<PAGE> 1
As filed with the Securities and Exchange Commission on June , 1998
REGISTRATION No. 333-
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
GENERAL GROWTH PROPERTIES, INC.
(Exact name of registrant as specified in its charter)
Delaware 42-1283895
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
110 NORTH WACKER DRIVE
CHICAGO, ILLINOIS 60606
(312) 960-5000
(Address, including zip code and telephone number, including area code, of
registrant's principal executive offices)
Mr. MATTHEW BUCKSBAUM
CHAIRMAN AND CHIEF EXECUTIVE OFFICER
GENERAL GROWTH PROPERTIES, INC.
110 NORTH WACKER DRIVE
CHICAGO, ILLINOIS 60606
(312) 960-5000
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
with copies to:
MARSHALL E. EISENBERG, ESQ.
NEAL, GERBER & EISENBERG
TWO NORTH LASALLE STREET
CHICAGO, ILLINOIS 60602
(312) 269-8000
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
From time to time after the Registration Statement becomes effective.
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the
following box: [ ]
If any of the securities being registered on this Form are to be offered
on a delayed or continuous basis pursuant to Rule 415 under the Securities Act
of 1933, other than securities offered only in connection with dividend or
interest reinvestment plans, check the following box: [X]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering.
If delivery of the prospectus is expected to be made pursuant to Rule
434, please check the following box.
CALCULATION OF REGISTRATION FEE
<TABLE>
<S> <C> <C>
Proposed
Maximum
Title of Each Class of Aggregate Amount of
Securities to be Registered Offering Price(1) Registration Fee
Common Stock, par value $.10 per share.......$12,616,852 $3,722
</TABLE>
(1) Estimated solely for the purpose of calculating the registration fee in
accordance with Rule 457(c) for the purpose of computing the amount of
registration fee based upon the average of the high and low prices of the
Common Stock as reported on the New York Stock Exchange on June 25, 1998.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS
REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH
SECTION 8(a) OF THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE SECURITIES AND EXCHANGE COMMISSION,
ACTING PURSUANT TO SAID SECTION 8(a), MAY DETERMINE.
<PAGE> 2
Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor may
offers to buy be accepted prior to the time the registration statement becomes
effective. This prospectus shall not constitute an offer to sell or the
solicitation of an offer to buy nor shall there be any sale of these securities
in any State in which such offer, solicitation or sale would be unlawful prior
to registration or qualification under the securities laws of any such State.
SUBJECT TO COMPLETION, DATED JUNE 29, 1998
PROSPECTUS
353,537 Shares
GENERAL GROWTH PROPERTIES, INC.
Common Stock
(par value $.10 per share)
This Prospectus relates to the issuance by General Growth Properties, Inc.,
a Delaware corporation (the "Company"), of up to 353,537 shares (the
"Redemption Shares") of common stock, par value $.10 per share (the "Common
Stock"), of the Company if and to the extent that the holders of up to 353,537
limited partnership units (the "Units") in GGP Limited Partnership, a Delaware
limited partnership (the "Operating Partnership"), of which the Company is the
sole general partner, tender such Units for redemption and the Company elects
to deliver Redemption Shares. Such Units were issued in connection with the
June 19, 1997 transaction in which CA Southlake Investors, Ltd., a Georgia
limited partnership (the "Contributor"), conveyed (or caused to be conveyed) to
the Operating Partnership all of the partnership interests in Southlake Retail
Venture, a Georgia general partnership, which owned Southlake Mall in Morrow
(Atlanta), Georgia (the "Mall"), in exchange for Units and other consideration
(the "Southlake Acquisition"). In connection with the Southlake Acquisition,
the Company, the Operating Partnership and the Contributor entered into the
Redemption Rights Agreement, dated June 19, 1997 (the "Redemption Rights
Agreement"), which sets forth the terms and conditions under which the Units
received by the Contributor may be redeemed for cash, or, at the election of
the Company, in its sole and absolute discretion, Redemption Shares or cash.
The Company has registered the Redemption Shares under the Securities Act of
1933, as amended (the "Securities Act"), as required under the terms of the
Redemption Rights Agreement, to provide the holders of the Redemption Shares
with freely traceable securities, but such registration does not provide any
assurance that any of the Redemption Shares will be issued by the Company upon
redemption of the Units or thereafter offered or sold by the holders thereof.
The Company will not receive any cash proceeds from the issuance of the
Redemption Shares to holders of Units tendered for redemption; however, it will
acquire Units in the Operating Partnership in exchange for Redemption Shares
that the Company may issue to holders of Units pursuant to this Prospectus.
With each such acquisition, the Company's interest in the Operating Partnership
will increase.
The Company's Common Stock is listed on the New York Stock Exchange (the
"NYSE") under the symbol "GGP". The last reported sale price of the Common
Stock on the NYSE on June 25, 1998, was $35.69 per share.
The Redemption Shares are subject to certain restrictions on ownership designed
to preserve the Company's status as a real estate investment trust ("REIT") for
Federal income tax purposes. See "Description of Common Stock."
SEE "REDEMPTION OF UNITS--TAX CONSEQUENCES OF REDEMPTION" AND
"--POTENTIAL CHANGE IN INVESTMENT UPON REDEMPTION OF UNITS"
FOR A DISCUSSION OF CERTAIN POTENTIALLY
MATERIAL CONSEQUENCES ASSOCIATED WITH A REDEMPTION OF UNITS.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION
TO THE CONTRARY IS A CRIMINAL OFFENSE.
The date of this Prospectus is 1998.
<PAGE> 3
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and in
accordance therewith files reports, proxy statements and other information
with the Securities and Exchange Commission ("Commission"). Such reports,
proxy statements and other information can be inspected and copied at the
Public Reference Room of the Commission, 450 Fifth Street, N.W., Room 1024,
Washington, D.C. 20549 and at the Commission's regional offices at Seven World
Trade Center, Suite 1300, New York, New York 10048 and Citicorp Center, 500
West Madison Street, Suite 1400, Chicago, Illinois 60661. Copies of such
material can be obtained from the Public Reference Room of the Commission, 450
Fifth Street, N.W., Room 1024, Washington, D.C. 20549, at prescribed rates.
Such materials also may be accessed electronically by means of the
Commission's home page on the Internet at http //www.sec.gov. The Company's
Common Stock is listed on the NYSE and such reports, proxy statements and
other information also can be inspected at the offices of the NYSE, 20 Broad
Street, 17th Floor, New York, New York 10005.
The Company has filed with the Commission a Registration Statement on
Form S-3 (the "Registration Statement") under the Securities Act, with respect
to the shares of Common Stock offered hereby. This Prospectus, which
constitutes a part of the Registration Statement, does not contain all of the
information set forth in the Registration Statement, certain items of which
are contained in schedules and exhibits to the Registration Statement as
permitted by the rules and regulations of the Commission. Statements made in
this Prospectus as to the contents of any contract, agreement or other
document referred to are in summary form and therefore are not necessarily
complete. With respect to each such contract, agreement or other document
filed as an exhibit to the Registration Statement, reference is made to the
exhibit for a more complete description of the matter involved, and each such
statement shall be deemed qualified in its entirety by such reference. Items
and information omitted from this Prospectus but contained in the Registration
Statement may be inspected and copied at the Public Reference Room of the
Commission.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed by the Company with the Commission pursuant
to the Exchange Act are incorporated in this Prospectus by reference and are
made a part hereof:
1. Annual Report on Form 10-K for the fiscal year ended December 31, 1997,
dated March 31, 1998 (the "Company 10-K");
2. Quarterly Report on Form 10-Q for the quarter ended March 31, 1998, as
amended by Form 10-Q/A dated May 21, 1998;
3. Current Report on Form 8-K dated May 26, 1998, as amended by Form 8-K/A
dated June 2, 1998;
4. Current Report on Form 8-K dated June 4, 1998;
5. Current Report on Form 8-K dated June 17, 1998;
6. The portions of the Company's Proxy Statement for its 1998 Annual
Meeting of Stockholders that have been incorporated by reference into the
Company 10-K; and
2
<PAGE> 4
7. The description of the Company's Common Stock which is contained in
the Registration Statement on Form 8-A filed by the Company with the
Commission on January 12, 1993, pursuant to Section 12(b) of the Exchange Act.
All documents filed by the Company pursuant to Sections 13(a), 13(c), 14
or 15(d) of the Exchange Act from the date of this Prospectus and prior to the
termination of the offering made by this Prospectus shall be deemed to be
incorporated by reference herein and to be a part hereof from the date of
filing of such documents. Any statement contained herein or in any document
incorporated or deemed to be incorporated by reference herein shall be deemed
to be modified or superseded for the purposes of this Prospectus to the extent
that a statement contained herein or in any other subsequently filed document
which also is or is deemed to be incorporated by reference herein modifies or
supersedes such statement. Any such statement so modified or superseded shall
not be deemed to constitute a part of this Prospectus, except as so modified
or superseded. The Company will provide without charge to each person,
including any beneficial owner, to whom a copy of this Prospectus is
delivered, upon written or oral request of such person, a copy of any or all
of the information that has been incorporated by reference in this Prospectus
(excluding exhibits to such information which are not specifically
incorporated by reference into such information). Requests for such
information should be directed to General Growth Properties, Inc., 110 North
Wacker, Chicago, IL 60606, Attention: Director of Investor Relations,
Telephone (312) 960-5000.
