes
entitled to be cast on the matter, excluding all shares in respect of which an
Acquiring Person, an officer of the corporation, or an employee of the
corporation who is also a director of the corporation is entitled to exercise or
direct the exercise of voting power in the election of directors. An Acquiring
Person is defined as a person who makes or proposes to make a Control Share
Acquisition.
The MGCL defines a Control Share Acquisition as the acquisition of
ownership of, or the power to direct the exercise of voting power with respect
to, issued and outstanding Control Shares. A Control Share Acquisition does not
include the acquisition of shares, among other instances, (i) under the laws of
descent and distribution, (ii) under the satisfaction of a pledge or other
security interest created in good faith and not
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for the purpose of circumventing the Control Share provisions of the MGCL, (iii)
under a merger, consolidation or share exchange with the corporation which meets
certain requirements or (iv) under an acquisition of voting power within a range
previously authorized by the stockholders and made in good faith and not for the
purpose of circumventing the Control Share provisions of the MGCL.
LIMITATION OF LIABILITY AND INDEMNIFICATION
The Charter provides that the personal liability of a director for monetary
damages for breach of fiduciary duty as a director shall be eliminated to the
fullest extent permissible under law. The MGCL permits a Maryland corporation to
include in its charter a provision limiting the liability of its directors and
officers to the corporation and its stockholders for money damages except for
liability resulting from (a) actual receipt of an improper benefit or profit in
money, property or services or (b) active and deliberate dishonesty established
by a final judgment as being material to the cause of action. The Charter
contains such a provision which provides for the elimination of such liability
to the maximum extent permitted by the MGCL.
The Charter and Bylaws contain provisions which permit the Company to
indemnify its officers and directors to the extent permitted by Maryland law and
the Company has entered into indemnification agreements with its officers and
directors. The MGCL permits a corporation to indemnify its present and former
directors and officers, among others, against judgments, penalties, fines,
settlements and reasonable expenses actually incurred by them in connection with
any proceeding to which they may be made a party by reason of their service in
those or other capacities unless it is established that (a) the act or omission
of the director or officer was material to the matter giving rise to the
proceeding and (i) was committed in bad faith or (ii) was the result of active
and deliberate dishonesty, (b) the director or officer actually received an
improper personal benefit in money, property or services or (c) in the case of
any criminal proceeding, the director or officer had reasonable cause to believe
that the act or omission was unlawful. Such indemnification also may be subject
to certain limitations where claims under securities laws violations are
involved. Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to the Company's directors and officers pursuant
to the foregoing provisions or otherwise, the Company 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 addition,
indemnification may be limited by state securities laws.
DESCRIPTION OF WARRANTS
The Company may issue Warrants for the purchase of Common Stock or
Preferred Stock. The Warrants may be issued independently or together with any
other Offered Securities offered by any Prospectus Supplement and may be
attached to or separate from such Offered Securities. Each series of Warrants
will be issued under a separate warrant agreement (each, a "Warrant Agreement")
to be entered into between the Company and a warrant agent specified in the
applicable Prospectus Supplement (the "Warrant Agent"). The Warrant Agent will
act solely as an agent of the Company in connection with the Warrants of such
series and will not assume any obligation or relationship of agency or trust for
or with any holders or beneficial owners of Warrants. The following sets forth
certain general terms and provisions of the Warrants offered hereby. Further
terms of the Warrants and the applicable Warrant Agreement will be set forth in
the applicable Prospectus Supplement.
The applicable Prospectus Supplement will describe the terms of the
Warrants in respect of which this Prospectus is being delivered, including,
where applicable, the following:
(1) the title of such Warrants;
(2) the aggregate number of such Warrants;
(3) the price or prices at which such Warrants will be issued;
(4) the designation, number and terms of shares of Common Stock or
shares of Preferred Stock purchasable upon exercise of such Warrants;
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(5) the designation and terms of the other Offered Securities with
which such Warrants are issued and the number of such Warrants issued with
each such Offered Security;
(6) the date, if any, on and after which such Warrants and the related
Common Stock or Preferred Stock will be separately transferable;
(7) the price at which each share of Common Stock or share of
Preferred Stock purchasable upon exercise of such Warrants may be
purchased;
(8) the date on which the right to exercise such Warrants shall
commence and the date on which such right shall expire;
(9) the minimum or maximum amount of such Warrants which may be
exercised at any one time;
(10) information with respect to book-entry procedures, if any;
(11) a discussion of certain Federal income tax considerations; and
(12) any other terms of such Warrants, including terms, procedures and
limitations relating to the exchange and exercise of such Warrants.
FEDERAL INCOME TAX CONSIDERATIONS
The following summary of material Federal income tax considerations
regarding this Offering is based on current law, is for general information only
and is not tax advice. This discussion does not purport to deal with all aspects
of taxation that may be relevant to particular stockholders in light of their
personal investment or tax circumstances, or to certain types of stockholders
(including insurance companies, tax-exempt organizations, financial institutions
or broker-dealers, foreign corporations and persons who are not citizens or
residents of the United States) subject to special treatment under the Federal
income tax laws.
