PROSPECTUS
[CARRAMERICA LOGO]
CARRAMERICA REALTY CORPORATION
CARRAMERICA REALTY, L.P.
OFFER TO EXCHANGE
7.20% EXCHANGE NOTES DUE 2004 FOR ANY AND ALL OUTSTANDING
7.20% NOTES DUE 2004
AND
7.375% EXCHANGE NOTES DUE 2007 FOR ANY AND ALL OUTSTANDING
7.375% NOTES DUE 2007
THE EXCHANGE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 5:00 P.M.,
NEW YORK CITY TIME, ON DECEMBER 15, 1997, UNLESS EXTENDED
CarrAmerica Realty Corporation, a Maryland corporation (the 'Company'), and
CarrAmerica Realty, L.P., a Delaware limited partnership (the 'Guarantor' and,
together with the Company, the 'Issuers'), hereby offer, upon the terms and
subject to the conditions set forth in this Prospectus and the accompanying
Letter of Transmittal (which together constitute the 'Exchange Offer'), to
exchange $1,000 principal amount of the Company's 7.20% Exchange Notes due 2004
(the 'New Seven-Year Notes') for each $1,000 principal amount of the Company's
issued and outstanding 7.20% Notes due 2004 (the 'Old Seven-Year Notes' and,
together with the New Seven-Year Notes, the 'Seven-Year Notes') and $1,000
principal amount of the Company's 7.375% Exchange Notes due 2007 (the 'New
Ten-Year Notes') for each $1,000 principal amount of the Company's issued and
outstanding 7.375% Notes due 2007 (the 'Old Ten-Year Notes' and, together with
the New Ten-Year Notes, the 'Ten-Year Notes'). All of such Notes are guaranteed
by the Guarantor. As of the date of this Prospectus, there were outstanding
$150,000,000 principal amount of Old Seven-Year Notes and $125,000,000 principal
amount of Old Ten-Year Notes (collectively, the 'Old Notes'). The terms of the
New Seven-Year Notes and the New Ten-Year Notes (collectively, the 'New Notes'
and, together with the Old Notes, the 'Notes') are identical in all material
respects to the Old Notes, except that the New Notes will be freely transferable
by their holders (except as described herein). The New Notes evidence the same
debt as the Old Notes and will be issued and entitled to the same benefits under
the Indenture relating to the Old Notes.
Interest on the Notes is payable semiannually on January 1 and July 1 of
each year, commencing January 1, 1998. Holders who exchange their Old Notes for
New Notes in the Exchange Offer will receive interest accrued on their Old Notes
and interest accrued on their New Notes in one interest payment, payable on
January 1, 1998. The Notes are redeemable, in whole or in part, at the option of
the Company at any time at a redemption price equal to the sum of (i) the
principal amount of the Notes being redeemed plus (ii) accrued interest thereon
to the date of redemption plus (iii) the Make-Whole Amount (as defined), if any.
The Notes are senior unsecured obligations of the Company and rank equally with
each other and with the Company's other unsecured and unsubordinated
indebtedness. The Notes are effectively subordinated to mortgages and other
secured indebtedness of the Company as well as to indebtedness and other
liabilities of the Company's subsidiaries. The Company's obligations under the
Notes are unconditionally guaranteed by the Guarantor.
(Cover continued on next page)
------------------------
SEE 'RISK FACTORS' BEGINNING ON PAGE 10 FOR A DISCUSSION OF CERTAIN RISK
FACTORS THAT
SHOULD BE CONSIDERED BY HOLDERS BEFORE DECIDING WHETHER OR NOT TO TENDER THEIR
OLD NOTES IN THE EXCHANGE OFFER.
------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
THE DATE OF THIS PROSPECTUS IS NOVEMBER 14, 1997.
<PAGE>
(Cover continued from previous page)
The Old Notes originally were issued and sold on July 1, 1997 in a
transaction not registered under the Securities Act of 1933, as amended (the
'Securities Act'), in reliance on the exemptions provided in Section 4(2) of and
Rule 144A under the Securities Act. The Issuers are making the Exchange Offer in
reliance on positions of the staff of the U.S. Securities and Exchange
Commission (the 'SEC') set forth in certain no-action letters issued to other
parties in other transactions. The Issuers have not sought their own no-action
letter, however, and there can be no assurance that the staff of the SEC would
make a similar determination with respect to the Exchange Offer. Based upon such
positions of the SEC staff, the Issuers believe that the New Notes issued in the
Exchange Offer in exchange for Old Notes may be offered for resale, resold and
otherwise transferred by the holders thereof (other than a holder that is a
broker-dealer, as set forth below, or an 'affiliate' of the Issuers within the
meaning of Rule 405 under the Securities Act) without compliance with the
registration and prospectus delivery provisions of the Securities Act, provided
that such New Notes are acquired in the ordinary course of such holder's
business and such holder has no arrangement or understanding with any person to
participate in a distribution of such New Notes. Holders of Old Notes accepting
the Exchange Offer are required to represent to the Issuers in the Letter of
Transmittal that such conditions have been met. Each broker-dealer that receives
New Notes for its own account pursuant to the Exchange Offer must acknowledge
that it will deliver a prospectus in connection with any resale of such New
Notes. The Letter of Transmittal states that by so acknowledging and by
delivering a prospectus, a broker-dealer will not be deemed to admit that it is
an 'underwriter' within the meaning of the Securities Act. This Prospectus, as
it may be amended or supplemented from time to time, may be used by a
broker-dealer in connection with resales of New Notes received in exchange for
Old Notes where such Old Notes were acquired by such broker-dealer as a result
of market-making activities or other trading activities. The Issuers will use
their reasonable best efforts to make this Prospectus available to any such
broker-dealer for use in connection with any such resale for such period of time
as broker-dealers must deliver a prospectus, up to 90 days after the
consummation of the Exchange Offer.
The New Notes are new securities for which there currently is no trading
market. The Issuers do not intend to apply for listing of the New Notes on any
securities exchange or for quotation through the Nasdaq quotation system. The
Initial Purchasers (as defined) have advised the Company that they currently
intend to make a market in the New Notes after the Exchange Offer as permitted
by applicable laws and regulations, although they are not obligated to do so and
may discontinue any market making activity at any time without notice.
Accordingly, there can be no assurance that a trading market for the New Notes
will develop or, if one does develop, that it will be sustained. If an active
trading market for the New Notes fails to develop or be sustained, the trading
price of the New Notes could be materially adversely affected.
Any Old Notes not tendered and accepted in the Exchange Offer will remain
subject to the existing restrictions on transfer of the Old Notes, and the
Issuers will have no further obligations to the holders (other than to the
Initial Purchasers) of such Old Notes to provide for their registration under
the Securities Act. It is not expected that a trading market in the Old Notes
will develop while they are subject to restrictions on transfer. In addition, a
holder's ability to sell Old Notes could be adversely affected to the extent
that Old Notes are tendered and accepted in the Exchange Offer.
The Issuers will accept for exchange any and all Old Notes that are validly
tendered and not withdrawn on or before 5:00 p.m., New York City time, on the
date the Exchange Offer expires, which will be December 15, 1997 (the
'Expiration Date'), unless the Exchange Offer is extended by the Issuers in
their sole discretion, in which case the term 'Expiration Date' shall mean the
latest date and time to which the Exchange Offer is extended. Tenders of Old
Notes may be withdrawn at any time before 5:00 p.m., New York City time, on the
Expiration Date. The Exchange Offer is not conditioned upon any minimum amount
of Old Notes being tendered for exchange, but the Exchange Offer is subject to
certain conditions that may be waived by the Issuers and to certain other terms
and conditions. Old Notes may be tendered only in denominations of $1,000 and
integral multiples thereof. The Issuers have agreed to pay all of the expenses
incurred by them in connection with the Exchange Offer.
The Issuers will not receive any cash proceeds from the issuance of the New
Notes in the Exchange Offer.
This Prospectus, together with the Letter of Transmittal, is being first
sent to all registered holders of Old Notes on or about November 14, 1997.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Information Incorporated by Reference...................................................................... 2
Available Information...................................................................................... 2
Summary.................................................................................................... 4
Risk Factors............................................................................................... 10
The Exchange Offer......................................................................................... 16
Description of Notes....................................................................................... 22
Note Guarantees............................................................................................ 29
Certain Federal Income Tax Consequences.................................................................... 30
The Company................................................................................................ 31
Capitalization............................................................................................. 34
Ratios of Earnings to Fixed Charges........................................................................ 35
Recent Developments........................................................................................ 35
Plan of Distribution....................................................................................... 35
Legal Matters.............................................................................................. 36
Experts.................................................................................................... 36
</TABLE>
1
<PAGE>
INFORMATION INCORPORATED BY REFERENCE
The documents listed below have been filed by the Issuers with the U.S.
Securities and Exchange Commission (the 'SEC') under the Securities Exchange Act
of 1934, as amended (the 'Exchange Act'), and are incorporated herein by
reference:
1. The Company's Annual Report on Form 10-K for the year ended
December 31, 1996;
2. The Company's Quarterly Reports on Form 10-Q for the quarters ended
March 31, 1997, June 30, 1997 and September 30, 1997;
3. The Company's Current Reports on Form 8-K filed with the SEC on
January 3, 1997; January 23, 1997 (and a Form 8-K/A related thereto filed
on January 27, 1997); January 27, 1997; January 31, 1997; February 12,
1997; March 26, 1997; April 21, 1997; June 20, 1997; June 25, 1997; June
27, 1997; July 1, 1997; July 11, 1997; August 4, 1997 (and a Form 8-K/A
related thereto filed on August 8, 1997); August 12, 1997; August 14, 1997;
August 28, 1997; October 30, 1997 (two filings); October 31, 1997; and
November 6, 1997;
4. The Guarantor's Registration Statement on Form 10 filed with the
SEC on October 8, 1997; and
5. The Guarantor's Current Report on Form 8-K filed with the SEC on
October 20, 1997.
All documents filed with the SEC after the filing of this Prospectus by
each of the Company and the Guarantor pursuant to Section 13(a), 13(c), 14 or
15(d) of the Exchange Act and before termination of the Exchange Offer shall be
deemed to be incorporated by reference in this Prospectus and be a part hereof
from the time of filing of such document.
Any statement in this Prospectus or in a document incorporated or deemed to
be incorporated by reference in this Prospectus shall be deemed to be modified
or superseded for purposes of this Prospectus to the extent that another
statement in a subsequently filed document that is incorporated or deemed to be
incorporated by reference in this Prospectus modifies or supersedes the first
statement. Any such statement so modified or superseded shall not be deemed,
except as so modified or superseded, to constitute a part of this Prospectus.
Subject to the foregoing, all information appearing in this Prospectus is
qualified in its entirety by the information appearing in the documents
incorporated by reference.
AVAILABLE INFORMATION
The Issuers will provide without charge to any person to whom a copy of
this Prospectus is delivered, upon their written or oral request, a copy of any
or all of the documents incorporated by reference in this Prospectus (other than
exhibits to such documents, unless such exhibits are specifically incorporated
by reference in such documents). Written requests for such copies should be
addressed to Secretary, CarrAmerica Realty Corporation, 1700 Pennsylvania
Avenue, N.W., Washington, D.C. 20006, telephone number (202) 624-7500.
The Issuers are subject to the informational requirements of the Exchange
Act, and, in accordance therewith, file reports and other information with the
SEC. Such reports and other information can be inspected at the Public Reference
Rooms maintained by the SEC at Room 1024, 450 Fifth Street, N.W., Washington,
D.C. 20549 and the following regional offices of the SEC: 500 West Madison
Street, Suite 1400, Chicago, Illinois 60661-2511 and Seven World Trade Center,
13th Floor, New York, New York 10048. Copies of such information can be obtained
from the Public Reference Section of the Commission, 450 Fifth Street, N.W.,
Washington, D.C. 20549, at prescribed rates. Certain of such information may be
accessed electronically at the SEC's World Wide Web site at http://www.sec.gov.
In addition, the Company's Common Stock is listed on the New York Stock Exchange
and the reports filed by the Company with the SEC and other information
concerning the Company can be inspected at the offices of the New York Stock
Exchange, 20 Broad Street, New York, New York 10005.
2
<PAGE>
The Issuers have filed with the SEC a registration statement on Form S-4
(the 'Registration Statement'), of which this Prospectus is a part, under the
Securities Act of 1933, as amended (the 'Securities Act'), with respect to the
securities offered hereby. This Prospectus does not contain all of the
information set forth in the Registration Statement, certain portions of which
have been omitted as permitted by the rules and regulations of the SEC.
Statements contained in this Prospectus as to the contents of any contract or
other document are not necessarily complete and, in each instance, reference is
made to the copy of such contract or document filed as an exhibit to the
Registration Statement, each such statement being qualified in all respects by
such reference and the exhibits and schedules thereto. For further information
regarding the Company and the securities offered hereby, reference is hereby
made to the Registration Statement and such exhibits and schedules, which may be
obtained from the Commission at its principal office in Washington, D.C. upon
payment of the fees prescribed by the Commission and accessed electronically at
the SEC's World Wide Web site at the address set forth in the previous
paragraph.
3
<PAGE>
SUMMARY
The following summary is qualified in its entirety by reference to the more
detailed information and financial statements, including the notes thereto,
appearing elsewhere in this Prospectus or incorporated herein by reference.
Unless the context indicates or requires otherwise, references in this
Prospectus to the 'Company' are to CarrAmerica Realty Corporation, a Maryland
corporation, and its subsidiaries, references to the 'Guarantor' are to
CarrAmerica Realty, L.P., a Delaware limited partnership, and references to the
'Issuers' are to the Company and the Guarantor collectively.
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
Certain Statements in this Prospectus and in the documents incorporated by
reference herein, including those set forth under 'Risk Factors' herein,
constitute 'forward-looking statements' within the meaning of the Private
Securities Litigation Reform Act of 1995 (the 'Reform Act'). Such
forward-looking statements involve known and unknown risks, uncertainties and
other factors that may cause the actual results, performance or achievements of
the Company or industry results to be materially different from any future
results, performance or achievements expressed or implied by such
forward-looking statements. Such factors include, among others, the following:
national and local economic, business and real estate conditions that will,
among other things, affect demand for office properties, availability and
creditworthiness of prospective tenants, the level of lease rents and the
availability of financing for both tenants and the Company, adverse changes in
the real estate markets including, among other things, competition with other
companies, risks of real estate acquisition and development (including the
failure of pending acquisitions to close and pending developments to be
completed on time and within budget), governmental actions and initiatives, and
environmental/safety requirements.
THE COMPANY
The Company is a publicly-traded real estate investment trust ('REIT') that
focuses primarily on the acquisition, development, ownership and operation of
office properties in select suburban markets across the United States. As of
October 31, 1997, the Company owned interests in 232 operating properties
containing approximately 17.9 million square feet of office space, 16 projects
under construction that it intends to own and operate that will contain
approximately 2.7 million square feet of office space, and land and options to
acquire land that will support the future development of up to 4.6 million
square feet of office space. The operating properties owned by the Company as of
September 30, 1997 were 96.5% leased as of that date.
4
<PAGE>
The following table provides an overview of the Company's portfolio by
market as of October 31, 1997:
<TABLE>
<CAPTION>
NUMBER OF SQUARE FOOTAGE % OF TOTAL SQUARE FOOTAGE BUILDING
OPERATING OF OPERATING PORTFOLIO UNDER SQUARE
MARKET PROPERTIES PROPERTIES SQUARE FOOTAGE(4) CONSTRUCTION FOOTAGE(2)
- --------------------------------------- --------- -------------- ----------------- -------------- ----------
<S> <C> <C> <C> <C> <C>
Northern California
San Francisco Bay Area............... 57 3,736,000 20.9% 726,000 --
Sacramento........................... 8 314,000 1.7 -- --
Metropolitan Washington, D.C.