FORWARD LOOKING STATEMENTS
This Prospectus and those documents incorporated by reference herein
contain statements that constitute "forward-looking statements" within the
meaning of Section 27A of the Securities Act and Section 21E of the Exchange
Act. The words "expect," "estimate," "anticipate," "predict," "believe" and
similar expressions and variations thereof are intended to identify
forward-looking statements. Such statements include those statements regarding
the intent, belief or current expectations of the Company, its directors or
its officers with respect to, among other things: (a) changes in the general
economic climate, (b) local conditions, (c) conditions of tenants, (d)
competition, (e) increased operating costs and interest expense, (f) changes
in taxation or zoning laws, (g) governmental regulations, (h) failure of the
Company to continue to qualify as a REIT, (i) availability of financing in the
amounts or on acceptable terms and (j) potential liability under environmental
or other laws or regulations.
THE COMPANY
The Company is a self-administered and self-managed real estate
investment trust ("REIT") that owns, operates, acquires, develops, expands,
finances and manages enclosed mall shopping centers in major and middle
markets throughout the United States. The Company was organized in 1986 to
continue and expand the business of the Bucksbaum family, which has been
engaged in the shopping center business since 1954.
As of June 23, 1998, the Company owned or had an ownership interest in 73
enclosed mall shopping centers with approximately 60.8 million square feet of
gross retail space, including anchor stores, freestanding stores and mall
tenant areas ("GLA"), located in 35 states. Specifically, the Company owned:
(i) 100% of 45 enclosed mall shopping centers; (ii) 51% of the outstanding
common stock of GGP/Ivanhoe, Inc., a Delaware corporation that has qualified
as a REIT for federal income tax purposes ("GGP/lvanhoe") which owned 100% of
two enclosed mall shopping centers; (iii) 50% of each of two enclosed mall
shopping centers; (iv) approximately 38% of the outstanding common stock of
GGP/Homart, Inc., a Delaware corporation that has qualified as a REIT for
federal income tax purposes ("GGP/Homart") which owned interests in 24
enclosed mall shopping centers; and (v) a 100% non-voting preferred stock
interest (representing 95% of the equity interest) in General Growth
Management, Inc. ("GGMI") (the voting common stock of GGMI (representing 5% of
the equity interest in GGMI) is held by certain employees of GGMI (who are
also officers of the Company)). As
3
<PAGE> 5
of the same date, the Company owned 100% of the Preferred Units (as defined
below) and an approximate 65% general partnership interest in the Operating
Partnership. The approximate 35% minority interest in the Operating
Partnership which remains is held by limited partners (the "Limited Partners")
in the form of Units. See "Summary of the Partnership Agreement." Such Limited
Partners include a partnership comprised of trusts for the benefit of members
of the Bucksbaum Family and subsequent contributors of properties to the
Company.
The Company has qualified as a REIT for federal income tax purposes. In
order to maintain such qualification, the Company is required to distribute at
least 95% of its REIT taxable income (as computed without regard to net
capital gains or the dividends-paid deduction) and its net income (after tax)
from foreclosure property each year. Dividends on any Preferred Stock
including, without limitation, the PIERS (as defined below), would be included
as distributions for this purpose.
The Company is incorporated under the LAWS OF THE State of Delaware. Its
principal executive offices are located at 110 North Wacker, Chicago, IL
60606, its telephone number is (312) 960-5000 and its website address is
http://www.generalgrowth.com.
All references to the "Company" in this Prospectus include the Company
and those entities owned or controlled by the company (including the Operating
Partnership), unless the context indicates otherwise.
RECENT DEVELOPMENTS
PROPERTY ACQUISITIONS
Since January I, 1998, the Company, in four separate transactions, has
acquired or entered into definitive agreements to acquire a total of 16
enclosed mall shopping centers located throughout the United States for
aggregate consideration in excess of $1.6 billion. These transactions include
the following:
Northbrook Court and Southwest Plaza Transactions. On May 8, 1998, two
Delaware limited liability companies, the sole members of which are the
Operating Partnership and the Company, acquired from Grosvenor International
(Westcoast Estates) Limited, a California corporation, and P.I.C. Investments,
a Nevada corporation, in a negotiated arms-length transaction 100% of the
partnership interests in the partnership which owns Northbrook Court, an
enclosed mall shopping center located in Northbrook (Chicago), Illinois. The
purchase price for the partnership interests was paid in cash from borrowings
under the Company's line of credit.
Northbrook Court opened in 1976 and was renovated and expanded in 1995
and 1996. It is a two-level mall containing approximately one million square
feet of GLA. The center is anchored by Neiman Marcus, Lord & Taylor, Marshall
Field's and a General Cinema theater. The center, which has an additional
362,000 square feet of mall shop space, is currently 88% occupied.
On April 2, 1998, two Delaware limited liability companies, the sole
members of which are the Operating Partnership and the Company, acquired from
Southwest Properties Venture, a Colorado joint venture, in a negotiated
arms-length transaction 100% of Southwest Plaza, an enclosed mall shopping
center located outside of Denver, Colorado. The purchase price consisted of
cash from borrowings under the Company's line of credit, redeemable units of
limited partnership interest in the Operating Partnership and the assumption
of certain indebtedness.
Southwest Plaza opened in 1983 and was renovated in 1994 and 1995. It is
a two-level mall of approximately 1.3 million square feet of GLA. The center
is anchored by Joslin's, Foley's Sears, JC Penney and Montgomery Ward. The
mall has an additional 438,000 square feet of mall shop space, a 100,000
square foot
4
<PAGE> 6
freestanding Target store and two office buildings totaling approximately
92,000 square feet. The center is currently 83% occupied.
The aggregate purchase price paid for Southwest Plaza and Northbrook Court
was approximately $261 million.
The MEPC Transaction. On June 2, 1998, the Company acquired in a
negotiated arms-length transaction the U.S. retail property portfolio (the
"MEPC Portfolio") of MEPC plc, a United Kingdom based real estate company
("MEPC"), through the purchase of the stock of the three U.S. subsidiaries of
MEPC that directly or indirectly own the MEPC Portfolio (the "MEPC U.S.
Subsidiaries"). The stock of the MEPC U.S. Subsidiaries was acquired by a
newly formed corporate subsidiary of the Company that will elect to be taxed
as a REIT. The Company acquired the MEPC Portfolio for approximately $871
million (less certain adjustments for tenant allowances, construction costs,
MEPC U.S. Subsidiary liabilities and other items). The Company borrowed
approximately $830 million from Lehman Brothers Holdings Inc. d/b/a Lehman
Capital, a division of Lehman Brothers Holdings Inc. to finance the purchase
price for the stock, which was paid in cash at closing. The Company repaid
approximately $217 million of the loan on June 10, 1998 with a portion of the
net proceeds of the Company's recent public offering of Depositary Shares (as
defined below). The loan initially bears interest at the rate of 6.56% per
annum, which rate will be adjusted monthly to equal LIBOR plus 0.9%. The loan
is secured by the MEPC Portfolio and will mature on June 1, 1999. The MEPC
Portfolio consists of eight enclosed mall shopping centers: the Apache Mall in
Rochester, Minnesota, the Boulevard Mall in Las Vegas, Nevada, the Cumberland
Mall in Atlanta, Georgia, the McCreless Mall in San Antonio, Texas, the
Northridge Fashion Center in Northridge (Los Angeles) California, the Regency
Square Mall in Jacksonville, Florida, the Riverlands Shopping center in
LaPlace, Louisiana and the Valley Plaza Mall in Bakersfield, California. The
MEPC Portfolio is comprised of approximately 7.7 million square feet of GLA.
The mall store and freestanding store portions of the MEPC Portfolio are
currently 87% leased.
The USPPI Transaction. On May 14, 1998, the Company entered into a
definitive merger agreement with USPPI, pursuant to which the Company has
agreed to acquire USPPI through the merger of a subsidiary of the Company with
and into USPPI. The Company has reached agreement with a joint venture partner
pursuant to which the joint venture partner will acquire 49% of the common
stock to be acquired by the Company pursuant to the merger agreement and the
Company will acquire the remainder of the common stock. The aggregate purchase
price to be paid under the merger agreement is approximately $625 million
(less certain adjustments, including a credit of approximately $65 million for
outstanding mortgage indebtedness and accrued interest thereon). USPPI and its
subsidiaries own (or will at closing own): (i) the Landmark Mall (Alexandria,
Virginia); (ii) the Mayfair Mall and adjacent office buildings (Wauwatosa,
Wisconsin); (iii) the Meadows Mall (Las Vegas, Nevada); (iv) the Northgate Mall
(Chattanooga, Tennessee); (v) Oglethorpe Mall (Savannah, Georgia); and (vi) the
Park City Center (Lancaster, Pennsylvania). Subject to the satisfaction of
customary closing conditions, the USPPI merger transaction is expected to close
during the second quarter of 1998.