EACH PROSPECTIVE PURCHASER IS ADVISED TO CONSULT HIS/HER OWN TAX ADVISOR
REGARDING THE SPECIFIC TAX CONSEQUENCES TO HIM/HER OF THE PURCHASE, OWNERSHIP
AND SALE OF THE OFFERED SECURITIES AND OF THE COMPANY'S ELECTION TO BE TAXED AS
A REAL ESTATE INVESTMENT TRUST, INCLUDING THE FEDERAL, STATE, LOCAL, FOREIGN AND
OTHER TAX CONSEQUENCES OF SUCH PURCHASE, OWNERSHIP, SALE AND ELECTION AND OF
POTENTIAL CHANGES IN APPLICABLE TAX LAWS.
TAXATION OF THE COMPANY
General. The Company has elected to be taxed as a REIT, under Sections 856
through 860 of the Code, from the Company's commencement of operations in 1991.
The Company believes that it is organized and operated in such a manner as to
qualify for taxation as a REIT under the Code and the Company intends to
continue to operate in such a manner, but no assurance can be given that it will
operate in a manner so as to remain qualified.
The REIT provisions of the Code are highly technical and complex. The
following sets forth the material aspects of the sections that govern the
Federal income tax treatment of a REIT and its stockholders. This summary is
qualified in its entirety by the applicable Code provisions, rules and
regulations promulgated thereunder, and administrative and judicial
interpretations thereof. Gibson, Dunn & Crutcher LLP has acted as tax counsel to
the Company in connection with this Prospectus, but did not represent the
Company in connection with its initial qualification and election to be taxed as
a REIT.
In the opinion of Gibson, Dunn & Crutcher LLP, the Company is organized in
conformity with the requirements for qualification as a REIT and its method of
operation will enable it to meet the requirements for continued qualification
and taxation as a REIT under the Code. It must be emphasized that this opinion
is based on various assumptions and is conditioned upon certain representations
made by the Company as to factual matters. Moreover, such qualification and
taxation as a REIT depends upon the Company's ability to
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meet, through actual annual operating results, distribution levels and diversity
of stock ownership, the various qualification tests imposed under the Code
discussed below, the results of which will not be reviewed by Gibson, Dunn &
Crutcher LLP. Accordingly, no assurance can be given that the actual results of
the Company's operations for any particular taxable year will satisfy such
requirements.
So long as the Company qualifies for taxation as a REIT, it generally will
not be subject to Federal corporate income taxes on its net income that is
currently distributed to stockholders. This treatment substantially eliminates
the "double taxation" (at the corporate and stockholder levels) that generally
results from investment in a corporation. However, the Company will be subject
to Federal income tax as follows. First, the Company will be taxed at regular
corporate rates on any undistributed real estate investment trust taxable
income, including undistributed net capital gains. Second, under certain
circumstances, the Company may be subject to the "alternative minimum tax" on
its items of tax preference. Third, if the Company has (i) net income from the
sale or other disposition of "foreclosure property" which is held primarily for
sale to customers in the ordinary course of business or (ii) other nonqualifying
income from foreclosure property, it will be subject to tax at the highest
corporate rate on such income. Fourth, if the Company has net income from
prohibited transactions (which are, in general, certain sales or other
dispositions of property held primarily for sale to customers in the ordinary
course of business other than foreclosure property), such income will be subject
to a 100% tax. Fifth, if the Company should fail to satisfy the 75% gross income
test or the 95% gross income test (as discussed below), but has nonetheless
maintained its qualification as a REIT because certain other requirements have
been met, it will be subject to a 100% tax on an amount equal to (a) the gross
income attributable to the greater of the amount by which the Company fails the
75% or 95% test multiplied by (b) a fraction intended to reflect the Company's
profitability. Sixth, if the Company should fail to distribute during each
calendar year at least the sum of (i) 85% of its real estate investment trust
ordinary income for such year, (ii) 95% of its real estate investment trust
capital gain net income for such year and (iii) any undistributed taxable income
from prior periods, the Company would be subject to a 4% excise tax on the
excess of such required distribution over the amounts actually distributed.
Seventh, with respect to an asset (a "Built-In Gain Asset") acquired by the
Company from a corporation which is or has been a C corporation (i.e., generally
a corporation subject to full corporate-level tax) in a transaction in which the
basis of the Built-In Gain Asset in the hands of the Company is determined by
reference to the basis of the asset in the hands of the C corporation, if the
Company recognizes gain on the disposition of such asset during the ten year
period (the "Recognition Period") beginning on the date on which such asset was
acquired by the Company, then, to the extent of the Built-In Gain (i.e., the
excess of (a) the fair market value of such asset over (b) the Company's
adjusted basis in such asset, determined as of the beginning of the Recognition
Period), such gain will be subject to tax at the highest regular corporate tax
pursuant to Internal Revenue Service ("IRS") regulations that have not yet been
promulgated. The results described above with respect to the recognition of
Built-In Gain assume that the Company will make an election pursuant to IRS
Notice 88-19.
