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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON SEPTEMBER 19, 1997
REGISTRATION NO. 333-35433
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
AMENDMENT NO. 1
TO
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
TAUBMAN CENTERS, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS ARTICLES OF INCORPORATION)
MICHIGAN 38-2033632
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER IDENTIFICATION NO.)
INCORPORATION OR ORGANIZATION)
200 EAST LONG LAKE ROAD
SUITE 300, P.O. BOX 200
BLOOMFIELD HILLS, MICHIGAN 48303-0200
(248) 258-6800
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING
AREA CODE, OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
------------------------
LISA A. PAYNE
TAUBMAN CENTERS, INC.
200 EAST LONG LAKE ROAD
SUITE 300, P.O. BOX 200
BLOOMFIELD HILLS, MICHIGAN 48303-0200
(248) 258-6800
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
INCLUDING AREA CODE, OF AGENT FOR SERVICE)
------------------------
COPY TO:
DAVID A. HANDELSMAN, ESQ.
MIRO WEINER & KRAMER
500 N. WOODWARD AVENUE, SUITE 100
BLOOMFIELD HILLS, MICHIGAN 48304
(248) 646-2400
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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: From time
to time after the effective date of this Registration Statement.
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, please check the following box. [X]
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THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
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PROSPECTUS
- -----------------
$500,000,000
TAUBMAN CENTERS, INC.
COMMON STOCK, PREFERRED STOCK,
DEPOSITARY SHARES, AND WARRANTS
------------------------------
Taubman Centers, Inc. (the "Company") may offer from time to time (i)
shares of the Company's common stock, par value $0.01 per share ("Common
Stock"), (ii) in one or more series, shares of preferred stock ("Preferred
Stock"), (iii) in one or more series, shares of Preferred Stock represented by
depositary shares ("Depositary Shares"), and (iv) warrants to purchase Common
Stock or Preferred Stock ("Warrants") with an aggregate public offering price of
up to $500 million in amounts, at prices, and on terms to be determined at the
time of the offering. The Common Stock, Preferred Stock, Depositary Shares, and
Warrants (collectively, the "Securities") may be offered separately or together,
in amounts, at prices, and on terms to be described in one or more supplements
to this Prospectus (each, a "Prospectus Supplement").
The specific terms of the Securities with respect to which this Prospectus
is being delivered will be set forth in the applicable Prospectus Supplement and
will include, as applicable: (i) in the case of Common Stock, the initial
offering price; (ii) in the case of Preferred Stock, the title, the
distribution, liquidation, redemption, conversion, voting, and other rights, and
the public offering price; (iii) in the case of Depositary Shares, the
fractional shares of Preferred Stock represented by each Depositary Share; and
(iv) in the case of Warrants, the offering price, duration, exercise price, and
detachability provisions. Such specific terms may also include limitations on
direct or beneficial ownership and restrictions on transfer to assist in
maintaining the Company's qualification as a real estate investment trust (a
"REIT") for Federal income tax purposes or for other reasons.
Each Prospectus Supplement will also contain any additional information not
contained in this Prospectus relating to any material United States Federal
income tax considerations relating to, and any listing on a securities exchange
of, the Securities offered by such Prospectus Supplement.
The Securities may be offered directly or 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 Securities, their
names, and any applicable purchase price, fee, commission, or discount
arrangement between or among them will be set forth in, or will be calculable
from, the information in the accompanying Prospectus Supplement. No Securities
may be sold by the Company through agents, underwriters, or dealers without
delivery of a Prospectus Supplement describing the method and terms of the
offering of such Securities.
------------------------------
SEE THE DISCUSSION UNDER THE CAPTION "RISK FACTORS" BEGINNING ON PAGE 1 OF
THIS PROSPECTUS FOR A DISCUSSION OF CERTAIN FACTORS RELATING TO AN INVESTMENT IN
THE SECURITIES.
------------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY
OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
------------------------------
The date of this Prospectus is September 19, 1997.
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NO PERSON IS AUTHORIZED IN CONNECTION WITH ANY OFFERING MADE BY THIS
PROSPECTUS 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. THIS
PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO
BUY ANY SECURITY OTHER THAN THE SECURITIES NOR DOES IT CONSTITUTE AN OFFER TO
SELL OR A SOLICITATION OF AN OFFER TO BUY ANY OF THE SECURITIES TO ANY PERSON IN
ANY JURISDICTION IN WHICH IT IS UNLAWFUL TO MAKE SUCH AN OFFER OR SOLICITATION
TO SUCH PERSON. NEITHER THE DELIVERY OF NOR SALE UNDER THIS PROSPECTUS OR THE
RELATED PROSPECTUS SUPPLEMENT SHALL UNDER ANY CIRCUMSTANCE CREATE ANY
IMPLICATION THAT THE INFORMATION CONTAINED IN THIS PROSPECTUS OR THE RELATED
PROSPECTUS SUPPLEMENT IS CORRECT AS OF ANY DATE SUBSEQUENT TO THE DATE OF THIS
PROSPECTUS OR THE RELATED PROSPECTUS SUPPLEMENT.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
The Company................................................. 1
Risk Factors................................................ 1
Use of Proceeds............................................. 5
Ratio of Earnings to Combined Fixed Charges and Preferred
Stock Dividends........................................... 5
Certain Provisions of the Articles of Incorporation and
Bylaws.................................................... 5
Description of Common Stock................................. 7
Description of Preferred Stock.............................. 7
Description of Depositary Shares............................ 11
Description of Warrants..................................... 14
Restrictions on Transfer.................................... 15
Federal Income Tax Considerations........................... 17
ERISA Considerations........................................ 30
Plan of Distribution........................................ 32
Legal Matters............................................... 32
Experts..................................................... 33
Available Information....................................... 33
Incorporation by Reference.................................. 33
Glossary.................................................... 35
</TABLE>
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THE COMPANY
The Company believes that it is organized and operates in such a manner so
as to qualify as a real estate investment trust (a "REIT") under the Internal
Revenue Code of 1986, as amended (the "Code"). The Company is the managing
general partner of The Taubman Realty Group Limited Partnership ("TRG"), an
operating partnership that engages in the ownership, operation, management,
leasing, acquisition, development, redevelopment, expansion, financing, and
refinancing of regional shopping centers. TRG owns as its primary assets
interests in regional retail shopping centers located throughout the United
States (the "Taubman Shopping Centers" or "Centers"). TRG has interests in
certain Centers through partnerships (the "Joint Ventures" and, together with
the partnerships owning Taubman Shopping Centers that are 100% beneficially
owned by TRG, the "Center Owners") with unaffiliated third parties (the "Joint
Venture Partners"). TRG also owns development projects for future regional
shopping centers and more than a 99% beneficial interest in The Taubman Company
Limited Partnership (the "Manager"), which manages the Taubman Shopping Centers
and provides other services to TRG and the Company. TRG also owns the entire
beneficial interest in various grantor trusts established by TRG (the "TRG
Trusts") to serve as TRG's partners in the Center Owners of the wholly-owned
Taubman Shopping Centers.
See "Glossary" for the definitions of certain terms used in this
Prospectus.
The Company's executive offices are maintained by the Manager at 200 East
Long Lake Road, Suite 300, P.O. Box 200, Bloomfield Hills, Michigan 48304,
Telephone: (248) 258-6800.
RISK FACTORS
Prospective investors should carefully consider, among other factors, the
matters described below.
EQUITY REAL ESTATE INVESTMENTS
ECONOMIC PERFORMANCE AND VALUE OF SHOPPING CENTERS DEPENDENT ON MANY FACTORS
Shopping center economic performance and values could be adversely affected
by a number of factors, including changes in the national, regional, and local
economic climate, the quality and philosophy of management, local conditions
(such as the supply of retail space), the attractiveness of the properties to
tenants and their customers, the ability and willingness of the owner to provide
adequate maintenance and insurance, operating costs, and the public perception
of the safety of customers at the shopping centers. In addition to the factors
affecting economic performance of shopping centers, shopping center values could
be adversely affected by such factors as government regulations and changes in
real estate zoning and tax laws, interest rate levels, the availability of
financing, and potential liability under environmental and other laws. Adverse
changes in one or more of these factors could adversely affect the Company's
income and cash available for distribution, as well as the value of its
investment in TRG.
DEPENDENCE ON RENTAL INCOME FROM REAL PROPERTY
Substantially all of the Company's income is derived (through its interest
in TRG) from rental income from real property. If the sales of stores operating
in the Centers decline sufficiently, tenants might be unable to pay their
existing minimum rents or expense recovery charges, since such rents and charges
would represent a higher percentage of their sales. In addition, if there were
such declines in sales, new tenants would be less likely to be willing to pay
minimum rents as high as they would otherwise pay. In a recessionary
environment, such risks are increased.
The Company's income and cash available for distribution would be adversely
affected if lessees were unable to meet their lease obligations or if one or
more of the Center Owners were unable to lease space (or collect rental
payments). In the event of default by a lessee, the relevant Center Owner may
experience delays in enforcing its rights as lessor and may incur substantial
costs in protecting its investment.
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INABILITY TO COMPETE
The Taubman Shopping Centers compete with other retailers in attracting
customers. Regional shopping centers face increasing competition from discount
stores, outlet malls, discount shopping clubs, and direct mail and
telemarketing. There are numerous shopping centers that compete with the Taubman
Shopping Centers in seeking tenants to lease space in commercial properties and
numerous companies that compete with TRG in seeking properties for acquisition
or development. No assurance can be given that the Taubman Shopping Centers will
be able to compete successfully in the future. The inability of one or more
Taubman Shopping Centers to compete successfully would adversely affect TRG's
revenues and, consequently, the Company's income and funds available to pay
dividends.
CONFLICTS OF INTEREST WITH JOINT VENTURE PARTNERS IN JOINTLY OWNED CENTERS
Certain Taubman Shopping Centers are owned by Joint Ventures consisting of
TRG and one or more Joint Venture Partners who have no interest in TRG. Sales or
transfers of interests in the Joint Ventures are subject to various restrictive
provisions and rights. These may work to the advantage or disadvantage of TRG
because, among other things, TRG may have an opportunity to acquire the
interests of the Joint Venture Partners on advantageous terms, or TRG may be
required to make decisions as to the purchase or sale of interests in a Joint
Venture at a time that is disadvantageous to TRG.
In addition, the consent of each Joint Venture Partner could be required
with respect to certain major transactions, such as refinancing, encumbering, or
the expansion or sale of, the relevant Taubman Shopping Center. The interests of
the Joint Venture Partners and those of TRG are not necessarily aligned in
connection with the resolution of such issues. Accordingly, TRG may not be able
to favorably resolve any such issue, or TRG may have to provide financial or
other inducement to the Joint Venture Partner to obtain such resolution.
FAILURE TO QUALIFY AS A REIT
Although the Company believes that it is organized and operates in such a
manner so as to qualify as a REIT under the Code, no assurance can be given that
the Company will remain so qualified. Qualification as a REIT involves the
application of highly technical and complex Code provisions for which there are
only limited judicial or administrative interpretations. The complexity of these
provisions and applicable Treasury Regulations is also increased in the context
of a REIT that holds its assets in partnership form. The determination of
various factual matters and circumstances not entirely within the Company's
control may affect its ability to qualify as a REIT. In addition, no assurance
can be given that legislation, new 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.
If in any taxable year the Company fails to qualify as a REIT, the Company
would not be allowed a deduction for distributions to shareholders in computing
its taxable income 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, the amount available for distribution to the Company's
shareholders would be reduced for the year or years involved. In addition,
unless entitled to relief under certain statutory provisions, the Company would
also be disqualified from treatment as a REIT for the four taxable years
following the year during which qualification was lost.
Notwithstanding that the Company currently operates in a manner designed to
qualify as a REIT, future economic, market, legal, tax, or other considerations
may cause the Company to determine that it is in the best interest of the
Company and its shareholders to revoke the REIT election. The Company would be
disqualified to elect treatment as a REIT for the four taxable years following
the year of such revocation.
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INABILITY TO COMPLY WITH REIT DISTRIBUTION REQUIREMENTS
REIT REQUIREMENTS
To obtain the favorable tax treatment for REITs qualifying under the Code,
the Company generally will be required each year to distribute to its
shareholders at least 95% of its otherwise taxable income (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 the calendar year, 95% of its capital gains net income for the calendar year
and any undistributed taxable income from prior periods. Failure to comply with
the 95% distribution requirement would result in the Company failing to qualify
as a REIT and the Company's income being subject to tax at regular corporate
rates.
INABILITY OF THE COMPANY TO MAINTAIN ITS DISTRIBUTION POLICY
The Company intends to make distributions to its shareholders to comply
with the 95% distribution provision of the Code and to avoid the nondeductible
excise tax discussed above. The Company's income consists almost entirely of the
Company's share of the income of TRG, and the Company's cash flow consists
almost entirely of its share of distributions from TRG. No assurance can be
given that the Company's share of distributions from TRG will be sufficient to
enable it to pay its operating expenses and meet the distribution requirements
discussed above.
BANKRUPTCY OF OTHERS
BANKRUPTCY OF ANCHORS
Several department store companies operating anchors at regional shopping
centers have filed for protection under the United States Bankruptcy Code. In
TRG's experience, anchors have continued to operate their stores at the Taubman
Shopping Centers during bankruptcy proceedings, until and unless the proceedings
have resulted in liquidation. In the event of liquidation, the store site and
related property (or the leasehold interest) are generally sold at auction. In
TRG's experience, the bankruptcy of department store companies has not had a
materially adverse effect on TRG's financial condition; however, anchor closings
could result in reduced customer traffic and lower mall tenant sales.
Over time, there has been a consolidation in the department store industry.
As a result, there are fewer independent department store chains in existence
today. Accordingly, the bankruptcy of any one department store chain could
involve more anchors at the Taubman Shopping Centers (and, therefore, could have
a greater effect on TRG) than may have been the case when there was less
concentration in the department store industry.
BANKRUPTCY OF MALL TENANTS
Mall tenants at Taubman Shopping Centers may seek the protection of the
bankruptcy laws, which could result in the termination of such tenants' leases
and thus cause a reduction in the cash flow generated by the Taubman Shopping
Centers.
BANKRUPTCY OF JOINT VENTURE PARTNERS
The bankruptcy of a Joint Venture Partner could adversely affect the
relevant Taubman Shopping Center, principally because of the problems created by
dealing with a bankruptcy court regarding material partnership decisions. Under
the bankruptcy laws, TRG would be precluded by the automatic stay from taking
certain actions which affect the estate of the Joint Venture Partner without
prior approval of the bankruptcy court, which would, in most cases, entail prior
notice to other parties and a hearing in the bankruptcy court. At a minimum, the
requirement of approval may delay the taking of such actions. If a Joint Venture
has incurred recourse obligations, the discharge in bankruptcy of a Joint
Venture Partner might result in the ultimate liability of TRG for a greater
portion of such obligations than it would otherwise bear. In addition, even in
situations where the Joint Venture Partner (or its estate) was not completely
relieved of liability for such
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obligations, TRG, as a general partner of the Joint Venture, might be required
to satisfy such obligations and then rely upon a claim against the Joint Venture
Partner's estate for reimbursement.
EFFECT OF UNINSURED LOSS ON PROFITABILITY
Each Center Owner carries comprehensive liability, fire, flood, earthquake,
extended coverage, and rental loss insurance, with policy specifications and
insured limits customarily carried for similar properties. There are, however,
certain types of losses (generally of a catastrophic nature, such as from wars,
riots, or civil disturbances) that are generally not insured either because they
are uninsurable or not economically insurable. Should an uninsured loss occur,
the Center Owner could lose capital invested in, and anticipated profits from,
the property, which would nevertheless continue to be subject to the obligation
of any mortgage indebtedness. Any such loss could adversely affect the
profitability and cash flow of TRG and, therefore, the Company. The Company
believes that the Taubman Shopping Centers are adequately insured in accordance
with industry standards.
LIABILITIES FOR ENVIRONMENTAL MATTERS
Under various Federal, state and local environmental laws, ordinances, and
regulations, the Company, TRG, or the Manager, as the case may be, in connection
with the ownership (direct or indirect), operation, management, and development
of real properties, may be considered an owner or operator of such properties or
may have arranged for the disposal or treatment of hazardous or toxic
substances, and therefore may become potentially liable for removal or
remediation costs, as well as certain other potential costs that could relate to
such hazardous or toxic substances (including governmental fines and injuries to
persons and property). Such laws often impose liability without regard to
whether the owner or operator knows of, or was responsible for, the release of
such hazardous or toxic substances.
Of the Centers, one is located in a region that has been used extensively
to store various petroleum products; one is located over an oil field and
several abandoned oil wells and is adjacent to an active oil production
facility; and one is situated on land that was previously used as a landfill.
In addition, certain environmental laws impose liability for release of
asbestos-containing materials ("ACMs") into the air, and third parties may seek
recovery from owners or operators of real properties for personal injury
associated with ACMs. There are ACMs at most of the Taubman Shopping Centers,
primarily in the form of floor tiles and mastics.
Although there can be no assurances, the Company is not aware of any
environmental liability relating to the above matters or generally to the
Taubman Shopping Centers or any other property in which the Company, TRG, or the
Manager has or had an interest (whether as an owner or operator) that the
Company believes would have a material adverse effect on the Company's or TRG's
business, assets, or results of operations. The existence of any such
environmental liability could have an adverse effect on TRG's cash flow and the
funds available to the Company to pay dividends.