The enclosed mall shopping centers included in the USPPI Portfolio
contain approximately 5.9 million square feet of retail GLA. The mall store
and freestanding store portions of the USPPI portfolio are currently
approximately 88% leased.
CAPITAL STOCK
GENERAL
The authorized capital stock of the Company consists of 210,000,000
shares of Common Stock and 5,000,000 shares of preferred stock, par value $100
per share (the "Preferred Stock", and together with the
5
<PAGE> 7
Common Stock, the "Capital Stock"). The following summary description of the
Capital Stock of the Company does not purport to be complete and is qualified
by reference to the Company's Amended and Restated Certificate of
Incorporation, as amended (the "Certificate"), the Certificate of
Designations, Preferences and Rights relating to the PIERS (the "Certificate
of Designations"), which was filed by the Company on June 4, 1998 on Form 8-K
and any other certificate of designation which will be filed with the
Commission in connection with any other offering of preferred stock.
As of June 23, 1998, 35,896,572 shares of Common Stock were issued and
outstanding. As of the same date, 12,000,000 depositary shares (the
"Depositary Shares"), each representing 1/40 of a share of 7.25% Preferred
Income Equity Redeemable Stock, Series A, par value $100 per share ("PIERS"),
of the Company were issued and outstanding and an additional 1,800,000
Depositary Shares are expected to be issued on or about June 29, 1998. In
addition, as of such date, there were 19,135,430 Units outstanding, 353,537 of
which were issued in connection with the Southlake Acquisition. The Company's
Common Stock is listed on the NYSE under the symbol "GOP" and the Depositary
Shares are listed on the NYSE under the symbol "GGPPrA."
DESCRIPTION OF COMMON STOCK
The holders of Common Stock are entitled to one vote per share on all
matters submitted to a vote of stockholders, including elections of directors,
and, except as otherwise required by law or provided in the Certificate of
Designations and any resolution adopted by the Board of Directors with respect
to any series of Preferred Stock subsequently established, exclusively possess
all voting power. The Certificate does not provide for cumulative voting in
the election of directors. Subject to any preferential rights of any
outstanding series of Preferred Stock (including the PIERS), the holders of
Common Stock are entitled to such distributions as may be declared from time
to time by the Board of Directors from funds available therefor and upon
liquidation are entitled to receive pro rata all assets of the REIT available
for distribution to such holders. All shares of Common Stock offered hereby,
upon issuance to holders of Units tendered for redemption, will be fully paid
and nonassessable and the holders thereof will not have preemptive rights.
DESCRIPTION OF PIERS AND DEPOSITARY SHARES
Each owner of a Depositary Share is entitled to its pro rata share of all
the rights and preferences of the PIERS represented thereby. The following is
a brief description of the dividend, voting, conversion, redemption and
liquidation rights, preferences and privileges applicable to the PIERS.
Dividends. Dividends on the PIERS are cumulative from the date of
original issue and are payable in arrears quarterly on or about the fifteenth
day of January, April, July and October of each year, commencing on October
15, 1998, in an amount per PIERS equal to the greater of (i) 7.25% of the
liquidation preference per annum (equivalent to $1.8125 per annum per
Depositary Share) and (ii) the cash dividends paid or payable (determined on
each of the dividend payment dates for the PIERS) on that number of shares of
Common Stock equal to the number of shares of Common Stock (or portion
thereof) into which a PIERS is convertible. Dividends will accumulate whether
or not the Company has sufficient earnings, whether or not there are funds
legally available for the payment of such dividends and whether or not such
dividends are declared.
Liquidation Preference and Conversion Rights. The PIERS have a
liquidation preference of $1,000.00 per PIERS (equivalent to $25.00 per
Depositary Share), plus a proportionate amount equal to accrued and unpaid
dividends on the PIERS (whether or not earned or declared).
6
<PAGE> 8
The PIERS are convertible at any time, in whole or in part at the option
of the holder, unless previously redeemed, into shares of Common Stock, at an
initial conversion price of $39.70 per share of Common Stock (equivalent to a
conversion rate of .6297 shares of Common Stock per Depositary Share) (the
"Conversion Price"), subject to adjustment in certain circumstances.
Redemption. Except in certain circumstances relating to the preservation
of the Company's status as a REIT for federal income tax purposes, the PIERS
and the Depositary Shares representing such PIERS are not redeemable prior to
July 15, 2003. Under certain circumstances, on and after July 15, 2003, the
PIERS and the Depositary Shares representing such PIERS may be redeemed by the
Company, in whole or in part, at the option of the Company, for such number of
shares of Common Stock as are issuable at the Conversion Price (the "Stock
Redemption Right") (equivalent initially to a conversion rate of .6297 shares
of Common Stock per Depositary Share). In addition, on or after July 15, 2003,
the PIERS and the Depositary Shares may be redeemed at the option of the
Company, in whole or in part, initially at $1,032.22 per PIERS (equivalent to
$25.8055 per Depositary Share) and thereafter at prices declining to $1,000.00
per PIERS (equivalent to a price of $25.00 per Depositary Share) on and after
July 15, 2007, plus in each case accrued and unpaid dividends, if any, to the
redemption date.
The PIERS and the Depositary Shares are subject to mandatory redemption
on July 15, 2008, at a price of $1,000.00 per PIERS (equivalent to a price of
$25.00 per Depositary Share), plus accrued and unpaid dividends, if any, to the
redemption date.
Ranking and Voting Rights. The PIERS will rank senior to the Common Stock
as to priority for receiving dividends and amounts upon liquidation,
dissolution or winding-up of the Company. Holders of PIERS do not generally
have any voting rights, except as provided by applicable law. If dividends on
the PIERS are in arrears for six or more quarterly periods, holders of the
PIERS (voting separately as a class with all other series of Preferred Stock
upon which like voting rights have been conferred and are exercisable) will be
entitled to vote for the election of two additional directors to serve on the
Board of Directors until all dividend arrearages are eliminated.
RESTRICTIONS ON TRANSFER OF CAPITAL STOCK
For the Company to remain qualified as a REIT under the Internal Revenue
Code of 1986, as amended (the "Code"): (a) not more than 50% in value of its
outstanding Capital Stock may be owned, directly or indirectly, by five or
fewer individuals (as defined in the Code to include certain entities) at any
time during the last half of a taxable year; (b) the Capital Stock must be
beneficially owned (without regard to any rules of attribution of ownership)
by 100 or more persons during at least 335 days of a taxable year of 12 months
or during a proportionate part of a shorter taxable year; and (c) certain
percentages of the REIT's gross income must be from particular activities.
Accordingly, the Certificate contains provisions, subject to certain
exceptions, which limit the number of shares of Capital Stock that may be
owned by any stockholder (the "Ownership Limit").
The Ownership Limit provides that, subject to certain exceptions
specified in the Certificate, no stockholder (other than Martin Bucksbaum,
Matthew Bucksbaum, their families and related trusts (collectively, the
"Bucksbaums") and the International Business Machines Retirement Plan (the
"IBM Retirement Plan")) may own, or be deemed to own by virtue of the
applicable attribution provisions of the Code, more than the Ownership Limit.
The Ownership Limit was originally set at 6.5% of the outstanding Capital
Stock, and was increased to 7.5% of the value of the outstanding Capital Stock
as a result of legislation passed in 1993. The Board of Directors is
authorized to further increase the Ownership Limit to not more than 9.8%. The
Bucksbaums and the IBM Retirement Plan are each permitted by the Certificate
to exceed the Ownership Limit and currently the Bucksbaums exceed such limit.
The Ownership Limit provides that the Bucksbaums may
7
<PAGE> 9
acquire additional shares pursuant to certain rights granted to them in
connection with the Company's initial public offering, which rights are
described more fully below, or from other sources so long as the acquisition
does not result in the five largest beneficial owners of Capital Stock holding
more than 50% of the outstanding Capital Stock. The Ownership Limit restricts
the IBM Retirement Plan from acquiring additional shares of Capital Stock so
long as it exceeds the Ownership Limit, except through stock splits or other
pro rata transactions that do not increase its percentage interest in the
Company.