Requirements for Qualification. The Code defines a REIT as a corporation,
trust or association (1) which is managed by one or more trustees or directors;
(2) the beneficial ownership of which is evidenced by transferable shares, or by
transferable certificates of beneficial interest; (3) which would be taxable as
a domestic corporation, but for Sections 856 through 859 of the Code; (4) which
is neither a financial institution nor an insurance company subject to certain
provisions of the Code; (5) the beneficial ownership of which is held by 100 or
more persons; (6) during the last half of each taxable year not more than 50% in
value of the outstanding stock of which is owned, directly or constructively, by
five or fewer individuals (as defined in the Code to include certain entities);
and (7) which meets certain other tests, described below, regarding the nature
of its income and assets. The Code provides that conditions (1) to (4),
inclusive, must be met during the entire taxable year and that condition (5)
must be met 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. Conditions (5) and
(6) do not apply until after the first taxable year for which an election is
made to be taxed as a REIT.
The Company has previously issued sufficient shares to allow it to satisfy
conditions (5) and (6). In addition, the Company's Articles of Incorporation
provide for restrictions regarding transfer of shares, which
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restrictions are intended to assist the Company in continuing to satisfy the
share ownership requirements described in (5) and (6) above.
Income Tests. In order to maintain qualification as a REIT, the Company
annually must satisfy three gross income requirements. First, at least 75% of
the Company's gross income (excluding gross income from prohibited transactions)
for each taxable year must be derived directly or indirectly from investments
relating to real property or mortgages on real property (including "rents from
real property" and, in certain circumstances, interest) or from certain types of
temporary investments. Second, at least 95% of the Company's gross income
(excluding gross income from prohibited transactions) for each taxable year must
be derived from such real property investments, dividends, interest and gain
from the sale or disposition of stock or securities (or from any combination of
the foregoing). Third, short-term gain from the sale or other disposition of
stock or securities, gain from prohibited transactions and gain on the sale or
other disposition of real property held for less than four years (apart from
involuntary conversions and sales of foreclosure property) must represent less
than 30% of the Company's gross income (including gross income from prohibited
transactions) for each taxable year.
Rents received by the Company will qualify as "rents from real property" in
satisfying the gross income requirements for a REIT described above only if
several conditions are met. First, the amount of rent must not be based in whole
or in part on the income or profits of any person. However, an amount received
or accrued generally will not be excluded from the term "rents from real
property" solely by reason of being based on a fixed percentage or percentages
of receipts or sales. (If a REIT receives or accrues rent from a tenant that
derives substantially all of its income with respect to the property from the
subleasing of substantially all such property, and a portion of the tenant's
sublease income would be treated as qualified rents if it were received by the
REIT, then the amounts received or accrued by the REIT from the tenant will be
treated as qualified rents to the same extent that the amounts so received or
accrued are attributable to qualified rents received by the tenant.) Second, the
Code provides that rents received from a tenant will not qualify as "rents from
real property" in satisfying the gross income tests if the REIT, or an owner of
10% or more of the REIT, directly or constructively owns 10% or more of such
tenant (a "Related Party Tenant"). For purposes of this test, the holdings of
certain family members are aggregated. Third, if rent attributable to personal
property, leased in connection with a lease of real property, is greater than
15% of the total rent received under the lease, then the portion of rent
attributable to such personal property will not qualify as "rents from real
property." Finally, for rents received to qualify as "rents from real property,"
the REIT generally must not operate or manage the property or furnish or render
services to the tenants of such property, other than through an independent
contractor from whom the REIT derives no revenue. The REIT may, however,
directly perform certain services that are "usually or customarily rendered" in
connection with the rental of space for occupancy only and are not otherwise
considered "rendered to the occupant" of the property. The Company does not and
will not (i) charge rent for any property that is based in whole or in part on
the income or profits of any person (except by reason of being based on a
percentage of receipts or sales, as described above), (ii) rent any property to
a Related Party Tenant, (iii) derive rental income attributable to personal
property (other than personal property leased in connection with the lease of
real property, the amount of which is less than 15% of the total rent received
under the lease) or (iv) perform services considered to be rendered to the
occupant of the property, other than through an independent contractor from whom
the Company derives no revenue.
The term "interest" generally does not include any amount received or
accrued (directly or indirectly) if the determination of such amount depends in
whole or in part on the income or profits of any person. However, an amount
received or accrued generally will not be excluded from the term "interest"
solely by reason of being based on a fixed percentage or percentages of receipts
or sales.