TREATMENT OF ASSETS OF THE COMPANY AS PLAN ASSETS UNDER ERISA
The Company believes that shares of Common Stock are, and that other
Securities offered hereby will be, "publicly-offered securities" for purposes of
the Employee Retirement Income Security Act of 1974, as amended ("ERISA"), and
that, consequently, the assets of the Company are not, and will not be, "plan
assets" of an ERISA plan, individual retirement account, or other non-ERISA plan
that invests in the Common Stock or such Securities. Were the Company's assets
deemed to be plan assets of any such plan, then TRG's and the Company's ability
to engage in business transactions would be hampered because: (i) certain
persons exercising discretion as to the Company's assets might be considered to
be fiduciaries under ERISA; (ii) transactions involving the Company undertaken
at their direction or pursuant to their advice might violate ERISA; and (iii)
certain transactions that the Company might enter into in the ordinary course of
its business might constitute "prohibited transactions" under ERISA and the
Code.
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SALE OF THE TAUBMAN SHOPPING CENTERS
Under TRG's partnership agreement, upon the sale of a Center or TRG's
interest in a Center, TRG may be required to distribute to its partners all of
the cash proceeds received by TRG from such sale. If TRG made such a
distribution, the sale proceeds would not be available to finance TRG's
activities, and the sale of a Center may result in a decrease in funds generated
by continuing operations and in distributions to TRG's partners, including the
Company.
RESTRICTIONS ON CONTROL OF TRG
TRG's Partnership Committee has final authority over the management of
TRG's business. As a result of provisions in TRG's Partnership Agreement, the
Company may not be able to designate a majority of the members of the
Partnership Committee prior to owning, under certain circumstances, up to 61.5%
of TRG.
OWNERSHIP LIMIT AND OTHER PROVISIONS OF THE ARTICLES AND BYLAWS
The general limitation on ownership of the Company's Regular Capital Stock
and other provisions of the Company's Articles and Bylaws could have the effect
of discouraging offers to acquire the Company and of inhibiting a change of
control, which could adversely affect the shareholders' ability to receive a
premium for their shares in connection with such a transaction. See "Certain
Provisions of the Articles of Incorporation and Bylaws" and "Restrictions on
Transfer."
USE OF PROCEEDS
Unless otherwise specified in the applicable Prospectus Supplement, the
Company anticipates that the net proceeds from the Company's sale of the
Securities will be available for general corporate purposes, which may include
the acquisition of additional regional retail shopping centers, other
properties, interests in such centers or other properties, or additional
interests in TRG. TRG may use any proceeds that the Company contributes or
otherwise transfers to TRG to repay or prepay indebtedness of TRG, including
secured indebtedness, finance capital expenditures, including expansions and
development activities, acquisitions, working capital, and for other general
partnership activities.
RATIO OF EARNINGS TO COMBINED FIXED CHARGES AND
PREFERRED STOCK DIVIDENDS
The Company does not have, and has not had, any outstanding indebtedness or
Preferred Stock. The applicable Prospectus Supplement with respect to an
offering of Securities will include a pro forma ratio of earnings to combined
fixed charges and preferred stock dividends, if applicable.
CERTAIN PROVISIONS OF THE ARTICLES OF INCORPORATION AND BYLAWS
Set forth below is a description of certain provisions of the Company's
Second Amended and Restated Articles of Incorporation (the "Articles") and the
Company's Bylaws (the "Bylaws") as in effect on the date of this Prospectus. The
description is a summary only, and is qualified in its entirety by reference to
the Articles and Bylaws, which have been filed as exhibits to the Registration
Statement of which this Prospectus is a part.
Under the Articles, the Company is authorized to issue a total of 300
million shares of Capital Stock, consisting of 250 million shares of Common
Stock and up to 50 million shares of Preferred Stock. The term "Capital Stock"
means Common Stock, Preferred Stock, and Excess Stock, and the term "Regular
Capital Stock" means shares of Common Stock and Preferred Stock that have not
become Excess Stock. See "Restrictions on Transfer."
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STAGGERED BOARD OF DIRECTORS
The Bylaws provide that the Board of Directors will be divided into three
classes of directors, each class constituting approximately one-third of the
total number of directors, with the classes serving staggered three-year terms.
The Articles provide that 40% of the Company's Directors must be "Independent,"
as defined in the Articles (in general, a Director is Independent if he is not
affiliated with A. Alfred Taubman or his affiliates or certain pension trusts of
General Motors Corporation or their affiliates (the "GM Trusts")). The
classification of the Board of Directors will have the effect of making it more
difficult for shareholders to change the composition of the Board of Directors
because only a minority of the directors are elected at any one time. The
Company believes, however, that the longer terms associated with the classified
Board of Directors will help to ensure continuity and stability of the Company's
management and policies.
The classification provisions could also have the effect of discouraging a
third party from accumulating a large block of the Company's stock or attempting
to obtain control of the Company, even though such an attempt might be
beneficial to the Company and some, or a majority, of its shareholders.
NUMBER OF DIRECTORS; REMOVAL
The Articles provide that the number of directors will be fixed by the
Bylaws. The Bylaws currently provide that the number of directors will be 11 or
such greater number as is necessary to ensure that 40% of the directors are
Independent Directors.
Directors may be removed only upon the affirmative vote of two-thirds of
the outstanding shares of Capital Stock entitled to vote.
PREFERRED STOCK
The Articles authorize the Board of Directors to establish one or more
series of Preferred Stock and to determine, with respect to any series of
Preferred Stock, the preferences, rights (including voting and conversion
rights), and other terms of such series. See "Description of Preferred Stock."
The Company believes that the ability of the Board of Directors to issue one or
more series of Preferred Stock will provide the Company with increased
flexibility in meeting corporate needs. All authorized but unissued shares of
Preferred Stock and Common Stock are available for issuance without further
action by the Company's shareholders, unless such action is required by
applicable law or the rules of any stock exchange or automated quotation system
on which the Company's securities may be listed or traded. The Board of
Directors could issue a series of Preferred Stock that (because of its terms)
could impede a merger, tender offer, or other transaction that some of the
Company's shareholders might believe to be in their best interests or in which
shareholders might receive a premium over the then-prevailing market prices for
their shares.
AMENDMENT OF ARTICLES OF INCORPORATION AND BYLAWS
The Articles may be amended only by the affirmative vote of two-thirds of
the outstanding Capital Stock entitled to vote. A majority of the disinterested
members of the Board of Directors, together with a majority of the disinterested
Independent Directors, may amend the Bylaws at any time, except with respect to
a bylaw that is adopted by the shareholders and that, by its terms, can be
amended only by the shareholders. The shareholders can amend the Bylaws only
upon the affirmative vote of two-thirds of the outstanding Capital Stock
entitled to vote.
OWNERSHIP LIMIT
The General Ownership Limit set forth in the Company's Articles could have
the effect of discouraging offers to acquire the Company and of increasing the
difficulty of consummating any such acquisition. See "Restrictions on Transfer."
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DESCRIPTION OF COMMON STOCK
Subject to such preferential rights as may be granted by the Board of
Directors in connection with the future issuance of Preferred Stock, holders of
Common Stock are entitled to one vote per share on all matters to be voted on by
shareholders and are entitled to receive ratably such dividends as may be
declared on the Common Stock by the Board of Directors in its discretion from
funds legally available for the payment of dividends. In the event of the
liquidation, dissolution, or winding up of the Company, holders of Common Stock
are entitled to share ratably in all assets remaining after payment of all debts
and other liabilities and any liquidation preference of the holders of Preferred
Stock.
Currently, a majority of the outstanding shares of Common Stock is required
for a quorum. Any action requiring shareholder approval (other than the election
of directors) will be approved upon the affirmative vote of the holders of
two-thirds of the outstanding shares of Capital Stock entitled to vote
(currently, two-thirds of the outstanding shares of Common Stock because no
Preferred Stock has been issued). Directors are elected by a plurality of the
votes cast. Holders of Common Stock do not have cumulative voting rights in the
election of directors. Holders of shares of Common Stock do not have preemptive
rights, which means they have no right to acquire additional securities that the
Company may issue. See "Restrictions on Transfer" and "Certain Provisions of the
Articles of Incorporation and Bylaws."
The Common Stock is listed on The New York Stock Exchange (symbol: TCO).
The registrar and transfer agent for the Common Stock is ChaseMellon Shareholder
Services, L.L.C.
DESCRIPTION OF PREFERRED STOCK
GENERAL
The following description of the Preferred Stock sets forth certain general
terms and provisions of the Preferred Stock to which a Prospectus Supplement may
relate.
The Board of Directors is authorized to establish, from time to time, one
or more series of Preferred Stock and to establish the number of shares in each
series and to fix the preferences, conversion, and other rights, voting powers,
restrictions, limitations as to dividends, qualifications, and terms and
conditions of redemption of such series, without any further vote or actions by
the shareholders, unless such action is required by applicable law or the rules
of a stock exchange or automated quotation system on which the Company's
securities may be listed. Because the Board of Directors has the power to
establish the preferences and rights of each series of Preferred Stock, the
Board may afford the holder of any series of Preferred Stock preferences,
powers, and rights, voting or otherwise, senior to the rights of holders of
Common Stock. The Preferred Stock will, when issued, be fully paid and
nonassessable.
The Prospectus Supplement relating to any Preferred Stock offered by such
Prospectus Supplement will contain the specific terms of the offered shares,
including:
(i) the title of such Preferred Stock;
(ii) the number of shares of such Preferred Stock offered, the
liquidation preference per share, and the offering price of such Preferred
Stock;
(iii) the dividend rate, payment date, or method of calculating the
foregoing applicable to such Preferred Stock;
(iv) the date from which dividends on such Preferred Stock will
accumulate, if applicable;
(v) the procedures for any auction and remarketing, if any, for such
Preferred Stock;
(vi) the provision for any sinking fund for such Preferred Stock;
(vii) any redemption provisions applicable to such Preferred Stock;
(viii) any listing of such Preferred Stock on any securities exchange;
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(ix) the terms and conditions, if applicable, upon which such
Preferred Stock will be convertible into Common Stock of the Company,
including the conversion price (or manner of calculating the conversion
price);
(x) whether interests in such Preferred Stock will be represented by
Depositary Shares;
(xi) any other specific terms, preferences, rights, limitations, or
restrictions of such Preferred Stock;
(xii) a discussion of all material Federal income tax considerations
applicable to such Preferred Stock that are not discussed in this
Prospectus;
(xiii) 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;
(xiv) any limitations on issuance of any 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; and
(xv) any limitations on direct or beneficial ownership and
restrictions on transfer in addition to the General Ownership Limit. See
"Restrictions on Transfer."
RANK
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; (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; and (iii) junior to all equity securities issued by
the Company the terms of which specifically provide that such equity securities
rank senior to the Preferred Stock. The term "equity securities" does not
include convertible debt securities.
DIVIDENDS
Holders of the Preferred Stock of each series will be entitled to receive,
when, as, and if declared by the Board of Directors, out of assets of the
Company legally available for payment, cash dividends (or dividends in kind or
in other property if expressly permitted and described in the applicable
Prospectus Supplement) at such rates and on such dates as will be set forth in
the applicable Prospectus Supplement. Each such dividend will be payable to
holders of record as they appear on the stock transfer books of the Company on
the record date fixed by the Board of Directors.
REDEMPTION
If so provided in the applicable Prospectus Supplement, the Preferred Stock
will be subject to mandatory redemption or redemption at the option of the
Company, in whole or in part, in each case upon the terms, at the times, and at
the redemption prices set forth in such Prospectus Supplement.
The Prospectus Supplement relating to shares of a series of Preferred Stock
that is subject to mandatory redemption will specify the number of shares of
such Preferred Stock that will be redeemed by the Company in each year
commencing after a date to be specified, at a redemption price per share to be
specified, together with an amount equal to all accrued and unpaid dividends
(which will not, if such Preferred Stock does not have a cumulative dividend,
include any accumulation in respect of unpaid dividends for prior dividend
periods) to the date of redemption. The redemption price may be payable in cash
or other property, as specified in the applicable Prospectus Supplement. If the
redemption price for Preferred Stock of any series is payable only from the net
proceeds of the issuance of shares of capital stock of the Company, the terms of
such Preferred Stock may provide that, if no such shares of capital stock have
been issued or to the extent the net proceeds from any issuance are insufficient
to pay in full the aggregate redemption price then due, such Preferred Stock
shall automatically and mandatorily be converted into the applicable shares of
capital stock of the Company pursuant to conversion provisions to be specified
in the applicable Prospectus Supplement.
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Notwithstanding the foregoing, unless (i) if such series of Preferred Stock
has a cumulative dividend, full cumulative dividends on all shares of series of
Preferred Stock have been paid or contemporaneously are declared and paid or are
declared and a sum sufficient for the payment of such dividends has been set
apart for payment for all past distribution periods and the then current
dividend period, and (ii) if such series of Preferred Stock does not have a
cumulative dividend, full dividends of the Preferred Stock of any series have
been paid or contemporaneously are declared and paid or are declared and a sum
sufficient for the payment of such dividends has been set apart for payment for
the then current dividend period, no shares of any series of Preferred Stock may
be redeemed unless all outstanding Preferred Stock of such series is
simultaneously redeemed. The foregoing limitation will not prevent the purchase
or acquisition of Preferred Stock of such series to preserve the Company's REIT
qualification or pursuant to a purchase or exchange offer made on the same terms
to holders of all outstanding Preferred Stock of such series.
In addition, unless (i) if such series of Preferred Stock has a cumulative
dividend, full cumulative dividends on all outstanding shares of any series of
Preferred Stock have been paid or contemporaneously are declared and paid or are
declared and a sum sufficient for the payment of such dividends has been set
apart for payment for all past dividend periods and the then current dividend
period, and (ii) if such series of Preferred Stock does not have a cumulative
dividend, full dividends on the Preferred Stock of any series have been paid or
contemporaneously are declared and paid or are declared and sum sufficient for
the payment of such dividends has been set apart for payment for the then
current dividend period, the Company may not purchase or otherwise acquire
(directly or indirectly) any shares of Preferred Stock of such series (except by
conversion into or exchange for shares of capital stock of the Company ranking
junior to the Preferred Stock of such series as to dividends and upon
liquidation). The foregoing limitation will not prevent the purchase or
acquisition of Preferred Stock of such series to preserve the Company's REIT
qualification or pursuant to a purchase or exchange offer made on the same terms
to holders of all outstanding Preferred Stock of such series.
If fewer than all of the outstanding shares of Preferred Stock of any
series are to be redeemed, the number of shares to be redeemed will be
determined by the Company, and such shares may be redeemed pro rata from the
holders of record of such shares in proportion to the number of such shares held
or for which redemption is requested by each holder (with adjustments to avoid
redemption of fractional shares) or by lot in a manner determined by the
Company.
Notice of redemption will be mailed at least 30 days but not more than 60
days before the redemption date to each holder of record of Preferred Stock of
any series to be redeemed at the address shown on the stock transfer books of
the Company. Each notice will state: (i) the redemption date; (ii) the number of
shares and series of the Preferred Stock to be redeemed; (iii) the redemption
price; (iv) the place(s) where certificates for such Preferred Stock are to be
surrendered for payment of the redemption price; (v) that dividends on the
shares to be redeemed will cease to accrue on such redemption date; and (vi) the
date upon which the holder's conversion rights, if any, as to such shares will
terminate. If fewer than all of the shares of Preferred Stock of any series are
to be redeemed, the notice mailed to each holder of such series will also
specify the number of shares of Preferred Stock to be redeemed from each holder.
If notice of redemption of any Preferred Stock has been given and if the funds
necessary for such redemption have been set aside by the Company in trust for
the benefit of the holders of any Preferred Stock so called for redemption, then
from and after the redemption date, dividends will cease to accrue on such
Preferred Stock, and all rights of the holders of such shares will terminate,
except the right to receive the redemption price.
LIQUIDATION PREFERENCE
Upon any voluntary or involuntary liquidation, dissolution, or winding up
of the affairs of the Company, then before any dividend or payment may be made
to the holders of the Common Stock, which will rank junior to the Preferred
Stock in the distribution of assets upon any liquidation, dissolution, or
winding up of the Company, the holders of each series of Preferred Stock will be
entitled to receive out of assets of the Company legally available for
distribution to shareholders liquidating distributions in the amount of the
liquidation preference per share of Preferred Stock (set forth in the applicable
Prospectus Supplement), plus an amount equal to all accrued but unpaid dividends
(which will not include any accumulation in respect of unpaid
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dividends for prior dividend periods if such Preferred Stock does not have a
cumulative dividend). After payment of the full amount of the liquidating
distributions to which they are entitled, the holders of Preferred Stock will
have no right or claim to any of the remaining assets of the Company. If upon
any voluntary or involuntary liquidation, dissolution, or winding up of the
Company, the available assets of the Company are insufficient to pay the amount
of the liquidating distributions on all outstanding Preferred Stock, then the
holders of the Preferred Stock will share ratably in any such distribution of
assets in proportion to the full liquidating distributions to which they would
otherwise be respectively entitled.
If the liquidating distributions have been made in full to all holders of
Preferred Stock, the remaining assets of the Company will be distributed among
the holders of Common Stock according to their respective number of shares. For
such purposes, neither the consolidation or merger of the Company with or into
any other corporation or entity nor the sale, lease, or conveyance of all or
substantially all of the property or business of the Company will be deemed to
constitute a liquidation, dissolution, or winding up of the Company.
VOTING RIGHTS
Holders of Preferred Stock will not have any voting rights, except as set
forth below or as otherwise from time to time required by law or as indicated in
the applicable Prospectus Supplement.