The Board of Directors may waive the Ownership Limit if presented with
satisfactory evidence that such ownership will not jeopardize the Company's
status as a REIT. As a condition of such waiver, the Board of Directors may
require opinions of counsel satisfactory to it and/or an undertaking from the
applicant with respect to preserving the REIT status of the Company. The
Ownership Limit will not apply if the Board of Directors and the holders of
Capital Stock determine that it is no longer in the best interests of the
Company to attempt to qualify, or to continue to qualify, as a Company. If
shares of Common Stock in excess of the Ownership Limit, or shares which would
cause the Company to be beneficially owned by fewer than 100 persons, are
issued or transferred to any person, such issuance or transfer shall be null
and void and the intended transferee will acquire no rights to such shares.
The Certificate further provides that upon a transfer or other event that
results in a person owning (either directly or by virtue of the applicable
attribution rules) Capital Stock in excess of the applicable Ownership Limit
("Excess Shares"), such person (a "Prohibited Owner") will not acquire or
retain any rights or beneficial economic interest in such Excess Shares.
Rather, the Excess Shares will be automatically transferred to a person or
entity unaffiliated with and designated by the Company to serve as trustee
(the "Trustee") of a trust for the exclusive benefit of a charitable
beneficiary (the "Beneficiary") to be designated by the Company within five
(5) days after the discovery of the transaction which created the Excess
Shares. The Trustee shall have the exclusive right to designate a person who
may acquire the Excess Shares without violating the applicable ownership
restrictions (a "Permitted Transferee") to acquire all of the shares held by
the Trust. The Permitted Transferee must pay the Trustee an amount equal to
the fair market value (determined at the time of transfer to the Permitted
Transferee) for the Excess Shares. The Trustee shall pay to the Prohibited
Owner the lesser of: a) the value of the shares at the time they became Excess
Shares and b) the price received by the Trustee from the sale of the Excess
Shares to the Permitted Transferee. The excess of: a) the sale proceeds from
the transfer to the Permitted Transferee over b) the amount paid to the
Prohibited Owner, if any, in addition to any dividends paid with respect to
the Excess Shares will be distributed to the Beneficiary.
The Ownership Limit will not be automatically removed even if the REIT
provisions of the Code are changed so as to no longer contain any ownership
concentration limitation or if the ownership concentration limitation is
increased. Except as otherwise described above, any change in the Ownership
Limit would require an amendment to the Certificate. Amendments to the
Certificate require the affirmative vote of holders owning a majority of the
outstanding Capital Stock. In addition to preserving the Company's status as a
REIT, the Ownership Limit may have the effect of precluding an acquisition of
control of the Company without the approval of the Board of Directors.
All certificates representing Capital Stock will bear a legend referring
to the restrictions described above.
All persons who own, directly or by virtue of the attribution provisions
of the Code, more than 7.5% of the outstanding Capital Stock must file an
affidavit with the Company containing the information specified in the
Certificate within 30 days after January I of each year. In addition, each
stockholder shall upon demand be required to disclose to the Company in
writing such information with respect to the direct, indirect and constructive
ownership of shares as the Board of Directors deems necessary to comply with
the provisions of the Code applicable to a REIT or to comply with the
requirements of any taxing authority or governmental agency. United States
Treasury Regulations (the "Regulations") currently require that the Company
annually send written statements requesting information as to the actual
ownership of the Capital Stock from each record holder of more
8
<PAGE> 10
than 1% of the Company's outstanding Capital Stock. Depending upon the number
of record holders of the Capital Stock, the reporting threshold required by
the Regulations can fall as low as .5%. Record holders that fail to submit a
written statement in response to the request required by the Regulations are
required to attach to their federal income tax returns specified information
regarding the actual ownership of shares of Capital Stock of which they are
the record holder.
LIMITATION OF LIABILITY OF DIRECTORS
The Certificate provides that a director will not be personally liable
for monetary damages to the Company or its stockholders for breach of
fiduciary duty as a director, except for liability (i) for any breach of the
director's duty of loyalty to the Company or its stockholders, (ii) for acts
or omissions not in good faith or which involve intentional misconduct or a
knowing violation of law, (iii) for paying a dividend or approving a stock
repurchase in violation of Section 174 of the Delaware General Corporation Law
("DGCL") or (iv) for any transaction from which the director derived an
improper personal benefit.
While the Certificate provides directors with protection from awards for
monetary damages for breaches of their duty of care, it does not eliminate
such duty. Accordingly, the Certificate will have no effect on the
availability of equitable remedies such as an injunction or rescission based
on a director's breach of his or her duty of care. The provisions of the
Certificate described above apply to an officer of the Company only if he or
she is a director of the Company and is acting in his or her capacity as
director, and do not apply to officers of the Company who are not directors.
INDEMNIFICATION AGREEMENTS
The Company has entered into indemnification agreements with each of its
officers and directors. The indemnification agreements require, among other
things, that the Company indemnify its officers and directors to the fullest
extent permitted by law, and advance to the officers and directors all related
expenses, subject to reimbursement if it is subsequently determined that
indemnification is not permitted. The Company must also indemnify and advance
all expenses incurred by officers and directors seeking to enforce their
rights under the indemnification agreements, and cover officers and directors
under the Company's directors' and officers' liability insurance. Although the
form of the indemnification agreement offers substantially the same scope of
coverage afforded by provisions in the Company's Certificate and Bylaws, it
provides greater assurance to directors and officers that indemnification will
be available, because, as a contract, it cannot be modified unilaterally in
the future by the Board of Directors or by stockholders to eliminate the
rights it provides.
DELAWARE ANTI-TAKEOVER STATUTE
The Company is a Delaware corporation and is subject to Section 203 of
the DGCL. In general, Section 203 prevents an "interested stockholder"
(defined generally as a person owning 15% or more of the Company's outstanding
voting stock) from engaging in a "business combination" (as defined in Section
203) with the Company for three years following the date that person becomes
an interested stockholder unless (a) before that person became an interested
stockholder, the Company's Board of Directors approved the transaction in
which the interested stockholder became an interested stockholder or approved
the business combination, (b) upon completion of the transaction that resulted
in the interested stockholder's becoming an interested stockholder, the
interested stockholder owns at least 85% of the Company's voting stock
outstanding at the time the transaction commenced (excluding stock 'nerd by
directors who are also officers of the Company and by employee stock plans
that do not provide employees with the right to determine confidentially
whether shares held subject to the plan will be tendered in a tender or
exchange offer), or (c) following the transaction in which that person became
an interested stockholder, the business combination is approved by the
Company's Board of Directors and authorized at a meeting of stockholders by
the affirmative vote of the holders of at least two-thirds of the Company's
outstanding voting stock not owned by the interested stockholder.
9
<PAGE> 11
Under Section 203, these restrictions also do not apply to certain
business combinations proposed by an interested stockholder following the
announcement or notification of one of certain extraordinary transactions
involving the Company and a person who was not an interested stockholder
during the previous three years or who became an interested stockholder with
the approval of a majority of the Company's directors, if that extraordinary
transaction is approved or not opposed by a majority of the directors who were
directors before any person became an interested stockholder in the previous
three years or who were recommended for election or elected to succeed such
directors by a majority of such directors then in office.
SUMMARY OF PARTNERSHIP AGREEMENT
The following summary of the partnership agreement of the Operating
Partnership is qualified by reference to the Second Amended and Restated
Agreement of Limited Partnership of the Operating Partnership, as amended (the
"Partnership Agreement"), which has been previously filed with the Commission,
and the foregoing is incorporated herein by reference.
MANAGEMENT AND OPERATIONS
The Operating Partnership is a Delaware limited partnership which is,
pursuant to the Partnership Agreement, required to be operated in a manner
that will enable the Company to continue to satisfy the requirements for being
classified as a REIT and to avoid any Federal income tax liability. The
Partnership Agreement provides that the net operating cash revenues of the
Operating Partnership, as well as net sales and refinancing proceeds, will be
distributed from time to time as determined by the Company, in its capacity as
the sole general partner of the Operating Partnership (but not less frequently
than quarterly), pro rata in accordance with the partners' percentage
interests.
Generally, pursuant to the Partnership Agreement, the Company, as the
sole general partner of the Operating Partnership, has exclusive and complete
responsibility and discretion in the management and control of the Operating
Partnership, and the Limited Partners have no authority to transact business
for, or participate in the management activities or decisions of, the
Operating Partnership. However, certain decisions, including those to amend
the Partnership Agreement (other than in connection with the admission of
additional Limited Partners) or terminate the Partnership Agreement, to make a
general assignment for the benefit of creditors, to take title to any property
other than in the name of the Operating Partnership or a subsidiary
partnership, to institute any proceeding for bankruptcy or to be dissolved
would require the consent of a majority in interest of the Limited Partners.
In addition, without the written consent of a Limited Partner, the Partnership
Agreement may not be amended to materially adversely affect such Limited
Partner's rights to distributions or allocations except in connection with the
admission of additional Limited Partners or unless such amendment affects the
existing Limited Partners who are Bucksbaums in the same manner on a
Unit-for-Unit basis.
The Partnership Agreement does not contemplate holding partnership
meetings but limited partners are given notice of and are welcome to attend
annual and special meetings of the Company's stockholders
See "--Preferred Units."
