As filed with the Securities and Exchange Commission on December 4, 1997
Registration No. 333-40129
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
------------------------
AMENDMENT NO. 1
TO
FORM S-3
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
------------------------
GREAT LAKES REIT, INC.
(Exact name of Registrant as specified in charter)
Maryland 36-3844714
(State or other jurisdiction (I.R.S. Employer
of incorporation or Identification No.)
organization)
823 Commerce Drive
Suite 300
Oak Brook, Illinois 60523
(630) 368-2900
(Address, including zip code, and telephone number, including area code,
of Registrant's principal executive offices)
Richard L. Rasley
Executive Vice President,
Co-General Counsel and Secretary
823 Commerce Drive, Suite 300
Oak Brook, Illinois 60523
(630) 368-2900
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
Copies to:
Timothy J. Melton
Jones, Day, Reavis & Pogue
77 West Wacker Drive
Chicago, Illinois 60601-1692
(312) 782-3939
------------------------
Approximate date of commencement of proposed sale to the public:
From time to time after this Registration Statement becomes effective as
determined by market conditions and other factors.
------------------------
If the only securities being registered on this Form are being offered pursuant
to dividend or interest reinvestment plans, please check the following box. |_|
If any of the securities being registered on this Form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. |X|
If this form is filed to register additional securities for an offering pursuant
to Rule 462(b) under the Securities Act, please check the following box and list
the Securities Act registration statement number of the earlier effective
registration statement for the same offering. |_|
If this form is a post-effective amendment filed pursuant to Rule 462(c) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. |_|
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. |_|
------------------------
<TABLE>
CALCULATION OF REGISTRATION FEE
<CAPTION>
Proposed maximum Proposed maximum
Title of each class Amount to be offering price aggregate Amount of
of securities to be registered registered (1) per security (1) offering price (1) registration fee
<S> <C> <C> <C> <C>
Common Stock, par value $0.01 per share...... 3,867,000 $18.97 $73,356,990 $22,230(2)
============================================= ====================== ======================= ==================== ===============
</TABLE>
(1) Estimated solely for the purpose of calculating the registration fee in
accordance with Rule 457(c) under the Securities Act of 1933, as amended, based
upon the average of the reported high and low sales prices of Common Stock of
the registrant on the New York Stock Exchange on November 12, 1997.
(2) This amount was previously paid in accordance with Rule 457(c) under the
Securities Act of 1933, as amended.
------------------------
The Registrant hereby amends this Registration Statement on such date or dates
as may be necessary to delay its effective date until the Registrant shall file
a further amendment which specifically states that this Registration Statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933 or until this Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
<PAGE>
Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor may
offers to buy be accepted prior to the time the registration statement becomes
effective. This prospectus shall not constitute an offer to sell or the
solicitation of an offer to buy nor shall there be any sale of these securities
in any State in which such offer, solicitation or sale would be unlawful prior
to registration or qualification under the securities laws of any such State.
Subject to Completion, Dated December 4, 1997
3,867,000 Shares
GREAT LAKES REIT, INC.
Common Stock
---------------------------------------
This Prospectus relates to 3,867,000 shares of Common Stock, par value $.01
per share ("Common Stock"), of Great Lakes REIT, Inc., a Maryland corporation
(the "Company"), to be offered (the "Offering") by certain selling stockholders
(the "Selling Stockholders"). See "Selling Securityholders." The Offering will
terminate on the earlier of the date that all shares of Common Stock subject to
the Offering have been sold or otherwise disposed of to parties unaffiliated
with the Selling Stockholders or on November 19, 1998, unless otherwise
extended. The Company will not receive any of the proceeds from the sale of
shares by the Selling Stockholders. The Common Stock is the only class of common
stock outstanding and each share of Common Stock is entitled to one vote per
share. The shares of Common Stock offered hereby are listed on the New York
Stock Exchange (the "NYSE") under the symbol "GL." On December 3, 1997, the
closing sale price of the Common Stock on the NYSE Composite Tape was $18.81 per
share.
See "Risk Factors" beginning on page 5 of this Prospectus for a
discussion of certain factors that should be considered by prospective
purchasers of 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 COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED
UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
The distribution of the shares of Common Stock by the Selling Stockholders
may be effected from time to time in one or more transactions (which may involve
block transactions) on the NYSE or such other national stock exchange or such
other national stock exchange on which shares of Common Stock are traded, in
special offerings, exchange distributions and/or secondary distributions
pursuant to and in accordance with the rules of such exchanges, in the
over-the-counter market, in negotiated transactions, through underwriters, or a
combination of such methods of sale, at market prices prevailing at the time of
sale, at prices related to such prevailing market price or at negotiated prices.
The aggregate proceeds to the Selling Stockholders from the Common Stock
will be the purchase price of Common Stock sold less the aggregate agents'
commissions and underwriters' discounts, if any. The Company will receive no
proceeds from this Offering, but will pay the expenses of registration under the
Securities Act of 1933, as amended (the "Securities Act"), relating to this
Offering. See "Plan of Distribution."
---------------------------------------
Any broker-dealers, agents or underwriters that participate with the Selling
Stockholders in the distribution of any of the shares of Common Stock may be
deemed to be "underwriters" within the meaning of the Securities Act and any
discount or commission received by them and any profits on the resale of the
shares of Common Stock purchased by them may be deemed to be underwriting
commissions or discounts under the Securities Act.
---------------------------------------
The date of this Prospectus is , 1997.
<PAGE>
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"). Such reports, proxy
statements and other information can be inspected and copied at the public
reference facilities maintained by the Commission at Room 1024, 450 Fifth
Street, N.W., Washington, D.C. 20549, and at the Commission's regional offices
located at Seven World Trade Center, 13th Floor, New York, New York 10048 and
500 West Madison Street, Suite 1400, Chicago, Illinois 60661. Copies of such
material may be obtained at prescribed rates by writing the Commission, Public
Reference Section, 450 Fifth Street, N.W., Washington, D.C. 20549. The
Commission maintains a Web site at http://www.sec.gov that contains reports,
proxy and information statements and other information regarding registrants,
including the Company, that file electronically with the Commission. The Common
Stock is listed on the NYSE, and reports, proxy statements and other information
concerning the Company may also be inspected 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," which term shall include any amendments thereto) on
Form S-3 under the Securities Act with respect to the shares of Common Stock
offered hereby. This Prospectus does not contain all the information set forth
in the Registration Statement and the exhibits and schedules thereto, certain
parts of which are omitted in accordance with the rules and regulations of the
Commission, and to which reference is hereby made. For further information,
reference is hereby made to the Registration Statement and the exhibits and
schedules thereto.
All information contained in this Prospectus relating to the Selling
Stockholders or to the proposed or potential methods of distribution of Common
Stock being offered hereby has been supplied by the Selling Stockholders and the
Company takes no responsibility for the accuracy thereof.