Unless otherwise indicated in the applicable Prospectus Supplement,
whenever dividends on any shares of Preferred Stock are in arrears for six or
more quarterly periods, the holders of such shares of Preferred Stock (voting
separately as a class with all other series of Preferred Stock upon which like
voting rights have been conferred and are exercisable) will be entitled to vote
for the election of two additional directors of the Company at a special meeting
called by the holders of record of at least 10% of any series of Preferred Stock
so in arrears (unless such request is received less than 90 days before the date
fixed for the next annual or special meeting of the shareholders) or at the next
annual meeting of shareholders, and at each subsequent annual meeting, until (i)
if such series of Preferred Stock has a cumulative dividend, all dividends
accumulated on such shares of Preferred Stock for the past dividend periods and
the then current dividend period have been paid or declared and a sum sufficient
for the payment of such dividends has been set aside for payment or (ii) if such
series of Preferred Stock does not have a cumulative dividend, four consecutive
quarterly distributions have been paid regularly. In such case, the Board of
Directors will be increased by two directors.
Unless otherwise provided for any series of Preferred Stock, as long as any
shares of Preferred Stock remain outstanding, the Company will not, without the
affirmative vote or consent of the holders of at least two-thirds of the shares
of each series of Preferred Stock outstanding at the time, given in person or by
proxy, either in writing or at a meeting (such series voting separately as a
class): (i) authorize or create, or increase the authorized or issued amount of,
any class or series of capital stock ranking senior to such series of Preferred
Stock with respect to the payment of dividends or the distribution of assets
upon liquidation, dissolution, or winding up or reclassify any authorized
capital stock of the Company into such shares, or create, authorize, or issue
any obligation or security convertible into or evidencing the right to purchase
any such shares; or (ii) amend, alter, or repeal the provisions of the Company's
Articles, whether by merger, consolidation, or otherwise (an "Event"), so as to
materially and adversely affect any right, preference, privilege, or voting
power of such series of Preferred Stock or the holders of such series; however,
as long as the Preferred Stock remains outstanding with its terms materially
unchanged, taking into account that upon the occurrence of an Event, the Company
may not be the surviving entity, the occurrence of an Event described in clause
(ii) above will not be deemed to materially and adversely affect such rights,
preferences, privileges, or voting power of holders of Preferred Stock, and (x)
any increase in the amount of the authorized Preferred Stock or the creation or
issuance of any other series of Preferred Stock, or (y) any increase in the
amount of authorized shares of such series or any other series of Preferred
Stock, in each case ranking on a parity with or junior to the Preferred Stock of
such series with respect to payment of dividends or the distribution of assets
upon liquidation, dissolution, or winding up, will not be deemed to materially
and adversely affect such rights, preferences, privileges, or voting powers.
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The foregoing voting provisions will not apply if at or prior to the time
when the act with respect to which such vote would otherwise be required is
effected, all outstanding shares of such series of Preferred Stock have been
redeemed or called for redemption, and sufficient funds have been deposited in
trust to effect such redemption.
CONVERSION RIGHTS
The terms and conditions, if any, upon which any series of Preferred Stock
is 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 series of
Preferred Stock.
REGISTRAR AND TRANSFER AGENT
The registrar and transfer agent for the Preferred Stock will be set forth
in the applicable Prospectus Supplement. See "Restrictions on Transfer" and
"Certain Provisions of the Articles of Incorporation and Bylaws."
DESCRIPTION OF DEPOSITARY SHARES
GENERAL
The Company may issue receipts ("Depositary Receipts") for Depositary
Shares, each of which will represent a fractional interest of a share of a
particular series of Preferred Stock, as specified in the applicable Prospectus
Supplement. Shares of Preferred Stock of each series represented by Depositary
Shares will be deposited under a separate deposit agreement (each, a "Deposit
Agreement") among the Company, the depositary named in such Depositary Agreement
(the "Preferred Stock Depositary"), and the holders from time to time of the
Depositary Receipts. Subject to the terms of the Deposit Agreement, each owner
of a Depositary Receipt will be entitled, in proportion to the fractional
interest of a share of a particular series of Preferred Stock represented by the
Depositary Shares evidenced by such Depositary Receipt, to all the rights and
preferences of the Preferred Stock represented by such Depositary Shares
(including dividend, voting, conversion, redemption, and liquidation rights).
The Depositary Shares will be evidenced by Depositary Receipts issued
pursuant to the applicable Deposit Agreement. Immediately following the issuance
and delivery of the Preferred Stock by the Company to the Preferred Stock
Depositary, the Company will cause the Preferred Stock Depositary to issue the
Depositary Receipts on behalf of the Company. Copies of the applicable form of
Deposit Agreement and Depositary Receipt may be obtained from the Company upon
request.
DIVIDENDS
The Preferred Stock Depositary will distribute all cash dividends received
in respect of the Preferred Stock to the record holders of Depositary Receipts
evidencing the related Depositary Shares in proportion to the number of such
Depositary Receipts owned by such holders, subject to certain obligations of
holders to file proofs, certificates, and other information and to pay certain
charges and expenses to the Preferred Stock Depositary.
In the event of a dividend other than in cash, the Preferred Stock
Depositary will distribute property received by it to the record holders of
Depositary Receipts entitled to such dividends, subject to certain obligations
of holders to file proofs, certificates, and other information and to pay
certain charges and expenses to the Preferred Stock Depositary, unless the
Preferred Stock Depositary determines that it is not feasible to make such
distribution, in which case the Preferred Stock Depositary may, with the
approval of the Company, sell such property and distribute the net proceeds from
such sale to such holders.
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No dividend will be paid to the record holder of any Depositary Receipt to
the extent that it represents any Preferred Stock converted into Excess Stock.
WITHDRAWAL OF PREFERRED STOCK
Upon surrender of the Depositary Receipts at the corporate trust office of
the Preferred Stock Depositary (unless the related Depositary Shares have
previously been called for redemption or converted into Excess Stock), the
holders of such Depositary Receipt will be entitled to delivery at such office,
to or upon such holder's order, of the number of whole or fractional shares of
Preferred Stock and any money or other property represented by the Depositary
Shares evidenced by Depositary Receipts. Holders of Depositary Receipts will be
entitled to receive whole or fractional shares of the related Preferred Stock on
the basis of the proportion of the Preferred Stock represented by each
Depositary Share as specified in the applicable Prospectus Supplement, but
holders of such Preferred Stock will not thereafter be entitled to receive
Depositary Shares for such Stock. If the Depositary Receipts delivered by the
holder evidence a number of Depositary Shares in excess of the number of
Depositary Shares representing the number of shares of Preferred Stock to be
withdrawn, the Preferred Stock Depositary will deliver to such holder at the
same time a new Depositary Receipt evidencing such excess number of Depositary
Shares.
REDEMPTION OF DEPOSITARY SHARES
Whenever the Company redeems shares of Preferred Stock held by the
Preferred Stock Depositary, the Preferred Stock Depositary will redeem as of the
same redemption date the number of Depositary Shares representing shares of
Preferred Stock so redeemed, provided the Company has paid in full to the
Preferred Stock Depositary the redemption price of the Preferred Stock to be
redeemed plus an amount equal to any accrued and unpaid dividends to the date
fixed for redemption. The redemption price per Depositary Share will be equal to
the redemption price and any other amounts per share payable with respect to the
Preferred Stock. If fewer than all the Depositary Shares are to be redeemed, the
Depositary Shares to be redeemed will be selected pro rata (as nearly as may be
practicable without creating fractional Depositary Shares) or by any other
equitable method determined by the Company.
From and after the date fixed for redemption: all distributions in respect
of the shares of Preferred Stock called for redemption will cease to accrue; the
Depositary Shares called for redemption will no longer be deemed to be
outstanding; and all rights of the holders of the Depositary Receipts evidencing
the Depositary Shares called for redemption will cease, except the right to
receive any monies payable upon such redemption and any money or other property
to which the holders of such Depositary Receipts were entitled upon such
redemption upon surrender of the Depositary Receipts to the Preferred Stock
Depositary.
VOTING OF THE PREFERRED STOCK
Upon receipt of notice of any meeting at which the holders of the Preferred
Stock are entitled to vote, the Preferred Stock Depositary will mail the
information contained in such notice of meeting to the record holders of the
Depositary Receipts evidencing the Depositary Shares that represent such
Preferred Stock. Each record holder of Depositary Receipts evidencing Depositary
Shares on the record date (which will be the same date as the record date for
the Preferred Stock) will be entitled to instruct the Preferred Stock Depositary
as to the exercise of the voting rights pertaining to the shares of Preferred
Stock represented by such holder's Depositary Shares. The Preferred Stock
Depositary will vote the shares of Preferred Stock represented by such
Depositary Shares in accordance with such instructions, and the Company will
agree to take all reasonable action that may be deemed necessary by the
Preferred Stock Depositary in order to enable the Preferred Stock Depositary to
do so. The Preferred Stock Depositary will abstain from voting the shares of
Preferred Stock represented by such Depositary Shares to the extent it does not
receive specific instructions from the holders of Depositary Receipts evidencing
such Depositary Shares. The Preferred Stock Depositary will not be responsible
for any failure to carry out any instruction to vote or for the manner or effect
of any such vote made, as long as any such action or inaction is in good faith
and does not result from negligence or willful misconduct of the Preferred Stock
Depositary.
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LIQUIDATION PREFERENCE
In the event of the liquidation, dissolution, or winding up of the Company,
whether voluntary or involuntary, the holders of each Depositary Receipt will be
entitled to the fraction of the liquidation preference accorded each share of
Preferred Stock represented by the Depositary Share evidenced by such Depositary
Receipt, as set forth in the applicable Prospectus Supplement.
CONVERSION OF PREFERRED STOCK
The Depositary Shares, as such, are not convertible into Common Stock or
any other securities or property of the Company. Nevertheless, if so specified
in the applicable Prospectus Supplement relating to an offering of Depositary
Shares, the Depositary Receipts may be surrendered by their holders to the
Preferred Stock Depositary with written instructions to the Preferred Stock
Depositary to instruct the Company to cause conversion of the Preferred Stock
represented by the Depositary Shares evidenced by such Depositary Receipts into
whole shares of Common Stock or other shares of Preferred Stock of the Company,
and the Company has agreed that upon receipt of such instructions and any
amounts payable in respect of such conversion, it will cause the conversion
utilizing the same procedures as those provided for delivery of Preferred Stock
to effect such conversion. If the Depositary Shares evidenced by a Depositary
Receipt are to be converted in part only, a new Depositary Receipt will be
issued for any Depositary Shares not to be converted. No fractional shares of
Common Stock will be issued upon conversion, and if such conversion would result
in a factional share being issued, an amount will be paid in cash by the Company
equal to the value of the fractional interest based upon the closing price of
the Common Stock on the last business day prior to the conversion.
AMENDMENT AND TERMINATION OF A DEPOSIT AGREEMENT
Any form of Depositary Receipt evidencing Depositary Shares and any
provision of a Deposit Agreement will be permitted at any time to be amended by
agreement between the Company and the applicable Preferred Stock Depositary. Any
amendment that materially and adversely alters the rights of the holders of
Depositary Receipts or that would be materially and adversely inconsistent with
the rights granted to the holders of the related Preferred Stock will not be
effective unless such amendment has been approved by the existing holders of at
least two-thirds of the applicable Depositary Shares evidenced by the applicable
Depositary Receipts then outstanding. No amendment may impair the right, subject
to certain anticipated exceptions in the Deposit Agreements, of any holder of
Depositary Receipts to surrender any Depositary Receipt with instructions to
deliver to the holder the related Preferred Stock and all money and other
property, if any, represented by such Receipt, except in order to comply with
law. Every holder of an outstanding Depositary Receipt at the time any such
amendment becomes effective will be deemed, by continuing to hold such
Depositary Receipt, to consent and agree to such amendment and to be bound by
the applicable Deposit Agreement as amended.
A Deposit Agreement will be permitted to be terminated by the Company upon
not less than 30 days' prior written notice to the applicable Preferred Stock
Depositary if a majority of each series of Preferred Stock affected by such
termination consents to such termination. Upon such termination, the Preferred
Stock Depositary will be required to deliver or make available to each holder of
Depositary Receipts, upon surrender of the Depositary Receipts held by such
holder, the number of whole or fractional shares of Preferred Stock that are
represented by the Depositary Shares evidenced by such Depositary Receipts,
together with any other property held by such Preferred Stock Depositary with
respect to such Depositary Receipts. In addition, a Deposit Agreement will
automatically terminate if (i) all outstanding Depositary Shares issued under
such Agreement have been redeemed, (ii) there has been a final distribution in
respect of the related Preferred Stock in connection with any liquidation,
dissolution, or winding up of the Company, and such distribution has been
distributed to the holders of Depositary Receipts evidencing the Depositary
Shares representing such Preferred Stock, or (iii) each share of the related
Preferred Stock has been converted into stock of the Company not so represented
by Depositary Shares.
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CHARGES OF A PREFERRED STOCK DEPOSITARY
The Company will pay all transfer and other taxes and governmental charges
arising solely from the existence of a Deposit Agreement. In addition, the
Company will pay the fees and expenses of a Preferred Stock Depositary in
connection with the performance of its duties under a Deposit Agreement;
however, holders of Depositary Receipts will pay the fees and expenses of a
preferred Stock Depositary for any duties requested by such holders to be
performed that are outside of those expressly provided for in the applicable
Deposit Agreement.
RESIGNATION AND REMOVAL OF DEPOSITARY
A Preferred Stock Depositary will be permitted to resign at any time by
delivering to the Company notice of its election to do so, and the Company will
be permitted at any time to remove a Preferred Stock Depositary effective upon
the appointment of a successor Preferred Stock Depositary. A successor Preferred
Stock Depositary will be required to be appointed within 60 days after delivery
of the notice of resignation or removal and will be required to be a bank or
trust company having its principal office in the United States and having a
combined capital and surplus of at least $50.0 million.
MISCELLANEOUS
The Preferred Stock Depositary will forward to holders of Depositary
Receipts any reports and communications from the Company that are received by
the Preferred Stock Depositary with respect to the related Preferred Stock.
Neither the Preferred Stock Depositary nor the Company will be liable if it
is prevented from, or delayed in (whether by law or any circumstances beyond its
control), performing its obligations under the Deposit Agreement. The
obligations of the Company and the Preferred Stock Depositary under the Deposit
Agreement will be limited to performing their duties in good faith and without
negligence (in the case of any action or inaction in the voting of Preferred
Stock represented by the Depositary Shares), gross negligence, or willful
misconduct, and the Company and the Preferred Stock Depositary will not be
obligated to prosecute or defend any legal proceeding in respect of any
Depositary Receipts, Depositary Shares, or shares of Preferred Stock represented
by such Receipts unless satisfactory indemnity is furnished. The Company and the
Preferred Stock Depositary may rely on written advice of counsel or accountants,
information provided by persons presenting shares of Preferred Stock for
deposit, holders of Depositary Receipts, or other persons believed in good faith
to be competent to give such information, and on documents believed in good
faith to be genuine and signed by a proper party.
In the event the Preferred Stock Depositary receives conflicting claims,
requests, or instructions from any holders of Depositary Receipts, on the one
hand, and the Company, on the other hand, the Preferred Stock Depositary will be
entitled to act on such claims, requests or instructions received from the
Company.
DESCRIPTION OF WARRANTS
The Company has no Warrants outstanding; however, as of September 11, 1997,
the Company had reserved for issuance approximately 97 million shares of Common
Stock that may be issued (i) in exchange for TRG Units of Partnership Interest
upon acceptance by certain TRG partners or employees of the Manager of the
Company's Continuing Offer to exchange Units (including Units issuable upon the
exercise of Incentive Options under TRG's Incentive Option Plan) for Common
Stock or (ii) by the Company in one or more public offerings to raise funds to
enable it to satisfy its obligations pursuant to the Cash Tender Agreement to
purchase the TRG Units held by the GM Trusts and A. Alfred Taubman and members
of his family.
The Company may issue Warrants for the purchase of shares of Preferred
Stock or Common Stock. Warrants may be issued independently or together with any
other Securities offered by any Prospectus Supplement and may be attached to or
separate from such Securities. Each series of Warrants will be issued
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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
holders or beneficial owners of Warrants. The following sets forth certain
general terms and provisions of the Warrants offered by this Prospectus. Further
terms of the Warrants and the applicable Warrant Agreements 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:
(i) the title of such Warrants;
(ii) the aggregate number of such Warrants;
(iii) the price at which such Warrants will be issued;
(iv) the designation, terms, and number of shares of Common Stock or
Preferred Stock purchasable upon exercise of such Warrants;
(v) the designation and terms of the Securities, if any, with which
such Warrants are issued, and the number of such Warrants issued with each
such Security;
(vi) the date, if any, on and after which such Warrants and the
related shares of Common Stock or Preferred Stock will be separately
transferable;
(vii) the price at which each share of Common Stock or Preferred Stock
purchasable upon exercise of such Warrants may be purchased;
(viii) the date on which the right to exercise such Warrants will
commence and the date on which such right will expire;
(ix) the minimum or maximum amount of such Warrants that may be
exercised at any one time;
(x) information with respect to book-entry procedures, if any;
(xi) a discussion of certain Federal income tax considerations; and
(xii) any other terms of such Warrants, including terms, procedures
and limitations relating to the exchange and exercise of such Warrants.
See "Description of Preferred Stock," "Description of Common Stock,"
"Restrictions on Transfer," and "Certain Provisions of the Articles of
Incorporation and Bylaws."