Management, leasing and similar fees and other income from services do not
count toward satisfaction of either the 95% or the 75% gross income tests. The
Company receives management fee income from its property management business. In
the past, such management fee and other nonqualifying income constituted less
than 5% of the Company's gross income in any year, and the Company anticipates
that such nonqualifying income will continue to be less than 5% of the Company's
gross revenue in any year. The Company will continue to monitor and manage the
amount of such nonqualifying income in order to comply with the 95% and 75%
gross income tests.
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If the Company fails to satisfy one or both of the 75% or 95% gross income
tests for any taxable year, it may nevertheless qualify as a REIT for such year
if it is entitled to relief under certain provisions of the Code. These relief
provisions will be generally available if the Company's failure to meet such
test was due to reasonable cause and not due to willful neglect, the Company
attaches a schedule of the sources of its income to its return, and any
incorrect information on the schedule was not due to fraud with intent to evade
tax. It is not possible, however, to state whether in all circumstances the
Company would be entitled to the benefit of these relief provisions. As
discussed above in "Federal Income Tax Considerations-Taxation of the Company-
General," even if these relief provisions apply, a tax would be imposed with
respect to the excess net income.
Asset Tests. The Company, at the close of each quarter of its taxable year,
must also satisfy three tests relating to the nature of its assets. First, at
least 75% of the value of the Company's total assets must be represented by real
estate assets (including (i) its allocable shares of real estate assets held by
partnerships in which the Company owns an interest and (ii) stock or debt
instruments held for not more than one year purchased with the proceeds of a
stock offering or long-term (at least five years) debt offering of the Company),
cash, cash items and government securities. Second, not more than 25% of the
Company's total assets may be represented by securities other than those in the
75% asset class. Third, of the investments included in the 25% asset class, the
value of any one issuer's securities owned by the Company may not exceed 5% of
the value of the Company's total assets and the Company may not own more than
10% of any one issuer's outstanding voting securities. The Company's investment
in K&F Development Company is not a qualifying asset for purposes of the 75%
test. The Company expects, however, that such investment will continue to
represent less than 5% of the Company's total assets and, together with any
other non- qualifying assets, will continue to represent less than 25% of the
Company's total assets.
Annual Distribution Requirements. The Company, in order to qualify as a
REIT, is required to distribute dividends (other than capital gain dividends) to
its stockholders in an amount at least equal to (A) the sum of (i) 95% of the
Company's "real estate investment trust taxable income" (computed without regard
to the dividends paid deduction and the Company's net capital gain) and (ii) 95%
of the net income (after tax), if any, from foreclosure property, minus (B) the
sum of certain items of noncash income. In addition, if the Company disposes of
any Built-In Gain Asset during its Recognition Period, the Company will be
required, pursuant to IRS regulations which have not yet been promulgated, to
distribute at least 95% of the Built-In Gain (after tax), if any, recognized on
the disposition of such asset. Such distributions must be paid in the taxable
year to which they relate, or in the following taxable year if declared before
the Company timely files its tax return for such year and if paid on or before
the first regular dividend payment after such declaration. To the extent that
the Company does not distribute all of its net capital gain or distributes at
least 95%, but less than 100%, of its "real estate investment trust taxable
income," as adjusted, it will be subject to tax thereon at regular ordinary and
capital gain corporate tax rates. Furthermore, if the Company should fail to
distribute during each calendar year at least the sum of (i) 85% of its ordinary
income for such year, (ii) 95% of its real estate investment trust capital gain
income for such year and (iii) any undistributed taxable income from prior
periods, the Company would be subject to a 4% excise tax on the excess of such
required distribution over the amounts actually distributed. The Company intends
to make timely distributions sufficient to satisfy this annual distribution
requirement.
It is possible that the Company, from time to time, may not have sufficient
cash or other liquid assets to meet the 95% distribution requirement due to
timing differences between (i) the actual receipt of income and actual payment
of deductible expenses and (ii) the inclusion of such income and deduction of
such expenses in arriving at taxable income of the Company. In the event that
such timing differences occur, in order to meet the 95% distribution
requirement, the Company may find it necessary to arrange for short-term, or
possibly long-term, borrowings or to pay dividends in the form of taxable stock
dividends.
Under certain circumstances, the Company may be able to rectify a failure
to meet the distribution requirement for a year by paying "deficiency dividends"
to stockholders in a later year, which may be included in the Company's
deduction for dividends paid for the earlier year. Thus, the Company may be able
to avoid being taxed on amounts distributed as deficiency dividends; however,
the Company will be required to pay interest based upon the amount of any
deduction taken for deficiency dividends.
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Failure to Qualify. If the Company fails to qualify for taxation as a REIT
in any taxable year, and the relief provisions do not apply, the Company will be
subject to tax (including any applicable alternative minimum tax) on its taxable
income at regular corporate rates. Distributions to stockholders in any year in
which the Company fails to qualify will not be deductible by the Company nor
will they be required to be made. In such event, to the extent of current and
accumulated earnings and profits, all distributions to stockholders will be
taxable as ordinary income, and, subject to certain limitations of the Code,
corporate distributees may be eligible for the dividends received deduction.