No persons have been authorized to give any information or to make any
representation other than those contained in this Prospectus and, if given or
made, such information or representation must not be relied upon as having been
authorized by the Company or the Selling Stockholders. This Prospectus does not
constitute an offer to sell, or a solicitation of an offer to buy, any
securities in any jurisdiction to or from any person to whom it is not lawful to
make any such offer or solicitation in such jurisdiction. Neither the delivery
of this Prospectus nor any distribution of securities made hereunder shall under
any circumstances create an implication that there has been no change in the
facts set forth in this Prospectus or the affairs of the Company since the date
hereof or that the information herein is correct as of any time subsequent to
the date hereof.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents heretofore filed by the Company with the
Commission pursuant to the Exchange Act are hereby incorporated by reference in
this Prospectus and shall be deemed to be a part hereof:
1. The Company's Annual Report on Form 10-K for the year ended December
31, 1996;
2. The Company's Quarterly Report on Form 10-Q for the quarter ended March
31, 1997 and the Company's Quarterly Report on Form 10-Q for the
quarter ended June 30, 1997 and the Company's Quarterly Report on Form
10-Q for the period ended September 30, 1997;
3. The Company's Current Report on Form 8-K filed with the Commission on
January 3, 1997; the Company's Current Report on Form 8-K/A filed with
the Commission on February 5, 1997; the Company's Current Report on
Form 8-K/A filed with the Commission on February 26, 1997; the
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<PAGE>
Company's Current Report on Form 8-K filed with the Commission on
September 15, 1997; the Company's Current Report on Form 8-K filed with
the Commission on October 14, 1997; and the Company's Current Report on
Form 8-K/A filed with the Commission on November 17, 1997; and
4. The description of the Company's Common Stock set forth in the
Company's Registration Statement on Form 8-A filed April 21, 1997,
including any amendments or reports filed for the purpose of updating
such description.
All documents filed by the Company pursuant to Section 13(a), 13(c), 14
or 15(d) of the Exchange Act after the date of this Prospectus and prior to the
termination of the Offering shall be deemed to be incorporated by reference in
this Prospectus and to be a part hereof from their respective dates of filing.
Any statement contained herein or in any document incorporated or deemed to be
incorporated shall be deemed to be modified or superseded for all purposes of
this Prospectus to the extent a statement contained in this Prospectus or in any
subsequently filed document that also is deemed to be incorporated by reference
herein modifies or supersedes such statement. Any statement so modified or
superseded shall not be deemed, except as so modified or superseded, to
constitute a part of this Prospectus.
The Company hereby undertakes to provide without charge to each person
to whom a copy of this Prospectus has been delivered, upon written or oral
request of such person, a copy of any and all of the information that has been
incorporated by reference in this Prospectus (other than exhibits to the
information that has been incorporated by reference unless such exhibits are
specifically incorporated by reference into the information that this Prospectus
incorporates). Requests should be directed to Richard L. Rasley, Executive Vice
President, Co-General Counsel and Secretary, Great Lakes REIT, Inc., at the
Company's principal executive offices, 823 Commerce Drive, Suite 300, Oak Brook,
Illinois 60523, telephone number (630) 368-2900. Persons requesting copies of
exhibits to such documents that were not specifically incorporated by reference
in such documents will be charged the costs of reproduction and mailing.
THE COMPANY
In 1996, Great Lakes REIT, Inc. (the "Company") organized Great Lakes
REIT, L.P. (the "Operating Partnership") and has subsequently transferred all of
the Properties (as defined herein) to the Operating Partnership. As the sole
general partner of the Operating Partnership, the Company has exclusive power to
manage and conduct the business of the Operating Partnership, subject to certain
limited exceptions. Although the Company and Great Lakes REIT, L.P. (the
"Operating Partnership") are separate entities, unless the context otherwise
requires, all references in this Prospectus to the "Company" refer to the
Company and the Operating Partnership, collectively.
Business
The Company is a fully integrated, self-administered and self-managed
real estate company focused on acquiring, renovating, owning and operating
suburban office and light industrial properties located within an approximate
500-mile radius of metropolitan Chicago (the "Midwest Region"). As of November
10, 1997, the Company owned and operated 32 properties (the "Properties") in
suburban Chicago, Milwaukee, Minneapolis, Detroit, Columbus and Cincinnati. The
Properties contain approximately 3.5 million rentable square feet leased to over
300 tenants in a variety of businesses. The Properties primarily consist of
Class A and Class B suburban office properties and range in size from 15,000 to
260,000 rentable square feet. The Company has elected to be treated for federal
income tax purposes as a real estate investment trust ("REIT").
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<PAGE>
The Company is a Maryland corporation and its principal executive
offices are located at 823 Commerce Drive, Suite 300, Oak Brook, Illinois 60523,
telephone number (630) 368-2900.
THE OFFERING
Common Stock offered by the Selling Stockholders............. 3,867,000 shares
Common Stock outstanding as of November 10, 1997.......... 15,709,916 shares(1)
New York Stock Exchange Symbol............................... GL
(1) Assumes the issuance of 24,050 shares of Common Stock in exchange for all
outstanding interests in the Operating Partnership ("OP Units") other than
those OP Units held by the Company. Excludes 1,559,463 shares issuable upon
the exercise of outstanding stock options.
USE OF PROCEEDS
All shares of Common Stock being offered hereby will be sold by the
Selling Stockholders for their own account. The Company will not receive any
proceeds from such sales.
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<PAGE>
RISK FACTORS
An investment in the Common Stock involves various risks. Prospective
investors should carefully consider the following information in conjunction
with the other information contained in this Prospectus before making a decision
to purchase Common Stock in the Offering.
Concentration of Properties in Midwest Region
All of the Properties are located in the Midwest Region, including 17
Properties located in the suburban Chicago, Illinois area. Like other real
estate markets, these commercial real estate markets have experienced economic
downturns in the past, and future declines in any of these economies or real
estate markets could adversely affect the Company's funds available for
distribution to stockholders. The Company's financial performance and its
ability to make distributions to stockholders are therefore dependent on the
economic conditions in the Midwest Region, particularly in the Chicago area. The
Company's revenues and the value of its Properties may be affected by a number
of factors, including local economic conditions (which may be adversely impacted
by business layoffs or downsizing, industry slowdowns, changing demographics and
other factors) and local real estate conditions (such as oversupply of or
reduced demand for office, industrial and other competing commercial
properties). There can be no assurance that the economies of the Midwest Region
or the Chicago area will continue to grow or that any future growth will meet
historical growth rates.
Risk that the Company May Be Unable to Retain Tenants or Rent Space Upon Lease
Expirations
The Company will be subject to the risks that upon expiration, leases may
not be renewed, the space may not be relet or the terms of renewal or reletting
(including the cost of required renovations) may be less favorable than the
expired lease terms. Leases on a total of approximately 5.5%, 14.0%, 11.9% and
17.0% of the occupied rentable square feet of the Properties will expire in
1997, 1998, 1999 and 2000, respectively. If the Company is unable to promptly
relet or renew leases for all or a substantial portion of this space or if the
rental rates upon such renewal or reletting are significantly lower than
expected, the Company's cash flow and ability to make distributions to
stockholders could be adversely affected.
Risks Associated with the Recent Acquisition of Many of the Properties; Lack of
Operating History
All of the Properties have been under the Company's management for less
than five years and 15 of the Properties have been acquired since January 1,
1996. The most recently acquired Properties may have characteristics or
deficiencies unknown to the Company that may impact their value or revenue
potential. It is also possible that the operating performance of the most
recently acquired Properties may decline under the Company's management.
The Company is currently experiencing a period of rapid growth. As the
Company acquires additional properties, the Company will be subject to risks
associated with managing new properties, including lease-up and tenant
retention. In addition, the Company's ability to manage its growth effectively
will require it to successfully integrate its new acquisitions into its existing
management structure. No assurances can be given that the Company will be able
to successfully integrate such properties or effectively manage additional
properties, or that newly acquired properties will perform as expected.
Real Estate Financing Risks
Inability to Repay or Refinance Indebtedness at Maturity. The Company
will be subject to risks normally associated with debt financing, including the
risk that the Company's cash flow will be insufficient to meet required payments
of principal and interest and the risk that any indebtedness will not be able to
be
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<PAGE>
refinanced or that the terms of any such refinancing will be less favorable than
the terms of the expiring indebtedness.
Potential Effect of Rising Interest Rates on the Company's Cash Flow.