RESTRICTIONS ON TRANSFER
To maintain its qualification as a REIT, the Company cannot be "closely
held" within the meaning of applicable provisions of the Code and Treasury
Regulations. In general, a REIT is "closely held" if five or fewer individuals
(as defined by the Code and Regulations) own more than 50% in value of the
REIT's outstanding capital stock. Under the Company's Articles, in general, no
shareholder may own more than 8.23% in value of the Company's Capital Stock
(which term refers to Regular Common Stock, Regular Preferred Stock, and Excess
Stock) (the "General Ownership Limit"). The GM Trusts may collectively own the
greater of 8,731,426 shares of Regular Capital Stock (which term refers to
shares of Common Stock and Preferred Stock that are not Excess Stock) and 19.8%
in value of the outstanding Capital Stock; the AT&T Master Pension Trust and its
assigns (collectively, the "AT&T Trust and, together with the GM Trusts, the
"Trusts") may own the greater of 6,059,080 shares of Regular Capital Stock and
13.74% in value of the outstanding Capital Stock; and the Trusts may own, in the
aggregate, the greater of 14,790,506 shares of Regular Capital Stock and 33.54%
in value of the outstanding Capital Stock (each such variation from the General
Ownership Limit is referred to as an "Existing Holder Limit"). In addition, the
Board of Directors has the authority to allow a "Look Through Entity" to own up
to 9.9% in value of the Capital Stock (the
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"Look Through Entity Limit"). A "Look Through Entity," in general, is an entity
(other than a qualified trust under section 401(a) of the Code, an entity that
owns 10% or more of the equity of any tenant from which the Company or TRG
receives or accrues rent from real property, or certain tax exempt entities
described in the Articles) whose beneficial owners, rather than the entity,
would be treated as owning the Capital Stock owned by such entity.
The Articles provide that if the transfer of any shares of Regular Capital
Stock or a change in the Company's capital structure would cause any person (the
"Purported Transferee") to own Regular Capital Stock in excess of the General
Ownership Limit (which refers to 8.23% in value of the outstanding Capital
Stock) or the Look Through Limit (which refers to 9.9% in value of the
outstanding Capital Stock) or in excess of the applicable Existing Holder Limit
(which is the greater of the fixed number of shares of Regular Capital Stock and
percentage in value of the outstanding Capital Stock applicable to the relevant
Trust, as described above), then the transfer is void ab initio (the General
Ownership Limit, the Look Through Limit, and the Existing Holder Limit are
referred to collectively as the "Ownership Limits"). It is possible, however,
that a transfer of Regular Capital Stock in violation of one of the Ownership
Limits could occur without the Company's knowledge. Accordingly, the Articles
provide that if notwithstanding the provisions of the Articles, the transfer
nevertheless occurs or a change in capital structure causes a person to own in
excess of any of the Ownership Limits, the shares in excess of such Ownership
Limit automatically acquire the status of "Excess Stock." Shares that have
become Excess Stock continue to be issued and outstanding shares of Common Stock
or Preferred Stock, as the case may be.
A Purported Transferee of Excess Stock acquires no rights to those shares.
Rather, all rights associated with the ownership of those shares (with the
exception of the right to be reimbursed for the original purchase price of those
shares) immediately vest in one or more charitable organizations designated from
time to time by the Company's Board of Directors (each, a "Designated Charity").
An agent designated from time to time by the Board of Directors (each, a
"Designated Agent") will act as attorney-in-fact for the Designated Charity to
vote the shares of Excess Stock and to take delivery of the certificates
evidencing the shares that have become Excess Stock and any distributions paid
to the Purported Transferee with respect to those shares. The Designated Agent
will sell the Excess Stock, and any increase in value of the Excess Stock
between the date it became Excess Stock and the date of sale will inure to the
benefit of the Designated Charity.
A Purported Transferee must notify the Company of any transfer resulting in
shares converting into Excess Stock, as well as such other information regarding
such person's ownership of the Company's Capital Stock as the Company requests.
In addition, any person holding 5% or more of the Company's Capital Stock must
provide the Company with information regarding such person's ownership of
Capital Stock.
Under the Articles, only the Designated Agent has the right to vote shares
of Excess Stock; however, the Articles also provide that votes cast with respect
to certain irreversible corporate actions (e.g., a merger or sale of the
Company) will not be invalidated if erroneously voted by the Purported
Transferee. The Articles also provide that a director is deemed to be a director
for all purposes, notwithstanding a Purported Transferee's unauthorized exercise
of voting rights with respect to shares of Excess Stock in connection with such
director's election.
The General Ownership Limit will not be automatically removed even if the
REIT provisions under the Code are changed so as to no longer contain any
ownership concentration limitation or if the concentration limitation is
increased. In addition to preserving the Company's status as a REIT, the effect
of the General Ownership Limit is to prevent any person from acquiring
unilateral control of the Company. Any change in the General Ownership Limit
would require an amendment to the Articles. Currently, amendments to the
Articles require the affirmative vote of holders owning not less than two-thirds
of the outstanding Capital Stock entitled to vote.
All certificates evidencing shares of Capital Stock bear or will bear a
legend referring to the restrictions described above.
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FEDERAL INCOME TAX CONSIDERATIONS
The following is a summary of all material Federal income tax
considerations that may be relevant to a prospective purchaser of Securities, is
based upon current law, and is not tax advice. This discussion does not address
all aspects of taxation that may be relevant to particular shareholders in light
of their personal investment or tax circumstances or to certain types of
shareholders (including insurance companies, financial institutions, and
broker-dealers) subject to special treatment under the Federal income tax laws.
This discussion was prepared by Miro Weiner & Kramer, counsel to the
Company, and is based on certain factual assumptions, current provisions of the
Code, existing, temporary, and currently proposed Treasury Regulations under the
Code, the legislative history of the Code, existing administrative rulings and
practices of the IRS, and judicial decisions. No assurance can be given that
legislative, judicial, or administrative changes will not affect the accuracy of
any statements in this Prospectus with respect to transactions entered into or
contemplated prior to the effective date of such changes.
EACH PROSPECTIVE PURCHASER IS ADVISED TO CONSULT HIS OWN TAX ADVISOR REGARDING
THE SPECIFIC TAX CONSEQUENCES TO HIM OF THE PURCHASE, OWNERSHIP, AND SALE OF THE
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.
GENERAL
The Company has made an election to be taxed as a REIT under Sections 856
through 860 of the Code and applicable Treasury Regulations, which are the
requirements for qualifying as a REIT (the "REIT Requirements"). The Company
believes that it is organized and operates 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; however, no assurance can be given that it has
operated in such a manner or that it will continue to operate in a manner so as
to qualify or remain qualified.
In the opinion of Miro Weiner & Kramer, counsel to the Company, the Company
qualifies for taxation as a REIT under the Code. Such opinion assumes, among
other things, the accuracy of the Company's representations that it conducts,
and has conducted, its operations in a manner consistent with the REIT
Requirements described below.
The REIT Requirements relating to the Federal income tax treatment of REITs
and their shareholders are highly technical and complex. The following
discussion sets forth only a summary of the material aspects of the REIT
Requirements and the Federal income taxation of REITs and their shareholders.
TAXATION OF THE COMPANY
As a REIT, the Company generally will not be subject to Federal corporate
income taxes on that portion of its ordinary income or capital gain that is
currently distributed to shareholders.
The REIT provisions of the Code generally allow a REIT to deduct dividends
paid to its shareholders. This deduction for dividends paid to shareholders
substantially eliminates the Federal "double taxation" on earnings (once at the
corporate level and once again at the shareholder level) that results from
investment in a corporation.
Even if the Company qualifies for taxation as a REIT, the Company may be
subject to Federal income and excise taxes as follows:
First, the Company will be taxed at regular corporate rates on any
undistributed REIT taxable income and undistributed net capital gains.
Second, under certain circumstances, the Company may be subject to the
"alternative minimum tax" on its items of tax preference, if any.
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Third, if the Company has (i) net income from the sale or other
disposition of "foreclosure property" (generally, property acquired by
reason of a default on a lease or an indebtedness held by a REIT) that is
held primarily for sale to customers in the ordinary course of business or
(ii) other nonqualifying net 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) and has nonetheless
maintained its qualification as a REIT because certain other requirements
have been met, it will be subject to a 100% tax on the gross income
attributable to the greater of the amount by which the Company fails the
75% or 95% test, multiplied by a fraction intended to reflect the Company's
profitability.
Sixth, if the Company should fail to distribute with respect to each
calendar year at least the sum of (i) 85% of its REIT ordinary income from
such year, (ii) 95% of its REIT 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, if a REIT acquires any asset from a C corporation (i.e.,
generally a corporation subject to full corporate-level tax) in a carryover
basis transaction (or if a REIT such as the Company holds assets beginning
on the first day of the first taxable year for which the Company qualifies
as a REIT) and the REIT subsequently recognizes gain on the disposition of
such asset during the 10-year period (the "Recognition Period") beginning
on the date on which the asset was acquired by the REIT (or the REIT first
qualified as a REIT), then the excess of (a) the fair market value of the
asset as of the beginning of the applicable Recognition Period, over (b)
the REIT's adjusted basis in such asset as of the beginning of such
Recognition Period will be subject to tax at the highest regular corporate
rate, pursuant to guidelines issued by the IRS (the "Built-in Gain Rules").
REQUIREMENTS FOR QUALIFICATION
To qualify as a REIT, the Company must meet the requirements discussed
below relating to the Company's organization, sources of income, nature of
assets, and distributions of income to shareholders.
ORGANIZATIONAL REQUIREMENTS
The Code defines a REIT as a corporation, trust, or association:
(i) that is managed by one or more trustees or directors;
(ii) the beneficial ownership of which is evidenced by transferable
shares or by transferable certificates of beneficial interest;
(iii) that would be taxable as a domestic corporation but for the REIT
Requirements;
(iv) that is neither a financial institution nor an insurance company
subject to certain provisions of the Code;
(v) the beneficial ownership of which is held by 100 or more persons;
and
(vi) during the last half of each taxable year not more than 50% in
value of the outstanding stock of which is owned, directly or indirectly
through the application of certain attribution rules, by five or fewer
individuals (as defined in the Code to include certain entities).
In addition, certain other tests, described below, regarding the nature of its
income and assets must also be satisfied.
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The Code provides that conditions (i) through (iv), inclusive, must be met
during the entire taxable year and that condition (v) 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.
The Company satisfies the requirements set forth in (i) through (v) above
and believes that it satisfies the requirement set forth in (vi) above. In
addition, the Company's Articles currently include certain restrictions
regarding transfer of the Company's shares, and the Company's Continuing Offer
to certain individuals in TRG to exchange Units of Partnership Interest for
shares of Common Stock includes certain restrictions on who is entitled to
exercise rights under the Continuing Offer. In both cases, these restrictions
are intended (among other things) to assist the Company in continuing to satisfy
the share ownership requirements described in (v) and (vi) above.
INCOME TESTS
To maintain qualification as a REIT, there are three gross income
requirements that must be satisfied annually.
- First, at least 75% of the Company's gross income, excluding gross
income from certain dispositions of property held primarily for sale to
customers in the ordinary course of a trade or business ("prohibited
transactions"), for each taxable year must be derived directly or
indirectly from investments relating to real property or mortgages
(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 described above and from 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 held for less than one year, 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. The Taxpayer Relief Act of 1997 (the "1997 Act") repealed the
30% income test for taxable years commencing after August 5, 1997. See "--
Recent Legislation."
In the case of a REIT that is a partner in a partnership, Treasury
Regulations provide that the REIT is deemed to own its proportionate share of
the assets of the partnership and is deemed to be entitled to the income of the
partnership attributable to such share. In addition, the character of the assets
and gross income of the partnership retain the same character in the hands of
the REIT for purposes of the REIT Requirements, including satisfying the gross
income tests and the asset tests. Accordingly, the Company's proportionate share
of the assets, liabilities, and items of income of TRG, including TRG's
proportionate share of the assets, liabilities, and items of income of the
Manager and of the Center Owners, will be treated as assets, liabilities, and
items of income of the Company for purposes of applying the requirements
described in this Prospectus, provided that each of the Center Owners is treated
as a partnership for Federal income tax purposes and that none of the TRG Trusts
are taxable as corporations for Federal income tax purposes. See the discussion
below under "-- Tax Aspects of TRG -- Classification."
Rents received or deemed to be 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. 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. Rents based on income or profits do not include rents
received from a tenant based on the tenant's income from the property if
the tenant derives substantially all of its income with respect to such
property from the leasing or subleasing of substantially all of such
property, provided that the tenant receives from subtenants only amounts
that would be treated as rents from real property if received directly by a
REIT.
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- 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, directly, indirectly, or constructively, owns 10% or more of
such tenant (a "Related Party Tenant").
- 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, if a REIT provides services to tenants of a property, the
rent received from such property will qualify as "rents from real property"
only if the services are of a type that a tax-exempt organization can
provide to its tenants without causing its rental income to be unrelated
business taxable income under the Code (that is, if such services are
"usually or customarily rendered in connection with the rental of space for
occupancy only" and are not otherwise considered "primarily for the
tenant's convenience"). Services which would give rise to unrelated
business taxable income ("Prohibited UBTI Service Income") if provided by a
tax-exempt organization must be provided by an "independent contractor" (as
defined in the Code) who is adequately compensated and from whom the REIT
does not derive any income. In any event, receipts from services furnished
(whether or not rendered by an independent contractor) which are not
customarily provided to tenants in properties of a similar class in the
geographic market in which the property is located will in no event qualify
as "rents from real property." The 1997 Act provides a de minimis exception
for impermissible service income. See "-- Recent Legislation."
Substantially all of the Company's income is derived from its partnership
interest in TRG. Currently, TRG's real estate investments give rise to income
that enables the Company to satisfy all of the income tests described above.
TRG's income is largely derived from its interests in the Taubman Shopping
Centers, which income qualifies as "rents from real property" for purposes of
the 75% and the 95% gross income tests in an amount sufficient to permit the
Company to satisfy these tests. TRG also derives income from its partnership
interest in the Manager and, to the extent dividends are paid by the Manager's
managing partner ("Taub-Co"), from TRG's interest in Taub-Co.
The Company believes that neither TRG nor any of the Center Owners charges
rent from 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 fixed percentage of
receipts or sales, as described above). The Company believes that neither TRG
nor any of the Center Owners derives rent attributable to personal property
leased in connection with real property that exceeds 15% of the total rents.
The Company does not believe that it derives rent from property rented to a
Related Party Tenant; however, the determination of whether the Company owns 10%
or more of any tenant is made after the application of complex attribution rules
under which the Company will be treated as owning interests in tenants that are
owned by its "Ten Percent Stockholders." In identifying the Company's Ten
Percent Stockholders, each individual or entity will be treated as owning Common
Stock and Preferred Stock held by related individuals and entities. Accordingly,
the Company cannot be absolutely certain whether all Related Party Tenants have
been or will be identified. Although rent derived from a Related Party Tenant
will not qualify as rents from real property and, therefore, will not be
qualifying income under the 75% or 95% gross income tests, the Company believes
that the aggregate amount of such rental income (together with any other
nonqualifying income) in any taxable year will not cause the Company to exceed
the limits on nonqualifying income under such gross income tests.
See "-- Failure to Qualify."
TRG has entered into an agreement with the Manager, pursuant to which the
Manager provides services in connection with the operation of the Taubman
Shopping Centers. As a result of TRG's ownership interests in the Manager and
Taub-Co, the Manager does not qualify as an independent contractor from whom the
Company derives no income. The Company believes, however, that no amounts of
rent should be excluded from the definition of rents from real property solely
by reason of the failure to use an independent contractor since TRG hires
independent contractors to the extent necessary to qualify rental income as
rents from real property under Section 856(d)(1).
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The Manager receives fees in exchange for the performance of certain
management and administrative services, including fees to be received pursuant
to agreements with the Company and TRG. A portion of those fees will accrue to
the Company because TRG owns a limited partnership interest in the Manager. The
Company's indirect interest in the management fees generated by the Manager
generally may not be qualified income under the 75% or 95% gross income tests
(at least to the extent attributable to properties in which TRG has no interest
or to a Joint Venture Partner's interest in a property). In any event, the
Company believes that the aggregate amount of such fees (together with any other
nonqualifying income) in any taxable year has not exceeded and will not exceed
the limits on nonqualifying income under the 75% and 95% gross income tests.
The term "interest," for purposes of satisfying the income tests, 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. An amount received or accrued generally will not be
excluded from the term "interest," however, solely by reason of being based on a
fixed percentage or percentages of receipts or sales. TRG or the Center Owners
may advance money from time to time to tenants for the purpose of financing
tenant improvements. The Company and TRG do not intend to charge interest that
will depend in whole or in part on the income or profits of any person.
The term "prohibited transaction," for purposes of the income tests and the
excise tax described below, generally means a sale or other disposition of
property (other than foreclosure property) that is held primarily for sale to
customers in the ordinary course of a trade or business. Any gross income
derived from a prohibited transaction is taken into account in applying the 30%
test (and the net income from any such transaction is subject to a 100% tax);
however, the 1997 Act repealed the 30% income test for taxable years beginning
after August 5, 1997. See "-- Recent Legislation." TRG owns interests in real
property that is situated on the periphery of certain of the Taubman Shopping
Centers. The Company and TRG believe that this peripheral property is not held
for sale to customers and that the sale of such peripheral property is not in
the ordinary course of TRG's business. Whether property is held "primarily for
sale to customers in the ordinary course of its trade or business" depends,
however, on the facts and circumstances in effect from time to time, including
those relating to a particular property. As a result, no assurance can be given
that the Company can avoid being deemed to own property that the IRS later
characterizes as property held "primarily for sale to customers in the ordinary
course of its trade or business."
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 (i) the Company's failure to meet such
tests was due to reasonable cause and not due to willful neglect, (ii) the
Company attaches a schedule of the sources of its income to its return, and
(iii) 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. For
example, if the Company fails to satisfy the gross income tests because
nonqualifying income that the Company intentionally earns exceeds the limits on
such income, the IRS could conclude that the Company's failure to satisfy the
tests was not due to reasonable cause. As discussed above in "Federal Income Tax
Considerations -- Taxation of the Company," even if these relief provisions
apply, a tax would be imposed with respect to the excess gross income. No
similar mitigation provision applies to provide relief if the 30% income test is
failed, and in such case, the Company will cease to qualify as a REIT. See
"Federal Income Tax Considerations -- Failure to Qualify." For taxable years
beginning after August 5, 1997, the 1997 Act repealed the 30% income test. See
"-- Recent Legislation."