Unless entitled to relief under specific statutory provisions, the Company will
also be disqualified from taxation as a REIT for the four taxable years
following the year during which qualification was lost. It is not possible to
state whether in all circumstances the Company would be entitled to such
statutory relief. Failure to qualify for even one year could result in the
Company's incurring substantial indebtedness (to the extent that borrowings are
feasible) or liquidating substantial investments in order to pay the resulting
taxes.
TAXATION OF STOCKHOLDERS
Taxation of Taxable Domestic Stockholders. As long as the Company qualifies
as a REIT, distributions made to the Company's taxable domestic stockholders out
of current or accumulated earnings and profits (and not designated as capital
gain dividends) will be taken into account by them as ordinary income and will
not be eligible for the dividends received deduction for corporations.
Distributions that are designated as capital gain dividends will be taxed as
long-term capital gains (to the extent they do not exceed the Company's actual
net capital gain for the taxable year) without regard to the period for which
the stockholder has held its stock. However, corporate stockholders may be
required to treat up to 20% of certain capital gain dividends as ordinary
income. Distributions in excess of current and accumulated earnings and profits
will not be taxable to a stockholder to the extent that they do not exceed the
adjusted basis of the stockholder's shares, but rather will reduce the adjusted
basis of such shares. To the extent that such distributions exceed the adjusted
basis of a stockholder's shares they will be included in income as long-term
capital gain (or short-term capital gain if the Shares have been held for one
year or less) assuring the shares are a capital asset in the hands of the
stockholder. In addition, any dividend declared by the Company in October,
November or December of any year payable to a stockholder of record on a
specified date in any such month shall be treated as both paid by the Company
and received by the stockholder on December 31 of such year, provided that the
dividend is actually paid by the Company during January of the following
calendar year. Stockholders may not include in their individual income tax
returns any net operating losses or capital losses of the Company.
In general, any loss upon a sale or exchange of shares by a stockholder who
has held such shares for six months or less (after applying certain holding
period rules) will be treated as a long-term capital loss to the extent of
distributions from the Company required to be treated by such stockholder as
long-term capital gain.
Taxation of Tax-Exempt Stockholders. In Revenue Ruling 66-106, 1966-1 C.B.
151, the IRS ruled that amounts distributed by a REIT to a tax-exempt employees'
pension trust did not constitute "unrelated business taxable income" ("UBTI").
Revenue rulings are interpretive in nature and subject to revocation or
modification by the IRS. However, based upon Revenue ruling 66-106 and the
analysis therein, distributions by the Company to a stockholder that is a
tax-exempt entity should also not constitute UBTI, provided that the tax-exempt
entity has not financed the acquisition of its shares with "acquisition
indebtedness" within the meaning of the Code and the shares are not otherwise
used in an unrelated trade or business of the tax-exempt entity.
Taxation of Foreign Stockholders. The rules governing United States Federal
income taxation of nonresident alien individuals, foreign corporations, foreign
partnerships and other foreign stockholders (collectively, "Non-U.S.
Stockholders") are complex, and no attempt will be made herein to provide more
than a summary of such rules. Prospective Non-U.S. Stockholders 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 shares, including any reporting
requirements.
Distributions by the Company that are not attributable to gain from sales
or exchanges by the Company of United States real property interests and not
designated by the Company as capital gain dividends will be
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treated as dividends of ordinary income to the extent that they are made out of
current or accumulated earnings and profits of the Company. Such distributions,
ordinarily, will be subject to a withholding tax equal to 30% of the gross
amount of the distribution unless an applicable tax treaty reduces or eliminates
that tax. However, if income from the investment in the shares is treated as
effectively connected with the conduct by the Non-U.S. Stockholder of a United
States trade or business, the Non-U.S. Stockholder generally will be subject to
a tax at graduated rates in the same manner as U.S. Stockholders are taxed with
respect to such dividends (and may also be subject to the 30% branch profits tax
in the case of a stockholder that is a foreign corporation). The Company
withholds United States income tax at the rate of 30% on the gross amount of any
such dividends made to a Non-U.S. Stockholder unless (i) a lower treaty rate
applies or (ii) the Non-U.S. Stockholder files an IRS Form 4224 with the Company
certifying that the investment to which the distribution relates is effectively
connected to a United States trade or business of such Non-U.S. Stockholder.
Lower treaty rates applicable to dividend income may not necessarily apply to
dividends from a REIT such as the Company, however. Distributions in excess of
current and accumulated earnings and profits of the Company will not be taxable
to a stockholder to the extent that they do not exceed the adjusted basis of the
stockholder's shares, but rather will reduce the adjusted basis of such shares.
To the extent that such distributions exceed the adjusted basis of a Non-U.S.
Stockholder's shares, they will give rise to tax liability if the Non-U.S.