Downtown............................. 10 2,404,000 13.4 -- 221,000
Suburban............................. 7 1,273,000 7.1 -- --
Suburban Atlanta....................... 43 1,891,000 10.6 204,000 216,000
Southern California
Orange County/Los Angeles............ 29 1,357,000 7.6 -- 181,000
San Diego............................ 4 250,000 1.4 -- --
Suburban Chicago....................... 10 1,571,000 8.8 91,000 620,000
Southeast Denver....................... 12 1,210,000 6.8 238,000 562,000
Suburban Dallas........................ 10 965,000 5.4 357,000 422,000
Suburban Seattle....................... 17 741,000 4.1 376,000 278,000
Austin, Texas.......................... 10 709,000 4.0 313,000 1,309,000
Suburban Salt Lake City................ 8 463,000 2.6 -- 242,000
Suburban Phoenix....................... 4 457,000 2.6 137,000 120,000
Florida................................ 2 444,000 2.5 188,000 388,000
Suburban Portland, Oregon.............. 1 81,000 0.5 46,000 --
--- -------------- ------ -------------- ----------
Total............................. 232 17,866,000 100.0% 2,676,000 4,559,000
--- -------------- ------ -------------- ----------
--- -------------- ------ -------------- ----------
</TABLE>
- ------------------
(1) Represents the percentage of total square footage of the consolidated
properties.
(2) Represents buildable square footage of land (including land subject to
options but excluding square footage under construction) that is held for
development.
The Company has maintained a strategic alliance with Security Capital U.S.
Realty, a European real estate company (together with its wholly-owned
subsidiary, 'SC-USREALTY') since November 1995. As of September 30, 1997,
SC-USREALTY owned approximately 42.6% of the outstanding common stock, par value
$.01 per share ('Common Stock'), of the Company (38.2% on a fully diluted
basis).
The Company and its predecessor, The Oliver Carr Company ('OCCO'), have
been in the real estate business in the Washington, D.C. metropolitan area for
more than 35 years. In late 1995, the Company shifted its focus from downtown
Washington, D.C. to a national business strategy. The Company provides a full
range of real estate services through a staff of over 1,000 employees located
throughout the United States. See 'The Company.'
SUMMARY SELECTED FINANCIAL INFORMATION
The following table sets forth selected financial and operating information
for the Company as of and for the years ended December 31, 1996, 1995 and 1994.
This information is derived from and should be read in conjunction with the
audited financial statements of the Company, which statements have been audited
by KPMG Peat Marwick LLP, independent public accountants, and are incorporated
in this Prospectus by reference. In addition, the following tables set forth
selected financial and operating information for the Company as of and for the
nine months ended September 30, 1997 and September 30, 1996, which information
is derived from the unaudited financial statements of the Company incorporated
in this Prospectus by reference.
The following table also sets forth pro forma financial information for the
Company as of and for the nine months ended September 30, 1997 and for the year
ended December 31, 1996, giving effect to (i) the acquisitions of office
properties and land that have been consummated since the beginning of the
periods presented and the acquisitions of other office properties and land that
the Company expects to consummate in the near future,
5
<PAGE>
(ii) sales of Common Stock, preferred stock and unsecured notes during 1996 and
1997, and (iii) the repayment of certain outstanding indebtedness.
The following selected financial and operating information should be read
in conjunction with the discussion under 'Management's Discussion and Analysis
of Financial Condition and Results of Operations' in the Company's most recent
annual report on Form 10-K and quarterly reports on Form 10-Q incorporated
herein by reference:
<TABLE>
<CAPTION>
NINE MONTHS ENDED SEPTEMBER 30, YEAR ENDED DECEMBER 31,
-------------------------------------- -----------------------------------------------
PRO FORMA HISTORICAL PRO FORMA HISTORICAL
---------- ------------------------ --------- ----------------------------------
1997 1997 1996 1996 1996 1995 1994
---------- ---------- ---------- --------- ---------- -------- --------
(IN THOUSANDS, EXCEPT PER SHARE AND PROPERTY DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
OPERATING DATA:
Real estate operating revenue:
Rental revenue.................. $ 272,321 $ 231,832 $ 100,639 $334,927 $ 154,165 $ 89,539 $ 82,665
Real estate service revenue..... 11,512 11,512 9,265 12,512 12,512 11,315 8,890
OmniOffices Executive Suites
Revenue....................... 34,084 5,000 42,019
Real estate operating expenses:
Property operating expenses..... 93,808 81,920 33,371 104,932 51,927 31,579 29,707
Interest expense................ 40,774 37,266 21,857 54,281 31,630 21,873 21,366
Executive Suites Operating
Expenses...................... 28,697 4,124 36,718
General and administrative
expenses...................... 15,777 15,777 10,661 17,528 15,228 10,711 9,535
Depreciation and amortization... 64,615 54,561 25,744 78,263 38,264 18,495 14,419
Net income........................ 69,346 50,663 15,502 78,217 24,318(1) 12,067(1) 12,097
Dividends paid to common
stockholders.................... 74,103 27,367 42,914 23,344 20,204
PER SHARE DATA:
Net income before extraordinary
item............................ $ 0.79 $ 0.87 $ 0.70 $ 0.81 $ 0.90 $ 0.90 $ 1.06
Dividends paid to common
stockholders.................... 1.3125 1.3125 1.75 1.75 1.75
Weighted average shares
outstanding(2).................. 58,001 53,886 27,723 57,827 31,999 13,338 11,387
BALANCE SHEET DATA
(AT PERIOD END):
Real estate, before accumulated
depreciation.................... $2,600,042 $2,309,069 $1,062,500 $1,539,998 $480,589 $429,537
Real estate, after accumulated
depreciation.................... 2,432,580 2,141,607 946,791 1,420,341 381,716 341,129
Total assets...................... 2,635,010 2,351,017 1,043,908 1,536,564 458,860 407,948
Mortgages payable................. 574,699 481,058 354,069 440,449 317,374 254,933
Senior Unsecured Notes............ 275,000 275,000
Other indebtedness................ 133,678 147,000 72,000 215,000
Total indebtedness................ 983,377 903,058 426,069 655,449 317,374 254,933
Minority interest................. 120,444 67,331 51,611 50,597 34,850 38,644
Total stockholders' equity........ 1,458,101 1,308,114 545,748 787,478 95,543 106,042
OTHER DATA:
Net cash provided by operating
activities...................... $ 95,904 $ 47,352 $ 82,300 $ 35,277 $ 29,908
Net cash used by investing
activities...................... (745,313) (484,623) (876,947) (81,635) (67,046)
Net cash provided by financing
activities...................... 647,575 442,292 813,067 37,113 32,652
Funds from operations before
minority interest of the
Unitholders of Carr
Partnerships(3)................. $ 137,196 $ 107,592 $ 43,289 $160,098 $ 64,496(1) $ 33,190(1)
Weighted average shares and Units
outstanding(4).................. 66,580 61,013 27,723 66,502 32,263 18,157 15,878
Number of properties (at period
end)............................ 243 230 87 243 159 13 11
Square footage (in thousands, at
period end)..................... 18,973 17,628 10,043 18,973 12,430 3,326 2,706
Percent leased (at period end).... 96.5% 92.0% 93.6% 93.5% 95.9%
EBITDA(5)......................... $ 181,972 $ 148,856 $ 67,482 $217,681 $ 99,428 $ 57,652 $ 53,606
Ratio of EBITDA to interest
expense......................... 4.46x 4.00x 3.09x 4.01 x 3.14x 2.64x 2.51x
Ratio of earnings to fixed
charges......................... 2.03x 2.01x 1.74x 1.89 x 1.74x 1.91x 1.81(6)
</TABLE>
- ------------------
(1) Net income and funds from operations include non-recurring deductions of
approximately $2.3 million and $1.9 million in 1996 and 1995, respectively,
related to the write-off of the unamortized purchase price of certain third
party real estate service contracts that were terminated in 1996 and the
termination of an agreement to acquire the development business of The Evans
Company in 1995.
(Footnotes continued on next page)
6
<PAGE>
(Footnotes continued from previous page)
(2) Weighted average shares outstanding used in calculating net income (loss)
per share includes Common Stock and stock equivalents and, when dilutive,
stock options and units of partnership interest.
(3) The Company believes that funds from operations is helpful to investors as a
measure of the performance of an equity REIT because, along with cash flow
from operating activities, financing activities and investing activities, it
provides investors with an indication of the ability of the Company to incur
and service debt, to make capital expenditures, and to fund other cash
needs. In accordance with the final National Association of Real Estate
Investment Trusts (NAREIT) White Paper on Funds From Operations as approved
by the Board of Governors of NAREIT on March 3, 1995, funds from operations
represents net income (loss) (computed in accordance with generally accepted
accounting principles), excluding gains (or losses) from debt restructuring
or sales of property, plus depreciation and amortization of assets uniquely
significant to the real estate industry and after adjustments for
unconsolidated partnerships and joint ventures. Adjustments for
unconsolidated partnerships and joint ventures are calculated to reflect
funds from operations on the same basis. For purposes of calculating the
Company's funds from operations, the Company has added back to net income
the amortization expense associated with the goodwill amortization related
to the purchase of the assets of OmniOffices, Inc., by an affiliate of the
Company. The Company computes funds from operations in accordance with
standards established by NAREIT, which may or may not be comparable to funds
from operation reported by other REITs that do not define the term in
accordance with the current NAREIT definition, or that interpret the current
NAREIT definition differently than the Company. The Company's funds from
operations in 1994 have been restated to conform to the NAREIT definition of
funds from operations. Funds from operations does not represent net income
or cash flow generated from operating activities in accordance with
generally accepted accounting principles and, as such, should not be
considered an alternative to net income as an indication of the Company's
performance or to cash flow as a measure of liquidity or the Company's
ability to make distributions.
(4) Includes shares of Common Stock and convertible preferred stock outstanding
plus units of partnership interest in the Guarantor and Carr Realty, L.P., a
majority-owned subsidiary of the Company ('Carr Realty, L.P.') that the
holders thereof have a right to have redeemed for cash equal to the value of
a share of Common Stock for each unit redeemed or, at the option of the
Company, for shares of Common Stock on a one-for-one basis. Such units
include non-dividend paying units.
(5) EBITDA is calculated as net operating income before minority interest and
extraordinary items, plus interest expense, depreciation and amortization,
and income taxes, if any.
THE EXCHANGE OFFER
<TABLE>
<S> <C>
The Exchange Offer........................ The Issuers are offering to exchange up to $150,000,000 aggregate
principal amount of the Company's 7.20% Exchange Notes due 2004 and
up to $125,000,000 aggregate principal amount of the Company's 7.375%
Exchange Notes due 2007 (the 'New Notes') for up to $150,000,000
aggregate principal amount of the Company's outstanding 7.20% Notes
due 2004 and up to $125,000,000 aggregate principal amount of the
Company's outstanding 7.375% Notes due 2007 (the 'Old Notes'),
respectively, on a $1,000 principal amount for $1,000 principal
amount basis.
Procedures for Tendering Old Notes........ See 'The Exchange Offer--Procedures for Tendering.'
Minimum Condition......................... The Exchange Offer is not conditioned upon any minimum principal
amount of Old Notes being tendered for exchange, but Old Notes may be
tendered only in denominations of $1,000 or integral multiples
thereof.
Expiration................................ The Exchange Offer will expire at 5:00 p.m., New York City time, on
December 15, 1997, or such later date and time to which it is
extended. Any Old Notes not accepted for exchange for any reason will
be returned without expense to the tendering holder thereof as
promptly as practicable after the expiration or termination of the
Exchange Offer.
Exchange Date............................. The date of acceptance of the Old Notes for exchange will be the
first business day following the Expiration Date.
Withdrawal Rights......................... A tender of Old Notes in the Exchange Offer may be withdrawn at any
time before the Expiration Date.
</TABLE>
7
<PAGE>
<TABLE>
<S> <C>
Federal Income Tax Consequences........... An exchange of Old Notes for New Notes in the Exchange Offer will not
be a taxable exchange for federal income tax purposes, and exchanging
holders should not recognize any taxable gain or loss or any interest
income as a result of an exchange. See 'Certain Federal Income Tax
Consequences.'
Use of Proceeds........................... The Issuers will not receive any cash proceeds from the issuance of
the New Notes in the Exchange Offer.
Exchange Agent............................ Bankers Trust Company is serving as Exchange Agent in connection with
the Exchange Offer.
Effect on Holders of Old Notes............ Upon the acceptance of Old Notes for exchange in the Exchange Offer,
holders of Old Notes will have no further registration or other
rights, except in certain limited circumstances, under the
Registration Rights Agreement dated July 1, 1997 (the 'Registration
Rights Agreement') among the Issuers and J.P. Morgan Securities Inc.,
Goldman, Sachs & Co. and Lehman Brothers Inc. (the 'Initial
Purchasers'). Holders of Old Notes who do not tender them in the
Exchange Offer will continue to be entitled to all the rights
applicable thereto under the Indenture dated as of July 1, 1997 among
the Issuers and Bankers Trust Company, as trustee (the 'Trustee'),
which relates to both the Old Notes and the New Notes (the
'Indenture'), but will continue to be subject to the restrictions on
transfer of the Old Notes provided for in the Old Notes and in the
Indenture. See 'Risk Factors--Consequences of Failure to Exchange.'
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THE NEW NOTES
The terms of the New Notes will be identical in all material respects
(including principal amount, interest rate, maturity and ranking) to the terms
of the Old Notes for which they are exchanged, except that the New Notes will be
freely transferable except as described herein. See 'The Exchange Offer--Terms
of the Exchange' and '--Terms and Conditions of the Letter of Transmittal.'
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Notes Offered............................. Up to $150,000,000 aggregate principal amount of 7.20% Exchange Notes
due 2004 (the 'New Seven-Year Notes') and up to $125,000,000
aggregate principal amount of 7.375% Exchange Notes due 2007 (the
'New Ten-Year Notes' and, together with the New Seven-Year Notes, the
'New Notes').
Maturity Date............................. The New Seven-Year Notes will mature on July 1, 2004 and the New
Ten-Year Notes will mature on July 1, 2007.
Scheduled Interest Payment Dates.......... January 1 and July 1, commencing January 1, 1998. Holders whose Old
Notes are accepted for exchange will receive interest on such Old
Notes accrued from July 1, 1997, the date of issuance of the Old
Notes, to the date of the issuance of the New Notes, with such
interest payable with the first interest payment on the New Notes.
Consequently, holders who exchange their Old Notes for New Notes will
receive the same interest payment payable on January 1, 1998 (the
first interest payment date with respect to the Old Notes and the New
Notes) that they would have received had they not accepted the
Exchange Offer.
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<S> <C>
Optional Redemption....................... The New Notes will be redeemable, in whole or in part, at any time,
at the option of the Company at a redemption price equal to the sum
of (i) the principal amount of the Notes being redeemed plus (ii)
accrued interest thereon to the date of redemption plus (iii) the
Make-Whole Amount (as defined), if any. See 'Description of the
Notes--Optional Redemption.'
Ranking................................... The New Notes will be senior unsecured obligations of the Company and
rank equally with each other and with the Company's other unsecured
and unsubordinated indebtedness. The New Notes will be effectively
subordinated to mortgages and other secured indebtedness of the
Company as well as to indebtedness and other liabilities of the
Company's subsidiaries. As of September 30, 1997, such mortgages and
other secured indebtedness aggregated approximately $481 million
(approximately $575 million on a pro forma basis) and the Company's
unsecured and unsubordinated indebtedness (including the Notes)
aggregated approximately $422 million (approximately $134 million on
a pro forma basis). See 'Capitalization--Debt Financing.'