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,
including its allocable share of assets held by TRG, must be represented by
real estate assets (which for this purpose include stock or debt
instruments held for not more than one year purchased with the proceeds of
a stock offering or a
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long-term (at least five years) public debt offering of the Company), cash,
cash items, and government securities.
- Second, not more than 25% of the value 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 is deemed to own its proportionate share of all of the assets
owned by TRG and the Center Owners. The Company believes that more than 75% of
the value of TRG's assets qualify as "real estate assets." TRG's interest in
Taub-Co should not violate the prohibition against a REIT's ownership of more
than 10% of the voting securities of any one issuer. The Company believes that
the value of the Company's proportionate share of TRG's interest in Taub-Co does
not exceed 5% of the total value of the Company's assets, and the Company does
not expect that it will exceed 5% in the future.
After initially meeting the asset tests at the close of any quarter, the
Company will not lose its status as a REIT for failure to satisfy the asset
tests at the end of a later quarter solely by reason of changes in asset values.
If the failure to satisfy the asset tests results from an acquisition of
securities or other property during a quarter, the failure can be cured by a
disposition of sufficient nonqualifying assets within 30 days after the close of
that quarter. The Company believes that it maintains adequate records of the
value of its assets to ensure compliance with the asset tests and to enable the
Company to take such other action within 30 days after the close of any quarter
as may be required to cure any noncompliance. There can be no assurance,
however, that such other action will always be successful.
ANNUAL DISTRIBUTION REQUIREMENTS
In order to be treated as a REIT, the Company is required to distribute
dividends (other than capital gain dividends) to its shareholders in an amount
at least equal to (i) the sum of (a) 95% of the Company's "REIT taxable income"
(computed without regard to the dividends paid deduction and the Company's net
capital gain) and (b) 95% of the net income, if any, from foreclosure property
in excess of the special tax on income from foreclosure property, minus (ii) the
sum of certain items of noncash income.
In addition, during its Recognition Period, if the Company disposes of any
asset that was held by the Company prior to January 1, 1992, or that is
otherwise subject to the Built-in Gain rules, the Company may be required,
pursuant to guidance to be issued by the IRS, to distribute at least 95% of the
Built-in Gain (after tax), if any, recognized on the disposition of such asset.
Any 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 date of 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 "REIT taxable
income," as adjusted, it will be subject to tax thereon at regular corporate tax
rates.
Furthermore, if the Company fails to distribute during each calendar year
at least the sum of (a) 85% of its REIT ordinary income for such year, (b) 95%
of its REIT capital gain net income for such year, and (c) any undistributed
taxable income from prior periods, the Company will 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.
The Company's REIT taxable income consists substantially of the Company's
distributive share of the income of TRG. Currently the Company's REIT taxable
income is less than the cash flow it receives from TRG due to the allowance for
depreciation and other non-cash charges in computing REIT taxable income.
Accordingly, the Company anticipates that it will have sufficient cash or liquid
assets to enable it to satisfy the 95% distribution requirement.
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It is possible that, from time to time, the Company may not have sufficient
cash or other liquid assets to meet the 95% distribution requirement due to the
insufficiency of cash flow from TRG in a particular year or 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 an
insufficiency or 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 shareholders 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.
FAILURE TO QUALIFY
If the Company fails to qualify for taxation as a REIT in any taxable year,
the Company will be subject to tax (including any applicable alternative minimum
tax) on its taxable income at regular corporate rates. Distributions to
shareholders 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 shareholders 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. For example, if the Company fails to satisfy
the gross income tests because nonqualifying income that the Company
intentionally earns exceeds the limits on such income, the IRS could conclude
that the Company's failure to satisfy the tests was not due to reasonable cause.
See "Federal Income Tax Considerations -- Requirements for Qualification --
Income Tests."
TAXATION OF U.S. SHAREHOLDERS
As used in the following discussion, the term U.S. Shareholder means a
holder of shares of Common Stock, Preferred Stock, or Depositary Shares
(collectively, the "Shares") that (for United States Federal income tax
purposes) (i) is a citizen or resident of the United States, (ii) is a
corporation, partnership, or other entity created or organized in or under the
laws of the United States or of any political subdivision thereof, or (iii) is
an estate or trust the income of which is subject to United States Federal
income taxation regardless of its source. For any taxable year for which the
Company qualifies for taxation as a REIT, amounts distributed to taxable U.S.
Shareholders will be taxed as follows.
DISTRIBUTIONS GENERALLY
Distributions to U.S. Shareholders, other than capital gain dividends
discussed below, constitute dividends to such shareholders up to the amount of
the Company's current or accumulated earnings and profits and are taxable to
such shareholders as ordinary income. Such distributions are not eligible for
the dividends-received deduction for corporations. Under current law, the
maximum Federal income tax rate applicable to ordinary income of individuals is
39.6% and applicable to corporations is 35%. To the extent that the Company
makes distributions in excess of its current or accumulated earnings and
profits, such distributions will first be treated as a tax-free return of
capital, reducing the tax basis in the U.S. Shareholders' shares. Distributions
in excess of the U.S. Shareholders' tax basis are taxable as gain realized from
the sale of such shares. Distributions on the Preferred Stock will be considered
to be made out of the Company's earnings and profits to the extent thereof.
Distributions on the Common Stock will be considered to be made out of the
Company's undistributed earnings and profits as reduced by distributions on the
Preferred Stock. A dividend declared by the Company in October, November, or
December of any year payable to a shareholder of record on a specified date in
any such month is treated as both paid by the Company and received by the
shareholder
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on December 31 of such year, provided that the dividend is actually paid by the
Company during January of the following calendar year. Shareholders may not
include on their own income tax returns any tax losses of the Company. Pursuant
to Regulations to be promulgated by the Treasury, a portion of the Company's
distributions may be subject to the alternative minimum tax to the extent of the
Company's items of tax preference, if any, allocated to the shareholders.
The Company will be treated as having sufficient earnings and profits to
treat as a dividend any distribution by the Company up to the amount required to
be distributed in order to avoid imposition of the 4% excise tax discussed in
"Federal Income Tax Considerations -- Taxation of the Company" above. As a
result, U.S. Shareholders may be required to treat certain distributions that
would otherwise result in a tax-free return of capital as taxable dividends.
Moreover, any "deficiency dividend" will be treated as a "dividend" (an ordinary
dividend or a capital gain dividend, as the case may be), regardless of the
Company's earnings and profits.
CAPITAL GAIN DIVIDENDS
A dividend paid to a U.S. Shareholder that is properly designated by the
Company as a capital gain dividend will be treated as long-term capital gain (to
the extent it does not exceed the Company's actual net capital gain) for the
taxable year without regard to the period for which the shareholder has held his
Shares. Capital gain dividends are not eligible for the dividends-received
deduction for corporations.
PASSIVE ACTIVITY LOSS AND INVESTMENT INTEREST LIMITATIONS
Distributions from the Company and gain from the disposition of Shares will
not be treated as passive activity income, and therefore, U.S. Shareholders
generally will not be able to apply any "passive losses" against such income.
Dividends from the Company (to the extent they do not constitute a return of
capital) and gain from the disposition of shares generally may be treated as
investment income for purposes of the investment interest limitation.
CERTAIN DISPOSITIONS OF SHARES
A U.S. Shareholder will recognize gain or loss on the sale or exchange of
Shares to the extent of the difference between the amount realized on such sale
or exchange and the shareholder's tax basis in such Shares. Such gain or loss
generally will constitute long-term capital gain or loss if the shareholder has
held such shares for more than one year. Losses incurred on the sale or exchange
of Shares held for six months or less (after applying certain holding period
rules), however, will generally be deemed long-term capital loss to the extent
of any long-term capital gain dividends received by the U.S. Shareholder with
respect to such Shares.
TREATMENT OF TAX-EXEMPT SHAREHOLDERS
Distributions from the Company to a tax-exempt employee's pension trust or
other domestic tax-exempt shareholder will not constitute "unrelated business
taxable income" ("UBTI") unless such shareholder has borrowed to acquire or
carry its shares of the Company or the Company is a "pension-held REIT," as
discussed below.
Qualified trusts that hold more than 10% (by value) of the shares of
certain REITs ("pension-held REITS") may be required to treat a certain
percentage of such a REIT's distributions as UBTI. This requirement will apply
only if (i) the REIT would not qualify as such for Federal income tax purposes
but for the application of a "look-through" exception to the five-or-fewer
requirement applicable to shares held by qualified trusts and (ii) the REIT is
"predominantly held" by qualified trusts. A REIT is predominantly held if either
(i) a single qualified trust holds more than 25% by value of the REIT interests
or (ii) one or more qualified trusts, each owning more than 10% by value of the
REIT interests, hold in the aggregate more than 50% of the REIT interests. The
percentage of any REIT dividend treated as UBTI is equal to the ratio of (a) the
UBTI earned by the REIT (treating the REIT as if it were a qualified trust and
therefore subject to tax on UBTI) to (b) the total gross income (less certain
associated expenses) of the REIT. A de minimis
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exception applies when the ratio set forth in the preceding sentence is less
than 5% for any year. For these purposes, a qualified trust is any trust
described in section 401(a) of the Code and exempt from tax under section 501(a)
of the Code. The provisions requiring qualified trusts to treat a portion of
REIT distributions as UBTI will not apply if the REIT is able to satisfy the
five-or-fewer requirement without relying upon the "look-through" exception. The
Company believes that it is not a pension-held REIT. No assurance can be given,
however, that the Company will not become a pension-held REIT in the future.
REDEMPTION OF PREFERRED STOCK
A redemption of the Preferred Stock will be treated under Section 302 of
the Code as a distribution taxable as a dividend (to the extent of the Company's
current and accumulated earnings and profits) at ordinary income rates unless
the redemption satisfies one of the tests set forth in Section 302(b) of the
Code and is therefore treated as a sale or exchange of the redeemed shares. The
redemption will be treated as a sale or exchange if it (i) is "substantially
disproportionate" with respect to the shareholder, (ii) results in a "complete
termination" of the shareholder's interest in the Company, or (iii) is "not
essentially equivalent to a dividend" with respect to the shareholder, all
within the meaning of Section 302(b) of the Code. In determining whether any of
these tests have been met, Preferred Stock actually owned by the shareholder as
well as Preferred Stock considered to be owned by such shareholder by reason of
certain constructive ownership rules set forth in the Code must generally be
taken into account. If a shareholder of Preferred Stock owns (actually or
constructively) no shares of Common Stock of the Company or an insubstantial
percentage of the Common Stock of the Company, a redemption of the Preferred
Stock held by such shareholder is likely to qualify for sale or exchange
treatment because the redemption would not be "essentially equivalent to a
dividend." Because the determination as to whether any of the alternative tests
set forth in Section 302(b) of the Code will be satisfied with respect to any
particular shareholder depends on the facts and circumstances at the time that
the determination must be made, prospective shareholders of Preferred Stock
should consult their own tax advisors to determine such tax treatment.
If a redemption of Preferred Stock is treated as a distribution taxable as
a dividend, the shareholder's adjusted basis in the redeemed Preferred Stock for
tax purposes will be transferred to such shareholder's remaining shares of the
Company. If the shareholder owns no other shares of the Company, such basis may,
under certain circumstances, be transferred to a related person or it may be
lost entirely.
ADDITIONAL TAX CONSEQUENCES FOR HOLDERS OF DEPOSITARY SHARES AND WARRANTS
If the Company offers Depositary Shares or Warrants, there may be
additional tax consequences for the holders of such Securities. For a discussion
of any such additional consequences, see the applicable Prospectus Supplement.
SPECIAL TAX CONSIDERATIONS FOR FOREIGN SHAREHOLDERS
The rules governing United States Federal income taxation of nonresident
alien individuals, foreign corporations, foreign partnerships, and foreign
trusts and estates (collectively, "Non-U.S. Shareholders") are complex, and the
following discussion is intended only as a summary of such rules. Prospective
Non-U.S. Shareholders should consult with their own tax advisors to determine
the impact of Federal, state, and local income tax laws on an investment in the
Company, including any reporting requirements.
In general, a Non-U.S. Shareholder will be subject to regular United States
income tax with respect to its investment in the Company if such investment is
"effectively connected" with the Non-U.S. Shareholder's conduct of a trade or
business in the United States. A corporate Non-U.S. Shareholder that receives
income that is (or is treated as) effectively connected with a U.S. trade or
business may also be subject to the branch profits tax under Section 884 of the
Code, which is payable in addition to regular United States corporate income
tax. The following discussion will apply to Non-U.S. Shareholders whose
investment in the Company is not so effectively connected.
A distribution by the Company that is not attributable to gain from the
sale or exchange by the Company of a United States real property interest and
that is not designated by the Company as a capital gain dividend
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will be treated as an ordinary income dividend to the extent made out of current
or accumulated earnings and profits. Generally, any ordinary income dividend
will be subject to a United States withholding tax equal to 30% of the gross
amount of the dividend unless such tax is reduced by an applicable tax treaty. A
distribution of cash in excess of the Company's earnings and profits will be
treated first as a return of capital that will reduce a Non-U.S. Shareholder's
basis in its Shares (but not below zero) and then as gain from the disposition
of such shares, the tax treatment of which is described under the rules
discussed below with respect to disposition of Shares.
Distributions by the Company that are attributable to gain from the sale or
exchange of a United States real property interest will be taxed to a Non-U.S.
Shareholder under the Foreign Investment in Real Property Tax Act of 1980
("FIRPTA"). Under FIRPTA, such distributions are taxed to a Non-U.S. Shareholder
as if such distributions were gains "effectively connected" with a United States
trade or business. Accordingly, a Non-U.S. Shareholder will be taxed at the
normal capital gain rates applicable to a U.S. Shareholder (subject to any
applicable alternative minimum tax and a special alternative minimum tax in the
case of nonresident alien individuals). Distributions subject to FIRPTA may be
subject to a 30% branch profits tax in the hands of a foreign corporate
shareholder that is not entitled to treaty exemption.
The Company will be required to withhold from distributions to Non-U.S.
Shareholders, and remit to the IRS, (i) 35% of designated capital gain dividends
(or, if greater, 35% of the amount of any distributions that could be designated
as capital gain dividends) and (ii) 30% of ordinary dividends paid out of
earnings and profits. Distributions on the Preferred Stock will be considered to
be made out of the Company's earnings and profits to the extent thereof.
Distributions on the Common Stock will be considered to be made out of the
Company's undistributed earnings and profits as reduced by distributions on the
Preferred Stock. In addition, if the Company designates prior distributions as
capital gain dividends, subsequent distributions, up to the amount of such prior
distributions, will be treated as capital gain dividends for purposes of
withholding. A distribution in excess of the Company's earnings and profits may
be subject to 30% dividend withholding if at the time of the distribution it
cannot be determined whether the distribution will be in an amount in excess of
the Company's current and accumulated earnings and profits. Tax treaties may
reduce the Company's withholding obligations. If the amount withheld by the
Company with respect to a distribution to a Non-U.S. Shareholder exceeds such
shareholder's United States tax liability with respect to such distribution (as
determined under the rules described in the two preceding paragraphs), the
Non-U.S. Shareholder may file for a refund of such excess from the IRS. It
should be noted that the 35% withholding tax rate on capital gain dividends
currently corresponds to the maximum income tax rate applicable to corporations,
but is higher than the 28% maximum rate on capital gains of individuals.
Unless the Shares constitute a "United States real property interest"
within the meaning of FIRPTA, the sale of Shares by a Non-U.S. Shareholder
generally will not be subject to United States taxation. The Shares will not
constitute a United States real property interest if the Company is a
"domestically controlled REIT." A domestically controlled REIT is a REIT in
which at all times during a specified testing period less than 50% in value of
its shares is held directly or indirectly by Non-U.S. Shareholders. Currently,
the Company believes that it is a domestically controlled REIT, and therefore
the sale of Shares is not subject to taxation under FIRPTA. Because the Shares
are or may be publicly traded, however, no assurance can be given that the
Company will continue to be a domestically controlled REIT. If the Company does
not constitute a domestically controlled REIT, whether a Non-U.S. Shareholder's
sale of Shares would be subject to tax under FIRPTA as a sale of a United States
real property interest would depend on whether the shares were "regularly
traded" (as defined by applicable Treasury Regulations) on an established
securities market (e.g., the New York Stock Exchange), and on the size of the
selling shareholder's interest in the Company.
If the gain on the sale of the Shares were subject to taxation under
FIRPTA, the Non-U.S. Shareholder would be subject to the same treatment as a
U.S. Shareholder with respect to such gain (subject to applicable alternative
minimum tax and a special alternative minimum tax in the case of nonresident
alien individuals). In any event, a purchaser of Shares from a Non-U.S.
Shareholder will not be required under FIRPTA to withhold on the purchase price
if the purchased Shares are "regularly traded" on an established securities
market or if the Company is a domestically controlled REIT. Otherwise, under
FIRPTA the purchaser of Shares may be required to withhold 10% of the purchase
price and remit such amount to the IRS, and the
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Company may be required to withhold 10% of certain distributions to Non-U.S.
Shareholders. Notwithstanding the foregoing, capital gain not subject to FIRPTA
will be taxable to a Non-U.S. Shareholder if the Non-U.S. Shareholder is a
nonresident alien individual who is present in the United States for 183 days or
more during the taxable year and certain other conditions apply, in which case
the nonresident alien individual will be subject to a 30% tax on such
individual's capital gains.