Stockholder otherwise is subject to tax on any gain from the sale or disposition
of his shares in the Company (as described below). If it cannot be determined at
the time a distribution is made whether or not such distribution will be in
excess of current and accumulated earnings and profits, the distributions will
be subject to withholding at the some rate applicable to dividends. However,
amounts thus withheld are refundable if it is subsequently determined that such
distribution was, in fact, in excess of current and accumulated earnings and
profits of the Company.
Distributions that are designated by the Company at the time of
distribution as capital gain dividends (other than those arising from the
disposition of a United States real property interest) generally will not be
subject to taxation, unless (i) investment in the shares is effectively
connected with the Non-U.S. Stockholder's United States trade or business, in
which case the Non-U.S. Stockholder will be subject to the same treatment as
U.S. Stockholders with respect to such gain (except that a stockholder that is a
foreign corporation may also be subject to the 30% branch profits tax), or (ii)
the Non-U.S. Stockholder is a nonresident alien individual who was present in
the United States for 183 days or more during the taxable year and has a "tax
home" in the United States, in which case the nonresident alien individual will
be subject to a 30% tax on the individual's capital gains.
For any year in which the Company qualifies as a REIT, distributions that
are attributable to gain from sales or exchanges by the Company of United States
real property interests will be taxed to a Non-U.S. Stockholder under the
provisions of the Foreign Investment in Real Property Tax Act of 1980
("FIRPTA"). Under FIRPTA, these distributions are taxed to a Non-U.S.
Stockholder as if such gain were effectively connected with a United States
trade or business. Non-U.S. Stockholders would thus be taxed at the same capital
gain rates applicable to U.S. Stockholders (subject to applicable alternative
minimum tax and a special alternative minimum tax in the case of nonresident
alien individuals). Also, distributions subject to FIRPTA may be subject to a
30% branch profits tax in the hands of a foreign corporate stockholder not
entitled to treaty exemption. The Company is required by applicable IRS
regulations to withhold 34% of any distribution that could be designated by the
Company as a capital gain dividend. This amount is creditable against the Non-
U.S. Stockholder's FIRPTA tax liability.
Gain recognized by a Non-U.S. Stockholder upon a sale of shares generally
will not be taxed under FIRPTA if the Company is a "domestically-controlled
REIT," defined generally as a REIT in which at all times during a specified
testing period less than 50% in value of the stock was held directly or
indirectly by foreign persons. The Company currently is a
"domestically-controlled REIT" and anticipates continuing to be so classified,
and therefore the sale of shares should not be subject to taxation under FIRPTA.
In addition, FIRPTA does not apply to gain recognized upon a sale of shares of a
class of the Company's stock regularly traded on an established market by a
Non-U.S. Stockholder holding (during specified periods) 5% or less of such class
of stock. However, gain not subject to FIRPTA will be taxable to a Non-U.S.
Stockholder if (i) investment in the shares is effectively connected with the
Non-U.S. Stockholder's United States trade or
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business, in which case the Non-U.S. Stockholder will be subject to the same
treatment as U.S. Stockholders with respect to such gain (a stockholder that is
a foreign corporation may also be subject to the 30% branch profits tax) or (ii)
the Non-U.S. Stockholder is a nonresident alien individual who was present in
the United States for 183 days or more during the taxable year and has a "tax
home" in the United States, in which case the nonresident alien individual will
be subject to a 30% tax on the individual's capital gains. If the gain on the
sale of shares were to be subject to taxation under FIRPTA, the Non-U.S.
Stockholder will be subject to the same treatment as U.S. Stockholders with
respect to such gain (subject to applicable alternative minimum tax and a
special alternative minimum tax in the case of nonresident alien individuals
and, in the case of foreign corporations, subject to the possible application of
the 30% branch profits tax).
Backup Withholding. The Company will report to its domestic stockholders
and the IRS the amount of dividends paid during each calendar year, and the
amount of tax withheld, if any. Under the backup withholding rules, a
stockholder may be subject to backup withholding at the rate of 31% with respect
to dividends paid unless such holder (a) is a corporation or comes within
certain other exempt categories and, when required, demonstrates this fact or
(b) provides a taxpayer identification number, certifies as to no loss of
exemption from backup withholding, and otherwise complies with applicable
requirements of the backup withholding rules. A stockholder that does not
provide the Company with his correct taxpayer identification number may also be
subject to penalties imposed by the IRS. Any amount paid as backup withholding
will be creditable against the stockholder's income tax liability. In addition,
the Company may be required to withhold a portion of capital gain distributions
to any stockholders who fail to certify their non-foreign status to the Company.
See "Taxation of Foreign Stockholders."
Offered Securities. Special federal income tax considerations with respect
to the Warrants, the Preferred Stock and the Debt Securities will be described
in the applicable Prospectus Supplement accompanying the issuance of such
Offered Securities.