Covenants................................. The Indenture for the New Notes, among other things, contains
restrictions (with certain exceptions) on the ability of the Company
and its Subsidiaries (as defined) to: (i) incur Indebtedness (as
defined) in excess of 60% of their assets; (ii) incur Indebtedness
secured by Encumbrances (as defined) in excess of 40% of their
assets; (iii) incur Indebtedness of Consolidated Income Available for
Debt Service (as defined) in excess of 1.5 times debt service for the
four most recent fiscal quarters; and (iv) own Total Unencumbered
Assets (as defined) equal to less than 150% of Unsecured Indebtedness
(as defined) of the Company and its Subsidiaries on a consolidated
basis.
Risk Factors.............................. Holders should carefully consider the matters set forth under 'Risk
Factors' before deciding whether or not to tender their Old Notes in
the Exchange Offer.
Note Guarantees........................... The obligations of the Company under the New Notes are
unconditionally guaranteed by the Guarantor. The obligations of the
Guarantor on the Notes (the 'Note Guarantees') are unsecured
obligations of the Guarantor, which are limited so as to avoid being
considered as a fraudulent conveyance under applicable law. See 'The
Note Guarantees.'
</TABLE>
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RISK FACTORS
Holders of Old Notes should carefully consider, among other factors, the
matters described below before deciding whether or not to tender their Old Notes
in the Exchange Offer.
CONSEQUENCES OF FAILURE TO EXCHANGE
Holders of Old Notes who do not exchange their Old Notes for New Notes in
the Exchange Offer will continue to be subject to the existing restrictions on
transfer of the Old Notes as set forth in the legend thereon, and, except in
certain limited circumstances applying to the Initial Purchasers only, the
Issuers will have no further obligations to provide for the registration of the
Old Notes under the Securities Act. In general, the Old Notes may not be offered
or sold, unless registered under the Securities Act, except pursuant to an
exemption from, or in a transaction not subject to, the registration provisions
of the Securities Act and applicable state securities laws. The Issuers do not
intend to register the Old Notes under the Securities Act. The Issuers believe
that, based upon positions taken by the staff of the SEC, New Notes issued in
the Exchange Offer in exchange for Old Notes may be offered for resale, resold
or otherwise transferred by the holder thereof (other than a holder that is a
broker-dealer, as set forth below, or an 'affiliate' of the Issuers within the
meaning of Rule 405 under the Securities Act) without compliance with the
registration and prospectus delivery provisions of the Securities Act, provided
that such New Notes are acquired in the ordinary course of such holder's
business and such holder has no arrangement or understanding with any person to
participate in a distribution of such New Notes. Eligible holders wishing to
accept the Exchange Offer must represent to the Issuers in the Letter of
Transmittal that such conditions have been met and must represent, if such
holder is not a broker-dealer, or is a broker-dealer but will not receive New
Notes for its own account in exchange for Old Notes, that neither such holder
nor the person receiving such New Notes, if other than the holder, is engaged in
or intends to participate in a distribution of such New Notes. Each
broker-dealer that receives New Notes for its own account pursuant to the
Exchange Offer must represent that the Old Notes tendered in exchange therefor
were acquired as a result of market-making activities or other trading
activities and must acknowledge that it will deliver a prospectus in connection
with any resale of such New Notes. The Letter of Transmittal states that by so
acknowledging and by delivering a prospectus, a broker-dealer will not be deemed
to admit that it is an 'underwriter' within the meaning of the Securities Act.
This Prospectus, as it may be amended or supplemented from time to time, may be
used by a broker-dealer in connection with the resales of New Notes received in
exchange for Old Notes where such Old Notes were acquired by such broker-dealer
as a result of market-making activities or other trading activities. The Issuers
will use their reasonable best efforts to make this Prospectus, as amended or
supplemented, available to any such broker-dealer for use in connection with any
such resale for such period of time as broker-dealers must deliver a prospectus,
up to 90 days after the consummation of the Exchange Offer. See 'Plan of
Distribution.' To comply with any applicable securities laws of certain
jurisdictions, however, the New Notes may not be offered or sold unless they
have been registered or qualified for sale in such jurisdictions or an exemption
from registration or qualification is available and is complied with. The
Issuers currently do not intend to take any action to register or qualify the
New Notes for resale in any such jurisdictions. In addition, the tender of Old
Notes pursuant to the Exchange Offer will reduce the principal amount of the Old
Notes outstanding, which may have an adverse effect upon, and increase the
volatility of, the market price of the Old Notes due to a reduction of
liquidity.
ABSENCE OF PUBLIC MARKET
The New Notes are new securities for which there currently is no trading
market. The Issuers do not intend to apply for listing of the New Notes on any
securities exchange or for quotation through the Nasdaq quotation system. The
Initial Purchasers have advised the Company that they currently intend to make a
market in the New Notes after the Exchange Offer as permitted by applicable law
and regulations, although they are not obligated to do so and may discontinue
any market making activity at any time without notice. Accordingly, there can be
no assurance that a market for the New Notes will develop or, if one does
develop, that it will be sustained. If an active trading market for the New
Notes fails to develop or be sustained, the trading price of the New Notes could
be materially adversely affected.
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REAL ESTATE INVESTMENT RISKS
General. Investments in real property are subject to varying degrees of
risk. The yields available from equity investments in real estate and the
Company's ability to service debt will depend in large part on the amount of
income generated, expenses incurred and capital expenditures required by its
real property investments. The Company's income from office properties may be
adversely affected by a number of factors, including the general economic
climate and local real estate conditions, an over-supply of, or a reduction in
demand for, office space in the areas where its properties are located and the
attractiveness of the properties to prospective tenants. Income from properties
and real estate values also are affected by such factors as the cost of
compliance with government regulation, including zoning and tax laws and the
potential for liability under applicable laws. Certain significant expenditures
associated with each equity investment by the Company in a property (such as
operating expenses and capital expenditures costs) may not be reduced when
circumstances cause a reduction in income from the property.
Renewal of Leases and Reletting of Space. The Company is subject to the
risks that upon expiration of leases for space located at its properties, the
space may not be relet or, if relet, the terms of the renewal or reletting
(including the cost of required renovations or concessions to tenants) may be
less favorable than current lease terms. Although the Company has established an
annual budget for renovation and reletting costs that it believes is reasonable
in light of each property's situation, no assurance can be given that this
budget will be sufficient to cover these costs. If the Company is unable
promptly to relet or renew leases for all or substantially all of the space at
its properties, if the rental rates upon such renewal or reletting are
significantly lower than expected, or if the Company's reserves for these
purposes prove inadequate, then the Company's cash provided by operating
activities and ability to make debt service payments or expected distributions
to stockholders could be adversely affected.
Possible Environmental Liabilities. Under various federal, state and local
laws, ordinances and regulations, a current or previous owner or operator of
real estate may be required to investigate and clean up certain hazardous
substances released at the property, and may be held liable to a governmental
entity or to third parties for property damage and for investigation and cleanup
costs incurred by such parties in connection with the contamination. In
addition, some environmental laws create a lien on the contaminated site in
favor of the government for damages and costs it incurs in connection with the
contamination. The presence of contamination or the failure to remediate
contamination may adversely affect the owner's ability to sell or lease real
estate or to borrow using the real estate as collateral. The owner or operator
of a site may be liable under common law to third parties for damages and
injuries resulting from environmental contamination emanating from the site. The
Company has not been notified by any governmental authority of any material
non-compliance, liability or other claim in connection with any of its
properties, and the Company is not aware of any other material environmental
condition with respect to any of its properties. No assurance, however, can be
given that no prior owner created any material environmental condition not known
to the Company, that no material environmental condition with respect to any
property has occurred during the Company's ownership thereof, or that future
uses or conditions (including, without limitation, changes in applicable
environmental laws and regulations) will not result in imposition of
environmental liability against the Company.
REAL ESTATE FINANCING RISKS
Debt Financing. The Company is subject to the risks associated with debt
financing, including the risk that the cash provided by the Company's operating
activities will be insufficient to meet required payments of principal and
interest, the risk of rising interest rates on the Company's floating rate debt
that is not hedged, the risk that the Company will not be able to repay or
refinance existing indebtedness (which generally will not have been fully
amortized at maturity) or that the terms of such refinancing will not be as
favorable as the terms of existing indebtedness. In the event the Company is
unable to secure refinancing of such indebtedness on acceptable terms, the
Company might be forced to dispose of properties upon disadvantageous terms,
which might result in losses to the Company, or to obtain financing at
unfavorable terms, either of which might adversely affect the cash flow
available to meet debt service obligations or for distribution to equity
holders. In addition, if a property or properties are mortgaged to secure
payment of indebtedness and the Company is unable to meet required mortgage
payments, the mortgage securing the property could be foreclosed upon by, or the
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property could be otherwise transferred to, the mortgagee with a consequent loss
of income and asset value to the Company.
Degree of Leverage. At September 30, 1997, on a consolidated basis, the
Company's Indebtedness was $903 million and the ratio of its Indebtedness to
Total Assets was 36.5%. The degree to which the Company is leveraged could have
important consequences to holders of the Notes, including affecting the
Company's ability to obtain additional financing in the future for working
capital, capital expenditures, acquisitions, development or other general
corporate purposes and making the Company more vulnerable to a downturn in its
business or the economy generally. The Indenture (as hereinafter defined)
contains financial and operating covenants including, among other things,
limitations on the Company's ability to incur other indebtedness, pay
distributions, engage in transactions with affiliates, sell assets and engage in
mergers and consolidations and certain acquisitions. If the Company fails to
comply with these covenants, the holders of the Notes will be able to accelerate
the maturity of the applicable indebtedness.
ACQUISITION AND DEVELOPMENT RISKS
The Company intends to continue acquiring and developing office properties
in markets where it believes that such acquisition or development is consistent
with the business strategies of the Company. Acquisitions entail risks that
investments will fail to perform in accordance with expectations and that
judgments with respect to the costs of improvements to bring an acquired
property up to standards established for the market position intended for that
property will prove inaccurate, as well as general investment risks associated
with any new real estate investment. See 'Real Estate Investment Risks' above.
New office development also is subject to a number of risks, including, but not
limited to, construction delays or cost overruns that may increase project
costs, financing risks as described above, the failure to meet anticipated
occupancy or rent levels, failure to receive required zoning, occupancy and
other governmental permits and authorizations and changes in applicable zoning
and land use laws, which may result in the incurrence of development costs in
connection with projects that are not pursued to completion. In addition,
because the Company must distribute 95% of its taxable income in order to
maintain its qualification as a REIT, the Company anticipates that new
acquisitions and developments will be financed primarily through periodic equity
and debt offerings, lines of credit or other forms of secured or unsecured
financing. If permanent debt or equity financing is not available on acceptable
terms, further acquisitions or development activities may be curtailed or cash
available to meet debt service obligations or for distribution to stockholders
may be adversely affected.
CHANGE IN BUSINESS STRATEGY; RISKS ASSOCIATED WITH ACQUISITION OF SUBSTANTIAL
NUMBER OF
NEW PROPERTIES
In late 1995, the Company shifted its emphasis from downtown Washington,
D.C. properties toward a more national business strategy, focusing primarily on
office properties in suburban growth markets across the United States. This
change represents a significant shift in the business strategy of the Company.
Although the Board believes that such a shift in strategy was warranted in light
of the opportunities available to the Company, there is no assurance that the
Company's efforts to implement its national business strategy will continue to
be successful. Consistent with the Company's strategy of acquiring office
properties in suburban growth markets, the Company significantly expanded its
portfolio of office properties in 1996 and has continued to do so through the
date of this Prospectus. These properties have a relatively short operating
history under the Company's management and they may have characteristics or
deficiencies unknown to the Company affecting their valuation or revenue
potential.
SUBSTANTIAL OWNERSHIP OF COMMON STOCK
As of September 30, 1997, SC-USREALTY owned 42.6% of the outstanding shares
of the Company's Common Stock (38.2% of the Common Stock on a fully-diluted
basis), and SC-USREALTY has the right to nominate a proportionate number of the
directors of the Board based upon its ownership of stock on a fully-diluted
basis, rounded down to the nearest whole number (but in no event more than 40%
of the directors). As a result, SC-USREALTY is the largest single stockholder of
the Company, and no other stockholder is permitted to own more than 5% of the
Company's Common Stock, subject to certain exceptions set forth in the Articles
of Incorporation or approved by the Board. Although certain standstill
provisions preclude SC-USREALTY from
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increasing its percentage interest in the Company above 45% until at least April
30, 2001 (subject to certain exceptions) and the Articles of Incorporation
preclude SC-USREALTY from increasing such percentage interest thereafter, and
SC-USREALTY agreed to certain limitations on its voting rights with respect to
its shares of Common Stock, SC-USREALTY nonetheless has a substantial influence
over the affairs of the Company.
LIMITATIONS ON CORPORATE ACTIONS
In conjunction with the transaction in which SC-USREALTY acquired its
initial interest in the Company, the Company agreed to certain limitations on
its operations, including restrictions relating to incurrence of additional
indebtedness, retention of third-party managers for the Company's properties,
investments in properties other than office buildings, issuances of limited
partnership interests ('CRLP Units') of Carr Realty, L.P., a partnership that
owns certain of the Company's properties, and certain other matters. The Company
may take actions relating to these matters only with the consent of SC-USREALTY.
In addition, the Company is contractually obligated to abide by certain
limitations on the amount of assets that it owns indirectly through other
entities and the manner in which it conducts its business (including the types
of assets that it can acquire and own and the manner in which such assets are
operated). These limitations (which were designed to permit SC-USREALTY to
comply with certain requirements of the Internal Revenue Code of 1986, as
amended (the 'Code'), applicable to foreign corporations with U.S. shareholders)
limit the flexibility of the Company to structure transactions that might
otherwise be advantageous to the Company, and may impair the Company's ability
to conduct its business in the future.
CONFLICTS OF INTEREST
Certain members of the Company's board of directors (the 'Board') and
officers of the Company own CRLP Units and, thus, may have interests that
conflict with stockholders of the Company with respect to business decisions
affecting the Company and Carr Realty, L.P. In particular, a holder of CRLP
Units may suffer different and/or more adverse tax consequences than the Company
upon the sale or refinancing of some of the properties owned by Carr Realty,
L.P. as a result of unrealized gain attributable to certain properties. These
CRLP Unit holders and the Company, therefore, may have different objectives
regarding the appropriate pricing and timing of a sale or refinancing of
properties. Although the Company, as the sole general partner of Carr Realty,
L.P., has the exclusive authority to determine whether and on what terms to sell
or refinance an individual property, these CRLP Unit holders might seek to
influence the Company not to sell or refinance a property, even though such a
sale might otherwise be financially advantageous to the Company, or may seek to
influence the Company to refinance a property with a higher level of debt than
would be in the best interests of the Company. Although the Company believes
that the change in 1996 in its operational structure from an 'UPREIT' to a
'DownREIT' has and should continue to reduce, over time, these potential
conflicts of interest, assets will continue to be owned by Carr Realty, L.P.,
diminishing the effects of this structural modification.
MANAGEMENT, LEASING AND BROKERAGE RISKS
The Company is subject to the risks associated with the property
management, leasing and brokerage businesses. These risks include the risk that
management contracts or service agreements with third-party owners will be lost
to competitors, that a property will be sold and the Company will lose the
contract, that contracts will not be renewed upon expiration or will not be
renewed on terms consistent with current terms and that leasing and brokerage
activity generally may decline. Each of these developments could adversely
affect the ability of the Company to make debt service payments or expected
distributions to stockholders.
LACK OF VOTING CONTROL OF OPERATING SUBSIDIARIES
The Company does not have voting control of Carr Real Estate Services, Inc.
('Carr Services, Inc.'), CarrAmerica Development & Construction, Inc.
('CarrAmerica Development & Construction') or OmniOffices, Inc., and may acquire
economic interests in similarly structured companies in the future
(collectively, the 'Operating Subsidiaries'). Carr Services, Inc., which
conducts primarily fee-based management and leasing, has capital stock which is
divided into two classes: voting common stock, approximately 92% and 8% of which
is held by OCCO and Carr Realty, L.P., respectively; and nonvoting common stock,
approximately 95% and 5% of which is held by Carr Realty, L.P. and OCCO,
respectively.