INFORMATION REPORTING REQUIREMENTS AND BACKUP WITHHOLDING TAX
Under certain circumstances, U.S. Shareholders of Shares may be subject to
backup withholding at a rate of 31% on payments made with respect to, or cash
proceeds of a sale or exchange of, Shares. Backup withholding will apply only if
the holder (i) fails to furnish its taxpayer identification number ("TIN")
(which, for an individual, would be his social security number), (ii) furnishes
an incorrect TIN, (iii) is notified by the IRS that it has failed properly to
report payments of interest and dividends, or (iv) under certain circumstances,
fails to certify, under penalty of perjury, that it has furnished a correct TIN
and has not been notified by the IRS that it is subject to backup withholding
for failure to report interest and dividend payments. Backup withholding will
not apply with respect to payments made to certain exempt recipients, such as
corporations and tax-exempt organizations. U.S. Shareholders should consult
their own tax advisors regarding their qualification for exemption from backup
withholding and the procedure for obtaining such an exemption. Backup
withholding is not an additional tax. Rather, the amount of any backup
withholding with respect to a payment to a U.S. Shareholder will be allowed as a
credit against such U.S. Shareholder's United States Federal income tax
liability and may entitle such U.S. Shareholder to a refund, provided that the
required information is furnished to the IRS.
Additional issues may arise pertaining to information reporting and backup
withholding with respect to Non-U.S. Shareholders, and Non-U.S. Shareholders
should consult their tax advisors with respect to any such information reporting
and backup withholding requirements. Backup withholding with respect to Non-U.S.
Shareholders is not an additional tax. Rather, the amount of any backup
withholding with respect to a payment to a Non-U.S. Shareholder will be allowed
as a credit against any United States Federal income tax liability of such
Non-U.S. Shareholder. If withholding results in an overpayment of taxes, a
refund may be obtained, provided that the required information is furnished to
the IRS.
TAX ASPECTS OF TRG
The following discussion summarizes certain Federal income tax
considerations applicable solely to the Company's investment in TRG. The
discussion does not cover state or local tax laws or any Federal tax laws other
than income tax laws.
CLASSIFICATION
The Company is entitled to include in its income its distributive share of
TRG's income and to deduct its distributive share of TRG's losses only if TRG
and each Center Owner is classified for Federal income tax purposes as a
partnership rather than as an association taxable as a corporation, and none of
the TRG Trusts are classified for Federal income tax purposes as associations
taxable as corporations.
An entity will be classified as a partnership rather than as a corporation
or an association taxable as a corporation for Federal income tax purposes if
the entity is treated as a partnership under Treasury Regulations, effective
January 1, 1997, relating to entity classification (the "Check-the-Box
Regulations").
In general, under the Check-the-Box Regulations, an unincorporated entity
with at least two members may elect to be classified either as an association
taxable as a corporation or as a partnership. If such an entity fails to make an
election, it generally will be treated as a partnership for Federal income tax
purposes. The Federal income tax classification of an entity that was in
existence prior to January 1, 1997, such as TRG and most of the Center Owners,
will be respected for all periods prior to January 1, 1997 if (i) the entity had
a reasonable basis for its claimed classification, (ii) the entity and all
members of the entity recognized the Federal income tax consequences of any
changes in the entity's classification within the 60 months prior to January 1,
1997, and (iii) neither the entity nor any member of the entity was notified in
writing by a taxing
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authority on or before May 8, 1996 that the classification of the entity was
under examination. The Company believes that TRG and each Center Owner existing
prior to January 1, 1997 reasonably claimed partnership classification under the
Treasury Regulations relating to entity classification in effect prior to
January 1, 1997, and such classification should be respected for Federal income
tax purposes. TRG and the Center Owners intend to continue to be classified as
partnerships for Federal income tax purposes, and none of them will elect to be
treated as an association taxable as a corporation under the Check-the-Box
Regulations.
The Company also believes that none of the TRG Trusts are taxable as a
corporation for Federal income tax purposes. No assurance can be given, however,
that the IRS will not challenge the non-corporate status of the TRG Trusts for
Federal income tax purposes. If such challenge were sustained by a court, the
TRG Trusts would be treated as a corporation for Federal income tax purposes, as
described below. In addition, the Company's belief is based on existing law,
which is to a great extent the result of administrative and judicial
interpretation. No assurance can be given that administrative or judicial
changes would not modify this conclusion.
If for any reason any TRG Trust were taxable as a corporation rather than
as a trust for Federal income tax purposes, the Company would not be able to
satisfy the income and asset requirements for REIT status. See "Federal Income
Tax Considerations -- Requirements for Qualification -- Income Tests" and
"Federal Income Tax Considerations -- Requirements for Qualification -- Asset
Tests." In addition, any change in the status of a TRG Trust for tax purposes
might be treated as a taxable event, in which case the Company might incur a tax
liability without any related cash distribution. If a TRG Trust were taxable as
a corporation, items of income and deduction would not pass through to its
beneficiary, which would be treated as a shareholder for tax purposes. Such TRG
Trust would be required to pay income tax at corporate tax rates on its net
income, and distributions would constitute dividends that would not be
deductible in computing such TRG Trust's taxable income.
INCOME TAXATION OF TRG AND ITS PARTNERS
PARTNERS, NOT TRG, SUBJECT TO TAX
A partnership is not a taxable entity for Federal income tax purposes.
Rather, the Company is required to take into account its allocable share of
TRG's income, gains, losses, deductions, and credits for any taxable year of TRG
ending within or with the taxable year of the Company, without regard to whether
the Company has received or will receive any distribution from TRG.
TAX ALLOCATIONS WITH RESPECT TO CONTRIBUTED PROPERTIES
Pursuant to Section 704(c) of the Code, income, gain, loss, and deduction,
including depreciation, attributable to appreciated or depreciated property that
is contributed to a partnership in exchange for an interest in the partnership
must be allocated for Federal income tax purposes in a manner such that the
contributor is charged with, or benefits from, the unrealized gain or unrealized
loss associated with the property at the time of the contribution. The amount of
such unrealized gain or unrealized loss is generally equal to the difference
between the fair market value of the contributed property at the time of
contribution and the adjusted tax basis of such property at the time of
contribution. TRG's partnership agreement requires allocations of income, gain,
loss, and deduction attributable to such contributed property to be made in a
manner that is consistent with Section 704(c) of the Code. Any income, gain,
loss, or deduction in excess of that specially allocated to the contributing
partners pursuant to Section 704(c) of the Code is allocated to TRG's partners
in accordance with their percentage interests.
Accordingly, depreciation on any property contributed to TRG is allocated
to each contributing partner in a manner designed to reduce the difference
between such property's fair market value and its tax basis, using methods that
are intended to be consistent with statutory intent and Treasury Regulations
under Section 704(c) of the Code. On the other hand, depreciation with respect
to any property purchased by TRG subsequent to the admission of the Company in
late 1992 will generally be allocated among the partners in accordance with
their respective percentage interests in TRG.
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SALE OF TRG'S PROPERTY
Generally, any gain realized by TRG on the sale of property held by TRG or
a Center Owner for more than one year will be long-term capital gain, except for
any portion of such gain that is treated as depreciation or cost recovery
recapture. For a discussion of the tax rate applicable to recapture of
depreciation on real property, see "-- Recent Legislation." Under Section 704(c)
of the Code and the Treasury Regulations governing the revaluation of TRG's
assets and the restatement of its capital accounts to fair market value, any
unrealized gain attributable to appreciation in the regional shopping center
interests prior to the admission of the Company to TRG in late 1992
("Built-in-Gain") must, when recognized, be allocated to the contributing
partners. Such Built-in-Gain would generally be equal to the difference between
the fair market value of the property upon the Company's admission and the
adjusted tax basis of TRG in such property. Thus, the Company will not incur a
tax on such Built-in-Gains because (except as noted in the following sentence)
they must be allocated to partners in TRG other than the Company. In addition,
any Built-in-Gain with respect to properties contributed to TRG subsequent to
the Company's admission to TRG must be allocated to the contributing partners.
As a consequence of its 1% pre-contribution interests in two of the Taubman
Shopping Centers, the Company will be allocated an equivalent portion of
pre-contribution gain in the event of a disposition of either property. Further,
depreciation will be allocated to reduce the disparity between fair market value
and tax basis with respect to appreciated property contributed to TRG or
otherwise held by TRG prior to the Company's admission to TRG. Such allocations
will permit the GM Trusts and the Company to claim larger depreciation
deductions because they have contributed solely unappreciated property.
The Company's share of any gain realized by TRG on the sale of any property
held by TRG or a Center Owner as inventory or other property held primarily for
sale to customers in the ordinary course of TRG's or a Center Owner's trade or
business will, however, be treated as income from a prohibited transaction that
is subject to a 100% penalty tax. See "Federal Income Tax Considerations --
Taxation of the Company -- Income Tests." Such prohibited transaction income
will also have an adverse effect on the Company's ability to satisfy the income
tests for REIT status. See "Federal Income Tax Considerations -- Requirements
For Qualification -- Income Tests" above. Under existing law, whether property
is held as inventory or primarily for sale to customers in the ordinary course
of TRG's or a Center Owner's trade or business is a question of fact that
depends on all the facts and circumstances with respect to the particular
transaction. TRG and the Center Owners intend to hold the Taubman Shopping
Centers for investment with a view to long-term appreciation, and to engage in
the business of acquiring, developing, owning, and operating the Taubman
Shopping Centers, including peripheral land, consistent with TRG's and the
Center Owners' investment objectives.
RECENT LEGISLATION
The 1997 Act contains significant changes to the taxation of capital gains
of individuals, trusts and estates and certain changes to the REIT Requirements
and to the taxation of REITs.
For net capital gains realized by individuals, trusts and estates after
July 28, 1997, and subject to certain exceptions, the maximum rate of tax on
gain from the sale or exchange of assets held for more than 18 months has been
reduced to 20%. The maximum rate has been reduced to 18% for assets acquired
after December 31, 2000 and held for more than five years. The maximum capital
gains rate for capital assets held for more than one year but not more than 18
months remains at 28%. The maximum rate for net capital gains attributable to
the sale of depreciable real property held for more than 18 months is 25% to the
extent of the deductions for depreciation with respect to such property. With
respect to any depreciable real property held for more than one year but not
more than 18 months, depreciation deductions claimed in excess of the
depreciation that would have been allowed if computed on a straight-line basis
will be taxed at the rates applicable to ordinary income with the remaining gain
being taxed at a maximum rate of 28%. The 1997 Act gives the Treasury authority
to issue regulations that could, among other things, apply these rates on a
look-through basis in the case of "pass-through" entities such as the Company.
The taxation of capital gains of corporations was not changed by the 1997 Act.
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The 1997 Act also includes several provisions that are intended to simplify
the taxation of REITs. These provisions are effective for the Company's taxable
years commencing after August 5, 1997.
- First, the 1997 Act repeals the requirement that a REIT receive less
than 30% of its gross income from the sale or disposition of stock or
securities held for less than one year, gain from prohibited transactions,
and gain from certain sales of real property held for less than four years.
- Second, in determining whether a REIT satisfies the income tests, a
REIT's rental income from a property will not cease to qualify as "rents
from real property" merely because the REIT performs services for a tenant
other than permitted customary services if the amount that the REIT
received or is deemed to have received as a result of performing
impermissible services does not exceed one percent of all amounts received,
directly or indirectly, by the REIT with respect to such property. The
amount that a REIT will be deemed to have received for performing
impermissible services is not less than 150% of the direct cost to the REIT
of providing those services.
- Third, certain non-cash income, including income from cancellation
of indebtedness and original issue discount in excess of actual payments
received will be excluded from income in determining the amount that a REIT
is required to distribute for the taxable year. The 1997 Act, however, did
not change the 4% excise tax imposed upon a failure to make required
distributions. See "-- Annual Distribution Requirements."
- Fourth, a REIT may elect to require its shareholders to include the
REIT's undistributed net capital gains in their income. If the REIT makes
such an election, the REIT's shareholders will include in their income as
long-term capital gain their proportionate share of the undistributed net
long-term capital gains and will receive a credit or refund for their
proportionate share of the tax paid by the REIT on such undistributed
capital gains as well as an increase in basis for the amount of capital
gain so included in their income reduced by the amount of the credit or
refund. The 1997 Act, however, did not change the 4% excise tax imposed
upon a failure to make required distributions. See "-- Annual Distribution
Requirements."
- Finally, the 1997 Act contains a number of technical provisions that
reduce the risk that a REIT will inadvertently cease to qualify as a REIT.
STATE AND LOCAL TAXES
The Company is, and its shareholders may be, subject to state, local, or
other taxation in various state, local, or other jurisdictions, including those
in which they transact business or reside. The tax treatment in such
jurisdictions may differ from the Federal income tax consequences discussed
above. Consequently, prospective shareholders should consult their own tax
advisors regarding the effect of state and local tax laws on their investment in
the Company.
ERISA CONSIDERATIONS
The following is a summary of material considerations arising under ERISA,
and the prohibited transaction provisions of Section 4975 of the Code that may
be relevant to prospective investors. This discussion does not purport to deal
with all aspects of ERISA or the Code that may be relevant to particular
investors in light of their particular circumstances. A PROSPECTIVE INVESTOR
THAT IS AN EMPLOYEE BENEFIT PLAN SUBJECT TO ERISA, A TAX QUALIFIED RETIREMENT
PLAN, AN IRA OR A GOVERNMENTAL, CHURCH OR OTHER PLAN THAT IS EXEMPT FROM ERISA
IS ADVISED TO CONSULT ITS OWN LEGAL ADVISOR REGARDING THE SPECIFIC
CONSIDERATIONS ARISING UNDER APPLICABLE PROVISIONS OF ERISA, THE CODE AND STATE
LAW WITH RESPECT TO THE PURCHASE, OWNERSHIP, OR SALE OF THE SECURITIES BY SUCH
PLAN OR IRA.
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<PAGE> 34
FIDUCIARY DUTIES AND PROHIBITED TRANSACTIONS
A fiduciary of a pension, profit-sharing, retirement, or other employee
benefit plan subject to ERISA (an "ERISA Plan") should consider the fiduciary
standards under ERISA in the context of the ERISA Plan's particular
circumstances before authorizing an investment of any portion of the ERISA
Plan's assets in Securities. Accordingly, such fiduciary should consider (i)
whether the investment satisfies the diversification requirements of Section
404(a)(1)(C) of ERISA; (ii) whether the investment is in accordance with the
documents and instruments governing the ERISA Plan as required by Section
404(a)(1)(D) of ERISA; (iii) whether the investment is prudent under Section
404(a)(1)(B) of ERISA; and (iv) whether the investment is solely in the
interests of the ERISA Plan participants and beneficiaries and for the exclusive
purpose of providing benefits to the ERISA Plan participants and beneficiaries
and defraying reasonable administrative expenses of the ERISA Plan as required
by Section 404(a)(1)(A) of ERISA.
In addition to the imposition of fiduciary standards, ERISA and Section
4975 of the Code prohibit a wide range of transactions between an ERISA Plan, an
IRA or certain other plans (collectively, a "Plan") and persons who have certain
specified relationships to the Plan ("parties in interest" within the meaning of
ERISA Section 3(14) and "disqualified persons" within the meaning of the Code
Section 4975(e)(2)). Thus, a Plan fiduciary or person making an investment
decision for a Plan also should consider whether the acquisition or the
continued holding of the Securities Warrants might constitute or give rise to a
direct or indirect prohibited transaction.
PLAN ASSETS
The prohibited transaction rules of ERISA and the Code apply to
transactions with a Plan and also to transactions with the "plan assets" of a
Plan. The "plan assets" of a Plan include the Plan's interest in an entity in
which the Plan invests and, in certain circumstances, the assets of the entity
in which the Plan holds such interest. The term "plan assets" is not
specifically defined in ERISA or the Code, nor, as of the date hereof, has it
been interpreted definitively by the courts in litigation. On November 13, 1986,
the United States Department of Labor (the "DOL"), the governmental agency
primarily responsible for administering ERISA, adopted a final regulation (the
"DOL Regulation") establishing the standards it will apply in determining
whether an equity investment in an entity will cause the assets of such entity
to constitute "plan assets." The DOL Regulation applies for purposes of both
ERISA and Section 4975 of the Code.
Under the DOL Regulation, if a Plan acquires an equity interest in an
entity, which equity interest is not a "publicly-offered security," and equity
participation in the entity by Plan investors is "significant" as defined in the
DOL Regulation, the Plan's assets generally would include both the equity
interest and an undivided interest in each of the entity's underlying assets
unless certain specified exceptions apply. The DOL Regulation defines a
publicly-offered security as a security that is "widely held," "freely
transferable," and either part of a class of securities registered under Section
12(b) or 12(g) of the Exchange Act or sold pursuant to an effective registration
statement under the Securities Act (provided the securities are registered under
the Exchange Act within 120 days after the end of the fiscal year of the issuer
during which the offering occurred). The shares of Common Stock and Preferred
Stock offered by this Prospectus are being sold in an offering registered under
the Securities Act and are registered under Section 12(b) of the Exchange Act.
The DOL Regulation provides that a security is "widely held" only if it is
part of a class of securities that is owned by 100 or more investors independent
of the issuer and of one another. The DOL Regulation also provides that class of
securities will not fail to be "widely held" solely because the number of
independent investors falls below 100 subsequent to an initial public offering
as a result of events beyond the issuer's control. The Company believes that the
Common Stock and the Preferred Stock are "widely held" for purposes of the DOL
Regulation.