OTHER TAX CONSEQUENCES
The Company and its stockholders may be subject to state or local taxation
in various state or local jurisdictions, including those in which it or they
transact business or reside. The state and local tax treatment of the Company
and its stockholders may not conform to the Federal income tax consequences
discussed above. Consequently, prospective stockholders should consult their own
tax advisors regarding the effect of state and local tax laws on an investment
in the Company.
PLAN OF DISTRIBUTION
The Company may sell the shares of Offered Securities to one or more
underwriters for public offering and sale by them or may sell the Offered
Securities to investors directly or through agents, which agents may be
affiliated with the Company. Direct sales to investors may be accomplished
through subscription offerings or concurrent rights offerings to the Company's
stockholders and direct placements to third parties. Any such underwriter or
agent involved in the offer and sale of the Offered Securities will be named in
the applicable Prospectus Supplement.
Sales of Offered Securities offered pursuant to any applicable Prospectus
Supplement may be effected from time to time in one or more transactions on the
New York Stock Exchange or in negotiated transactions or any combination of such
methods of sale, at market prices prevailing at the time of sale, at prices
related to such prevailing market prices or at other negotiated prices.
Underwriters may offer and sell Offered Securities at a fixed price or
prices which may be changed, at prices related to the prevailing market prices
at the time of sale, or at negotiated prices. The Company also may offer and
sell the Offered Securities in exchange for one or more of its then outstanding
issues of debt or convertible debt securities. The Company also may, from time
to time, authorize underwriters acting as the Company's agents to offer and sell
the Offered Securities upon the terms and conditions as set forth in the
applicable Prospectus Supplement. In connection with the sale of Offered
Securities, underwriters may be deemed to have received compensation from the
Company in the form of underwriting discounts or
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commissions and may also receive commissions from purchasers of Offered
Securities for whom they may act as agent. Underwriters may sell Offered
Securities to or through dealers, and such dealers may receive compensation in
the form of discounts, concessions or commissions from the underwriters and/or
commissions from the purchasers for whom they may act as agent.
Unless otherwise specified in the related Prospectus Supplement, each
series of Securities will be a new issue with no established trading market,
other than the Common Stock which is listed on the NYSE. Any shares of Common
Stock sold pursuant to a Prospectus Supplement will be listed on the NYSE,
subject to official notice of issuance. The Company may elect to list any series
of Debt Securities or Preferred Stock on an exchange, but is not obligated to do
so. It is possible that one or more underwriters may make a market in a series
of Offered Securities, but will not be obligated to do so and may discontinue
any market making at any time without notice. Therefore, no assurance can be
given as to the liquidity of, or the trading market for, the Offered Securities.
Any underwriting compensation paid by the Company to underwriters or agents
in connection with the offering of Offered Securities, and any discounts,
concessions or commissions allowed by underwriters to participating dealers,
will be set forth in the applicable Prospectus Supplement. Underwriters, dealers
and agents participating in the distribution of the Offered Securities may be
deemed to be underwriters, and any discounts and commissions received by them
and any profit realized by them on resale of the Offered Securities may be
deemed to be underwriting discounts and commissions under the Securities Act.
Underwriters, dealers and agents may be entitled, under agreements entered into
with the Company, to indemnification against and contribution toward certain
civil liabilities, including liabilities under the Securities Act. Any such
indemnification agreements will be described in the applicable Prospectus
Supplement.
An Underwriter may engage in stabilizing transactions, syndicate covering
transactions and penalty bids in accordance with Rule 104 under the Securities
Act of 1934, as amended. Stabilizing transactions permit bids to purchase the
Common Stock so long as the stabilizing bids to not exceed a specified maximum.
Syndicate covering transactions involve purchases of the Common Stock in the
open market following completion of this offering to cover all or a portion of a
syndicate short position created by an Underwriter selling more shares of Common
Stock in connection with an offering than it is committed to purchase from the
Company. In addition, an Underwriter may impose "penalty bids" under contractual
arrangements between an Underwriter and dealers participating in this offering
whereby they may reclaim from a dealer participating in the offering the selling
concession with respect to shares of Common Stock that are distributed in this
offering but subsequently purchased for the account of an Underwriter in the
open market. Such stabilizing transactions, syndicate covering transactions and
penalty bids may result in the maintenance of the price of the Common Stock at a
level above that which might otherwise prevail in the open market. None of the
transactions described in this paragraph is required and, if any are undertaken,
they may be discontinued at any time.
If so indicated in the applicable Prospectus Supplement, the Company may
authorize dealers acting as the Company's agents to solicit offers by certain
institutions to purchase Offered Securities from the Company at the public
offering price set forth in such Prospectus Supplement pursuant to Delayed
Delivery Contracts ("Contracts") providing for payment and delivery on the date
or dates stated in such Prospectus Supplement. Each Contract will be for an
amount not less than, and the aggregate principal amount of Offered Securities
sold pursuant to Contracts shall be not less nor more than, the respective
amounts stated in the applicable Prospectus Supplement. Institutions with whom
Contracts, when authorized, may be made include commercial and savings banks,
insurance companies, pension funds, investment companies, educational and
charitable institutions, and other institutions but will in all cases be subject
to the approval of the Company. Contracts will not be subject to any conditions
except (i) the purchase by an institution of the Offered Securities covered by
its Contracts shall not at the time of delivery be prohibited under the laws of
any jurisdiction in the United States to which such institution is subject and
(ii) if the Offered Securities are being sold to underwriters, the Company shall
have sold to such underwriters the total principal amount of the Offered
Securities less the principal amount thereof covered by Contracts.