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OCCO, as the holder of 92% of the voting common stock, has the ability to elect
the board of directors of Carr Services, Inc. CarrAmerica Development &
Construction, which conducts primarily fee-based development, has capital stock
which is divided into two classes: voting common stock, 99% and 1% of which is
held by OCCO and the Company, respectively; and nonvoting common stock, 96% and
4% of which is held by the Company and OCCO, respectively. OCCO, as the holder
of 99% of the voting common stock, has the ability to elect the board of
directors of CarrAmerica Development & Construction. Oliver T. Carr, Jr., who is
Chairman of the Board and a significant stockholder of the Company, beneficially
owns a majority of the voting stock of OCCO, which controls the election of
directors of Carr Services, Inc. and CarrAmerica Development & Construction.
OmniOffices, Inc., which conducts executive suites rentals and fee based
services, has capital stock which is divided into two classes: voting common
stock and nonvoting common stock. The voting stock is owned 17% by OCCO, 35% by
SC-US REALTY and 48% by an entity comprised of the six executive officers of the
Company. The nonvoting stock is 100% owned by the Company. Each of the three
voting stockholders may appoint one member to the board of directors of
OmniOffices, Inc. The remaining three seats on the board of directors are
determined by the majority vote of the stockholders which is not controlled by
any one stockholder.
Although neither the right of Carr Realty, L.P. or the Company, as
applicable, to receive distributions with respect to its equity interests in the
Operating Subsidiaries nor the terms of the promissory notes made by each of the
Operating Subsidiaries and held by Carr Realty, L.P. or the Company, as
applicable, can be changed by the holder of the majority of the voting common
stock, the Company will not be able to elect directors of each of the Operating
Subsidiaries, and its ability to influence the day-to-day decisions of the
Operating Subsidiaries is limited. As a result, the board of directors and
management of each of the Operating Subsidiaries may implement business policies
or decisions that might not have been implemented by persons elected by the
Company and that are adverse to the interests of the Company or that lead to
adverse financial results, which could adversely impact the Company's operating
income and funds from operations. Specifically, the Operating Subsidiaries may
implement business policies or decisions which may result in a breach of certain
covenants of the Company under the Indenture (as defined below) or an 'Event of
Default' with respect to the Notes under the Indenture. See 'Description of
Notes.'
CHANGES IN POLICIES
The major policies of the Company, including its policies with respect to
development, acquisitions, financing, growth, operations, debt capitalization
and distributions, are determined by its Board. The Board may amend or revise
these and other policies from time to time without a vote of the stockholders of
the Company. A change in these policies could adversely affect the Company's
financial condition, results of operations, funds available for distributions to
stockholders, debt service or the market price of the Notes. The Company cannot
change its policy of seeking to maintain its qualification as a REIT without the
approval of the holders of a majority of its Common Stock.
CERTAIN TAX RISKS
Tax Liabilities as a Consequence of the Failure to Qualify as a REIT. The
Company believes that it has operated so as to qualify and has qualified as a
REIT under the Code, commencing with its taxable year ended December 31, 1993,
and intends to continue to so operate. No assurance, however, can be given that
the Company has so qualified or will be able to remain so qualified.
Qualification as a REIT involves the application of highly technical and complex
Code provisions as to which there are only limited judicial and administrative
interpretations. Certain facts and circumstances that may be wholly beyond the
Company's control may affect its ability to qualify or to continue to qualify as
a REIT. In addition, no assurance can be given that new legislation, Treasury
Regulations, administrative interpretations or court decisions will not
significantly change the tax laws with respect to the Company's qualification as
a REIT or the federal income tax consequences of such qualification to the
Company. If the Company fails to qualify as a REIT, it will be subject to
federal income tax (including any applicable alternative minimum tax) on its
taxable income at regular corporate rates and it will not be entitled to a
deduction for dividends paid to its stockholders. In addition, unless entitled
to relief under certain statutory provisions, the Company would be disqualified
from treatment as a REIT for the four taxable years following the year during
which qualification is lost. The additional tax incurred in such event would
significantly reduce the cash flow available to meet debt service obligations.
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REIT Distribution Requirements and Potential Impact of Borrowings. To
obtain the favorable tax treatment associated with qualifying as a REIT under
the Code, the Company generally is required each year to distribute to its
shareholders at least 95% of its real estate investment trust taxable income. 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, 95% of its
capital gain net income and 100% of its real estate investment trust taxable
income from prior years that is not deemed to have been distributed under the
Code. Differences in timing between the receipt of income, the payment of
expenses and the inclusion of such income and the deduction of such expenses in
arriving at taxable income (of the Company or its subsidiaries), or the effect
of nondeductible capital expenditures, the creation of reserves or required debt
or amortization payments, could require the Company, directly or through its
subsidiaries, to borrow funds on a short-term basis to meet the distribution
requirements that are necessary to achieve the tax benefits associated with
qualifying as a REIT. In such instances, the Company might need to borrow funds
in order to avoid adverse tax consequences even if manage-ment believed that
then prevailing market conditions were not generally favorable for such
borrowings.
Other Tax Liabilities. Even if the Company qualifies as a REIT, the Company
and certain of its subsidiaries will be subject to certain federal, state and
local taxes on its income and property.
Consequences of Failure of the Guarantor, Carr Realty, L.P. or other
Partnerships to be Treated as a Partnership. The Company believes that the
Guarantor, Carr Realty, L.P. and each other partnership and limited liability
company in which it holds an interest are properly treated as partnerships for
federal income tax purposes. If the Internal Revenue Service (the 'IRS') were to
challenge successfully the tax status of the Guarantor or Carr Realty, L.P., or
any other partnership or limited liability company in which the Company holds an
interest, as a partnership for federal income tax purposes, the Guarantor, Carr
Realty, L.P. or the affected partnership or limited liability company would be
taxable as a corporation. In such event, since the value of the Company's
ownership interest in each of the Guarantor and Carr Realty, L.P. exceeds, and
the value of the Company's ownership interest in each affected partnership could
exceed, 5% of the Company's assets, the Company could cease to qualify as a
REIT. In addition, the imposition of a corporate tax on the Guarantor, Carr
Realty, L.P. or any of the other partnerships or limited liability companies in
which the Company holds an interest would reduce the amount of funds available
to meet debt service obligations.
RESTRICTIONS ON ACQUISITION AND CHANGE IN CONTROL
Various provisions of the Company's Articles of Incorporation restrict the
possibility for an acquisition or change in control of the Company, even if the
acquisition or change in control were in its stockholders' interest, including
limits on the ownership of shares of capital stock of the Company, staggered
terms of the Company's directors and the ability of the Board to authorize the
issuance of preferred stock without stockholder approval.
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THE EXCHANGE OFFER
TERMS OF THE EXCHANGE OFFER; PERIOD FOR TENDERING OLD NOTES
Upon the terms and subject to the conditions set forth in this Prospectus
and in the accompanying Letter of Transmittal (which together constitute the
Exchange Offer), the Issuers will accept for exchange Old Notes that are validly
tendered on or before the Expiration Date and not withdrawn as permitted below.
As used herein, the term 'Expiration Date' means 5:00 p.m., New York City time,
on December 15, 1997; provided, however, that if the Issuers, in their sole
discretion, have extended the period of time for which the Exchange Offer is
open, the term 'Expiration Date' means the latest time and date to which the
Exchange Offer is extended.
As of the date of this Prospectus, $275,000,000 aggregate principal amount
of the Old Notes was outstanding. This Prospectus, together with the Letter of
Transmittal, is first being sent on or about the date set forth on the cover
page to all holders of Old Notes at the addresses set forth in the security
register with respect to Old Notes maintained by the Trustee. The Issuers'
obligation to accept Old Notes for exchange in the Exchange Offer is subject to
certain conditions as set forth under 'Certain Conditions to the Exchange Offer'
below.
The Issuers expressly reserve the right, at any time or from time to time,
to extend the period of time during which the Exchange Offer is open, and
thereby delay acceptance of any Old Notes, by giving oral or written notice of
such extension to the Exchange Agent (as defined below) and notice of such
extension to the holders as described below. During any such extension, all Old
Notes previously tendered will remain subject to the Exchange Offer and may be
accepted for exchange by the Issuers. Any Old Notes not accepted for exchange
for any reason will be returned without expense to the tendering holders thereof
as promptly as practicable after the expiration or termination of the Exchange
Offer. The Issuers also expressly reserve the right to amend or terminate the
Exchange Offer, and not to accept for exchange any Old Notes not theretofore
accepted for exchange, upon the occurrence of any of the conditions of the
Exchange Offer specified below under 'Certain Conditions to the Exchange Offer.'
The Issuers will give oral or written notice of any extension, amendment,
non-acceptance or termination to the holders of the Old Notes as promptly as
practicable, such notice in the case of any extension to be issued by means of a
press release or other public announcement no later than 9:00 a.m., New York
City time, on the next business day after the previously scheduled Expiration
Date.
Holders of Old Notes do not have any appraisal or dissenters' rights under
the Maryland General Corporation Law, the Delaware Revised Uniform Limited
Partnership Act or the Indenture in connection with the Exchange Offer. The
Issuers intend to conduct the Exchange Offer in accordance with the applicable
requirements of the Exchange Act and the rules and regulations of the SEC
thereunder.
PROCEDURES FOR TENDERING OLD NOTES
Except as set forth below, in order for Old Notes to be validly tendered in
the Exchange Offer, Banker's Trust Company (the 'Exchange Agent') must receive a
properly completed and duly executed Letter of Transmittal (or facsimile
thereof) or an Agent's Message (as defined in the next paragraph), together with
any required signature guarantees and other required documents, at one of the
addresses set forth below under 'Exchange Agent' on or before the Expiration
Date. In addition, either (i) the Exchange Agent must receive the certificates
for such Old Notes, (ii) such Old Notes must be tendered pursuant to the
procedures for book-entry transfer set forth below and a book-entry
confirmation, including an Agent's Message if the tendering holder has not
delivered a Letter of Transmittal, must be received by the Exchange Agent, in
each case on or before the Expiration Date, (iii) the guaranteed delivery
procedures described below must be complied with. THE METHOD OF DELIVERY OF OLD
NOTES, LETTERS OF TRANSMITTAL AND ALL OTHER REQUIRED DOCUMENTS IS AT THE
ELECTION AND RISK OF EACH HOLDER. IF SUCH DELIVERY IS BY MAIL, IT IS RECOMMENDED
THAT REGISTERED MAIL, PROPERLY INSURED, WITH RETURN RECEIPT REQUESTED, BE USED.
IN ALL CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO ASSURE TIMELY DELIVERY. NO
LETTERS OF TRANSMITTAL OR OLD NOTES SHOULD BE SENT TO THE COMPANY OR THE
GUARANTOR.
The term 'Agent's Message' means a message transmitted by the Depository
Trust Company ('DTC') to, and received by, the Exchange Agent and forming a part
of a book-entry confirmation, which states that DTC has received an express
acknowledgement from the tendering participant, which acknowledgement states
that such
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participant has received and agrees to be bound by the terms of the Letter of
Transmittal and that the Company may enforce the Letter of Transmittal against
such particpant.
Signatures on a Letter of Transmittal or a notice of withdrawal, as the
case may be, must be guaranteed unless the Old Notes surrendered for exchange
pursuant thereto are tendered (i) by a registered holder of the Old Notes who
has not completed the box entitled 'Special Issuance Instructions' or 'Special
Delivery Instructions' on the Letter of Transmittal or (ii) for the account of a
firm or other entity identified in SEC Rule 17Ad-15 as an 'eligible guarantor
institution,' including (as such terms are defined therein), (i) a bank; (ii) a
broker, dealer, municipal securities broker or dealer or government securities
broker or dealer; (iii) a credit union; (iv) a national securities exchange,
registered securities association or clearing agency; or (v) a savings
association that is a participant in a Securities Transfer Association (an
'Eligible Institution'). In the event that signatures on a Letter of Transmittal
or a notice of withdrawal, as the case may be, are required to be guaranteed,
such guarantees must be by an Eligible Institution. If Old Notes are registered
in the name of a person other than the person signing the Letter of Transmittal,
the Old Notes surrendered for exchange must be endorsed, or be accompanied, by a
written instrument or instruments of transfer or exchange, in satisfactory form
as determined by the Issuers in their sole discretion, duly executed by the
registered holder and signed exactly as the name or names of the registered
holder or holders appear on the Old Notes and with any signature thereon
guaranteed by an Eligible Institution.
All questions as to the validity, form, eligibility (including time of
receipt) and acceptance of Old Notes tendered for exchange will be determined by
the Issuers in their sole discretion, which determination shall be final and
binding. The Issuers reserve the absolute right to reject any and all tenders of
any particular Old Notes not properly tendered or to not accept any particular
Old Notes the acceptance of which might, in the judgment of the Issuers or their
counsel, be unlawful. The Issuers also reserve the absolute right in their sole
discretion to waive any defects or irregularities or conditions of the Exchange
Offer as to any particular Old Notes either before or after the Expiration Date
(including the right to waive the ineligibility of any holder who seeks to
tender Old Notes in the Exchange Offer). The interpretation of the terms and
conditions of the Exchange Offer as to any particular Old Notes either before or
after the Expiration Date (including the Letter of Transmittal and the
instructions thereto) by the Issuers shall be final and binding on all parties.
Unless waived, any defects or irregularities in connection with the tenders of
Old Notes for exchange must be cured within such reasonable period of time as
the Issuers determine. Neither the Issuers, the Exchange Agent nor any other
person is under any duty to give notification of any defect or irregularity with
respect to any tender of Old Notes for exchange, nor will any of them incur any
liability for failure to give such notification.
If the Letter of Transmittal or any Old Notes or separate written
instruments of transfer or exchange are signed by a trustee, executor,
administrator, guardian, attorney-in-fact, officer of a corporation or other
person acting in a fiduciary or representative capacity, such person should so
indicate when signing and, unless waived by the Issuers, submit proper evidence
satisfactory to the Issuers of the person's authority to so act.
By tendering, each holder will represent to the Issuers that, among other
things, (i) the New Notes acquired pursuant to the Exchange Offer are being
acquired in the ordinary course of business of the person receiving such New
Notes, whether or not such person is the holder, (ii) neither the holder nor any
other person has an arrangement or understanding with any person to participate
in a distribution of such New Notes, (iii) if the holder is not a broker-dealer,
or is a broker-dealer but will not receive New Notes for its own account in
exchange for Old Notes, neither the holder nor any other person is engaged in or
intends to participate in a distribution of such New Notes and (iv) neither the
holder nor any other person is an 'affiliate,' as defined under Rule 405 of the
Securities Act, of either of the Issuers. If the tendering holder is a
broker-dealer (whether or not it is also an 'affiliate') that will receive New
Notes for its own account in exchange for Old Notes that were acquired as a
result of market-making activities or other trading activities, it will be
required to acknowledge that it will deliver a prospectus meeting the
requirements of the Securities Act in connection with any resale of such New
Notes. By acknowledging that it will deliver and by delivering a prospectus
meeting the requirements of the Securities Act in connection with any resale of
such New Notes, the holder will not be deemed to admit that it is an
'Underwriter' within the meaning of the Securities Act.
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BOOK-ENTRY TRANSFER
Any financial institution that is a participant in the DTC system may
utilize DTC's Automated Tender Offer Program ('ATOP') to tender Old Notes. The
Exchange Agent will make a request to establish a book-entry transfer facility
at DTC for purposes of the Exchange Offer promptly after the date of this
Prospectus. Financial institution participants in DTC's system may make
book-entry delivery of Old Notes by causing the book-entry transfer facility to
transfer such Old Notes into the Exchange Agent's account in accordance with the
book-entry transfer facility's ATOP procedures for transfer. The exchange for
the Old Notes so tendered will only be made, however, after timely confirmation
of such book-entry transfer of Old Notes into the Exchange Agent's account, and
timely receipt by the Exchange Agent of an Agent's Message and any other
documents required by the Letter of Transmittal.