Advances under the Company's secured bank credit facility (the "Credit
Facility") bear interest at variable rates and the indebtedness under certain
other lines of credit and existing mortgage notes are subject to periodic
adjustments based on the then current market interest rates. In addition, the
Company may incur other variable rate indebtedness in the future. Increases in
interest rates on such indebtedness would increase the Company's interest
expense, which could adversely affect the Company's cash flow and amounts
available for distribution to stockholders.
Real Estate Investment Risks
Real Estate Ownership Risks. Real property investments are subject to
varying degrees of risk. The yields available from equity investments in real
estate depend in large part on the amount of revenue generated and expenses
incurred. If the Company's real properties do not generate revenue sufficient to
meet operating expenses, including debt service, tenant improvements, leasing
commissions and other capital expenditures, the Company may have to borrow
additional amounts to cover fixed costs and the Company's cash flow and ability
to make distributions to its stockholders would be adversely affected. The
Company's revenue and the value of its Properties may be adversely affected by a
number of factors, including the national economic climate; the local economic
climate; local real estate conditions; the perceptions of prospective tenants of
the attractiveness of its Properties; the ability of the Company to manage and
maintain its real properties and secure adequate insurance; and increased
operating costs (including real estate taxes and utilities). In addition, real
estate values and income from properties are also affected by such factors as
applicable laws, including tax and environmental laws, interest rate levels and
the availability of capital.
Illiquidity of Real Estate. Equity real estate investments are relatively
illiquid. Such illiquidity will tend to limit the ability of the Company to vary
its portfolio promptly in response to changes in economic or other conditions.
In addition, the Internal Revenue Code of 1986, as amended (the "Code"), limits
a REIT's ability to sell properties held for fewer than four years. This
limitation may adversely affect the Company's ability to sell properties.
Impact of Competition on Occupancy Levels and Rents Charged. Numerous
office properties compete with the Properties in attracting tenants to lease
space. Some of the competing properties may be newer, better located or owned by
parties better capitalized than the Company. The number of competitive
commercial properties in a particular area could have a material adverse effect
on (i) the ability to lease space in the Properties (or in newly acquired or
developed properties) and (ii) the rents charged.
Potential Increases in Certain Taxes and Regulatory Compliance Costs.
Because increases in income, service or transfer taxes are generally not passed
through to tenants under leases, such increases may adversely affect the
Company's cash flow and its ability to make distributions to stockholders. The
Properties are also subject to various federal, state and local regulatory
requirements, such as requirements of the Americans with Disabilities Act (the
"ADA"), which requires all public accommodations and commercial facilities to
meet certain federal requirements related to access and use by disabled persons,
and state and local fire and life safety requirements. Compliance with the ADA
requirements could require removal of access barriers. Failure to comply with
all applicable regulatory requirements could result in the imposition of fines
by governmental authorities or awards of damages to private litigants. The
Company believes that the Properties are currently in substantial compliance
with all such regulatory requirements. However, there can be no assurance that
these requirements will not be changed or that new requirements will not be
imposed which would require significant unanticipated expenditures by the
Company that could have an adverse effect on the Company's cash flow and
distributions to stockholders.
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<PAGE>
Impact of Financial Condition and Solvency of Tenants on the Company's
Cash Flow. At any time, a tenant of the Properties may seek the protection of
bankruptcy laws, which could result in rejection and termination of such
tenant's lease and thereby cause a reduction in cash flow available for
distribution by the Company. Although the Company has not experienced material
losses from tenant bankruptcies, no assurance can be given that tenants will not
file for bankruptcy protection in the future or, if any tenants file, that they
will affirm their leases and continue to make rental payments in a timely
manner. In addition, a tenant from time to time may experience a downturn in its
business which may weaken its financial condition and result in a failure to
make rental payments when due. If tenant leases are not affirmed following
bankruptcy or if a tenant's financial condition weakens, the Company's revenues
and cash flows may be adversely affected.
Risks of Acquisition, Renovation and Development Activities
The Company intends to continue acquiring office properties. Acquisitions
of office properties entail risk that investments will fail to perform in
accordance with expectations. Estimates of renovation costs and costs of
improvements to bring an acquired property up to standards established for the
market position intended for that property may prove inaccurate. In addition,
there are general investment risks associated with any new real estate
investment.
The Company may renovate and/or expand its Properties from time to time.
Renovation and expansion projects generally require expenditure of capital as
well as various government and other approvals, the receipt of which cannot be
assured. While policies with respect to renovation and expansion activities are
intended to limit some of the risks otherwise associated with such activities,
the Company would nevertheless incur certain risks, including expenditures of
funds on, and devotion of management's time to, projects which may not be
completed.
The Company anticipates that future acquisitions and renovations will be
financed through a combination of advances under the Credit Facility, other
forms of secured or unsecured financing and issuance of OP Units, Common Stock
or other equity interests in the Company. If new projects are financed through
construction loans, there is a risk that, upon completion of construction,
permanent financing for these properties may not be available or may be
available only on disadvantageous terms.
While the Company has generally limited its acquisition, renovation,
management and leasing business primarily to the Midwest Region, it is possible
that the Company will in the future expand its business to new geographic
markets. The Company will not initially possess the same level of familiarity
with new markets outside of the Midwest Region, which could adversely affect its
ability to acquire, develop, manage or lease properties in any new markets.
Changing market conditions, including competition from other purchasers
of properties similar to the Properties, may diminish the Company's
opportunities for attractive acquisitions.
The Company also intends to review from time to time the possibility of
developing and constructing office buildings and other commercial properties in
accordance with the Company's development policies. Risks associated with the
Company's development and construction activities may include: abandonment of
development opportunities; construction costs of a property exceeding original
estimates, possibly making the property uneconomical; occupancy rates and rents
at a newly completed property which are not sufficient to make the property
profitable; the unavailability of financing on favorable terms for development
of a property; and an inability to complete construction and lease-up on
schedule, resulting in increased debt service expense and construction costs. In
addition, new development activities, regardless of whether they would
ultimately be successful, typically require a substantial portion of
management's time and attention. Development activities would also be subject to
risks relating to the inability to obtain, or delays in obtaining,
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all necessary zoning, land-use, building, occupancy, and other required
governmental permits and authorizations.
Effect of Shares Available for Future Sale on Common Stock Price
The shares of Common Stock acquired pursuant to the Offering will be
freely transferable by persons who are not affiliates of the Company without
restriction or further registration under the Securities Act. Virtually all of
the outstanding shares of Common Stock, other than shares held by affiliates of
the Company, are freely tradable. Shares of Common Stock held by affiliates of
the Company are subject to limitations on the volume that may be sold other than
sales pursuant to a registration statement under the Securities Act or an
applicable exemption from registration thereunder. The sale or issuance or the
potential for sale of additional shares by the Company, the sale of shares held
by affiliates or the sale of a significant number of shares by other current
holders could have an adverse impact on the market price of the Common Stock.
Dependence on Key Personnel
The Company is dependent on the efforts of its executive officers,
particularly Richard A. May, the Company's Chief Executive Officer, Patrick R.
Hunt, the Company's Chief Operating Officer, and Richard L. Rasley, the
Company's Executive Vice President. The loss of their services could have a
material adverse effect on the Company's operations, financial condition and
results of operations. In addition, it will be an event of default under the
Credit Facility if (i) Messrs. May and Rasley fail to own, in the aggregate, 1%
or more of the outstanding shares of Common Stock or (ii) either of them ceases
to be employed by the Company in their respective current positions and is not
replaced within six months by a suitable successor.