TRANSFERABILITY OF INTERESTS
The Partnership Agreement provides that the Company may not voluntarily
withdraw from the Operating Partnership, or transfer or assign its interest in
the Operating Partnership, without the consent of a majority in interest of
the Limited Partners. The Operating Partnership and the Contributor entered
into a Pledge Agreement, dated June 19, 1997 (the "Pledge Agreement") in
connection with the consummation of the Southlake Acquisition, which prohibits
the sale, assignment or other transfer of certain of Units received by
Contributors unless collateral
10
<PAGE> 12
is substituted in place of the secured Units. Subject to the terms of the
Pledge Agreement, the Contributor, as a Limited Partner, may transfer its
interest in the Operating Partnership at any time to a transferee; provided
that such transferee assumes all obligations of the transferor Limited Partner
and provided further that such transfer does not cause a termination of the
Operating Partnership for Federal income tax purposes, does not cause the
Company to cease to comply with requirements under the Code for qualification
as a REIT and satisfies certain other general requirements specified in the
Partnership Agreement.
BUCKSBAUM RIGHTS
Pursuant to the terms of the Rights Agreement, dated as of July 27, 1993
(the "Rights Agreement"), the Bucksbaums currently hold certain rights (the
"Bucksbaum Rights") granted to them in connection with the Company's initial
public offering, which enable them to convert a portion of their interest in
the Operating Partnership into shares of Common Stock (the "Exchange
Component") and to sell their remaining partnership interest to the Company
(the "Sale Component"). The Exchange Component enables the Bucksbaums to
exchange a portion of their interest in the Operating Partnership for shares
of Common Stock until they own up to 25% of the outstanding Common Stock. The
Sale Component enables the Bucksbaums to sell all or a portion of their
remaining interest in the Operating Partnership to the Company for cash or
Common Stock, or a combination thereof, at the Company's election. The Sale
Component can only be exercised if the Bucksbaums already own 25% or more of
the outstanding Common Stock.
The Bucksbaum Rights may be exercised by the Bucksbaums from time to time
(although only once during any calendar year), in whole or in part, subject to
the limitations that in any calendar year the Sale Component may be exercised
only with respect to one-fourth of the percentage interest in the Partnership
held by the Bucksbaums immediately after the Exchange Component is fully
exercised.
The Bucksbaum Rights expire on April 16, 2023 if not exercised prior to that
date.
CAPITAL CONTRIBUTIONS
The Partnership Agreement provides that if the Operating Partnership
requires additional funds at any time or from time to time in excess of funds
available to the Operating Partnership from borrowings or capital
contributions, the Company may borrow such funds from a financial institution
or other lender and lend such funds to the Operating Partnership on the same
terms and conditions as are applicable to the Company's borrowing of such
funds. As an alternative to borrowing funds required by the Operating
Partnership, the REIT may raise such funds through the sale of shares of
Common Stock and contribute the amount of such required funds as an additional
capital contribution to the Operating Partnership. In such event, the Company
generally will receive additional Units equal to the number of shares of
Common Stock that are sold by the Company. Conversely, the partnership
interests of the Limited Partners will be decreased on a proportionate basis
in the event of additional capital contributions by the Company. See
"--Preferred Units."
TAX MATTERS
Pursuant to the Partnership Agreement, the Company is the tax matters
partner of the Operating Partnership and, as such, has authority to make tax
elections under the Code on behalf of the Operating Partnership.
The net income or net loss of the Operating Partnership will generally be
allocated to the Company and the Limited Partners in accordance with their
percentage interests, subject to compliance with the provisions of Sections
704(b) and 704(c) of the Code and the regulations promulgated thereunder and
the terms of the Preferred Units.
11
<PAGE> 13
DUTIES AND CONFLICTS
The Partnership Agreement provides that all business activities of the
Company, including all activities pertaining to the acquisition and operation
of shopping center properties, must be conducted through the Operating
Partnership (excluding direct interests of up to 1% in subsidiaries of the
Operating Partnership that are owned by the Company or subsidiaries thereof).
The Partnership Agreement prohibits the Company from borrowing for the purpose
of making a distribution to stockholders except if it arranges such borrowing
through the Operating Partnership.
Pursuant to the Partnership Agreement, the Bucksbaums cannot acquire
interests in shopping center properties or vacant land suitable for
development as a shopping center for a specified period of time. The
Partnership Agreement permits the Bucksbaums to own less than 5% of any
publicly traded entity (or any subsidiary thereof) which invests in retail
malls, provided that neither Matthew Bucksbaum nor John Bucksbaum is actively
involved in the management of such entity by virtue of any such investment.
Term
The Operating Partnership will continue in full force and effect until
December 31, 2050, or until sooner dissolved upon the withdrawal, bankruptcy,
dissolution or termination of the Company (unless a majority in interest of
the Limited Partners elect to continue the Operating Partnership), the
election of the Company and a majority in interest of the Limited Partners, or
the sale or other disposition of all or substantially all the assets of the
Operating Partnership.
PREFERRED UNITS
In connection with the issuance of the Depositary Shares and in order to
enable the Company to comply with its obligations in respect of the PIERS, the
Partnership Agreement was amended to issue to the Company preferred units of
partnership interest (the "Preferred Units") which have rights, preferences
and other privileges, including distribution, liquidation, conversion and
redemption rights, that mirror those of the PIERS. Accordingly, the
Partnership will be required to make all required distributions on the
Preferred Units prior to any distribution of cash or assets to the holders of
other partnership interests in the Partnership, including the holders of
Units.
REDEMPTION OF UNITS
GENERAL
Each Limited Partner who is a party to the Redemption Rights Agreement or
a permitted assignee thereunder may, subject to certain limitations, require
that the Operating Partnership redeem such Limited Partner's Units, by
delivering a notice to the Operating Partnership. Such rights are described in
the Redemption Rights Agreement which was executed and delivered in connection
with the Southlake Acquisition. The summary of the terms of the Redemption
Rights Agreement set forth below does not purport to be complete and is
subject to and qualified by reference to the Redemption Rights Agreement.
Subject to the rights of the Company described in the next paragraph, upon
redemption, such Limited Partner will receive, with respect to each Unit
tendered, cash in an amount equal to the market value of one share of Common
Stock of the Company (subject to certain anti-dilution adjustments). The
market value of the Common Stock for this purpose will be equal to the average
of the closing trading price of the Company's Common Stock on the NYSE (or
substitute information, if no such closing price is available) for the five
consecutive trading days ending on the date on which a redemption notice is
received by the Operating Partnership (or, if such date is not a business day,
the first business day thereafter).
12
<PAGE> 14
In lieu of the Operating Partnership redeeming Units tendered for
redemption, the Company, as the sole general partner of the Operating
Partnership, has the right, in its sole and absolute discretion, to elect to
assume directly and satisfy the redemption right of a Limited Partner by
paying to the redeeming Limited Partner, with respect to each Unit tendered,
either (a) the cash amount described in the preceding paragraph or (b) one
share of Common Stock of the Company (subject to certain anti-dilution
adjustments). The Company anticipates that it generally will elect to directly
assume and satisfy any redemption right exercised by such a Limited Partner
through the issuance of shares of Common Stock (the Redemption Shares)
pursuant to this Prospectus, whereupon the Company will acquire the Units
being redeemed and will become the owner of such Units. However, there can be
no assurance that the Company will make such election in any particular case.
With each exchange of Units for shares of Common Stock or cash, the Company's
ownership interest in the Operating Partnership will increase. Such an
acquisition by the Company will be treated as a sale by the redeeming Limited
Partner of such Units to the Company for Federal income tax purposes. See
"--Tax Consequences of Redemption" below. Upon redemption, such Limited
Partner's right to receive distributions with respect to the Units redeemed
will cease (but if such right is exchanged for Redemption Shares, the Limited
Partner will have rights as a stockholder of the Company from the time of its
acquisition of the Redemption Shares), and if all of its Units are redeemed,
such Limited Partner will have withdrawn as a partner of the Operating
Partnership and will no longer be a party to the Partnership Agreement.
Each redeeming Limited Partner must notify the Operating Partnership of
such Limited Partner's desire to require the Operating Partnership to redeem
Units by sending a notice in accordance with the terms of the Redemption
Rights Agreement. A Limited Partner must request the redemption of at least
1000 Units (or all of the Units held by such holder, if such Limited Partner
owns fewer than 1000 Units). The redemption will occur within 30 days
following the Operating Partnership's receipt of the notice and related
documentation required by the Redemption Rights Agreement, except that no
redemption can occur if the delivery of Redemption Shares would be prohibited
under the provisions of the Certificate designed to protect the Company's
qualification as a REIT.