GUARANTEED DELIVERY PROCEDURES
If a registered holder of the Old Notes desires to tender such Old Notes
and the Old Notes are not immediately available, or time will not permit such
holder's Old Notes or other required documents to reach the Exchange Agent
before the Expiration Date, or the procedure for book-entry transfer cannot be
completed on a timely basis, a tender may be effected if (i) the tender is made
through an Eligible Institution, (ii) on or before the Expiration Date, the
Exchange Agent receives from such Eligible Institution a properly completed and
duly executed Letter of Transmittal (or a facsimile thereof) and Notice of
Guaranteed Delivery, substantially in the form provided by the Issuers (by
telegram, telex, facsimile transmission, mail or hand delivery), setting forth
the name and address of the holder of Old Notes and the amount of Old Notes
tendered, stating that the tender is being made thereby and guaranteeing that
within three New York Stock Exchange ('NYSE') trading days after the date of
execution of the Notice of Guaranteed Delivery, the certificates of all
physically tendered Old Notes, in proper form for transfer, or a book-entry
confirmation, as the case may be, and any other documents required by the Letter
of Transmittal will be deposited by the Eligible Institution with the Exchange
Agent, and (iii) the certificates for all physically tendered Old Notes, in
proper form for transfer, or a book-entry confirmation, as the case may be, and
all other documents required by the Letter of Transmittal, are received by the
Exchange Agent within three NYSE trading days after the date of execution of the
Notice of Guaranteed Delivery.
WITHDRAWAL RIGHTS
Tenders of Old Notes may be withdrawn at any time before the Expiration
Date.
For a withdrawal to be effective, a written notice of withdrawal must be
received by the Exchange Agent at one of the addresses set forth below under
'Exchange Agent.' Any such notice of withdrawal must specify the name of the
person who tendered the Old Notes to be withdrawn, identify the Old Notes to be
withdrawn (including the principal amount of such Old Notes), include a
statement that such holder is withdrawing its election to have such Old Notes
exchanged and the name of the registered holder of such Old Notes, and must be
signed by the holder in the same manner as the original signature on the Letter
of Transmittal (including any required signature guarantees) or be accompanied
by evidence satisfactory to the Issuers that the person withdrawing the tender
has succeeded to the beneficial ownership of the Old Notes being withdrawn. If
certificates for Old Notes have been delivered or otherwise identified to the
Exchange Agent, then, before the release of such certificates, the withdrawing
holder must also submit the serial numbers of the particular certificates to be
withdrawn and a signed notice of withdrawal with signatures guaranteed by an
Eligible Institution unless such holder is an Eligible Institution. If Old Notes
have been tendered pursuant to the procedure for book-entry transfer described
above, any notice of withdrawal must specify the name and number of the account
at the book-entry transfer facility to be credited with the withdrawn Old Notes
and otherwise comply with the procedures of such facility. All questions as to
the validity, form and eligibility (including time of receipt) of such notices
will be determined by the Issuers, whose determination shall be final and
binding on all parties. Any Old Notes so withdrawn will be deemed not to have
been validly tendered for exchange for purposes of the Exchange Offer. Any Old
Notes that have been tendered for exchange but that are not exchanged for any
reason will be returned to the holder thereof without cost to such holder (or,
in the case of Old Notes tendered by book-entry transfer into the Exchange
Agent's account at the book-entry transfer facility in accordance with the
book-entry transfer procedures described above, such Old Notes will be credited
to an account maintained with such book-entry transfer facility for the Old
Notes) as soon as practicable after withdrawal, rejection of tender or
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termination of the Exchange Offer. Properly withdrawn Old Notes may be
retendered by following one of the procedures described under 'Procedures for
Tendering' above at any time on or before the Expiration Date.
ACCEPTANCE OF OLD NOTES FOR EXCHANGE; DELIVERY OF NEW NOTES
Upon satisfaction or waiver of all of the conditions to the Exchange Offer,
the Issuers will accept, promptly after the Expiration Date, all Old Notes
properly tendered and will issue the New Notes promptly after acceptance of the
Old Notes. See 'Certain Conditions to the Exchange Offer' below. For purposes of
the Exchange Offer, the Issuers will be deemed to have accepted properly
tendered Old Notes for exchange when, as and if the Issuers have given oral or
written notice thereof to the Exchange Agent.
In all cases, delivery of New Notes in exchange for Old Notes that are
tendered and accepted for exchange in the Exchange Offer will be made only after
timely receipt by the Exchange Agent of (i) Old Notes or a book-entry
confirmation of a book-entry transfer of Old Notes into the Exchange Agent's
account at DTC, (ii) a Letter of Transmittal (or facsimile thereof) or Agent's
Message in lieu thereof, properly completed and duly executed, with any required
signature guarantees, and (iii) any other documents required by the Letter of
Transmittal. If any tendered Old Notes are not accepted for any reason set forth
in the terms and conditions of the Exchange Offer or if certificates
representing Old Notes are submitted for a greater principal amount than the
holder desires to exchange, such unaccepted or non-exchanged Old Notes will be
returned without expense to the tendering holder thereof (or, in the case of Old
Notes tendered by book-entry transfers into the Exchange Agent's account at the
book-entry transfer facility in accordance with the book-entry transfer
procedures described below, such non-exchanged Old Notes will be credited to an
account maintained with such book-entry transfer facility) as promptly as
practicable after the expiration or termination of the Exchange Offer.
CERTAIN CONDITIONS TO THE EXCHANGE OFFER
Notwithstanding any other provisions of the Exchange Offer, the Issuers
will not be required to accept for exchange, or to issue New Notes in exchange
for, any Old Notes and may terminate or amend the Exchange Offer, if at any time
before the acceptance of such Old Notes for exchange or the exchange of the New
Notes for such Old Notes, such acceptance or issuance would violate applicable
law or any interpretation of the staff of the SEC.
The foregoing condition is for the sole benefit of the Issuers and may be
asserted by the Issuers regardless of the circumstances giving rise to such
condition or may be waived by the Issuers in whole or in part at any time and
from time to time in their sole discretion. The failure by the Issuers at any
time to exercise the foregoing rights shall not be deemed a waiver of any such
right and each such right shall be deemed an ongoing right which may be asserted
at any time and from time to time.
In addition, the Issuers will not accept for exchange any Old Notes
tendered, and no New Notes will be issued in exchange for any such Old Notes, if
at such time any stop order is threatened or in effect with respect to the
Registration Statement of which this Prospectus constitutes a part or the
qualification of the Indenture under the Trust Indenture Act of 1939, as
amended.
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EXCHANGE AGENT
Bankers Trust Company has been appointed as the Exchange Agent for the
Exchange Offer. All executed Letters of Transmittal should be directed to the
Exchange Agent at one of the addresses set forth below. Questions and requests
for assistance, requests for additional copies of this Prospectus or of the
Letter of Transmittal and requests for Notices of Guaranteed Delivery should be
directed to the Exchange Agent, addressed as follows:
Deliver to:
BANKERS TRUST COMPANY, EXCHANGE AGENT
By Mail:
BT Services Tennessee, Inc.
P.O. Box 292737
Nashville, Tennessee 37229-2737
(registered or certified mail recommended)
By Hand:
Bankers Trust Company
Corporate Trust & Agency Group
Receipt & Delivery Window
123 Washington Street, 1st Floor
New York, New York 10006
By Overnight Courier:
BT Services Tennessee, Inc.
Corporate Trust & Agency Group
Reorganization Group
648 Grassmere Park Road
Nashville, Tennessee 37211
By Facsimile:
(615) 835-3701 (Confirm by Telephone: (615)
835-3572)
DELIVERY TO AN ADDRESS OTHER THAN AS SET FORTH ABOVE OR TRANSMISSION OF
INSTRUCTIONS VIA FACSIMILE OTHER THAN AS SET FORTH ABOVE DOES NOT CONSTITUTE A
VALID DELIVERY.
FEES AND EXPENSES
The principal solicitation of acceptances of the Exchange Offer is being
made by mail; however, additional solicitations may be made by telegraph,
telephone or in person by officers and regular employees of the Issuers and
their affiliates. No additional compensation will be paid to any such officers
and employees who engage in soliciting tenders. The Issuers will not make any
payment to brokers, dealers, or others soliciting acceptances of the Exchange
Offer. The Issuers, however, will pay the Exchange Agent reasonable and
customary fees for its services and will reimburse it for its reasonable
out-of-pocket expenses in connection therewith.
The estimated cash expenses to be incurred in connection with the Exchange
Offer will be paid by the Issuers.
TRANSFER TAXES
Holders who tender their Old Notes for exchange will not be obligated to
pay any transfer taxes in connection therewith, except that holders who instruct
the Issuers to register New Notes in the name of, or request that Old Notes not
tendered or not accepted in the Exchange Offer be returned to, a person other
than the registered tendering holder will be responsible for the payment of any
applicable transfer tax thereon.
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CONSEQUENCES OF FAILURE TO EXCHANGE
Holders of Old Notes who do not exchange their Old Notes for New Notes in
the Exchange Offer will continue to be subject to the restrictions on transfer
of the Old Notes as set forth in the legend thereon and, except in certain
limited circumstances, will no longer have any registration rights with respect
to the Old Notes. In general, the Old Notes may not be offered or sold, unless
registered under the Securities Act, except pursuant to an exemption from, or in
a transaction not subject to, the Securities Act and applicable state securities
laws. The Issuers do not intend to register the Old Notes under the Securities
Act or any state securities laws. The Issuers believe that, based upon positions
taken by the staff of the SEC, the New Notes issued in the Exchange Offer in
exchange for Old Notes may be offered for resale, resold or otherwise
transferred by each holder thereof (other than a broker-dealer, as set forth
below, and any such holder who is an 'affiliate' of the Company within the
meaning of Rule 405 under the Securities Act) without compliance with the
registration and prospectus delivery provisions of the Securities Act, provided
that the holder's New Notes are acquired in the ordinary course of the holder's
business and the holder has no arrangement or understanding with any person to
participate in a distribution of such New Notes. If any holder has any
arrangement or understanding with respect to a distribution of the New Notes to
be acquired in Exchange Offer, such holder (i) could not rely on the applicable
interpretations of the staff of the SEC and (ii) must comply with the
registration and prospectus delivery requirements of the Securities Act in
connection with any resale transaction. Each broker-dealer that receives New
Notes for its own account in exchange for Old Notes must acknowledge that it
will deliver a prospectus in connection with any resale of the New Notes. See
'Plan of Distribution.' In addition, to comply with the securities laws of
certain jurisdictions, if applicable, the New Notes may not be offered or sold
unless they have been registered or qualified for sale in any such jurisdiction
or an exemption from registration or qualification is available and the terms
and conditions of the exemption are satisfied. The Company does not currently
intend to take any action to register or qualify the New Notes for resale in any
jurisdiction.
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DESCRIPTION OF NOTES
The Old Notes have been issued, and the New Notes will be issued, under the
Indenture, which is an agreement among the Company, the Guarantor and the
Trustee. A copy of the Indenture has been filed as an exhibit to the
Registration Statement of which this Prospectus is a part. See 'Available
Information.' The Indenture is subject to, and governed by, the Trust Indenture
Act of 1939, as amended. The statements made hereunder relating to the Indenture
and the Notes are summaries of certain provisions thereof, do not purport to be
complete and are subject to, and qualified in their entirety by reference to,
all provisions of the Indenture and the Notes. Capitalized terms used but not
defined herein have the respective meanings set forth in the Indenture. As used
under this heading, the term 'Company' means CarrAmerica Realty Corporation and
not any of its subsidiaries unless otherwise expressly stated or the context
otherwise requires.
GENERAL
The Notes constitute two series for purposes of the Indenture. The
Seven-Year Notes are limited to an aggregate principal amount of $150,000,000,
and the Ten-Year Notes are limited to an aggregate principal amount of
$125,000,000. The Notes are direct, senior unsecured obligations of the Company
and rank equally with each other and with all other unsecured and unsubordinated
indebtedness of the Company from time to time outstanding. The Notes are
effectively subordinated to mortgages and other secured indebtedness of the
Company and to indebtedness and other liabilities of the Company's Subsidiaries.
Accordingly, this prior indebtedness would have to be satisfied in full before
holders of the Notes would be able to realize any value from encumbered
properties or properties held by Subsidiaries (as defined below).
As of September 30, 1997, after giving effect to the original sale of the
Old Notes and the application of the proceeds from that sale, the Company had
approximately $983 million of outstanding indebtedness, of which approximately
$575 million was secured by properties owned directly or indirectly by the
Company. The Company may incur additional indebtedness, including secured
indebtedness, subject to the provisions described below under '--Certain
Covenants--Limitations on Incurrence of Indebtedness.'
The Notes are guaranteed as to principal, premium, if any, and interest by
the Guarantor, as described below under 'Note Guarantees.'
The Notes may only be issued in fully registered form in minimum
denominations of $1,000 and integral multiples thereof.
PRINCIPAL AND INTEREST
The Seven-Year Notes bear interest at 7.20% per annum and will mature on
July 1, 2004; the Ten-Year Notes bear interest at 7.375% per annum and will
mature on July 1, 2007. The Notes bear interest from their respective original
dates of issue or from the immediately preceding Interest Payment Date (as
defined below) to which interest has been paid, payable semi-annually in arrears
on January 1 and July 1 of each year, commencing on January 1, 1998 (each, an
'Interest Payment Date'), to the persons in whose name the applicable Notes are
registered in the Security Register on the preceding December 15 or June 15
(whether or not a Business Day, as defined below), as the case may be (each, a
'Regular Record Date'). Interest on the Notes is computed on the basis of a
360-day year of twelve 30-day months.
The New Notes will bear interest from their date of issuance. The Company
will issue the New Notes promptly after expiration of the Exchange Offer and
acceptance of the Old Notes tendered for the New Notes. Holders of Old Notes
whose Old Notes are accepted for exchange will receive interest on such Old
Notes accrued from July 1, 1997, the date of issuance of the Old Notes, to the
date of issuance of the New Notes, with such interest payable with the first
interest payment on the New Notes. Consequently, holders who exchange their Old
Notes for New Notes will receive the same interest payment on January 1, 1998
(the first interest payment date with respect to the Old Notes and the New
Notes) that they would have received had they not accepted the Exchange Offer.
If any Interest Payment Date or Stated Maturity falls on a day that is not
a Business Day, the required payment is to be made on the next Business Day as
if it were made on the date the payment was due and no interest will accrue on
the amount so payable for the period from and after the Interest Payment Date or
the
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Maturity Date, as the case may be. 'Business Day' means any day, other than a
Saturday or Sunday, that is neither a legal holiday nor a day on which banks in
the City of New York or in the City of Chicago are required or authorized by
law, regulation or executive order to close.
The Notes are payable at the corporate trust office or agency maintained
for that purpose in the City of New York, New York, or elsewhere as provided in
the Indenture (the 'Paying Agent'), provided that, at the option of the Company,
payment of interest may be made by check mailed to the address of the person
entitled thereto as it appears in the Security Register or by wire transfer of
funds to that person at an account maintained within the United States.