No Limitation on Debt
The Company currently has a policy of incurring debt only if upon such
incurrence the total debt to total market capitalization ratio would be 50% or
less, but the organizational documents of the Company do not contain any
limitation on the amount of indebtedness the Company may incur. Accordingly, the
Board of Directors could alter or eliminate that policy at any time. If that
policy was changed, the Company could become more highly leveraged, resulting in
increased debt service costs that could adversely affect the Company's cash flow
and, consequently, the amount available for distribution to stockholders and
could increase the risk of default on the Company's indebtedness.
The Company has established its debt policy relative to its total debt to
total market capitalization ratio rather than relative to the book value of its
assets. The Company has used total market capitalization because it believes
that the book value of its assets (which to a large extent is the depreciated
original cost of real property, the Company's primary tangible assets) does not
accurately reflect its ability to borrow and to meet debt service requirements.
The market capitalization of the Company, however, is more variable than book
value, and does not necessarily reflect the fair market value of the underlying
assets of the Company. The Company also will consider factors other than market
capitalization in making decisions regarding the incurrence of indebtedness,
such as the purchase price of properties to be acquired with debt financing, the
estimated market value of its Properties upon refinancing and the ability of
particular Properties and the Company as a whole to generate sufficient cash
flow to cover expected debt service costs.
Changes in Policies Without Stockholder Approval
The Company's investment, financing, borrowing, distribution and
conflicts of interest policies and its policies with respect to all other
activities will be determined by the Company's Board of Directors. Although the
Board of Directors has no present intention to do so, it can amend, revise or
eliminate these policies at any time and from time to time at its discretion
without a vote of the stockholders. A change in any of these
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policies could adversely affect the Company's financial condition or results of
operations or the market price of the Common Stock.
Adverse Consequences of Failure to Qualify as a REIT; Other Tax Liabilities
Tax Liabilities as a Consequence of Failure to Qualify as a REIT. The
Company elected to be taxed as a REIT under Sections 856 through 860 of the
Code, commencing with its taxable year ended December 31, 1993, and the Company
believes that it has been organized and has operated in such a manner so as to
qualify as a REIT for federal income tax purposes. Although the Company believes
that it will remain organized and will continue to operate so as to qualify as a
REIT, no assurance can be given that the Company has so qualified or will be
able to remain so qualified. Qualification as a REIT involves the satisfaction
of numerous requirements (in certain instances, on an annual and quarterly
basis) set forth in highly technical and complex Code provisions for which there
are only limited judicial and administrative interpretations, and may be
affected by various factual matters and circumstances not entirely within the
Company's control. In the case of a REIT, such as the Company, that holds
substantially all of its assets in partnership form, the complexity of these
Code provisions and the applicable Treasury Regulations that have been
promulgated thereunder is even greater. Further, no assurance can be given that
future legislation, new Treasury Regulations, administrative interpretations or
court decisions will not significantly change the tax laws with respect to
qualification as a REIT or the federal income tax consequences of such
qualification. The Company, however, is not aware of any pending proposal to
amend the tax laws that would materially and adversely affect its ability to
operate in such a manner so as to qualify as a REIT.
If the Company were to fail to qualify as a REIT with respect to any
taxable year, the Company would not be allowed a deduction in computing its
taxable income for amounts distributed to its stockholders, and would be subject
to federal income tax (including any applicable alternative minimum tax) on its
taxable income at regular corporate rates. As a result, any net earnings of the
Company available for investment or distribution to stockholders would be
reduced for the year or years involved because of the additional tax liability
of the Company, and distributions to stockholders would no longer be required to
be made. Moreover, unless entitled to relief under certain statutory provisions,
the Company would also be ineligible for qualification as a REIT for the four
taxable years following the year during which such qualification was lost.
Although the Company believes it has operated and currently intends to operate
in a manner designed to allow it to continue to qualify as a REIT, future
economic, market, legal, tax or other considerations may cause it to determine
that it is in the best interests of the Company and its stockholders to revoke
the REIT election.
Other Tax Liabilities. Even if the Company continues to qualify for and
maintains its REIT status, it may be subject to certain federal, state and local
taxes on its income and property.
Effect of REIT Distribution Requirements
To maintain its status as a REIT for federal income tax purposes, the
Company generally will be required each year to distribute to its stockholders
at least 95% of its taxable income (excluding any net capital gain and after
certain adjustments). In addition, the Company will be subject to a 4%
nondeductible excise tax on the amount, if any, by which certain distributions
paid by it with respect to any calendar year are less than the sum of 85% of its
ordinary income for such year plus 95% of its capital gain net income for such
year plus 100% of its undistributed income from prior taxable years.
The Company intends to make distributions to its stockholders to comply
with the 95% distribution requirement of the Code and to avoid the nondeductible
excise tax described above. The Company anticipates that cash flow from
operations, including its share of distributions from the Operating Partnership,
will be sufficient to enable it to pay its operating expenses and meet the
distribution requirements of a REIT, but no
8
<PAGE>
assurance can be given that this will be the case. In addition, differences in
timing between (i) the actual receipt of income and the actual payment of
expenses and (ii) the inclusion of such income and the deduction of such
expenses in arriving at taxable income of the Company could leave the Company
without sufficient cash to enable it to meet the REIT distribution requirements.
Similarly, if the IRS were to determine that the Company had failed to comply
with the 95% distribution requirement of the Code for any taxable year, under
certain circumstances, the Company would be able to rectify that failure by
paying "deficiency dividends" to its stockholders, as well as interest to the
IRS, in a later taxable year. The amount of any such "deficiency dividends" and
interest could exceed the Company's available cash. Accordingly, the Company
could be required to borrow funds or liquidate investments on adverse terms to
comply with such requirements. The requirement to distribute a substantial
portion of the Company's taxable income could also cause the Company to have to
distribute amounts that would otherwise be spent on future acquisitions,
unanticipated capital expenditures or repayment of debt, which would require
additional borrowings or sales of assets to fund the costs of such items and
could restrict the Company's ability to expand at the same pace as it has
historically or at a pace necessary to remain competitive.
Failure of Operating Partnership to Qualify as a Partnership for Federal Income
Tax Purposes
The Company believes that the Operating Partnership has been organized as
a partnership and qualifies for treatment as such for federal income tax
purposes. If the Operating Partnership failed to qualify as a partnership for
federal income tax purposes and were instead taxable as a corporation, the
Company would cease to qualify as a REIT because of its inability to satisfy the
REIT asset income tests (as set forth in the Code), and the Operating
Partnership would be subject to federal income tax (including any applicable
minimum tax) on its taxable income at regular corporate rates. The imposition of
a corporate tax on the Operating Partnership would also reduce the amount of
cash available for distribution to the Company and its stockholders.
Limits on Changes in Control
Certain provisions of the Company's charter (the "Charter") and bylaws
(the "Bylaws") may have the effect of delaying, deferring or preventing a third
party from making an acquisition proposal for the Company and may therefore
inhibit a change in control of the Company. For example, such provisions may (i)
deter tender offers for the Common Stock, which offers may be attractive to
stockholders or (ii) deter purchases of large blocks of Common Stock, thereby
limiting the opportunity for stockholders to receive a premium for their Common
Stock over then-prevailing market prices. These provisions include the
following:
Limits on Ownership of Common Stock. For the Company to maintain its
qualification as a REIT for federal income tax purposes, not more than 50% in
value of the outstanding shares of stock of the Company may be owned, actually
or constructively (under the applicable attribution rules of the Code), by five
or fewer individuals (as defined in the Code to include certain tax-exempt
entities other than, in general, qualified domestic pension funds) at any time
during the last half of any taxable year of the Company (the "five or fewer
requirement"). For taxable years of the Company beginning after August 5, 1997,
however, the Company's failure to satisfy the five or fewer requirement would no
longer result in the Company's disqualification as a REIT so long as the Company
has otherwise complied with the requirements under the Code and the applicable
Treasury Regulations for ascertaining the actual ownership of its outstanding
shares of stock and maintaining records of its ownership, and the Company did
not know, and would not have known by exercising reasonable diligence, whether
it failed to meet the "five for fewer requirement." In addition, if the Company,
or an actual or constructive owner of 10% or more of the Company, actually or
constructively (under the applicable attribution rules of the Code) owns 10% or
more of a tenant of the Company (or a tenant of any partnership in which the
Company is a partner), the rent received by the Company (either directly or
through any such partnership) from such tenant will not be qualifying income for
purposes of the REIT gross income tests of the Code.