TAX CONSEQUENCES OF REDEMPTION
See "Certain Federal Income Tax Considerations" which summarizes certain
federal income tax considerations that may be relevant to a Limited Partner
who exercises such Limited Partner's right to require the redemption of such
Limited Partner's Units in accordance with the terms of the Redemption Rights
Agreement. Because the specific tax consequences to a redeeming Limited
Partner will depend upon the specif specific circumstances of that Limited
Partner, each Limited Partner considering exercising its redemption right is
strongly urged to consult such Limited Partner's own tax advisor regarding the
specific federal, state, and local tax consequences to such Limited Partner of
the exercise of his or her redemption rights.
POTENTIAL CHANGE IN INVESTMENT UPON REDEMPTION OF UNITS
If a Limited Partner exercises the right to require the redemption of
such Limited Partner's Units pursuant to the Redemption Rights Agreement, such
Limited Partner may receive cash or Redemption Shares in exchange for such
Units. If a Limited Partner receives cash, the Limited Partner will no longer
have any interest in the Operating Partnership or the Company and will not
benefit from any subsequent increases in the share price of the Common Stock
and will not receive any future distributions from the Operating Partnership
or the Company (unless the Limited Partner currently owns or acquires in the
future additional Units or shares of Common Stock). If a Limited Partner
receives Redemption Shares, the Limited Partner will become a stockholder of
the Company rather than a holder of Units in the Operating Partnership. See
"Comparison of Ownership of Units and Shares of Common Stock."
13
<PAGE> 15
REGISTRATION OF SHARES
The Company has registered the Redemption Shares under the Securities Act
to satisfy its registration obligations under the Redemption Rights Agreement.
Under the Redemption Rights Agreement, the Company is required to prepare and
file with the Commission such amendments and supplements to the Registration
Statement (of which this Prospectus is a part) and to this Prospectus, as may
be necessary to keep the Registration Statement effective, generally during
the term in which the Registration Rights exist for the Redemption Shares, as
discussed below, and to comply with the provisions of the Securities Act. See
"Plan of Distribution."
Pursuant to the Redemption Rights Agreement, the Company has agreed to
pay all expenses of effecting the above-described registration of the
Redemption Shares under the Securities Act prior to June 19, 2003. The Limited
Partners who are parties to the Redemption Rights Agreement have agreed
severally, in proportion to the number of Units held by them at such time in
relation to the total number of shares of Common Stock covered by the
Registration Statement, to reimburse the Company for registration expenses
which are incurred thereafter.
If the Company does not maintain the above-described registration
statement in accordance with the terms of the Redemption Rights Agreement, the
Company generally shall not have the right to deliver shares of Common Stock
(i.e., Redemption Shares) in consideration for tendered Units during the time
when such registration statement is not so effective.
COMPARISON OF OWNERSHIP OF UNITS AND SHARES OF COMMON STOCK
Although the nature of an investment in shares of Common Stock of the
Company is substantially equivalent economically to an investment in Units in
the Operating Partnership, there are certain differences between ownership of
Units and ownership of shares of Common Stock, some of which may be material
to investors.
The information below highlights a number of the significant differences
between the Operating Partnership and the Company and compares certain legal
rights associated with the ownership of Units and Common Stock. These
comparisons are intended to assist Limited Partners of the Operating
Partnership in understanding how their investment will be changed if their
Units are redeemed for Common Stock. THIS DISCUSSION IS SUMMARY IN NATURE AND
DOES NOT CONSTITUTE A COMPLETE DISCUSSION OF THESE MATTERS. HOLDERS OF UNITS
SHOULD CAREFULLY REVIEW THE BALANCE OF THIS PROSPECTUS AND THE REGISTRATION
STATEMENT OF WHICH THIS PROSPECTUS IS A PART FOR ADDITIONAL IMPORTANT
INFORMATION ABOUT THE COMPANY.
FORM OF ORGANIZATION AND ASSETS OWNED
The Operating Partnership is organized as a Delaware limited partnership.
The Company is a Delaware corporation. The Company has elected to be taxed as
a REIT under the Code. and intends to maintain its qualification as a REIT.
LENGTH OF INVESTMENT
The Operating Partnership has a stated termination date of December 31,
2050, although it may be terminated earlier under certain circumstances. The
Company has a perpetual term and intends to continue its operations for an
indefinite time period.
14
<PAGE> 16
ADDITIONAL EQUITY
The Operating Partnership is authorized to issue additional Units from
time to time, as determined by the Company as its general partner, in exchange
for contributions of cash or property to the Operating Partnership. The
Operating Partnership may issue additional Units to the Company, generally as
long as such Units are issued in connection with a comparable issuance of
shares of capital stock of the Company and proceeds raised in connection with
the issuance of such shares are contributed by the Company to the Operating
Partnership.
The Board of Directors of the Company may authorize the issuance, in its
discretion, of additional equity securities consisting of Common Stock or
Preferred Stock; provided that the total number of shares issued does not
exceed the number of authorized shares of Capital Stock set forth in the
Certificate. As long as the Operating Partnership is in existence, the
proceeds of all equity capital raised by the Company generally will be
contributed to the Operating Partnership in exchange for Units in the
Operating Partnership.
MANAGEMENT AND CONTROL
Generally, pursuant to the Partnership Agreement, the Company, as the
sole general partner of the Operating Partnership, has exclusive and complete
responsibility and discretion in the management and control of the Operating
Partnership, and the Limited Partners have no authority to transact business
for, or participate in the management activities or decisions of, the
Operating Partnership. However, certain decisions, including those to amend
the Partnership Agreement (other than in connection with the admission of
additional Limited Partners) or terminate the Partnership Agreement, to make a
general assignment for the benefit of creditors, to take title to any property
other than in the name of the Operating Partnership or a subsidiary thereof,
to institute any proceeding for bankruptcy or to be dissolved would require
the consent of a majority in interest of the Limited Partners. In addition,
without the written consent of a Limited Partner, the Partnership Agreement
may not be amended to materially adversely affect such Limited Partner's
rights to distributions or allocations except in connection with the admission
of additional Limited Partners or unless such amendment affects the existing
Limited Partners who are Bucksbaums in the same manner on a Unit-for-Unit
basis.
The Board of Directors of the Company has exclusive control over the
Company's business and affairs subject only to the restrictions in the
Certificate and Bylaws and the Partnership Agreement. At each annual meeting
of the stockholders, the successors of the class of directors whose terms
expire at that meeting will be elected. The policies adopted by the Board of
Directors may be altered or eliminated without a vote of the stockholders.
Accordingly, except for their vote in the elections of directors, stockholders
have no control over the ordinary business policies of the Company. The Board
of Directors cannot change the Company's policy of maintaining its status as a
REIT, however, without the approval of holders of a majority of the
outstanding shares of capital stock entitled to vote on such matter.
FIDUCIARY DUTIES
Under Delaware law, the general partner of the Operating Partnership is
accountable to the Operating Partnership as a fiduciary and, consequently, is
required to exercise good faith in all of its dealings with respect to
partnership affairs. The Partnership Agreement provides, however, that the
general partner is not liable for monetary damages for losses sustained or
liabilities incurred as a result of the general partner's acts or omissions,
provided that the general partner has acted in good faith and in the belief
that any such act or omission was in the best interests of the Operating
Partnership and, provided further, that the general partner was not guilty of
fraud, misconduct or gross negligence.
Under Delaware law, the Company's directors must perform their duties in
good faith, in a manner that they reasonably believe to be in the best
interests of the Company and with the care of an ordinarily prudent
15
<PAGE> 17
person in a like position. Directors of the Company who act in such a manner
generally will not be liable to the Company or its stockholders for monetary
damages arising from their activities.
MANAGEMENT LIABILITY AND INDEMNIFICATION
As a matter of Delaware law, the general partner has liability for the
payment of the obligations and debts of the Operating Partnership unless
limitations upon such liability are stated in the document or instrument
evidencing the obligation. Under the Partnership Agreement, the Operating
Partnership has agreed to indemnify the general partner and its "affiliates,"
as defined in the Partnership Agreement, and any individual acting on their
behalf, from and against all losses, damages, claims or liabilities,
including, but not limited to, reasonable attorneys' fees and expenses,
incurred in connection with any actions relating to the operations of the
Operating Partnership in which the general partner, its affiliates, or any
individual acting on their behalf is involved, to the fullest extent permitted
by Delaware law (including any procedures set forth therein regarding
advancement of expenses to such indemnified party).
The Certificate provides that a director of the Company will not be
personally liable for monetary damages to the Company or its stockholders for
breach of fiduciary duty as a director, except for liability (i) for any
breach of the director's duty of loyalty to the Company or its stockholders,
(ii) for acts or omissions not in good faith or which involve intentional
misconduct or a knowing violation of law, (iii) for paying a dividend or
approving a stock repurchase in violation of Section 174 of the DGCL or (iv)
for any transaction from which the director derived an improper personal
benefit.