The DOL Regulation provides that whether a security is "freely
transferable" is a factual question to be determined on the basis of all the
relevant facts and circumstances. The DOL Regulation further provides that when
a security is part of an offering in which the minimum investment is $10,000 or
less, as is the case with this offering, certain restrictions ordinarily will
not affect, alone or in combination, the finding that such
31
<PAGE> 35
securities are freely transferable. The Company believes that the restrictions
imposed under the Articles on the transfer of Common Stock and Preferred Stock
are limited to restrictions on transfer generally permitted under the DOL
Regulation and are not likely to result in the failure of the Common Stock or
the Preferred Stock to be "freely transferable." See "Restrictions on Transfer."
The DOL Regulation only establishes a presumption in favor of a finding of free
transferability; therefore, no assurance can be given that the Department of
Labor and the Treasury Department would not reach a contrary conclusion with
respect to the Common Stock and/or the Preferred Stock. Any additional transfer
restrictions imposed on the transfer of Common Stock or Preferred Stock will be
discussed in the applicable Prospectus Supplement.
Assuming that the Common Stock and the Preferred Stock will be "widely
held" and "freely transferable," the Company believes that the Common Stock will
be publicly-offered securities for purposes of the DOL Regulation and that the
assets of the Company will not be deemed to be "plan assets" of any Plan that
invests in the Common Stock or the Preferred Stock.
PLAN OF DISTRIBUTION
The Company may sell the Securities to or through underwriters and also may
sell the Securities directly to investors or through agents. The distribution of
the Securities may be effected from time to time in one or more transactions at
a fixed price or prices, which may be changed, at market prices prevailing at
the time of sale, at prices related to such prevailing market prices at the time
of sale, or at negotiated prices.
The Prospectus Supplement will set forth terms of the offering of the
Securities, including where applicable: (i) the name or names of any
underwriters or agents with whom the Company has entered into arrangements with
respect to the sale or issuance of Securities; (ii) any underwriting discounts,
commissions, and other items constituting underwriters' compensation from the
Company and any other discounts, concessions, or commissions allowed or
reallowed or paid by any underwriters to other dealers; (iii) any commissions
paid to any agents; and (iv) the net proceeds to the Company.
In connection with the sale of Securities, underwriters may receive
compensation from the Company or from purchasers of Securities, for whom they
may act as agents, in the form of discounts, concessions, or commissions.
Underwriters may sell Securities to or through dealers, and such dealers may
receive compensation in the form of discounts, concessions, or commissions from
the underwriters or commissions from the purchasers for whom they may act as
agents. Underwriters, dealers, and agents that participate in the distribution
of Securities may be deemed to be underwriters, and any discounts or commissions
they receive from the Company, and any profit on the resale of Securities they
realize, may be deemed to be underwriting discounts and commissions under the
Securities Act.
Underwriters, dealers, and agents may engage in transactions with, or
perform services for, the Company in the ordinary course of business.
Unless otherwise set forth in the Prospectus Supplement relating to the
issuance of Securities, the obligations of the underwriters to purchase such
Securities will be subject to certain conditions precedent, and each of the
underwriters with respect to such Securities will be obligated to purchase all
of the Securities allocated to it if any such Securities are purchased. Any
initial public offering price and any discounts or concessions allowed or
reallowed or paid to dealers may be changed from time to time.
LEGAL MATTERS
The validity of the Securities offered by this Prospectus, as well as
certain tax matters, will be passed upon for the Company by Miro Weiner &
Kramer, Bloomfield Hills, Michigan. Jeffrey H. Miro, a senior member of Miro
Weiner & Kramer, is the Secretary of the Company.
32
<PAGE> 36
EXPERTS
The audited financial statements and schedules incorporated by reference in
the Registration Statement of which this Prospectus is a part, to the extent and
for the periods indicated in their reports, have been audited by Deloitte &
Touche LLP, independent public accountants, and are incorporated by reference
herein in reliance upon the authority of said firm as experts in giving said
reports.
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934 (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 filed by the Company with the Commission can be inspected and
copied at 450 Fifth Street, N.W., Washington, D.C. 20549, and at the following
regional offices of the Commission: 7 World Trade Center, Suite 1300, New York,
New York 10048, and 500 West Madison Street, Suite 1400, Chicago, Illinois
60661. Copies of such material can also be obtained from the Public Reference
Section of the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549, at
prescribed rates. In addition, the Company's Common Stock is traded on the New
York Stock Exchange (the "NYSE"). These reports, proxy statements, and other
information filed by the Company can also be inspected at the NYSE's offices at
20 Broad Street, New York, New York 10005.
This Prospectus constitutes a part of a Registration Statement on Form S-3
(the "Registration Statement") filed by the Company with the Commission under
the Securities Act of 1933, as amended (the "Securities Act"). In accordance
with the rules and regulations of the Commission, this Prospectus omits certain
of the information contained in the Registration Statement and the exhibits and
schedules to the Registration Statement. For further information concerning the
Company and the Securities offered by this Prospectus, reference is hereby made
to the Registration Statement and the exhibits and schedules filed with the
Registration Statement, which may be inspected without charge at the office of
the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549 and copies of
which may be obtained from the Commission at prescribed rates. The Commission
maintains a World Wide Web Site (http://www.sec.gov) that contains such material
regarding issuers that file electronically with the Commission. The Registration
Statement has been so filed and may be obtained at such site. Any statements
contained in this Prospectus concerning the provisions of any document are not
necessarily complete, and in each instance, reference is made to the copy of
such document filed as an exhibit to the Registration Statement or otherwise
filed with the Commission. Each such statement is qualified in its entirety by
such reference.
INCORPORATION BY REFERENCE
The following documents filed with the Commission pursuant to the Exchange
Act (file number 1-11530) are incorporated by reference into this Prospectus:
(a) the Company's Annual Report on Form 10-K for the fiscal year ended
December 31, 1996;
(b) the Company's Proxy Statement dated March 28, 1997, relating to
the annual meeting of shareholders held on May 14, 1997;
(c) the Company's Quarterly Report on Form 10-Q for the quarters ended
March 31, 1997, and June 30, 1997;
(d) the Company's Current Report on Form 8-K/A#1 filed on July 10,
1997; and
(e) the Company's Current Reports on Form 8-K dated July 17, 1997, and
September 4, 1997.
All documents filed by the Company pursuant to Sections 13(a), 13(c), 14,
or 15(d) of the Exchange Act (including any documents incorporated by reference
in such documents) after the date of this Prospectus and prior to the
termination of the offering of the Securities offered by this Prospectus shall
be deemed to be incorporated by reference in this Prospectus and to be a part of
this Prospectus from the date of filing such
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<PAGE> 37
documents. Any statement contained in a document incorporated or deemed
incorporated by reference in this Prospectus shall be deemed to be modified or
superseded for purposes of this Prospectus to the extent that a statement
contained in this Prospectus or in any other subsequently filed document that
also is or is deemed to be incorporated by reference in this Prospectus modifies
or supersedes such statement. Any such statement so modified or superseded shall
not be deemed, except as so modified or superseded, to constitute a part of this
Prospectus.
The Company will provide without charge to each person to whom a copy of
this Prospectus has been delivered, upon the written or oral request of any such
person, a copy of any or all of the documents incorporated by reference in this
Prospectus (other than exhibits to such documents that are not specifically
incorporated by reference in such documents). Written or oral requests for
copies should be directed to Taubman Centers, Inc., 200 East Long Lake Road,
Suite 300, Bloomfield Hills, Michigan 48303-0200, Attention: Chief Financial
Officer (telephone: (248) 258-6800).
34
<PAGE> 38
GLOSSARY
Unless the context otherwise requires, the following capitalized terms
shall have the meanings set forth below for the purposes of this Prospectus:
"ACMs" means asbestos-containing materials.
"Articles" means the Company's Second Amended and Restated Articles of
Incorporation.
"Asset Tests" means, under the DOL Regulation's guidelines for an entity to
qualify as a real estate operating company, the requirement that on certain
specified valuation dates, at least 50% of its assets (valued at cost and
excluding certain short-term investments) be invested in real estate which is
managed or developed and with respect to which such entity has the right to
substantially participate directly in the management or development activities.
"AT&T Trust" means the AT&T Master Pension Trust and its assigns.
"Built-in-Gain" has the meaning ascribed to it under the caption "Federal
Income Tax Considerations -- Taxation of the Company."
"Capital Stock" means the Company's Common Stock, Preferred Stock, and
Excess Stock.
"Cash Tender Agreement" means the agreement among the Company, the GM
Trusts, and A. Alfred Taubman' trust, setting forth the terms and conditions of
the Cash Tender.
"Center Owners" means, collectively, the Joint Ventures, and the entities
owning Taubman Shopping Centers that are 100% beneficially owned by TRG.
"Centers" means the Taubman Shopping Centers.
"Code" means the Internal Revenue Code of 1986, as amended.
"Commission" means the United States Securities and Exchange Commission.
"Common Stock" means the Common Stock of the Company.
"Company" means Taubman Centers, Inc., a Michigan corporation.
"Continuing Offer" means the continuous, irrevocable offer that Company has
made to all present (and may, in the discretion of the Company, make to certain
future) holders of partnership interests in TRG other than the GM Trusts and A.
Alfred Taubman and affiliates.
"Deposit Agreement" means an agreement among the Company, a Depositary, and
the holders of the Depositary Receipts evidencing interests held by the
Depositary pursuant to such agreement.
"Depositary Shares" means shares of Preferred Stock deposited with a
Depositary pursuant to a Deposit Agreement.
"Depositary Receipts" means receipts for Depositary Shares evidencing a
fractional interest of a share of a particular series of Preferred Stock.
"DOL" means the United States Department of Labor.
"DOL Regulation" means a regulation, issued by the DOL, defining "plan
assets."
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time.
"ERISA Plan" means a pension, profit-sharing, or other employee benefit
plan subject to Title I of ERISA.
"Excess Stock" means shares owned, or deemed to be owned, or transferred to
a shareholder in excess of the General Ownership Limited or an Existing Holder
Limit.
"Existing Holder Limit" means the maximum shares of Regular Capital Stock
that the Trusts may own: the greater of 8,731,426 shares and 19.8% in value of
the Capital Stock, in the case of the GM Trusts
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<PAGE> 39
collectively; the greater of 6,059,080 shares and 13.74% in value of the Capital
Stock, in the case of the AT&T Trust; and the greater of 14,790,506 shares and
33.54% in value of the Capital Stock, in the case of the Trusts collectively.
"General Ownership Limit" means the ownership of more than 8.23% in value
of the Capital Stock.
"GM Trusts" means the General Motors Hourly-Rate Employes Pension Trust and
the General Motors Salaried Employes Pension Trust.
"Incentive Option Plan" means the plan under which TRG issues to employees
of the Manager options to acquire Units of Partnership Interest.
"Incentive Options" means options to acquire Units of Partnership Interest
that may be granted under TRG's Incentive Option Plan.
"Independent Directors" means the directors of the Company who are
unaffiliated with TRG, the TG Affiliates, and the GM Trusts.
"IRA" means an individual retirement account.
"IRS" means the United States Internal Revenue Service.
"Joint Ventures" means partnerships with unaffiliated third parties through
which TRG has interests in certain Centers.
"Look Through Limit" means the up to 9.9% in value of the outstanding
Capital Stock that a Look Through Entity may own under certain circumstances.
"Manager" means The Taubman Company Limited Partnership, a Delaware limited
partnership, which is more than 99% beneficially owned by TRG.
"Non-U.S. Shareholders" means non-resident alien individuals, foreign
corporations, foreign partnerships and foreign trusts and estates.
"Ownership Limits" means the General Ownership Limit, the Look Through
Limit, and the Existing Holder Limit.
"Partnership Agreement" means the partnership agreement of TRG.
"Partnership Committee" means the partnership committee of TRG in which
governance of TRG is vested.
"Preferred Stock" means the Preferred Stock of the Company.
"Prohibited UBTI Service Income" means services that would give rise to
UBTI.
"Recognition Period" means the recognition period pertaining to
Built-in-Gain as defined pursuant to Regulations to be issued under Section
337(d) of the Code.
"Regular Capital Stock" means shares of Common Stock and Preferred Stock
that have not become Excess Stock.
"Regular Preferred Stock" means shares of Preferred Stock that have not
become Excess Stock.
"REIT" means a real estate investment trust as defined pursuant to Sections
856 through 860 of the Code.
"REIT Requirements" means the requirements for qualifying as a REIT under
the Code and Treasury Regulations.
"Related Party Tenant" means a tenant that is owned, directly or
constructively, by a REIT or an owner of 10% or more of a REIT.
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<PAGE> 40
"Securities" means the Common Stock, Preferred Stock, Depositary Shares,
and Warrants offered by this Prospectus and the applicable Prospectus
Supplement.
"Securities Act" means the Securities Act of 1933, as amended from time to
time.
"Shares" means shares of Common Stock, Preferred Stock, or Depositary
Shares.
"Taub-Co" means Taub-Co Management, Inc., a Michigan corporation formerly
known as The Taubman Company, Inc., which is the Manager's managing general
partner and predecessor-in-interest.
"The Taubman Company Limited Partnership" means a Delaware limited
partnership that is the Manager and that provides substantially all property
management and leasing services for each Taubman Shopping Center and corporate,
development, administrative, and acquisition services for TRG and the Company.
"Taubman Shopping Centers" means the regional shopping centers in which TRG
has ownership interests.
"Ten Percent Stockholder" means each individual or entity which owns,
either directly or through related individuals and entities under the applicable
attribution rules of the Code, 10% or more of the Company's outstanding shares
of Capital Stock.
"TG" means TG Partners Limited Partnership, a Delaware limited partnership,
which is a general partner in TRG and affiliates of A. Alfred Taubman.
"TG Affiliates" means TG, A. Alfred Taubman, the members of his family, his
and their affiliates, the original partners in TRG and any affiliate of an
original partner in TRG or of any member of an original partner's family, and
all officers and employees of the Manager for so long as they are actively
employed by the Manager, and for so long as such individuals are so included,
any affiliate of such individuals, officers and employees.
"Treasury Regulations" means the Income Tax Regulations promulgated under
the Code.
"TRG" means The Taubman Realty Group Limited Partnership, a Delaware
limited partnership.
"TRG Trusts" means the trusts, of which TRG is the sole beneficiary, which
are (or in the future will become) a partner with TRG in certain of the Center
Owners.
"Trusts" means the GM Trusts and the AT&T Trust.
"UBTI" means unrelated business taxable income as defined in Section 512(a)
of the Code.
"Units of Partnership Interest" means the units into which partnership
interests of TRG are divided, as provided in the Partnership Agreement, and as
the same may be adjusted, as provided in the Partnership Agreement.
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<PAGE> 41
PART II. INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.(1)
<TABLE>
<S> <C>
Registration Fee............................................ $151,515.15
Engraving and Printing Expenses............................. $ 50,000.00
-----------
Legal Fees and Expenses..................................... 150,000.00(2)
Accounting Fees and Expenses................................ 150,000.00(2)
Blue Sky Fees and Expenses.................................. 7,500.00(2)
Miscellaneous............................................... 50,000.00(2)
-----------
Total....................................................... $559,015.15(2)
===========
</TABLE>
- -------------------------
(1) Excluding underwriting fees and commissions.
(2) Estimated.
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The Registrant's Articles of Incorporation provide that no director of the
Registrant shall be liable to the Registrant or the shareholders for monetary
damages for breach of the director's fiduciary duty. Such provision does not
limit a director's liability to the Registrant or its shareholders resulting
from:
(i) a breach of the director's duty of loyalty to the Registrant or
its shareholders;
(ii) acts or omissions of the director not in good faith or that
involve intentional misconduct or knowing violation of law;
(iii) a violation of Section 551(1) of the Michigan Business
Corporation Act (relating to unlawful payments of dividends);
(iv) a transaction from which the director derived an improper
personal benefit; or
(v) any act or omission occurring prior to November 20, 1992.
The Registrant's Articles of Incorporation provide for mandatory
indemnification by the Registrant of its directors (including directors of
subsidiaries) to the fullest extent permitted or not prohibited by existing law
or to such greater extent as may be permitted or not prohibited under succeeding
provisions of law. The Registrant's Articles of Incorporation provide that the
Registrant shall pay the expenses incurred by a director of the Registrant
(including a director of a subsidiary) in defending a civil or criminal action,
suit, or proceeding involving such person's acts or omissions as a director of
the Registrant (or of a subsidiary).
The Registrant's Articles of Incorporation authorize the Registrant to
indemnify any officer of the Registrant (or of a subsidiary), if such person
acted in good faith and in a manner he or she reasonably believed to be in or
not opposed to the best interests of the Registrant or its shareholders and,
with respect to a criminal action or proceeding, if the person had no reasonable
cause to believe his or her conduct was unlawful. Unless ordered by a court,
indemnification of an officer shall be made by the Registrant only as authorized
in a specific case upon the determination that indemnification of the officer is
proper in the circumstances because he or she has met the applicable standard of
conduct. Such determination shall be made (i) by majority vote of the directors
of the Registrant who are not parties to the action, suit or proceeding, (ii) by
independent legal counsel in a written opinion, or (iii) by the shareholders of
the Registrant. The Registrant's Articles of Incorporation authorize the
Registrant to pay the expenses incurred by an officer in defending a civil or
criminal action, suit, or proceeding in advance of the final disposition
thereof, upon receipt of an undertaking by or on behalf of such officer to repay
the expenses if it is ultimately determined that the person is not entitled to
be indemnified by the Registrant. Such undertaking shall be by unlimited general
obligation of the person on whose behalf advances are made but need not be
secured.