9
<PAGE>
The Charter, as amended and restated on September 23, 1997, and the
Bylaws of the Company contain certain restrictions on the ownership and transfer
of the Common Stock that are intended to prevent concentration of stock
ownership and thus to protect the Company against the risk of losing REIT
status. These restrictions limit any person from acquiring actual or
constructive ownership of more than 9.9% (the "Aggregate Stock Ownership Limit")
in value of the outstanding shares of stock of the Company. The Board of
Directors, in its sole discretion, may exempt a proposed transferee from the
Aggregate Stock Ownership Limit. However, the Board of Directors may not grant
an exemption from the Aggregate Stock Ownership Limit to any proposed transferee
whose actual or constructive ownership of more than 9.9% in value of the
outstanding shares of stock of the Company would result in the termination of
the Company's status as a REIT under the Code. These restrictions on
transferability and ownership will not apply if the Board of Directors
determines that it is no longer in the best interests of the Company to continue
to qualify as a REIT under the Code. The Aggregate Stock Ownership Limit may
delay, defer or prevent a transaction or a change in control of the Company that
might involve a premium price for the Common Stock or otherwise be in the best
interest of the stockholders.
Prior to the amendment and restatement of the Company's Charter earlier
this year, the restrictions described above were contained only in the Bylaws of
the Company, and the Charter contained other more general restrictions on the
ownership and transfer of the Common Stock. Although the Company believes that
it has satisfied the "five or fewer requirement" and the REIT gross income tests
for each of its taxable years commencing with its taxable year ended December
31, 1993, the restrictions in the Charter prior to amendment and the
restrictions in the Bylaws did not ensure that the Company in fact satisfied
these requirements, primarily because the provisions in the Charter did not
operate automatically to void any attempted transfer, acquisition or ownership
of shares of Common Stock of the Company that would result in the
disqualification of the Company as a REIT, but instead required the Company's
Board of Directors to take action to prohibit or deem to be null and void any
such attempted transfer, acquisition or ownership of shares of Common Stock or
to purchase or redeem any such shares of Common Stock. Particularly after the
shares of Common Stock became publicly traded, the Board of Directors may not
have become aware of attempted transfers, acquisitions or ownership of Common
Stock that would cause the Company to fail to qualify as a REIT. Moreover, the
restrictions on transferability contained in the Bylaws may not be enforceable
against holders of Common Stock who became holders prior to the time that the
restrictions were added to the Bylaws in February 1997. If the Company were to
fail to qualify as a REIT with respect to any taxable year, the Company would
not be allowed a deduction in computing its taxable income for amounts
distributed to its stockholders, and would be subject to federal income tax
(including any applicable alternative minimum tax) on its taxable income at
regular corporate rates.
Issuance of Additional Stock. The Charter authorizes the Board of
Directors to issue authorized but unissued shares of Common Stock and Preferred
Stock and to classify any unissued shares of Preferred Stock and to reclassify
any previously classified but unissued shares of any series of which no shares
have been issued. Prior to issuance of shares of each series, the Board is
required by the MGCL and the Charter to set, subject to the provisions of the
regarding restriction on transfer of stock, the terms, preferences, conversion
or other rights, voting powers, restrictions, limitations as to dividends or
other distributions, qualifications and terms or conditions of redemption for
each such series. The Board could authorize the issuance of shares of Preferred
Stock with terms and conditions that could have the effect of delaying,
deferring or preventing a transaction or a change in control of the Company that
might involve a premium price for Common Stock or otherwise be in the best
interest of the stockholders. As of November 10, 1997, there were 10,000,000
authorized but unissued shares of Preferred Stock and no shares of Preferred
Stock outstanding; the Company has no present plans to issue any shares of
Preferred Stock.
10
<PAGE>
Anti-Takeover Effects of Certain Provisions of Maryland Law and the Charter and
Bylaws
As more fully described below, the business combination provisions and
the control share acquisition provisions of the Maryland General Corporation
Law, as amended ("MGCL"), the provisions of the Charter on removal of directors,
and the advance notice provisions of the Bylaws could delay, defer or prevent a
transaction or change in control of the Company that might involve a premium
price for holders of Common Stock or otherwise be in their best interest. The
following paragraphs summarize certain anti-takeover effects of each of these
items.
Classified Board of Directors. The Charter authorizes the Company to have
a Board of Directors with three classes, each class of directors serving
staggered three-year terms. Although the Company currently has no intention of
implementing a classified Board of Directors, the Board of Directors would have
the discretion to do so at any time pursuant to the Charter. Adoption of a
classified board of directors could delay, defer or prevent a transaction or
change in control of the Company that might involve a premium price for holders
of Common Stock or otherwise be in their best interest.
Removal of Directors. Pursuant to the Charter, a director may be removed
with or without cause by the affirmative vote of a majority of all the votes
entitled to be cast in the election of directors. This provision, when coupled
with the provision in the Bylaws authorizing the Board of Directors to fill
vacant directorships, precludes stockholders from removing incumbent directors
except upon an affirmative majority vote and filling the vacancies created by
such removal with their own nominees.
Business Combinations. Under the MGCL, certain "business combinations"
(including a merger, consolidation, share exchange or, in certain circumstances,
an asset transfer or issuance or reclassification of equity securities) between
a Maryland corporation and any person who beneficially owns ten percent or more
of the voting power of the corporation's shares or an affiliate of the
corporation who, at any time within the two-year period prior to the date in
question, was the beneficial owner of ten percent or more of the voting power of
the then-outstanding voting stock of the corporation (an "Interested
Stockholder") or an affiliate of such an Interested Stockholder are prohibited
for five years after the most recent date on which the Interested Stockholder
becomes an Interested Stockholder. Thereafter, any such business combination
generally must be recommended by the board of directors of such corporation and
approved by two super-majority votes of the stockholders. These provisions of
the MGCL do not apply, however, to business combinations that are approved or
exempted by the board of directors of the corporation prior to the time that the
Interested Stockholder becomes an Interested Stockholder. The MGCL permits
companies to elect not to be governed by the business combination provisions of
the MGCL however, the Company's Charter does not currently contain such a
provision.
Therefore, pursuant to its Charter the Company is subject to the business
combination provisions of the MGCL, unless the Board of Directors adopts a
resolution thereafter exempting the Company from the business combination
provisions of the MGCL or approving business combinations, either specifically
or generally. The Board of Directors currently is unaware of any current or
potential Interested Shareholder, so the Board has no current plans for further
action with respect to these provisions.
Control Share Acquisitions. The MGCL provides that "control shares" of a
Maryland corporation acquired in a "control share acquisition" have no voting
rights except to the extent approved by a vote of two-thirds of the votes
entitled to be cast on the matter, excluding shares of stock owned by the
acquiror, officers or by directors who are employees of the corporation.