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EXPERTS
The consolidated financial statements and related financial statement
schedule of the Company appearing in the Company's Annual Report on Form 10-K
for the year ended December 31, 1996, have been audited by Ernst & Young LLP,
independent auditors, as set forth in their report thereon included therein and
incorporated herein by reference. Such consolidated financial statements and
related financial statement schedule are incorporated herein by reference in
reliance upon such report given upon the authority of such firm as experts in
accounting and auditing.
With respect to the unaudited condensed consolidated interim financial
information for the three-month periods ended March 31, 1997 and March 31, 1996,
incorporated by reference in this Prospectus, Ernst & Young LLP have reported
that they have applied limited procedures in accordance with professional
standards for a review of such information. However, their separate report,
included in the Company's Quarterly Report on Form 10-Q for the quarter ended
March 31, 1997, and incorporated herein by reference, state that they did not
audit and they do not express an opinion on that interim financial information.
Accordingly, the degree of reliance on their report on such information should
be restricted considering the limited nature of the review procedures applied.
The independent auditors are not subject to the liability provisions of Section
11 of the Securities Act of 1933 (the "Act") for their report on the unaudited
interim financial information because that report is not a "report" or a "part"
of the Registration Statement prepared or certified by the auditors within the
meaning of Sections 7 and 11 of the Act.
LEGAL MATTERS
The validity of the Debt Securities and Warrants and certain tax matters
described in "Federal Income Tax Considerations" will be passed upon for the
Company by Gibson, Dunn & Crutcher LLP, Los Angeles, California and the validity
of the Common Stock and Preferred Stock offered hereby will be passed upon for
the Company by Ballard Spahr Andrews & Ingersoll, Baltimore, Maryland. Gibson,
Dunn & Crutcher LLP will rely as to certain matters of Maryland law, including
the legality of the Common Stock and Preferred Stock, on the opinion of Ballard
Spahr Andrews & Ingersoll.
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NO DEALER, SALESPERSON OR OTHER INDIVIDUAL HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS NOT CONTAINED IN THIS PROSPECTUS
SUPPLEMENT AND THE PROSPECTUS. IF GIVEN OR MADE, SUCH INFORMATION OR
REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY
OR THE UNDERWRITER. THIS PROSPECTUS SUPPLEMENT AND THE PROSPECTUS DO NOT
CONSTITUTE AN OFFER TO SELL, OR A SOLICITATION OF AN OFFER TO BUY, THE COMMON
STOCK IN ANY JURISDICTION WHERE, OR TO ANY PERSON TO WHOM, IT IS UNLAWFUL TO
MAKE SUCH OFFER OR SOLICITATION. NEITHER THE DELIVERY OF THIS PROSPECTUS
SUPPLEMENT OR THE PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY
CIRCUMSTANCES, CREATE AN IMPLICATION THAT THERE HAS NOT BEEN ANY CHANGE IN THE
FACTS SET FORTH IN THIS PROSPECTUS SUPPLEMENT OR THE PROSPECTUS OR IN THE
AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF.
---------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
PROSPECTUS SUPPLEMENT
Available Information................ S-3
Prospectus Supplement Summary........ S-4
The Company........................ S-4
Recent Developments................ S-5
The Properties..................... S-7
The Offering....................... S-11
Distribution Policy................ S-11
Summary Selected Financial Data.... S-12
Risk Factors......................... S-14
Use of Proceeds...................... S-15
Capitalization....................... S-16
Price Range of Common Stock and
Distributions...................... S-16
Underwriting......................... S-17
Legal Matters........................ S-18
Experts.............................. S-18
PROSPECTUS
Available Information................ 2
Incorporation of Certain Documents by
Reference.......................... 2
The Company.......................... 4
Tax Status of the Company............ 4
Use of Proceeds...................... 4
Earnings to Fixed Charges Ratios..... 4
Description of Debt Securities....... 5
Description of Stock................. 14
Description of Warrants.............. 19
Federal Income Tax Considerations.... 20
Plan of Distribution................. 26
Experts.............................. 28
Legal Matters........................ 28
</TABLE>
1,000,000 SHARES
THE PRICE REIT, INC.
COMMON STOCK
($.01 PAR VALUE)
- -----------------------------------------------------
SALOMON BROTHERS INC
- ------------------------------------------------------------
PROSPECTUS SUPPLEMENT
DATED AUGUST 5, 1997