CERTAIN COVENANTS
Under the Indenture, neither the Company nor any Subsidiary may incur any
Indebtedness (as defined below) if, immediately after giving effect to the
incurrence of that additional Indebtedness and the application of the proceeds
thereof, the aggregate principal amount of all outstanding Indebtedness of the
Company and its Subsidiaries on a consolidated basis determined in accordance
with GAAP is greater than 60% of the sum of (without duplication) (i) the Total
Assets (as defined below) of the Company and its Subsidiaries as of the end of
the calendar quarter covered in the Company's Annual Report on Form 10-K or
Quarterly Report on Form 10-Q, as the case may be, most recently filed with the
SEC (or, if the filing is not permitted under the Exchange Act, with the
Trustee) before the incurrence of the additional Indebtedness and (ii) the
purchase price of any real estate assets or mortgages receivable acquired and
the amount of any securities offering proceeds received (to the extent that the
proceeds were not used to acquire real estate assets or mortgages receivable or
used to reduce Indebtedness), by the Company or any Subsidiary since the end of
the calendar quarter, including those proceeds obtained in connection with the
incurrence of the additional Indebtedness.
In addition to the foregoing limitation on the incurrence of Indebtedness,
neither the Company nor any Subsidiary may incur any Indebtedness secured by any
Encumbrance upon any of the property of the Company or any Subsidiary if,
immediately after giving effect to the incurrence of the additional Indebtedness
and the application of the proceeds thereof, the aggregate principal amount of
all outstanding Indebtedness of the Company and its Subsidiaries on a
consolidated basis which is secured by any Encumbrance on property of the
Company or any Subsidiary is greater than 40% of the sum of (without
duplication) (i) the Total Assets of the Company and its Subsidiaries as of the
end of the calendar quarter covered in the Company's Annual Report on Form 10-K
or Quarterly Report on Form 10-Q, as the case may be, most recently filed with
the SEC (or, if the filing is not permitted under the Exchange Act, with the
Trustee) before the incurrence of the additional Indebtedness and (ii) the
purchase price of any real estate assets or mortgages receivable acquired and
the amount of any securities offering proceeds received (to the extent that the
proceeds were not used to acquire real estate assets or mortgages receivable or
used to reduce Indebtedness), by the Company or any Subsidiary since the end of
the calendar quarter, including those proceeds obtained in connection with the
incurrence of the additional Indebtedness.
The Company and its Subsidiaries may not at any time own Total Unencumbered
Assets (as defined below) equal to less than 150% of the aggregate outstanding
principal amount of the Unsecured Indebtedness (as defined below) of the Company
and its Subsidiaries on a consolidated basis.
In addition to the foregoing limitations on the incurrence of Indebtedness,
neither the Company nor any Subsidiary may incur any Indebtedness if the ratio
of Consolidated Income Available for Debt Service (as defined below) to the
Annual Service Charge (as defined below) for the four consecutive fiscal
quarters most recently ended before the date on which the additional
Indebtedness is to be incurred shall have been less than 1.5:1 on a pro forma
basis after giving effect thereto and to the application of the proceeds
therefrom, and calculated on the assumption that (i) the Indebtedness and any
other Indebtedness incurred by the Company and its Subsidiaries since the first
day of the four-quarter period and the application of the proceeds therefrom,
including Indebtedness to refinance other Indebtedness, had occurred at the
beginning of the period, (ii) the repayment or retirement of any other
Indebtedness by the Company and its Subsidiaries since the first day of the
four-quarter period had been repaid or retired at the beginning of that period
(except that, in making the computation, the amount of Indebtedness under any
revolving credit facility is to be computed based upon the average daily balance
of the Indebtedness during that period), (iii) in the case of Acquired
Indebtedness (as
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defined below) or Indebtedness incurred in connection with any acquisition since
the first day of the four-quarter period, the related acquisition had occurred
as of the first day of the period with the appropriate adjustments with respect
to the acquisition being included in the pro forma calculation, and (iv) in the
case of any acquisition or disposition by the Company or its Subsidiaries of any
asset or group of assets since the first day of the four-quarter period, whether
by merger, stock purchase or sale, or asset purchase or sale, the acquisition or
disposition and any related repayment of Indebtedness had occurred as of the
first day of the period with the appropriate adjustments with respect to the
acquisition or disposition being included in the pro forma calculation.
As used herein, and in the Indenture:
'Acquired Indebtedness' means Indebtedness of a person (i) existing at
the time the person becomes a Subsidiary or (ii) assumed in connection with
the acquisition of assets from the person, in each case, other than
Indebtedness incurred in connection with, or in contemplation of, the
person becoming a Subsidiary or that acquisition. Acquired Indebtedness
shall be deemed to be incurred on the date of the related acquisition of
assets from any person or the date the acquired person becomes a
Subsidiary.
'Annual Service Charge' for any period means the aggregate interest
expense for the period in respect of, and the amortization during the
period of any original issue discount of, Indebtedness of the Company and
its Subsidiaries and the amount of dividends which are payable during the
period in respect of any Disqualified Stock.
'Capital Stock' means, with respect to any person, any capital stock
(including preferred stock), shares, interests, participations or other
ownership interests (however designated) of the person and any rights
(other than debt securities convertible into or exchangeable for corporate
stock), warrants or options to purchase any thereof.
'Consolidated Income Available for Debt Service' for any period means
Earnings from Operations (as defined below) of the Company and its
Subsidiaries plus amounts which have been deducted, and minus amounts which
have been added, for the following (without duplication): (i) interest
expense on Indebtedness of the Company and its Subsidiaries; (ii) provision
for taxes of the Company and its Subsidiaries based on income; (iii)
amortization of debt discount; (iv) provisions for gains and losses on
properties and property depreciation and amortization; (v) the effect of
any noncash charge resulting from a change in accounting principles in
determining Earnings from Operations for the period; and (vi) amortization
of deferred charges.
'Disqualified Stock' means, with respect to any person, any Capital
Stock of the person which by the terms of that Capital Stock (or by the
terms of any security into which it is convertible or for which it is
exchangeable or exercisable), upon the happening of any event or otherwise
(i) matures or is mandatorily redeemable, pursuant to a sinking fund
obligation or otherwise (other than Capital Stock which is redeemable
solely in exchange for common stock), (ii) is convertible into or
exchangeable or exercisable for Indebtedness or Disqualified Stock or (iii)
is redeemable at the option of the holder thereof, in whole or in part
(other than Capital Stock which is redeemable solely in exchange for
Capital Stock which is not Disqualified Stock or the redemption price of
which may, at the option of that person, be paid in Capital Stock which is
not Disqualified Stock), in each case on or before the Stated Maturity of
the Notes; provided, however, that equity interests whose holders have (or
will have after the expiration of an initial holding period) the right to
have such equity interests redeemed for cash in an amount determined by the
value of the Common Stock (including, without limitation, certain equity
interests in the Guarantor and Carr Realty, L.P.) do not constitute
Disqualified Stock.
'Earnings from Operations' for any period means net earnings excluding
gains and losses on sales of investments, extraordinary items, and property
valuation losses, net, as reflected in the financial statements of the
Company and its Subsidiaries for the period determined on a consolidated
basis in accordance with GAAP.
'Encumbrance' means any mortgage, lien, charge, pledge or security
interest of any kind, except any mortgage, lien, charge, pledge or security
interest of any kind which secures debt of the Guarantor owed to the
Company.
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'Indebtedness' of the Company or any Subsidiary means any indebtedness
of the Company or any Subsidiary, whether or not contingent, in respect of
(i) borrowed money or indebtedness evidenced by bonds, notes, debentures or
similar instruments, (ii) borrowed money or indebtedness evidenced by
bonds, notes, debentures or similar instruments secured by any Encumbrance
existing on property owned by the Company or any Subsidiary, (iii)
reimbursement obligations in connection with any letters of credit actually
issued or amounts representing the balance deferred and unpaid of the
purchase price of any property or services, except any such balance that
constitutes an accrued expense or trade payable, or all conditional sale
obligations or obligations under any title retention agreement, (iv) the
amount of all obligations of the Company or any Subsidiary with respect to
redemption, repayment or other repurchase of any Disqualified Stock, and
(v) any lease of property by the Company or any Subsidiary as lessee which
is reflected on the Company's consolidated balance sheet as a capitalized
lease in accordance with GAAP, to the extent, in the case of items of
indebtedness under (i) through (iv) above, that any such items (other than
letters of credit) would appear as a liability on the Company's
consolidated balance sheet in accordance with GAAP, and also includes, to
the extent not otherwise included, any obligation of the Company or any
Subsidiary to be liable for, or to pay, as obligor, guarantor or otherwise
(other than for purposes of collection in the ordinary course of business),
Indebtedness of another person (other than the Company or any Subsidiary)
(it being understood that Indebtedness shall be deemed to be incurred by
the Company or any Subsidiary whenever the Company or the Subsidiary shall
create, assume, guarantee or otherwise become liable in respect thereof).
'Subsidiary' means a corporation, partnership or other entity a
majority of the voting power of the voting equity securities or the
outstanding equity interests of which are owned, directly or indirectly, by
the Company or by one or more other Subsidiaries of the Company. For the
purposes of this definition, 'voting equity securities' means equity
securities having voting power for the election of directors, whether at
all times or only so long as no senior class of security has such voting
power by reason of any contingency.
'Total Assets' as of any date means the sum of (i) the Undepreciated
Real Estate Assets and (ii) all other assets of the Company and its
Subsidiaries determined in accordance with GAAP (but excluding
intangibles).
'Total Unencumbered Assets' means the sum of (i) those Undepreciated
Real Estate Assets not subject to an Encumbrance for borrowed money and
(ii) all other assets of the Company and its Subsidiaries not subject to an
Encumbrance for borrowed money determined in accordance with GAAP (but
excluding intangibles).
'Undepreciated Real Estate Assets' as of any date means the cost
(original cost plus capital improvements) of real estate assets of the
Company and its Subsidiaries on that date, before depreciation and
amortization, determined on a consolidated basis in accordance with GAAP.
'Unsecured Indebtedness' means Indebtedness which is not secured by
any Encumbrance upon any of the properties of the Company or any
Subsidiary.
The Indenture also contains certain other covenants which require the
Company to maintain its corporate existence, maintain the condition of the
Company's material properties and insurance on properties against loss or
damage, pay or discharge all taxes, assessments, charges and claims, provide
certain financial information to holders of the Notes and limit the ability of
each of the Company and the Guarantor to merge, consolidate or convey all or
substantially all of their assets.
OPTIONAL REDEMPTION
The Notes may be redeemed at any time at the option of the Company, in
whole or in part, at a redemption price equal to the sum of (i) the principal
amount of the Notes being redeemed plus (ii) accrued interest thereon to the
redemption date plus (iii) the Make-Whole Amount (as defined below), if any,
with respect to those Notes (the 'Redemption Price').
If notice has been given as provided in the Indenture and funds for the
redemption of any Notes called for redemption shall have been made available on
the redemption date referred to in the notice, the Notes will cease
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to bear interest on the date fixed for the redemption specified in the notice
and the only right of the holders of the Notes will be to receive payment of the
Redemption Price.
Notice of any optional redemption of any Notes is to be given to holders of
the Notes at their addresses, as shown in the Security Register, not more than
60 nor less than 30 days before the date fixed for redemption. The notice of
redemption is required to specify, among other items, the Redemption Price and
the principal amount of the Notes held by the holder to be redeemed.
If less than all of the Notes are to be redeemed at the option of the
Company, the Company must notify the Trustee at least 45 days before the giving
of the notice of redemption to the holders of the Notes (or such shorter period
as is satisfactory to the Trustee) of the aggregate principal amount of Notes to
be redeemed and their redemption date. The Trustee is required to select, in
such manner as it deems fair and appropriate, Notes to be redeemed in part.
Notes may be redeemed, in part, in the minimum authorized denomination for Notes
or in any integral multiple thereof.
'Make-Whole Amount' means, in connection with any optional redemption or
accelerated payment of any Note, the excess, if any, of (i) the aggregate
present value as of the date of the redemption or accelerated payment of each
dollar of principal being redeemed or paid and the amount of interest (exclusive
of interest accrued to the date of redemption or accelerated payment) that would
have been payable in respect of the dollar if the redemption or accelerated
payment had not been made, determined by discounting, on a semi-annual basis,
the principal and interest at the Reinvestment Rate (determined on the third
Business Day preceding the date the notice of redemption is given or declaration
of acceleration is made) from the respective dates on which the principal and
interest would have been payable if the redemption or accelerated payment had
not been made, over (ii) the aggregate principal amount of the Notes being
redeemed or paid.
'Reinvestment Rate' means 0.25% (twenty-five one hundredths of one percent)
plus the arithmetic mean of the yields under the respective headings 'This Week'
and 'Last Week' published in the Statistical Release under the caption 'Treasury
Constant Maturities' for the maturity (rounded to the nearest month)
corresponding to the remaining life to maturity of the applicable Notes, as of
the payment date of the principal being redeemed or paid. If no maturity exactly
corresponds to that maturity, yields for the two published maturities most
closely corresponding to that maturity are to be calculated pursuant to the
immediately preceding sentence and the Reinvestment Rate is to be interpolated
or extrapolated from those yields on a straight-line basis, rounding in each of
the relevant periods to the nearest month. For purposes of calculating the
Reinvestment Rate, the most recent Statistical Release published before the date
of determination of the Make-Whole Amount is to be used.
'Statistical Release' means the statistical release designated 'H.15(519)'
or any successor publication which is published weekly by the Federal Reserve
System and which establishes yields on actively traded United States government
securities adjusted to constant maturities or, if the statistical release is not
published at the time of any determination of the Make-Whole Amount, then such
other reasonably comparable index which shall be designated by the Company.
GLOBAL SECURITIES
The Notes may be issued in fully-registered form only.
Each series of the New Notes will be evidenced by one or more global Notes
(the 'Global Securities'), which will be deposited with, or on behalf of, The
Depository Trust Company, New York, New York ('DTC') and registered in the name
of Cede & Co. ('Cede'), as DTC's nominee.
Holders of the New Notes who are not participants in DTC ('Participants')
may beneficially own interests in a Global Security held by DTC only through
Participants, including certain banks, brokers, dealers, trust companies and
other parties that clear through or maintain a custodial relationship with a
Participant, either directly or indirectly, and have indirect access to the DTC
system ('Indirect Participants'). So long as Cede, as the nominee of DTC, is the
registered owner of any Global Security, Cede for all purposes will be
considered the sole holder of such Global Security. Except as provided below,
owners of beneficial interests in a Global Security will not be entitled to have
certificates registered in their names, will not receive or be entitled to
receive physical delivery of certificates in definitive form, and will not be
considered the holder thereof.
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Neither the Issuers nor the Trustee (nor any registrar or paying agent)
will have any responsibility for the performance by DTC or its Participants or
Indirect Participants of their respective obligations under the rules and
procedures governing their operations. DTC has advised the Company that it will
take any action permitted to be taken by a holder of Notes only at the direction
of one or more Participants whose accounts are credited with DTC interests in a
Global Security.
DTC has advised the Company as follows: DTC is a limited purpose trust
company organized under the laws of the State of New York, a 'banking
organization' within the meaning of the New York Banking Law, a member of the
Federal Reserve System, a 'clearing corporation' within the meaning of the New
York Uniform Commercial Code and a 'clearing agency' registered pursuant to the
provisions of Section 17A of the Exchange Act. DTC was created to hold
securities for its Participants and to facilitate the clearance and settlement
of securities transactions, such as transfers and pledges, among Participants in
deposited securities through electronic book-entry changes to accounts of its
Participants, thereby eliminating the need for physical movement of securities
certificates. Participants include securities brokers and dealers, banks, trust
companies, clearing corpora-tions and certain other organizations. Certain of
such Participants (or their representatives), together with other entities, own
DTC. The rules applicable to DTC and its Participants are on file with the SEC.
Purchases of Notes under the DTC system must be made by or through
Participants, which will receive a credit for the Notes on DTC's records. The
ownership interest of each actual purchaser of each Note (a 'Beneficial Owner')
is in turn to be recorded on the Participants' and Indirect Participants'
records. Beneficial Owners will not receive written confirmation from DTC of
their purchase, but Beneficial Owners are expected to receive written
confirmations providing details of the transaction, as well as periodic
statements of their holdings, from the Participant or Indirect Participant
through which the Beneficial Owner entered into the transaction. Transfers of
ownership interests in the Notes are to be accomplished by entries made on the
books of Participants acting on behalf of Beneficial Owners. Beneficial Owners
will not receive certificates representing their ownership interests in Notes,
except in the event that use of the book-entry system for the Notes is
discontinued.