"Control Shares" are voting shares of stock which, if aggregated with all other
such shares of stock previously acquired by the acquiror or with respect to
which the acquiror is able to exercise or direct the exercise of voting power
(except solely by virtue of a revocable proxy), would entitle the acquiror to
exercise voting power in electing directors within one of the following ranges
of voting power: (1) one-fifth or more but less than one-third, (ii) one-third
or more but less than a
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<PAGE>
majority, or (iii) a majority or more of all voting power. Control shares do not
include shares the acquiring person is then entitled to vote as a result of
having previously obtained stockholder approval. A "control share acquisition"
means the acquisition of control shares, subject to certain exceptions. The
control share acquisition statute does not apply (a) to shares acquired in a
merger, consolidation or share exchange if the corporation is a party to the
transaction or (b) to acquisitions approved or exempted by the charter or bylaws
of the corporation.
The Bylaws provide that the Company and its shares of stock shall not be
governed by the control share acquisition statute. The Board of Directors may in
the future amend or eliminate this provision.
Possible Losses Not Covered By Insurance
The Company carries comprehensive liability, fire, extended coverage and
rental loss insurance covering all of the Properties, with policy specifications
and insured limits that the Company believes are adequate and appropriate under
the circumstances. There are, however, certain types of losses that are not
generally insured because it is not economically feasible to insure against such
losses. Should an uninsured loss or a loss in excess of insured limits occur,
the Company could lose its capital invested in the Property, as well as the
anticipated future revenue from the Property and, in the case of debt with
recourse to the Company, would remain obligated for any mortgage debt or other
financial obligations related to the Property. Any such loss would materially
adversely affect the Company.
Possible Environmental Liabilities
Under various federal, state and local environmental laws, ordinances and
regulations, a current or previous owner or operator of real estate may be
required to investigate and clean up hazardous or toxic substances or petroleum
product releases at such property and may be held liable to a governmental
entity or to third parties for property damage and for investigation and
clean-up costs incurred by such parties in connection with the contamination.
Such laws typically impose clean-up responsibility and liability without regard
to whether the owner knew of or caused the presence of the contaminants, and the
liability under such laws has been interpreted to be joint and several unless
the harm is divisible and there is a reasonable basis for allocation of
responsibility. The costs of investigation, remediation or removal of such
substances may be substantial, and the presence of such substances, or the
failure properly to remediate the contamination on such property, may adversely
affect the owner's ability to sell or rent such property or to borrow using such
property as collateral. Persons who arrange for the disposal or treatment of
hazardous or toxic substances at a disposal or treatment facility also may be
liable for the costs of removal or remediation of a release of hazardous or
toxic substances at such disposal or treatment facility, whether or not such
facility is owned or operated by such person. In addition, some environmental
laws create a lien on the contaminated site in favor of the government for
damages and costs incurred in connection with the contamination. Finally, the
owner of a site may be subject to common law claims by third parties based on
damages and costs resulting from environmental contamination emanating from such
site.
Effect of Market Interest Rates on Price of Common Stock
One of the factors that will influence the market price of the Common
Stock in public markets will be the distribution rate on the Common Stock. To
the extent distribution rates do not increase sufficiently in response to
increasing market interest rates, such an increase in interest rates may
adversely affect the market price of the Common Stock.
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<PAGE>
SELLING SECURITYHOLDERS
The following table sets forth information as to the ownership of Common
Stock as of September 30, 1997 by the Selling Stockholders listed below. Each of
the Selling Stockholders acquired the shares of Common Stock offered hereby
pursuant to the Stock Purchase Agreement dated as of August 20, 1996 (the "Stock
Purchase Agreement") by and among the Company and the Selling Stockholders.
Pursuant to the Registration Rights Agreement dated as of August 20, 1996 (the
"Registration Rights Agreement") by and among the Company and the Selling
Stockholders, the Company has granted the Selling Stockholders certain
registration rights with respect to the 3,867,000 shares of Common Stock
acquired by them pursuant to the Stock Purchase Agreement (collectively, the
"Registrable Shares"). The following summary of certain material provisions of
the Registration Rights Agreement is qualified in its entirety by reference to
the Registration Rights Agreement, a copy of which is filed as an exhibit to the
Registration Statement of which this Prospectus forms a part. In accordance with
its obligations under the Registration Rights Agreement, the Company has
registered the Common Stock offered hereby under the Securities Act pursuant to
the Registration Statement of which this Prospectus forms a part.
Subject to certain terms and conditions, the Registration Rights
Agreement provides that not later than the 180th day after the closing of the
Company's initial public offering, the Company is obligated to cause a
registration statement covering the Registrable Shares. The Company completed
the initial public offering of its Common Stock on May 13, 1997. The Company is
obligated to use its best efforts, subject to any Permitted Interruption (as
defined in the Registration Rights Agreement), to cause such registration
statement to remain effective until the earlier of (i) the date on which all
Registrable Shares have been sold under such registration statement and (ii) the
later of (A) the date that is 12 months after such registration statement
becomes effective and (B) the date that all Registrable Shares are freely
transferable pursuant to Rule 144(k) or any successor rule of the rules and
regulations promulgated under the Securities Act (assuming for purposes of
calculating such period that no holder of Registrable Shares is an affiliate of
the Company) in any case, as extended by the period of any Permitted
Interruption.
The Registration Rights Agreement also provides that if the Company
proposes to register Common Stock under the Securities Act on any Registration
Statement covering such Common Stock, the holders of Registrable Shares are
entitled to have their shares included in such Registration Statement on a pro
rata basis at the Company's expense, subject to certain other terms and
conditions set forth in the Registration Rights Agreement. The Company has
agreed to pay all expenses incident to the Offering, including all related
registration and filing fees. In addition, the Company and the Selling
Stockholders have agreed to indemnify each other against certain liabilities,
including liabilities under the Securities Act.
13
<PAGE>
Except as indicated below, none of the Selling Stockholders is a
director, executive officer or employee of the Company.
<TABLE>
<CAPTION>
Shares of Common Shares of Common
Stock Beneficially Stock Beneficially
Owned Prior to Number of Shares Owned After
Name of Beneficial Owner the Offering(1) Offered Hereby the Offering(2)
Number Percentage Number Percentage
<S> <C> <C> <C> <C> <C>
Fortis Benefits Insurance Company(3)(4)................... 1,005,000 6.4% 1,000,000 5,000 *
Morgan Stanley Asset Management Inc.(3)(5)................ 1,005,000 6.4% 1,000,000 5,000 *
Wellsford Karpf Zarrilli Ventures, L.L.C.(3)(6)........... 1,000,000 6.4% 1,000,000 0 *
Logan, Inc.(3)(7)......................................... 682,000 4.3% 482,000 200,000 1.3%
Pension Trust Account No.................................. 385,000 2.5% 385,000 0 *
104972 Held by Bankers
Trust Company as Trustee
- ----------------
</TABLE>
* Less than 1%.
(1) Except as otherwise noted, all persons have sole voting and investment power
with respect to their shares. (2) Assumes all Registrable Shares will be sold
pursuant to the Offering. (3) Based on the most recent Schedule 13D or 13G on
file with the Commission, except as discussed in footnotes (5) and
(7) below.
(4) James J. Brinkerhoff, a director of the Company, is a Senior Vice
President, Real Estate, of Fortis Advisers, Inc., which provides
investment advisory services to Fortis Benefits Insurance Company
("FBIC"), and an Officer of FBIC. Mr. Brinkerhoff was appointed to the
Board of Directors in August 1996 pursuant to FBIC's right to nominate one
director under the Stock Purchase Agreement. Includes options exercisable
within 60 days to purchase 5,000 shares of Common Stock, which options
were granted to Mr. Brinkerhoff as director compensation and assigned by
Mr. Brinkerhoff to Fortis Benefits Insurance Company.