The Company has entered into indemnification agreements with each of its
officers and directors. The indemnification agreements require, among other
things, that the Company indemnify its officers and directors to the fullest
extent permitted by law, and advance to the officers and directors all related
expenses, subject to reimbursement if it is subsequently determined that
indemnification is not permitted. The Company must also indemnify and advance
all expenses incurred by officers and directors seeking to enforce their
rights under the indemnification agreements, and cover officers and directors
under the Company's directors' and officers' liability insurance. Although the
form of the indemnification agreement offers substantially the same scope of
coverage afforded by provisions in the Company's Certificate and Bylaws, it
provides greater assurance to directors and officers that indemnification will
be available, because, as a contract, it cannot be modified unilaterally in
the future by the Board of Directors or by stockholders to eliminate the
rights it provides.
ANTITAKEOVER PROVISIONS
Except in limited circumstances, the general partner of the Operating
Partnership has exclusive management power over the business and affairs of
the Operating Partnership. The general partner may not voluntarily withdraw
from the Operating Partnership, or transfer or assign its interest in the
Operating Partnership, without the consent of a majority in interest of the
Limited Partners, and other than as expressly provided in the Partnership
Agreement, no Limited Partner may withdraw from the Operating Partnership
without the prior written consent of the general partner.
The Certificate and Bylaws of the Company contain a number of provisions
that may have the effect of delaying or discouraging an unsolicited proposal
for the acquisition of the Company or the removal of incumbent management.
These provisions include, among others: (1) a staggered Board of Directors;
(2) authorized capital stock that may be issued as Preferred Stock in the
discretion of the Board of Directors, with superior voting rights to the
Common Stock; (3) a requirement that directors may be removed only for cause
and only by a vote of holders of at least 75% of the outstanding Common Stock;
and (4) provisions designed to avoid concentration of share ownership in a
manner that would jeopardize the Company's status as a REIT under the Code. In
addition, the Company is subject to Section 203 of the DGCL which provides
that, subject to certain exceptions, no Delaware corporation may engage in any
"business combination" with an "interested stockholder" for a period
16
<PAGE> 18
of three years following the date that such stockholder became an interested
stockholder unless prior to such date, the board of directors of the
corporation approved either the business combination or the transaction which
resulted in the stockholder becoming an interested stockholder.
VOTING RIGHTS
Under the Partnership Agreement, the Limited Partners have voting rights
only with respect to certain limited matters, including dissolution of the
Operating Partnership, amendments to the Partnership Agreement (other than to
reflect the admission of additional Limited Partners), making a general
assignment for the benefit of creditors, taking title to any personal or real
property other than in the name of the Operating Partnership or a subsidiary
thereof, and instituting any proceeding for bankruptcy on behalf of the
Operating Partnership. All matters submitted to a vote of Limited Partners
require the affirmative vote of a majority in interest of the Limited
Partners. Otherwise, all decisions relating to the operation and management of
the Operating Partnership are made by the Company, as general partner.
The Company is managed and controlled by a Board of Directors consisting
of three classes having staggered terms of office. One class of directors is
elected by the stockholders at each annual meeting of the Company. Delaware
law requires that certain major corporate transactions, including most
amendments to a corporation's certificate of incorporation, may not be
consummated without the approval of stockholders. All shares of Common Stock
have one vote, and the Company's Certificate permits the Board of Directors to
classify and issue Preferred Stock in one or more series having voting power
which may differ from that of the Common Stock. The PIERS have voting rights
under certain circumstances. See "Capital Stock - Description of PIERS and
Depositary Shares" above.
AMENDMENT OF THE PARTNERSHIP AGREEMENT OR THE CERTIFICATE OF INCORPORATION
The general partner of the Operating Partnership may not, without the
written consent of a majority in interest of the Limited Partners, amend or
modify the Partnership Agreement other than to reflect the admission of
additional Limited Partners.
Amendments to the Company's Certificate must be approved by a majority of
the Board of Directors and by the vote of at least majority of the votes
entitled to be cast at a meeting of stockholders.
VOTE REQUIRED TO DISSOLVE THE OPERATING PARTNERSHIP OR THE COMPANY
The general partner of the Operating Partnership may elect to dissolve
the Partnership upon making a written election to that effect with the written
consent of a majority in interest of the Limited Partners.
Under Delaware law, the Board of Directors must obtain approval of
holders of at least a majority of the outstanding capital stock in order to
dissolve the Company.
COMPENSATION, FEES AND DISTRIBUTIONS
The general partner does not receive any compensation for its services as
general partner of the Operating Partnership. As a partner in the Operating
Partnership, however, the general partner has the right to receive allocations
and distributions from the Operating Partnership, in respect of the Preferred
Units and otherwise pro rata in accordance with its percentage interest in the
Operating Partnership. In addition, the Operating Partnership reimburses the
general partner for all expenses incurred relating to the ongoing operation of
the Operating Partnership.
The directors and officers of the Company receive compensation for their
services.
17
<PAGE> 19
LIABILITY OF INVESTORS
Under the Partnership Agreement and applicable state law, the liability
of the Limited Partners for the Operating Partnership's debts and obligations
is generally limited to the amount of their investment the Operating
Partnership.
Under Delaware law, stockholders are not personally liable for the debts or
obligations of the Company.
POTENTIAL DILUTION OF RIGHTS
The general partner of the Operating Partnership is authorized to cause
the Operating Partnership to issue additional Units from time to time in
exchange for contributions of cash or property to the Operating Partnership.
The issuance of additional Units may result in the dilution of the interests
of the Limited Partners.
The Company's Board of Directors may issue, in its discretion, additional
shares of Common Stock and has the authority to issue from the authorized
Capital Stock a variety of other equity securities of the Company with such
powers, preferences and rights as the Board of Directors may designate at the
time of issuance. The issuance of additional shares of either Common Stock or
other similar equity securities may result in the dilution of the interests of
the stockholders. See "Summary of Partnership Agreement--Preferred Units."
CERTAIN FEDERAL INCOME TAX CONSIDERATIONS
TAX TREATMENT OF REDEMPTION OF UNITS
THE EXERCISE BY A LIMITED PARTNER OF SUCH LIMITED PARTNER'S RIGHT TO
REQUIRE THE REDEMPTION OF ALL OR A PORTION OF SUCH LIMITED PARTNER'S UNITS
PURSUANT TO THE REDEMPTION RIGHTS AGREEMENT WILL BE TREATED AS A TAXABLE
TRANSACTION FOR FEDERAL INCOME TAX PURPOSES. It is possible that the amount of
gain recognized (or even the tax liability resulting from such gain) could
exceed the amount of cash or the value of other property (i.e., Redemption
Shares) received upon such exercise. In addition, the ability of a Limited
Partner to sell a substantial number of Redemption Shares in order to raise
cash to pay tax liabilities associated with redemption of Units may be
adversely affected by fluctuations in the market price for the Common Stock,
and the price the Limited Partner receives for such shares may not equal the
value of such Limited Partner's Units at the time of redemption.
If the Company assumes and performs the redemption obligation, the
Redemption Rights Agreement provides that the redemption will be treated by
the Company, the Operating Partnership and the redeeming Limited Partner as a
sale of Units by such Limited Partner to the Company at the time of such
redemption. In that event, such sale will be fully taxable to the redeeming
Limited Partner and such redeeming Limited Partner will be treated as
realizing for tax purposes an amount equal to the sum of the cash or the value
of the Common Stock received in the exchange plus the amount of Operating
Partnership nonrecourse liabilities allocable to the redeemed Units at the
time of the redemption. The determination of the amount of gain or loss is
discussed more fully below.
Although the matter is not free from doubt, if the Company does not elect
to assume the obligation to redeem a Limited Partner's Units, the Operating
Partnership will be treated as redeeming such Units for cash. If the Operating
Partnership redeems Units for cash that the Company contributes to the
Operating Partnership to effect such redemption, the redemption likely would
be treated for tax purposes as a sale of such Units to the Company in a fully
taxable transaction. In that event, the redeeming Limited Partner would be
treated as realizing an amount equal to the sum of the cash received in the
exchange plus the amount of Operating Partnership
18
<PAGE> 20
nonrecourse liabilities allocable to the redeemed Units at the time of the
redemption. The determination of the amount of gain or loss in the event of
sale treatment is discussed more fully below.
If, instead, the Operating Partnership chooses to redeem a Limited
Partner's Units for cash that is not contributed by the Company to effect the
redemption, the tax consequences would be the same as described in the
previous paragraph, except that if the Operating Partnership redeems less than
all of a Limited Partner's Units, the Limited Partner would not be permitted
to recognize any loss occurring on the transaction and would recognize taxable
gain only to the extent that the cash, plus the share of Operating Partnership
nonrecourse liabilities allocable to the redeemed Units, exceeded the Limited
Partner's adjusted basis in all of such Limited Partner's Units immediately
before the redemption.