The deposit of Notes with DTC and their registration in the name of Cede
effect no change in beneficial ownership. DTC has no knowledge of the actual
Beneficial Owners of the Notes; DTC's records reflect only the identity of the
Participants to whose accounts such Notes are credited, which may or may not be
the Beneficial Owners. The Participants will remain responsible for keeping
account of their holdings on behalf of their customers.
The laws of some jurisdictions require that certain purchasers of
securities take physical delivery of securities in definitive form. Such laws
may impair the ability to transfer beneficial interests in the Global Security.
Conveyance of notices and other communications by DTC to Participants, by
Participants to Indirect Participants and by Participants and Indirect
Participants to Beneficial Owners will be governed by arrangements among them,
subject to any statutory or regulatory requirements that may be in effect from
time to time.
Principal and interest payments on the Notes will be made to DTC by wire
transfer of immediately available funds. DTC's practice is to credit
Participants' accounts on the payable date in accordance with their respective
holdings shown on DTC's records unless DTC has reason to believe that it will
not receive payment on the payable date. Payments by Participants to Beneficial
Owners will be governed by standing instructions and customary practices, as is
the case with securities held for the accounts of customers in bearer form or
registered in 'street name,' and will be the responsibility of such Participant
and not of DTC or the Issuers, subject to any statutory or regulatory
requirements as may be in effect from time to time. Payment of principal and
interest to DTC is the responsibility of the Company or the Guarantor, as the
case may be, disbursement of such payments to Participants is the responsibility
of DTC, and disbursement of such payments to the Beneficial Owners is the
responsibility of Participants and Indirect Participants. Neither the Issuers
nor the Trustee will have any responsibility or liability for any aspect of the
records relating to or payments made on account of beneficial ownership
interests in the Global Securities or for maintaining, supervising or reviewing
any records relating to such beneficial ownership interests.
DTC may discontinue providing its services as securities depository with
respect to the Notes at any time by giving reasonable notice to the Company. In
the event that DTC notifies the Company that it is unwilling or
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<PAGE>
unable to continue as depository for any Global Security or if at any time DTC
ceases to be a clearing agency registered as such under the Exchange Act when
DTC is required to be so registered to act as such depository and no successor
depository shall have been appointed within 90 days of such notification or of
the Company becoming aware of DTC's ceasing to be so registered, as the case may
be, certificates for the relevant Notes will be printed and delivered in
exchange for interests in such Global Security. Any Global Security that is
exchangeable pursuant to the preceding sentence shall be exchangeable for
relevant Notes registered in such names as DTC shall direct. It is expected that
such instructions will be based upon directions received by DTC from its
Participants with respect to ownership of beneficial interests in such Global
Security.
The Company may decide to discontinue use of the system of book-entry
transfers through DTC (or a successor securities depository). In that event,
certificates representing the Notes will be printed and delivered.
The information in this section concerning DTC and DTC's book-entry system
has been obtained from sources that the Issuers believe to be reliable, but the
Issuers do not take responsibility for the accuracy thereof.
EVENTS OF DEFAULT
The Indenture provides that the following events are 'Events of Default'
with respect to the Notes: (a) default for 30 days in the payment of any
interest due and payable on any Notes; (b) default in the payment of the
principal of (or premium or Make-Whole Amount, if any, on) any Notes when due
and payable; (c) (i) default in the performance, or breach, of any other
covenant or warranty of the Company or the Guarantor contained in the Indenture
with respect to the Notes, or (ii) the failure by any Subsidiary to comply with
the provisions of the covenants described under 'Certain Covenants--Limitations
on Incurrence of Indebtedness' above, in each case, continued for 60 days after
written notice as provided in the Indenture; (d) default under any bond,
debenture, note, or other evidence of indebtedness for money borrowed by the
Company or any of its Subsidiaries (including obligations under leases required
to be capitalized on the balance sheet of the lessee under GAAP) representing
recourse indebtedness or indebtedness guaranteed by such party in an aggregate
principal amount in excess of $5,000,000, or under any mortgage, indenture or
instrument under which there may be issued or by which there may be secured or
evidenced any indebtedness for money borrowed by the Company or any of its
Subsidiaries (including the leases) representing recourse indebtedness or
indebtedness guaranteed by such party in an aggregate principal amount in excess
of $5,000,000, whether the indebtedness existed at the date of the Indenture or
was created afterwards, which default shall have resulted in the indebtedness
becoming or being declared due and payable before the date on which it would
otherwise have become due and payable, or the obligations being accelerated,
without the acceleration having been rescinded or annulled; and (e) certain
events of bankruptcy, insolvency or reorganization, or court appointment of a
receiver, liquidator or trustee of the Company or any Significant Subsidiary or
for all or substantially all of the property of the Company or any Significant
Subsidiary. The Term 'Significant Subsidiary' has the meaning ascribed to the
term in Regulation S-X promulgated by the SEC under the Securities Act.
If an Event of Default described in clause (e) above relating to the
Company or any Significant Subsidiary occurs, the principal amount of, and the
Make-Whole Amount (if any) on, all outstanding Notes will become due and payable
without any declaration or other act on the part of the Trustee of the holders.
DEFEASANCE AND COVENANT DEFEASANCE
The Company may discharge any and all of its obligations to holders of the
Notes at any time ('defeasance'), but may not thereby avoid its duty to register
the transfer or exchange of the Notes, to replace any temporary, mutilated,
destroyed, lost or stolen Notes or to maintain an office or agency in respect of
the Notes. The Company may instead be released from the obligations imposed by
certain provisions of the Indenture (which contain the covenants described above
limiting incurrence of indebtedness and other matters) and omit to comply with
such provisions without creating an Event of Default ('covenant defeasance').
Defeasance or covenant defeasance may be effected only if, among other things:
(i) the Company irrevocably deposits with the Trustee cash or Government
Obligations (as defined in the Indenture), as trust funds, an amount certified
to be sufficient to pay at maturity (or upon redemption) the principal, premium,
if any, and interest on the outstanding Notes and (ii) the Company delivers to
the Trustee an opinion of counsel to the effect that the holders of the Notes
will not recognize income, gain or loss for United States federal income tax
purposes as a result of such
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defeasance or covenant defeasance and that defeasance or covenant defeasance
will not otherwise alter such holders' United States federal income tax
treatment of principal, premium and interest payments on the Notes. In the case
of a defeasance, such opinion must be based on a ruling of the IRS or a change
in United States
federal income tax law occurring after the date of the Indenture, since such a
result would not occur under current
tax law.
NO PERSONAL LIABILITY OF SHAREHOLDERS, OFFICERS OR DIRECTORS
The Indenture provides that no recourse may be had against any past,
present or future shareholder, officer or director of the Company, the Guarantor
or any successor entity under or upon any obligation, covenant or agreement
contained in the Indenture or in any Note, or because of any indebtedness
evidenced thereby.
NOTE GUARANTEES
The Notes are guaranteed irrevocably and unconditionally as to principal,
premium, if any, and interest by the Guarantor, as described below under 'The
Note Guarantees.'
SAME-DAY SETTLEMENT AND PAYMENT
All payments of principal and interest in respect of Notes in the form of
Global Securities will be made by the Company in immediately available funds.
Secondary trading in long-term notes and debentures of corporate issuers is
generally settled in clearing house or next-day funds. In contrast, Notes
represented by a Global Security will trade in DTC's Same-Day Funds Settlement
System until maturity or until the Notes are issued in certificated form, and
secondary market trading activity in such Notes will therefore be required by
DTC to settle in immediately available funds. No assurance can be given as to
the effect, if any, of settlement in immediately available funds on trading
activity in the Notes.
GOVERNING LAW
The Indenture is governed by and is to be construed in accordance with the
laws of the State of New York.
NOTE GUARANTEES
The Notes are guaranteed irrevocably and unconditionally as to principal,
premium, if any, and interest by the Guarantor. If the Company defaults in the
payment of the principal of or premium or interest on the Notes when and as the
same becomes due, whether upon maturity, acceleration, call for redemption, or
otherwise, the Guarantor is required promptly to make such payment in full,
without the necessity of action by the Trustee or any holder. The Indenture
provides that the Guarantor is to be released from its obligations as guarantor
under the Notes under certain circumstances. The obligations of the Guarantor
under its guarantee will be limited so as to avoid their performance being
considered a fraudulent conveyance under applicable law.
The Guarantor is a partnership in which the Company indirectly serves as
sole general partner and owned, as of September 30, 1997, approximately 87.7% of
the partnership interests.
The Note Guarantees are unsecured obligations of the Guarantor, and are
effectively subordinated to mortgage and other secured indebtedness of the
Guarantor. See 'Capitalization--Debt Financing.'
The Guarantor was organized in March 1996. Its activities include the
acquisition, development, ownership and operation of office properties,
primarily in select suburban growth markets across the United States. The
Guarantor's portfolio, as of October 31, 1997 consisted of (i) 47 operating
properties containing approximately 4.0 million square feet of office space
located in Austin, Texas, Southeast Denver, suburban Dallas, suburban Salt Lake
City, suburban Chicago, Northern California and Southern California, (ii) four
projects under construction that will contain approximately 414,000 square foot
of office space, and (iii) land and options to acquire land that will support
the development of up to 1.2 million square feet of office space. The
Guarantor's properties owned as of September 30, 1997 were 92.3% leased as of
that date. Each of these properties is wholly owned by the Guarantor.
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The Guarantor is subject to the informational requirements of the Exchange
Act, and files reports and other information with the SEC. See 'Available
Information.'
The Guarantor is capitalized through the issuance of units of limited
partnership interest ('Partnership Units'). As of September 30, 1997, the
partners' capital in the Guarantor was approximately $320 million. The Company
indirectly serves as the sole general partner of the Guarantor by reason of its
ownership of all the outstanding capital stock of the Guarantor's general
partner, CarrAmerica Realty GP Holdings, Inc., a Delaware corporation ('GP
Holdings'). GP Holdings owns a 1.0% general partner interest (in the form of
Partnership Units) in the Guarantor. In addition, the Company, through its
wholly owned subsidiary, CarrAmerica Realty LP Holdings, Inc., a Delaware
corporation, owned an approximate 86.7% limited partnership interest (in the
form of Partnership Units) in the Guarantor as of September 30, 1997. The
remaining Partnership Units are owned by persons who received Partnership Units
in connection with the contribution to the Guarantor of interests in certain
Properties. The Guarantor has approximately 70 employees, including
approximately 50 on-site employees.
Generally, the Company currently acquires office properties through the
Guarantor if they are located in its Austin, Texas, Southeast Denver, suburban
Dallas and suburban Salt Lake City target markets. In addition, the Company
currently utilizes the Guarantor as the acquisition vehicle in transactions
where some or all of the sellers desire to receive consideration in the form of
partnership interests rather than cash. As of October 31, 1997, such
transactions have been effected in the Southeast Denver, Austin, Texas, suburban
Salt Lake City, suburban Chicago and Southern California markets. The Company
currently expects that future acquisitions will be effected through the
Guarantor in the circumstances described above, although there can be no
assurance that the Company will elect to acquire any additional office
properties through the Guarantor, or that the Company will not acquire office
properties through the Guarantor under different circumstances. All such
decisions will be made by the Company, either directly or indirectly.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The following is a general summary of certain U.S. federal income tax
considerations applicable to the exchange of Old Notes for New Notes. This
discussion is based on laws, regulations, rulings and decisions now in effect,
all of which are subject to change, possibly retroactively. The discussion does
not cover all aspects of federal income taxation that may be relevant to holders
of the Notes, in light of their specific circumstances, particularly holders who
own 10% or more of the stock of the Company or holders subject to special
treatment under the federal income tax laws (such as insurance companies,
financial institutions, tax exempt organizations, foreign persons and taxpayers
subject to the alternative minimum tax). It also does not address state, local,
foreign or other tax laws.
EXCHANGE OF NOTES
The exchange of Old Notes for New Notes in the Exchange Offer should not be
treated as an 'exchange' for U.S. federal income tax purposes because the New
Notes should not be considered to differ materially in kind or extent from the
Old Notes and because the exchange will occur by operation of the terms of the
Old Notes. As a result, there should be no federal income tax consequences to
holders exchanging Old Notes for New Notes in the Exchange Offer, and a holder
will have the same adjusted basis and holding period in the New Notes as it had
in the Old Notes immediately before the exchange.
EACH HOLDER SHOULD CONSULT HIS OR HER TAX OWN ADVISOR IN DETERMINING THE
FEDERAL, STATE, LOCAL AND ANY OTHER TAX CONSEQUENCES TO THE PARTICULAR HOLDER OF
THE EXCHANGE OF OLD NOTES FOR NEW NOTES.
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THE COMPANY
The Company is a publicly-traded REIT that focuses primarily on the
acquisition, development, ownership and operation of suburban office properties
in select suburban markets across the United States. As of October 31, 1997, the
Company owned interests in 232 operating properties containing approximately
17.9 million square feet of office space, 16 projects under construction that it
intends to own and operate that will contain approximately 2.7 million square
feet of office space, and land and options to acquire land that will support the
development of up to 4.6 million square feet of office space. The operating
properties owned by the Company as of September 30, 1997 were 96.5% leased as of
that date.
The Company has maintained a strategic alliance with SC-USREALTY since
November 1995. As of September 30, 1997, SC-USREALTY owned approximately 42.6%
of the outstanding Common Stock
of the Company (38.2% on a fully diluted basis). The Company is the exclusive
strategic investment of
SC-USREALTY in the commercial office property business in the United States.
The Company and its predecessor, OCCO, have been in the real estate
business in the Washington, D.C. metropolitan area for more than 35 years. In
late 1995, the Company shifted its focus from downtown Washington, D.C. to a
national business strategy. The Company provides a full range of real estate
services through a staff of over 1,000 employees located throughout the United
States.
The Company is a Maryland corporation that was formed in July 1992. The
principal executive offices of the Company are located at 1700 Pennsylvania
Avenue, N.W., Washington, D.C. 20006, and its telephone number is (202)
624-7500.
BUSINESS STRATEGY
The Company's primary business objective is to achieve long-term
sustainable cash flow growth through a strategy of (i) acquiring, developing,
owning and operating office properties primarily in suburban markets throughout
the United States that exhibit strong, long-term growth characteristics and (ii)
developing a national operating system that satisfies and capitalizes on the
financial and operational demands of corporate office space users. The Company
believes that many growth-oriented companies are relocating to and expanding in
suburban locations that offer lower operating costs, greater convenience and a
higher quality of life than traditional central business districts. The Company
seeks to provide suburban office space that will meet the changing needs of
these corporate users of office space.
Target Markets. The Company has focused its acquisition and development
activity in the Pacific, Mountain, Central and Southeast regions of the United
States, regions which generally possess strong growth characteristics. Within
these regions, the Company is targeting specific submarkets in which operating
costs for businesses are relatively low, long-term population and job growth
generally are expected to exceed the national average, large, well-educated
employment pools exist, and barriers to entry exist for new supplies of office
space. The Company has established a local presence in each of its existing
target markets through its investment activity and through the relationships
established by its experienced market officers. The Company's target markets
include the following: San Francisco Bay Area; Sacramento; metropolitan
Washington, D.C.; suburban Atlanta; suburban Chicago; Southeast Denver; suburban
Dallas; suburban Seattle; Orange County/Los Angeles; San Diego; Austin, Texas;
suburban Salt Lake City; suburban Phoenix; Florida; and suburban Portland,
Oregon.