The Registrant has the power to purchase and maintain insurance on behalf
of any person who is or was a director, officer, employee, or agent of the
Registrant or is liable as a director of the Registrant, or is or was
II-1
<PAGE> 42
serving, at the request of the Registrant, as a director, officer, employee, or
agent of another corporation, partnership, joint venture, trust, or other
enterprise, against any liability asserted against him and incurred by him in
any such capacity or arising out of his status as such, regardless of whether
the Registrant would have power to indemnify him against such liability.
The Registrant has purchased a policy of directors' and officers' insurance
that insures both the Registrant and its officers and directors against expenses
and liabilities of the type normally insured against under such policies,
including the expense of the indemnifications described above.
ITEM 16. EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER
-------
<C> <C> <S>
*1 -- Underwriting Agreement.
4(a) -- Second Amended and Restated Articles of Incorporation
(incorporated by reference to Exhibit 3 to the Registrant's
Quarterly Report on Form 10-Q for the quarter ended June 30,
1996).
4(b) -- By-Laws, as amended (incorporated by reference to Exhibit 3
to the Registrant's Quarterly Report on Form 10-Q for the
quarter ended September 30, 1996).
*4(c) -- Form of Common Stock Warrant Agreement.
*4(d) -- Form of Amendment to Articles of Incorporation establishing
the terms of the Preferred Stock.
*4(e) -- Form of Preferred Stock Warrant Agreement.
*4(f) -- Form of Deposit Agreement and Depositary Receipt.
5 -- Opinion of Miro Weiner & Kramer, counsel to Registrant, as
to the validity of the Securities.
8 -- Opinion of Miro Weiner & Kramer, counsel to Registrant, as
to certain tax matters.
*12 -- Computation of ratio of Earnings to Combined Fixed Charges
and Preferred Stock Dividends.
**23(a) -- Consent of Deloitte & Touche LLP.
23(b) -- Consent of Miro Weiner & Kramer (included in Exhibits 5 and
8).
**24 -- Powers of Attorney.
</TABLE>
- -------------------------
* To be filed by amendment or incorporated by reference.
** Previously filed.
ITEM 17. UNDERTAKINGS.
The Registrant undertakes:
(1) to file, during any period in which offers or sales are being
made, a post-effective amendment to this Registration Statement:
(i) to include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(ii) (a) to reflect in the prospectus any facts or events arising
after the effective date of the registration statement (or the
most recent post-effective amendment thereof) which,
individually or in the aggregate, represent a fundamental
change in the information set forth in the registration
statement. (b) Notwithstanding the foregoing, any increase or
decrease in volume of securities offered (if the total dollar
value of securities offered would not exceed that which was
registered) and any deviation from the low or high end of the
estimated maximum offering range may be reflected in the form
of prospectus filed with the Commission pursuant to Rule
424(b) if, in the aggregate, the changes in volume and price
represent no more than a 20 percent change in the maximum
aggregate offering price set forth in the "Calculation of
Registration Fee" table in the effective registration
statement; and
II-2
<PAGE> 43
(iii) to include any material information with respect to the plan
of distribution not previously disclosed in the Registration
Statement or any material change to such information in this
Registration Statement;
(2) that, for the purpose of determining any liability under the
Securities Act of 1933 (the "Act"), each such post-effective
amendment shall be deemed to be a new registration statement
relating to the securities offered herein, and the offering of
such securities at that time shall be deemed to be the initial
bona fide offering thereof; and
(3) to remove from registration by means of a post-effective amendment
any of the securities being registered that remain unsold at the
termination of the offering.
Paragraphs (1)(i) and (1)(ii)(a) above do not apply if the information
required to be included in a post-effective amendment by those paragraphs is
contained in periodic reports filed with or furnished to the Commission by the
registrant pursuant to Section 13 or 15(d) of the Securities Exchange Act of
1934 that are incorporated by reference in the registration statement.
The Registrant undertakes that, for purposes of determining any liability
under the Securities Act of 1933, each filing of the Registrant's annual report
pursuant to Section 13(a) or Section 15(d) of the Securities Exchange Act of
1934 that is incorporated by reference in this Registration Statement shall be
deemed to be a new registration statement relating to the securities offered
herein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
Insofar as indemnification for liabilities arising under the Act may be
permitted to directors, officers, and controlling persons of the Registrant
pursuant to the provisions described under Item 15 above, or otherwise, the
Registrant has been advised that in the opinion of the Securities and Exchange
Commission, such indemnification is against public policy as expressed in the
Securities Act of 1933 and is, therefor, unenforceable. In the event that claim
for indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a director, officer, or controlling
person of the Registrant in the successful defense of any action, suit, or
proceeding) is asserted by such director, officer, or controlling person in
connection with the securities registered, the Registrant will, unless in the
opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Act and will
be governed by the final adjudication of such issue.
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<PAGE> 44
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3 and has duly caused this Amendment No. 1 to
Registration Statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City of Bloomfield Hills, State of Michigan, on the 19th
day of September, 1997.
TAUBMAN CENTERS, INC.
By: /s/ ROBERT S. TAUBMAN
------------------------------------
Robert S. Taubman
President and Chief Executive
Officer
Pursuant to the requirements of the Securities Act of 1933, this Amendment
No. 1 to Registration Statement on Form S-3 has been signed below by the
following persons in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
* Vice Chairman of the Board September 19, 1997
- ---------------------------------------------
Robert C. Larson
/s/ ROBERT S. TAUBMAN President, Chief Executive September 19, 1997
- --------------------------------------------- Officer, and Director
Robert S. Taubman
/s/ LISA A. PAYNE Chief Financial Officer and September 19, 1997
- --------------------------------------------- Director
Lisa A. Payne
/s/ RICHARD B. MCGLINN Chief Accounting Officer September 19, 1997
- ---------------------------------------------
Richard B. McGlinn
* Director September 19, 1997
- ---------------------------------------------
Claude M. Ballard
* Director September 19, 1997
- ---------------------------------------------
Allan J. Bloostein
* Director September 19, 1997
- ---------------------------------------------
Jerome A. Chazen
* Director September 19, 1997
- ---------------------------------------------
Thomas E. Dobrowski
* Director September 19, 1997
- ---------------------------------------------
W. Allen Reed
*By: /s/ LISA A. PAYNE
---------------------------------------
Lisa A. Payne, Attorney-in-Fact
</TABLE>
<PAGE> 45
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER
- -------
<C> <C> <S>
*1 -- Underwriting Agreement
4(a) -- Second Amended and Restated Articles of Incorporation
(incorporated by reference to Exhibit 3 to the Registrant's
Quarterly Report on Form 10-Q for the quarter ended June 30,
1996).
4(b) -- By-Laws, as amended (incorporated by reference to Exhibit 3
to the Registrant's Quarterly Report on Form 10-Q for the
quarter ended September 30, 1996).
*4(c) -- Form of Common Stock Warrant Agreement.
*4(d) -- Form of Amendment to Articles of Incorporation establishing
the terms of the Preferred Stock.
*4(e) -- Form of Preferred Stock Warrant Agreement.
*4(f) -- Form of Deposit Agreement and Depositary Receipt.
5 -- Opinion of Miro Weiner & Kramer, counsel to Registrant, as
to the validity of the Securities.
8 -- Opinion of Miro Weiner & Kramer, counsel to Registrant, as
to certain tax matters.
*12 -- Computation of ratio of Earnings to Combined Fixed Charges
and Preferred Stock Dividends.
**23(a) -- Consent of Deloitte & Touche LLP.
23(b) -- Consent of Miro Weiner & Kramer (included in Exhibits 5 and
8).
**24 -- Powers of Attorney.
</TABLE>
- -------------------------
* To be filed by amendment or incorporated by reference.
** Previously filed.
<PAGE> 1
EXHIBIT 5
[MIRO WEINER & KRAMER LETTERHEAD]
September 19, 1997
Taubman Centers, Inc.
200 East Long Lake Road
Suite 300
Bloomfield Hills, Michigan 48303-0200
Re: Registration Statement on Form S-3, Registration No. 333-35433
Gentlemen:
Reference is made to the above-referenced Registration Statement, as
amended (the "Registration Statement"), and the Prospectus included in the
Registration Statement at the time it is declared effective (the "Prospectus"),
filed with the Securities and Exchange Commission. We have acted as counsel to
you (the "Company") in connection with the filing of the Registration Statement
and the Company's registration for offering under the Securities Act of 1933 of
up to $500 million aggregate initial offering price of (i) shares of the
Company's Common Stock, (ii) shares of the Company's Preferred Stock, (iii)
Preferred Stock represented by depositary shares (the "Depositary Shares"), and
(iv) warrants to purchase shares of Common Stock or Preferred Stock (the
"Warrants" and, together with the Common Stock, the Preferred Stock, and the
Depositary Shares, the "Securities"). Terms used and not otherwise defined in
this opinion letter have the meanings ascribed to them in the Registration
Statement.
In our capacity as counsel to the Company, we have examined such
documents and other information as we deemed necessary and relevant as a basis
for the opinions expressed below. In such examinations, we have assumed the
genuineness of all signatures, the legal capacity of all individuals who have
executed documents we reviewed, the authenticity of all documents submitted to
us as originals, and the conformity with originals of all documents submitted
to us as copies. As to various questions of fact material to such opinions, we
have relied upon statements or certificates of officers and representatives of
the Company and others.
We assume that prior to the issuance of any shares of Preferred Stock
or Common Stock or of any Warrants or Depositary Shares, there will exist,
under the Company's Articles, the requisite number of authorized but unissued
shares of Preferred Stock or Common Stock, as the case may be, and that all
actions necessary to the creation of any such Preferred Stock, including the
filing of an amendment to the Articles establishing the terms of such Preferred
Stock, will have been taken. We further assume that appropriate certificates
representing shares of Preferred Stock or Common Stock will be executed and
delivered upon the issuance and sale of any shares of Preferred Stock or
<PAGE> 2
MIRO WEINER & KRAMER
Taubman Centers, Inc.
September 19, 1997
Page 2
Common Stock, as the case may be, and will comply with all applicable
requirements of Michigan law. We further assume that any Depositary Shares
will be issued under one or more valid and legally binding Deposit Agreements
between the Company and a Depositary and that any Warrants will be issued
under a valid and legally binding Warrant Agreement that conforms to the
description of a Warrant Agreement set forth in the Prospectus or applicable
Prospectus Supplement. Finally, we assume that each underwriting agreement for
an offering of the Securities (each, an "Underwriting Agreement") will be a
valid and legally binding agreement that conforms to its description set forth
in the applicable Prospectus Supplement.
We assume that the issuance, sale, amount, and terms of the Securities
to be offered from time to time will be authorized and determined by proper
action of the Board of Directors of the Company in accordance with the
parameters described in the Registration Statement and in accordance with the
Company's Articles and Bylaws and with applicable Michigan law (each, a "Board
Action"). To the extent that the Company's obligations under any agreement
directly pertaining to the issuance of Securities is dependent upon such
matters, we assume for purposes of this opinion letter that each other party to
such agreement has duly and validly authorized, executed, and delivered such
agreement and is duly qualified to perform all of such party's obligations
under such agreement and that such agreement is enforceable against each such
party in accordance with the agreement's terms.
Based upon and subject to the foregoing, we are of the opinion that:
1. upon due authorization by Board Action of an issuance of
Common Stock, and upon issuance and delivery of
certificates for shares of such Common Stock against payment
therefor in accordance with the terms of such Board Action,
the Registration Statement, the Prospectus, the applicable
Prospectus Supplement, and any applicable Underwriting
Agreement, or upon issuance and delivery of certificates for
shares of such Common Stock pursuant to the exercise of one or
more Common Stock Warrants, the shares of Common Stock
represented by such certificates will be duly authorized and
validly issued, fully paid, and nonassessable;
2. when a series of Preferred Stock has been duly authorized and
established in accordance with the applicable Board
Action, and upon issuance and delivery of certificates for
shares of such series of Preferred Stock against payment
therefor in accordance with the terms of such Board Action,
the Registration Statement, the Prospectus, the applicable
Prospectus Supplement, and any applicable Underwriting
Agreement, or upon issuance and delivery of certificates for
shares of such series of Preferred Stock pursuant to the
exercise of one or more Preferred Stock Warrants, the shares
of Preferred Stock represented by such certificates will be
duly authorized and validly issued, fully paid and
nonassessable;
<PAGE> 3
MIRO WEINER & KRAMER
Taubman Centers, Inc.
September 19, 1997
Page 3
3. when the Common Stock Warrants have been duly established by
the relevant Warrant Agreement, duly authenticated by the
Warrant Agent, and duly authorized and established by the
applicable Board Action, and when warrant certificates
representing the Common Stock Warrants have been duly executed
and delivered on behalf of the Company against payment
therefor in accordance with the terms and provisions of such
Board Action, the Registration Statement, the Prospectus, the
applicable Prospectus Supplement, and any applicable
Underwriting Agreement, the Common Stock Warrants will be duly
authorized and will constitute valid obligations of the
Company;
4. when a series of Preferred Stock has been duly authorized and
established in accordance with the applicable Board
Action, when the Preferred Stock Warrants for such series of
Preferred Stock have been duly established by the related
Preferred Stock Warrant Agreement, duly authenticated by the
Warrant Agent, and duly authorized and established by the
applicable Board Action, and when warrant certificates
representing the Preferred Stock Warrants have been duly
executed and delivered against payment therefor in accordance
with the terms of such Board Action, the Preferred Stock
Warrant Agreement, the Registration Statement, the Prospectus,
the applicable Prospectus Supplement, and any applicable
Underwriting Agreement, the Preferred Stock Warrants will be
duly authorized and will constitute valid obligations of the
Company; and
5. when a series of Preferred Stock has been duly authorized and
established in accordance with the applicable Board
Action, when Depositary Shares for such series have been duly
authorized in accordance with the applicable Board Action, and
when Depositary Receipts representing such Depositary Shares
have been duly executed and delivered by the Depositary
against payment therefor in the manner contemplated by such
Board Action, the Deposit Agreement, the Registration
Statement, the Prospectus, the applicable Prospectus
Supplement, and any applicable Underwriting Agreement, such
Depositary Shares will be validly issued and will entitle the
holders thereof to the rights specified in the Depositary
Receipts and such Deposit Agreement.
The opinions stated above relating to the validity and binding nature
of obligations of the Company are subject to the effect of any applicable
bankruptcy, insolvency, reorganization, moratorium, or similar rights affecting
creditors' rights generally and to the effect of general principles of equity,
regardless of whether considered in a proceeding at law or in equity. The
opinions expressed in this letter are limited to the matters set forth in this
letter, and no other opinions are implied or should be inferred.
We consent to the filing of this opinion as an exhibit to the
Registration Statement and to the
<PAGE> 4
MIRO WEINER & KRAMER
Taubman Centers, Inc.
September 19, 1997
Page 4
reference to our firm under the heading "Legal Matters" in the Prospectus.
Sincerely yours,
/s/ MIRO WEINER & KRAMER
<PAGE> 1
EXHIBIT 8
[MIRO WEINER & KRAMER LETTERHEAD]
September 19, 1997
Taubman Centers, Inc.
200 East Long Lake
Suite 300
Bloomfield Hills, Michigan 48303-0200
Re: Registration Statement on Form S-3, File No. 333-35433
Gentlemen:
We have acted as counsel to you (the "Company") in connection with the
preparation and filing of the above-referenced Registration Statement, as
amended (the "Registration Statement"),and the Prospectus included in the
Registration at the time it is declared effective (the "Prospectus"). Terms
used but not otherwise defined in this opinion letter have the meanings
ascribed to them in the Registration Statement.
In our capacity as counsel to the Company, we have examined such documents
and other information as we deemed necessary and relevant as a basis for the
opinions expressed below. In such examinations, we have assumed the
genuineness of all signatures, the legal capacity of all individuals who have
executed documents we reviewed, the authenticity of all documents submitted to
us as originals, and the conformity with originals of all documents submitted
to us as copies. As to various questions of fact material to such opinions, we
have relied upon statements or certificates of officers and representatives of
the Company and others. We have also assumed, with your consent, the accuracy
of the representations contained in the letter from the Company to us of even
date (the "Representation Letter"). These representations relate to the
classification and operation of the Company as a REIT and the organization and
operation of TRG, the Center Owners, and the TRG Trusts.
Based upon and subject to the foregoing, we are of the opinion that:
1. the Company qualifies for taxation as a REIT under the Code;
and
2. the discussion contained in that portion of the Prospectus
under the caption "Federal Income Tax Considerations" fairly
summarizes the Federal income tax considerations that are likely to
be material to a holder of Common Stock or Preferred Stock of the
Company.
<PAGE> 2
MIRO WEINER & KRAMER
Taubman Centers, Inc.
September 19, 1997
Page 2
The foregoing opinions are given as of the date of this letter and are
based on various statutory provisions, regulations promulgated thereunder, and
interpretations thereof by the Internal Revenue Service and the courts having
jurisdiction over such matters, all of which are subject to change either
prospectively or retroactively. Further, any variation from the facts set
forth in the Registration Statement or Representation Letter may affect the
conclusions stated above. Moreover, the Company's qualification for taxation
as a REIT depends upon its ability to meet, through actual annual operating
results, requirements under the Code regarding income, distributions, and
diversity of stock ownership. Because the Company's satisfaction of these
requirements will depend upon future events, no assurance can be given that the
actual results of operations for any taxable year will satisfy the tests
necessary to qualify for taxation as a REIT.
This opinion letter is furnished to you solely for use in connection with
the Registration Statement. We consent to the filing of this opinion letter as
an exhibit to the Registration Statement and to the reference to our firm under
the captions "Federal Income Tax Considerations" and "Legal Matters" in the
Prospectus. No opinions other than those expressly stated above are implied or
should be inferred.
Sincerely yours,
/s/ MIRO WEINER & KRAMER