(5) As reported in Amendment No. 3 to a Schedule 13D filed by Morgan Stanley
Asset Management Inc. ("MSAM") on March 11, 1997, (i) MSAM has shared
voting power as to 1,054,339 shares of Common Stock and shared dispositive
power as to 1,054,339 shares of Common Stock, (ii) Morgan Stanley
Institutional Fund, Inc. ("MSIF") has shared voting power as to 643,150
shares of Common Stock and shared dispositive power as to 643,150 shares
of Common Stock, (iii) Morgan Stanley SICAV Subsidiary S.A. (the "SICAV
Subsidiary") has shared voting power as to 411,189 shares of Common Stock
and shared dispositive power as to 1,054,339 shares of Common Stock. Such
13D included an aggregate of 54,339 shares of Common Stock that were
issuable pursuant to the conversion of outstanding shares of Preferred
Stock and shared dispositive power as to 1,054,339 shares of Common Stock.
All outstanding shares of Preferred Stock were subsequently canceled upon
the completion of the Company's initial public offering in May 1997. As a
result, such 54,339 shares of Common Stock have been excluded from the
share amount listed. Russell C. Platt, a director of the Company from
August 1996 to February 1997, is a Managing Director of MSAM. Mr. Platt
was appointed to the Board of Directors in August 1996 pursuant to MSAM's
right to nominate one director under the Stock Purchase Agreement.
Includes options exercisable within 60 days to purchase 5,000 shares of
Common Stock, which options were granted to Mr. Platt as director
compensation and assigned by Mr. Platt to MSAM.
(6) Edward Lowenthal, a member of Wellsford Karpf Zarrilli, L.L.C. ("WKZV"),
is a director of the Company. Mr. Lowenthal was appointed to the Board of
Directors in August 1996 pursuant to WKZV's right to nominate one director
under the Stock Purchase Agreement. In addition, beginning in December
1996, the Company retained Karpf, Zarrilli & Co. Incorporated ("Karpf
Zarrilli") as a consultant in connection with certain matters. In its
capacity as consultant, the Company paid Karpf Zarrilli $118,750 plus
expenses of $10,884 through the closing of the Company's initial public
offering in May 1997. Steven A. Karpf and Frederick P. Zarrilli are
Principals of Karpf Zarrilli and members of WKZV.
(7) Logan, Inc. is an indirect wholly owned subsidiary of The Northwestern
Mutual Life Insurance Company ("NML"). NML owns 200,000 shares (50,000 of which
are held in The Northwestern Mutual Life Insurance Company Group Annuity
Separate Account). Logan, Inc. and NML have shared voting and investment power
with respect to 482,000 of such shares.
14
<PAGE>
PLAN OF DISTRIBUTION
The shares of Common Stock offered hereby may be sold from time to time
by the Selling Stockholders. The Selling Stockholders may from time to time sell
all or a portion of such shares of Common Stock in one or more transactions
(which may involve one or more block transactions) on the exchange on which the
Common Stock is traded, if any, in the over-the-counter market, in separately
negotiated transactions or in a combination of such transactions; that each sale
may be made either at market prices prevailing at the time of such sale or at
negotiated prices; that some or all of the Common Stock may be sold through
brokers acting on behalf of the Selling Stockholders or to dealers or
underwriters for resale by such dealers or underwriters; and that in connection
with such sales such brokers, dealers and underwriters may receive compensation
in the form of discounts or commissions from the Selling Stockholders and may
receive commissions from the purchasers of shares of Common Stock for whom they
act as broker or agent (which discounts and commissions are not anticipated to
exceed those customary in the types of transactions involved).
To the extent required, the specific shares of Common Stock to be sold,
the respective purchase price and the public offering price, the names of any
such broker, dealer or underwriter, any commissions or discounts which respect
to a particular offer and any other information material to the transaction will
be set forth in an accompanying supplemental prospectus or, if appropriate, a
post-effective amendment to the Registration Statement of which this Prospectus
is a part.
In connection with any sales through a broker, such broker may act as
agent for the Selling Stockholders or may purchase from the Selling Stockholders
all or a portion of such Common Stock as principal. Common Stock sold by a
broker may involve one or more of the following transactions: (i) block
transactions (which may involve crosses) in which a broker may sell all or a
portion of such shares as agent but may position and resell all or a portion of
the block as principal to facilitate the transaction; (ii) purchases by any
broker as principal and resale by such broker for its own account pursuant to a
Prospectus Supplement; (iii) an exchange distribution or a secondary
distribution in accordance with applicable NYSE rules; (iv) ordinary brokerage
transactions and transactions in which any broker solicits purchasers; (v) sales
"at the market" to or through the market maker or into an existing trading
market, on an exchange or otherwise, for such Common Stock; and (vi) sales in
other ways not involving market makers or established trading markets, including
direct sales to institutions or individual purchasers.
If the sale of any shares is effected through underwriters, such
underwriters will be named in a supplemental prospectus. The Selling
Stockholders and any broker-dealers that participate with the Selling
Stockholders in the distribution of the shares of Common Stock may be deemed to
be underwriters and any commissions received by them and any profit on the
resale of shares by them might be deemed to be underwriting discounts and
commissions under the Securities Act. Any broker-dealers or others who may be
deemed underwriters may be entitled under agreements entered into with the
Company and the Selling Stockholders to indemnification against certain
liabilities, including liabilities under the Securities Act, or contribute to
payments which the underwriters may be required to make in respect thereof.
Any Common Stock covered by this Prospectus that qualifies for sale
pursuant to Rule 144 under the Securities Act ("Rule 144") may be sold under
Rule 144 rather than pursuant to this Prospectus. There can be no assurance that
any Selling Stockholder will sell any or all of such Common Stock, and any
Selling Stockholder may transfer, devise or gift such Common Stock by other
means not described herein.
The Company has advised the Selling Stockholders that this Offering
will terminate on the earlier of the date that all shares of Common Stock
subject to the Offering have been sold or otherwise disposed of to parties
unaffiliated with the Selling Stockholders or on November 19, 1998, unless
otherwise extended. No offers or sales may be made in reliance on this
Prospectus following on the earlier of the date that all shares
15
<PAGE>
of Common Stock subject to the Offering have been sold or otherwise disposed of
to parties unaffiliated with the Selling Stockholders or November 19, 1998,
unless otherwise extended.
LEGAL MATTERS
Certain legal matters will be passed upon for the Company by Jones,
Day, Reavis & Pogue, Chicago, Illinois, and certain matters of Maryland law,
including the validity of the shares of Common Stock offered hereby, will be
passed upon for the Company by Ballard Spahr Andrews & Ingersoll, Baltimore,
Maryland.
EXPERTS
The consolidated financial statements of Great Lakes REIT, Inc.
appearing in Great Lakes REIT, Inc.'s Annual Report (From 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 are incorporated
herein by reference in reliance upon such report given upon the authority of
such firm as experts in accounting and auditing.
16
<PAGE>
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- --------------------------------------------------------------
No dealer, salesperson or other person has been authorized to give any
information or to make any representation not contained in this Prospectus and,
if given or made, such information or representation must not be relied upon as
having been authorized by the Company, any Selling Stockholder or any person
deemed to be an underwriter within the meaning of the Securities Act. Neither
the delivery of this Prospectus nor any sale made hereunder shall, under any
circumstances, create any implication that the information contained herein is
correct as of any time subsequent to the date hereof. This Prospectus does not
constitute an offer to sell, or a solicitation of an offer to buy, any security
other than the securities covered by this Prospectus, nor does it constitute an
offer or solicitation by anyone in any jurisdiction where such offer or
solicitation is not authorized, or in which the person making such an offer or
solicitation is not qualified to do so or to any person to some it is unlawful
to make such an offer or solicitation.