For each identified target market, the Company has established a set of
general guidelines and physical characteristics to evaluate acquisition
opportunities. All investment decisions are driven by real estate research,
focusing on variables such as economic base analysis, job growth and supply and
demand fundamentals. The Company's goal is to become one of the major owners and
operators of office space in each of its selected target markets. By achieving
such critical mass, the Company believes that it will be able to better serve
its customers' needs and realize certain operating efficiencies.
Acquisitions of Operating Properties. The Company has implemented a major
initiative to acquire operating properties in order to establish the operating
platform for its national business strategy. Between January 1, 1996 and October
31, 1997, the Company acquired 218 operating properties containing approximately
14.5 million square feet of office space, resulting in an approximately 425%
increase in the total square footage of operating
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properties in which the Company has a majority interest. These properties were
acquired for an aggregate purchase price of approximately $1.7 billion. See
'Recent Developments.'
Development Program. The Company's development program is becoming an
increasingly important component of its growth strategy as a result of the
influx of capital into the office property market. The Company now believes that
long-term investment returns resulting from developing office properties
generally will exceed those from acquiring office properties, and without the
Company assuming significantly increased investment risks. The Company minimizes
its development risk by employing extensively trained and experienced
development personnel, by not assuming significant entitlement risk in
conjunction with land acquisitions and by entering into guaranteed maximum price
(GMP) construction contracts with seasoned and credible contractors. Most
importantly, the Company carefully analyzes the supply and demand
characteristics of its target markets before commencing inventory development in
a given market. In general, the Company will only undertake inventory
development in markets with strong real estate fundamentals and then, the
Company will construct prototypical office buildings attractive to a wide range
of office users. Furthermore, because the Company's development projects will
typically be between 125,000 and 150,000 square feet in size, these projects
individually are not significant to the Company. The Company does not intend to
have concentrations of inventory development exceeding 250,000 rentable square
feet in any of its target markets at any given time. Although the Company has no
pre-set leasing guidelines for inventory development, on average, the Company
expects that its development projects, in the aggregate, at any time will be
between 60% and 75% leased or committed. The Company's research-driven
development program enables it to tailor its development activities in each
target market, from inventory development to build-to-suit projects to holding
raw land for future opportunities.
To implement its national development program, the Company acquired a
substantial economic interest in CarrAmerica Development & Construction and its
experienced development staff in May 1996 and has since employed additional
development professionals in the Company's market offices where development is
taking place. The Company's development team currently consists of approximately
40 persons who have an average of over 15 years of experience in developing
office properties across the United States. Since January 1, 1997, the Company
has placed in service two development property containing approximately 290,000
rentable square feet. In addition, as of October 31, 1997, the Company had 16
other projects under construction (with an estimated development cost of $372.9
million) that it intends to own and operate. The 16 projects will contain
approximately 2.7 million rentable square feet. As of October 31, 1997, these 16
projects were 60% pre-leased. See 'Recent Developments--Recent Acquisitions and
Development Activity.'
Investments in Land for Future Development. Owning a sufficient inventory
of land for future development is critical to the Company's development program;
therefore, the Company will continue to invest in land for future development.
The Company's goal is to allocate approximately 5% of its invested capital to
investments in land. In addition to its portfolio of operating properties and
projects currently under development, the Company owned or controlled, as of
October 31, 1997, 238 acres of land for future development in ten of its target
markets. The Company also had, as of October 31, 1997, entered into binding
agreements (subject to certain conditions) and non-binding letters of intent to
acquire an additional 156 acres of land for future development in five of its
target markets. No assurance can be given that any of these potential land
acquisitions will be consummated. The Company believes that acquiring land to
support future development provides it with a competitive advantage in
responding to customers' needs for office space in markets with low vacancy
rates.
Asset Optimization. As a component of the Company's business strategy, it
may sell assets that are inconsistent with its long-term strategic or return
objectives or where market conditions for sale are favorable, and redeploy the
proceeds into other office properties (utilizing tax-deferred exchanges where
possible). Consistent with this strategy, the Company recently sold First State
Bank Tower, its 2% interest in the limited partnership that owned 1575 Eye
Street, N.W., Washington, D.C. and its 5% interest in the limited partnership
that owns 1776 Eye Street, N.W., Washington, D.C. The Company also may consider
selling additional properties or interests in properties, some of which may be
significant.
National Operating System. As part of its business strategy, the Company is
implementing a national operating system to provide nationally coordinated
customer service, marketing and development. The Company's national operating
system consists of three components: (i) a Market Officer Group, currently
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consisting of ten market officers focused on developing and maintaining strong
local relationships with the Company's customers and the brokerage community and
identifying investment opportunities for the Company; (ii) a National Marketing
Group, which, is dedicated to marketing the Company's products and services to a
targeted list of major corporate users of office space; and (iii) a National
Development Group, which is responsible for developing suburban office
properties, build-to-suit facilities and business parks. The Company's national
operating system is designed to satisfy and capitalize on the financial and
operational demands of corporate office space users. The Company believes that
through its existing portfolio of operating properties, property development
opportunities and land acquired for future development, the Company can generate
incremental demand through the relocation and expansion needs of many of its
customers, both within a target market and in multiple target markets.
FINANCING STRATEGY
In order to meet its capital requirements at a reasonable cost, the Company
will require access to diverse sources of capital, including the common and
preferred stock markets, the private market for operating partnership units, and
the public and private debt markets. In order to ensure access to these capital
sources, the Company's financial strategy is predicated on conservative
financial policies.
Common Stock, including operating partnership units that may be redeemed
for shares of Common Stock, is and will continue to be the largest component of
the Company's capital structure. Since January 1996, the Company has raised more
than $1.0 billion from the sale of shares of Com-mon Stock and $43.5 million
from the issuance of operating partnership units. Of the total Common Stock sold
since SC-USREALTY'S initial investment in the Company, SC-USREALTY has purchased
$232 million, or 30.0%. The Company expects that SC-USREALTY will continue to
participate in future Common Stock offerings, although it is not obligated
to do so.
To date, preferred stock has been only a small component of the Company's
capital structure. As of November 7, 1997, the Company had 780,000 shares of
Series A Cumulative Convertible Redeemable Preferred Stock outstanding, 8
million shares of Series B Cumulative Redeemable Preferred Stock outstanding and
6 million depositary shares of Series C Cumulative Redeemable Preferred Stock
Outstanding. The Company currently does not expect that its preferred stock
capitalization will exceed 20% of its total equity capitalization. See 'Recent
Developments--Financing Activity.'
Debt from the public and private debt markets is also a key component of
the Company's capital structure. In June 1997, the Company sold the Old Notes,
which are unsecured, to institutional investors for net proceeds of
approximately $272 million. In formulating its debt capitalization strategy, the
Company considers a number of factors, including the benefits of Company-based
financings versus asset-specific financings, floating rate debt exposure, debt
maturity management, coverage ratios and total debt outstanding as compared to
asset values. Although the Company may from time to time assume mortgage debt in
connection with property acquisitions, the Company, in accordance with its debt
capitalization strategy, plans to primarily utilize Company-based financings in
the form of long-term, unsecured, fixed rate bonds, rather than asset-specific
mortgage financings. The maturities of bonds issued will be staggered in order
to produce normalized maturities and therefore mitigate refinancing risk. For
short-term debt capitalization, the Company will continue to utilize its
unsecured, floating rate, revolving line of credit to provide the necessary
capital for acquisitions and development. With respect to floating rate debt
exposure, the Company plans to keep its average unhedged floating rate debt
outstanding to an amount less than 10% of total asset value. The Company expects
to continue operating with adequate debt service coverage ratios and to continue
maintaining a sufficient pool of unencumbered assets to service the Company's
unsecured debt.
The Company's financing strategy may be changed from time to time by its
Board of Directors without the consent of its stockholders or other
securityholders.
REAL ESTATE SERVICES
The Company generally provides real estate operating services for its
properties. In certain circumstances, however, such as during a transitional
period following the acquisition of a property, the Company may use a
third-party real estate service provider. As of October 31, 1997, the Company
provided its own real estate operating services for 17.5 million square feet (or
98%) of its portfolio. The Company, through certain subsidiaries, also provides
fee-based real estate services for related and unrelated parties.
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CAPITALIZATION
The following table sets forth the capitalization of the Company as of
September 30, 1997 on an historical basis and on a pro forma basis, giving
effect to (i) the acquisitions of office properties and land that the Company
has consummated since September 30, 1997 and expects to consummate in the near
future, (ii) sale of Preferred Stock since September 30, 1997 and (iii) the
repayment of certain of the Company's outstanding indebtedness.
<TABLE>
<CAPTION>
SEPTEMBER 30, 1997
------------------------
HISTORICAL PRO FORMA
---------- ----------
(IN THOUSANDS)
<S> <C> <C>
Mortgage Debt..................................................... $ 481,058 $ 574,699
Lines of credit................................................... 147,000 133,678
Senior Unsecured Notes due 2004 and 2007.......................... 275,000 275,000
Other liabilities................................................. 72,514 73,088
Total liabilities............................................... 975,572 1,056,465
Minority Interest................................................. 67,331 120,444
Stockholders' equity:
Preferred Stock, $.01 par value; 15,000,000 shares authorized:
Series A Preferred Shares, 780,000 issued and outstanding....... 8 8
Series B Preferred Shares, 8,000,000 issued and outstanding..... 80 80
Series C Depositary Preferred Shares, 6,000,000 issued and
outstanding.................................................. -- 60
Common Stock, $.01 par value, 90,000,000 shares authorized;
58,168,602 shares issued and outstanding;.......................
Additional paid-in capital........................................ 1,381,214 1,526,029
Cumulative dividends paid in excess of net income................. (73,770) (68,658)
---------- ----------
Total stockholders' equity........................................ 1,308,114 1,458,101
---------- ----------
Total capitalization.............................................. $2,351,017 $2,635,010
---------- ----------
---------- ----------
</TABLE>
DEBT FINANCING
As of September 30, 1997, certain of the 232 operating office properties
that were consolidated for financial statement purposes were subject to existing
mortgage indebtedness in an aggregate principal amount of $481 million
(encumbering 48 of such properties), and unsecured indebtedness of approximately
$147 million, which bore a floating interest rate. As of September 30, 1997, the
Company's fixed rate debt (comprising an aggregate principal amount of $756
million) bears an effective weighted average interest rate of 7.9% and a
weighted average maturity of 6.4 years (assuming loans callable before maturity
are called as early as possible).
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RATIOS OF EARNINGS TO FIXED CHARGES
The Company's ratio of earnings to fixed charges for the period from
February 16, 1993 (commencement of operations) to December 31, 1993, for the
years ended December 31, 1994, 1995 and 1996 and for the nine months ended
September 30, 1997 were 1.75x, 1.81x, 1.91x, 1.74x, 1.74x and 2.01x,
respectively. See 'Summary--Summary Selected Financial Information' for pro
forma information on the Company's ratios of earnings to fixed charges.
The ratios of earnings to fixed charges were computed by dividing earnings
by fixed charges. For this purpose, earnings consist of income (loss) before
gains from sales of property and extraordinary items plus fixed charges. Fixed
charges consist of interest expense (including interest costs capitalized), the
amortization of debt issuance costs and rental expense deemed to represent
interest expense.
RECENT DEVELOPMENTS
RECENT ACQUISITIONS AND DEVELOPMENT ACTIVITY
Between July 1 and October 31, 1997 the Company acquired 23 operating
properties containing approximately 1.6 million square feet of office space for
an aggregate purchase price of approximately $231 million. In addition, as of
October 31, 1997, the Company had 16 other projects under construction that it
intends to own and operate. These 16 projects will contain approximately 2.7
million square feet of rentable office space.
On August 25, 1997, an affiliate of the Company ('OmniOffices') acquired
substantially all of the assets of OmniOffices, Inc. and its subsidiaries for an
aggregate purchase price of approximately $50 million in cash. OmniOffices is
one of the nation's leading providers of executive office suites to commercial
customers throughout the United States, operating 28 executive suites centers
located in 14 markets. The Company believes that there is significant potential
for growth in this business because the demand for executive offices suites is
likely to increase as corporations seek greater flexibility and alternative
workplace solutions for their staffing and business plan requirements. The
Company believes that this acquisition has provided OmniOffices with the
operating platform necessary to expand its business and assist the Company in
meeting the changing office space needs of the Company's national customers. The
Company expects that OmniOffices will expand its business through development
and acquisitions financed principally by the Company until such expansion can be
financed through third-party financing sources. Because of limitations under the
tax laws relating to REITs, OmniOffices is structured as a taxable 'C'
corporation in which the Company owns 95% of the economic interest, but none of
the voting stock.
FINANCING ACTIVITY
Since January 1997, the Company has completed two separate offerings of
shares of Common Stock to the public and SC-USREALTY for aggregate net proceeds
of approximately $238 million. In August 1997, the Company sold shares of
preferred stock to institutional investors for net proceeds of approximately
$194 million. In November 1997, the Company sold depositary shares of preferred
stock for net proceeds of approximately $145 million.
PLAN OF DISTRIBUTION
Each broker-dealer that receives New Notes for its own account in the
Exchange Offer must acknowledge that it will deliver a prospectus in connection
with any resale of such New Notes. This Prospectus, as it may be amended or
supplemented from time to time, may be used by a broker-dealer in connection
with resales of New Notes received in exchange for Old Notes where such Old
Notes were acquired as a result of market-making or other trading activities.
The Issuers will make this Prospectus, as amended or supplemented, available to
any such broker-dealer for use in connection with any such resale for a period
of up to 90 days after the consummation of the Exchange Offer. The Company will
not receive any proceeds from any sale of New Notes by broker-dealers. New Notes
received by broker-dealers for their own accounts pursuant to the Exchange Offer
may be sold from time to time in one or more transactions in the
over-the-counter market, in negotiated transactions, through the writing of
options on the New Notes or in a combination of such methods of resale, at
market prices prevailing at
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<PAGE>
the time of resale, at prices related to such prevailing market prices or at
negotiated prices. Any such resales may be made directly to purchasers or to or
through brokers or dealers who may receive compensation in the form of
commissions or concessions from any such broker-dealer and/or the purchasers of
any such New Notes. Any broker-dealer that resells New Notes that were received
by it for its own account pursuant to the Exchange Offer and any broker or
dealer that participates in a distribution of such New Notes may be deemed to be
an 'underwriter' within the meaning of the Securities Act and any profit on any
such resale of New Notes and any commissions or concessions received by any such
persons may be deemed to be underwriting compensation under the Securities Act.
The Letter of Transmittal states that by acknowledging that it will deliver and
by delivering a prospectus, a broker-dealer will not be deemed to admit that it
is an 'underwriter' within the meaning of the Securities Act.
For period of 90 days after the consummation of the Exchange Offer the
Company will promptly send additional copies of this Prospectus and any
amendment or supplement to this Prospectus to any broker-dealer that requests
such documents in the Letter of Transmittal.
The Company has agreed in the Registration Rights Agreement to indemnify
each broker-dealer reselling New Notes pursuant to this Prospectus, and their
officers, directors and controlling persons, against certain liabilities in
connection with the offer and sale of the New Notes, including liabilities under
the Securities Act, or to contribute to payments that such broker-dealers may be
required to make in respect thereof.
LEGAL MATTERS
The legality of the securities offered hereby will be passed upon for the
Issuers by Hogan & Hartson L.L.P., Washington, D.C.
EXPERTS
The consolidated financial statements and schedule of CarrAmerica Realty
Corporation and subsidiaries as of December 31, 1996 and 1995 and for each of
the years in the three-year period ended December 31, 1996 and the financial
statements and schedule of CarrAmerica Realty L.P. as of December 31, 1996 and
for the period from March 6, 1996 (date of inception) to December 31, 1996, each
incorporated by reference in this Prospectus, have been incorporated in reliance
upon the reports of KPMG Peat Marwick LLP, independent certified public
accountants, which are also incorporated by reference herein, and upon the
authority of said firm as experts in accounting and auditing.
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