---------------------------
TABLE OF CONTENTS
Page
Available Information................................................. 2
Incorporation of Certain Documents by Reference....................... 2
The Company........................................................... 3
The Offering.......................................................... 4
Use of Proceeds ...................................................... 4
Risk Factors.......................................................... 5
Selling Securityholders............................................... 15
Plan of Distribution.................................................. 17
Legal Matters ........................................................ 18
Experts .............................................................. 18
- --------------------------------------------------------------
- --------------------------------------------------------------
- --------------------------------------------------------------
- --------------------------------------------------------------
3,867,000 Shares
GREAT LAKES REIT, INC.
Common Stock
PROSPECTUS
- --------------------------------------------------------------
- --------------------------------------------------------------
17
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 14. Other Expenses of Issuance and Distribution
The following is a list of the estimated expenses to be incurred by the
Company in connection with the issuance and distribution of the Shares being
registered hereby, other than underwriting discounts and commissions.
Securities and Exchange Commission registration fee.................$ 22,230
Printing costs................................................... 10,000
Accounting fees and expenses..................................... 5,000
Legal fees and expenses.......................................... 20,000
Miscellaneous expenses............................................ 2,270
----------
Total................................. $ 60,000
==========
Item 15. Indemnification of Directors and Officers
The Maryland General Corporation Law, as amended (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 of the Company (the "Charter")
contains such a provision which eliminates such liability except to the extent
required by the MGCL.
The Charter obligates the Company to indemnify the directors and
officers (and former directors and officers) of the Company to the fullest
extent permitted by the MGCL. The bylaws of the Company (the "Bylaws") obligate
it, to the maximum extent permitted by Maryland law, to indemnify and to pay or
reimburse reasonable expenses in advance of final disposition of a proceeding to
(a) any present or former director or officer who is made a party to the
proceeding by reason of his service in that capacity or (b) any individual who,
while a director of the Company and at the request of the Company, serves or has
served another corporation, partnership, joint venture, trust, employee benefit
plan or any other enterprise as a director, officer, partner or trustee of such
corporation, partnership, joint venture, trust, employee benefit plan or other
enterprise and who is made a party to the proceeding by reason of his service in
that capacity. The Charter and Bylaws also permit the Company to indemnify and
advance expenses to any person who served a predecessor of the Company in any of
the capacities described above and to any employee or agent of the Company or a
predecessor of the Company.
The MGCL requires a corporation (unless its charter provides otherwise,
which the Company's Charter does not) to indemnify a director or officer who has
been successful, on the merits or otherwise, in the defense of any proceeding to
which he is made a party by reason of his service in that capacity. 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. However, under the MGCL, a Maryland corporation may
not indemnify for an
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adverse judgment in a suit by or in the right of the corporation. In addition,
the MGCL requires the Company, as a condition to advancing expenses, to obtain
(a) a written affirmation by the director or officer of his good faith belief
that he has met the standard of conduct necessary for indemnification by the
Company as authorized by the Bylaws and (b) a written statement by or on his
behalf to repay the amount paid or reimbursed by the Company if it shall
ultimately be determined that the standard of conduct was not met.
The Company has in effect insurance policies in the amount of $5
million covering all of the Company's directors and officers.
Item 16. Exhibits
4.1 Articles of Amendment and Restatement of the Company filed
with the Maryland State Department of Assessments and Taxation
on September 23, 1997 (incorporated by reference to Exhibit
3.1 to the Company's Quarterly Report on Form 10-Q for the
period ended September 30, 1997).
*4.2 Amended and restated bylaws of the Company dated September 11,
1997.
*4.3 Specimen of certificate representing shares of Common Stock.
4.4 Stock Purchase Agreement dated as of August 20, 1996 by and
among the Company and the Selling Stockholders (incorporated
by reference to Exhibit 1 to the Company's Current Report on
Form 8-K filed with the Securities and Exchange Commission on
August 28, 1996).
4.5 Registration Rights Agreement dated as of August 20, 1996 by
and among the Company and the Selling Stockholders
(incorporated by reference to Exhibit 2 to the Company's
Current Report on Form 8-K filed with the Securities and
Exchange Commission on August 28, 1996).
*5.1 Opinion of Ballard Spahr Andrews & Ingersoll regarding the
validity of the securities being registered.
*23.1 Consent of Ballard Spahr Andrews & Ingersoll (included in
their opinion filed as Exhibit 5.1).
23.2 Consent of Ernst & Young LLP.
*24.1 Powers of Attorney
* Previously filed
Item 17. Undertakings
(a) The undersigned Company hereby undertakes:
(1) To file, during any period in which offers or sales are
being made, a post-effective amendment to this registration statement,
to include any material information with respect to the plan of
distribution not previously disclosed in the Registration Statement or
any material change to such information in the Registration Statement.
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(2) That, for the purpose of determining any liability under
the Securities Act of 1933, each such post-effective amendment shall be
deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall
be deemed to be the initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain unsold at
the termination of the offering.
(b) The undersigned Company hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
Company's annual report pursuant to Section 13(a) or Section 15(d) of the
Securities Exchange Act of 1934 (and, where applicable, each filing of any
employee benefit plan's annual report pursuant to Section 15(d) of the
Securities Exchange Act of 1934) that is incorporated by reference in the
Registration Statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
(c) Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and controlling
persons of the Company pursuant to the provisions described under Item 15, or
otherwise, the Company has been advised that in the opinion of the Securities
and Exchange Commission such indemnification is against public policy as
expressed in the Securities Act of 1933 and is, therefore, unenforceable. In the
event that a claim for indemnification against such liabilities (other than the
payment by the Company of expenses incurred or paid by a director, officer or
controlling person of the Company in the successful defense of any action, suit
or proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the Company will, unless in the
opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Securities
Act of 1933 and will be governed by the final adjudication of such issue.
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SIGNATURES
Pursuant to the requirements of the Securities Act, the Registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3 and has duly caused this Amendment No. 1 to
Registration Statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City of Chicago, State of Illinois on the 4th day of
December, 1997.
GREAT LAKES REIT, INC.
By: /s/ Richard A. May
Richard A. May
Chairman of the Board of Directors,
President and Chief Executive Officer
Pursuant to the requirements of the Securities Act, this Registration
Statement has been signed below by the following persons in the capacities
indicated and on the 4th day of December, 1997.
Title
/s/ Richard A. May Chairman of the Board of Directors, President
Richard A. May and Chief Executive Officer (Principal
Executive Officer)
/s/ Richard L. Rasley Executive Vice President,
Richard L. Rasley Secretary, Co-General Counsel and Director
/s/ James Hicks Senior Vice President-Finance,
James Hicks Chief Financial Officer and Treasurer
(Principal Financial Officer and
Principal Accounting Officer)
* Director
James J. Brinkerhoff
* Director
Daniel E. Josephs
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* Director
Edward Lowenthal
* Director
Donald E. Phillips
* Director
Walter H. Teninga
* The undersigned by signing his name hereunto has hereby signed this Amendment
No. 1 to Registration Statement on behalf of the above-named directors, on
December 4, 1997, pursuant to a power of attorney executed on behalf of each
such director and filed with the Securities and Exchange Commission.
By: /s/ Richard A. May
Richard A. May
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Exhibit 23.2
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" in the
Registration Statement (Form S-3) and related Prospectus of Great Lakes REIT,
Inc. for the registration of 3,867,000 shares of its common stock and to the
incorporation by reference therein of our report dated January 28, 1997, with
respect to the consolidated financial statements and schedule of Great Lakes
REIT, Inc. included in its Annual Report (Form 10-K) for the year ended December
31, 1996, filed with the Securities and Exchange Commission.
Ernst & Young LLP
Chicago, Illinois
December 4, 1997
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