TAX TREATMENT OF DISPOSITION OF UNITS BY LIMITED PARTNERS GENERALLY
If a Unit is redeemed in a manner that is treated as a sale of the Unit,
the determination of gain or loss from the sale will be based on the
difference between the amount considered realized for tax purposes and the tax
basis in such Unit. See "Basis of Units" below. Upon the sale of a Unit, the
"amount realized" will be measured by the sum of the cash and fair market
value of other property (i.e., Redemption Shares) received plus the portion of
the Operating Partnership's nonrecourse liabilities allocable to the Unit
sold. To the extent that the amount of cash or property received plus the
allocable share of the Operating Partnership's nonrecourse liabilities exceeds
the Limited Partner's basis for the Unit sold, such Limited Partner will
recognize gain. It is possible that the amount of gain recognized or even the
tax liability resulting from such gain could exceed the amount of cash and the
value of any other property (i.e., Redemption Shares) received upon such sale.
Except as described below, any gain recognized upon a sale or other
disposition of Units will be treated as gain attributable to the sale or
disposition of a capital asset. To the extent, however, that the amount
realized upon the sale of a Unit attributable to a Limited Partner's share of
"unrealized receivables" of the Operating Partnership (as defined in Section
751 of the Code) exceeds the basis attributable to those assets, such excess
will be treated as ordinary income. Unrealized receivables include, to the
extent not previously included in Operating Partnership income, any rights to
payment for services rendered or to be rendered. Unrealized receivables also
include amounts that would be subject to recapture as ordinary income if the
Operating Partnership had sold its assets at their fair market value at the
time of the transfer of a Unit.
BASIS OF UNITS
In general, a Limited Partner who was deemed at the time of the Southlake
Acquisition to have received its Units upon liquidation of a partnership had
an initial tax basis in its Units ("Initial Basis") equal to its basis in its
partnership interest at the time of such liquidation. Similarly, in general, a
Limited Partner who at the time of the Southlake Acquisition contributed a
partnership interest in exchange for its Units had an Initial Basis in the
Units equal to its basis in the contributed partnership interest. A Limited
Partner's Initial Basis in its Units generally is increased by (a) such
Limited Partner's share of Operating Partnership taxable income and (b)
increases in its share of liabilities of the Operating Partnership (including
any increase in its share of liabilities occurring in connection with the
Southlake Acquisition). Generally, such Limited Partner's basis in its Units
is decreased (but not below zero) by (i) its share of Operating Partnership
distributions, (ii) decreases in its share of liabilities of the Operating
Partnership (including any decrease in its share of liabilities occurring in
connection with the Southlake Acquisition), (iii) its share of losses of the
Operating Partnership, and (iv) its share of nondeductible expenditures of the
Operating Partnership that are not chargeable to capital.
POTENTIAL APPLICATION OF THE DISGUISED SALE REGULATIONS TO A REDEMPTION OF
UNITS
There is a possibility that a redemption of Units issued in the Southlake
Acquisition might cause the original transfer of property to the Operating
Partnership in exchange for Units to be treated as a "disguised sale"
19
<PAGE> 21
of property. The Code and the Treasury Regulations thereunder (the "Disguised
Sale Regulations") generally provide that, unless one of the prescribed
exceptions is applicable, a partner's contribution of property to a
partnership and a simultaneous or subsequent transfer of money or other
consideration (including the ASSUMPTION of or taking subject to a liability)
from the partnership to the partner will be presumed to be a sale, in whole or
in part, of such property by the partner to the partnership. The Disguised
Sale Regulations also provide, however, that if two years have passed between
the transfer of money or other consideration and the contribution of property,
the transactions will not be presumed to be a sale unless the facts and
circumstances clearly establish that the transfers constitute a sale. There
can be no assurance that the Internal Revenue Service ("IRS") might not seek
to contend that the Disguised Sale Regulations apply here. The IRS could
contend that the Southlake Acquisition itself was taxable as a disguised sale
under the Disguised Sale Regulations. Any gain recognized thereby may be
eligible for installment sale reporting under Section 453 of the Code, subject
to certain limitations.
CERTAIN FEDERAL INCOME TAX CONSIDERATIONS TO HOLDERS OF CAPITAL STOCK
This section is a summary of certain Federal income tax matters of
general application pertaining to REITs and their stockholders under the Code.
The discussion is based on current law and does not purport to deal with all
aspects of Federal income taxation that may be relevant to investors subject
to special treatment under Federal income tax laws, such as investors subject
to the Employee Retirement Income Security Act of 1974, as amended, other tax
exempt investors, dealers in securities or foreign persons. The provisions of
the Code pertaining to REITs are highly technical and complex and sometimes
involve mixed questions of fact and law. In addition, this section does not
discuss foreign, state or local taxation. Limited Partners who are considering
exercising their redemption rights should consult, and must depend on, their
own tax advisors regarding the Federal, state, local, foreign and other tax
consequences of holding and disposing of the Redemption Shares.
In the opinion of Neal, Gerber & Eisenberg, tax counsel to the Company,
the Company has been organized and operated in a manner that has enabled it to
qualify as a REIT under Sections 856 through 859 of the Code, and its proposed
method of operation will enable it to continue to so qualify. No assurance can
be given, however, that the Company will so qualify or continue to so qualify.
The Company's ability to qualify as a REIT under the requirements of the Code
and the regulations promulgated thereunder is dependent upon actual operating
results.
To qualify as a REIT under the Code for a taxable year, the Company must
meet certain organizational and operational requirements, which generally
require it to be a passive investor in operating real estate and to avoid
excessive concentration of ownership of its stock. First, its principal
activities must be real estate related. Generally, at least 75% of the value
of the total assets of the Company at the end of each calendar quarter must
consist of real estate assets, cash or governmental securities. The Company
may not own more than 10% of the outstanding voting securities of any
corporation; shares of qualified REITs and of certain wholly owned
subsidiaries are exempt from this prohibition. For each taxable year, at least
75% of a REIT's gross income must be derived from specified real estate
sources and 95% must be derived from such real estate sources plus certain
other permitted sources. Real estate income for purposes of these requirements
includes gains from the sale of real property not held primarily for sale to
customers in the ordinary course of business, dividends on REIT shares,
interest on loans secured by mortgages on real property, certain rents from
real property and income from foreclosure property. For rents to qualify, they
may not be based on the income or profits of any person, except that they may
be based on a percentage or percentages of gross income or receipts, and,
subject to certain limited exceptions, the REIT may not manage the property or
furnish services to residents except through an independent contractor which
is paid an arms'-length fee and from which the REIT derives no income.
For the Company to remain qualified as a REIT, no more than 50% in value
of the outstanding Capital Stock, including in some circumstances stock into
which outstanding securities might be converted, may be owned
20
<PAGE> 22
actually or constructively by five or fewer individuals (as defined in the
Code to include certain entities) at any time during the last half of the
Company's taxable year. Accordingly, the Certificate of Incorporation of the
Company, as amended, contains provisions restricting the acquisition of shares
of Capital Stock. See "Description of Common Stock -- Restrictions on
Transfer."
So long as the Company qualifies for taxation as a REIT and distributes
at least 95% of the sum of (a) its REIT taxable income (as computed without
regard to net capital gains or the dividends-paid deduction) and (b) its net
income (after tax) from foreclosure property for its taxable year to its
stockholders annually, the Company itself will not be subject to Federal
income tax on that portion of such income distributed to stockholders. The
Company will be taxed at regular corporate rates on all income not distributed
to stockholders. The Company's policy is to distribute at least 95% of the sum
of its REIT taxable income and net income from foreclosure property. REITs may
also incur taxes for certain other activities or to the extent distributions
do not satisfy certain other requirements.
In the case of a REIT which is a partner in a partnership, such as the
Company, Treasury Regulations provide that the REIT will be deemed to own its
proportionate share of the assets of the partnership and will be deemed to
earn the income of the partnership attributable to such share. In addition,
for purposes of satisfying the asset and income tests described above, the
character of the gross income and assets in the hands of the partnership
remains the same when allocated to the REIT. Accordingly, the Company's
proportionate share of the assets, liabilities and items of income of the
Operating Partnership will be treated as assets. liabilities. and items of
income of the Company for purposes of qualifying as a REIT.
Failure of the Company to qualify during any taxable year as a REIT
could, unless certain relief provisions were available, have a material
adverse effect upon investors. If disqualified for taxation as a REIT for a
taxable year, the Company would also be disqualified for taxation as a REIT
for the next four taxable years, unless the failure was due to reasonable
cause rather than willful neglect and certain other conditions are met. The
Company would be subject to Federal income tax at corporate rates on all of
its taxable income and would not be able to deduct the dividends paid, which
could result in a discontinuation of or substantial reduction in dividends to
stockholders. Dividends would also be subject to the regular tax rules
applicable to dividends received by stockholders of corporations. Should the
failure to qualify be determined to have occurred retroactively in an earlier
tax year of the Company, the imposition of a substantial Federal income tax
liability on the Company attributable to such nonqualifying tax years may
adversely affect the Company's ability to pay dividends. In the event that the
Company fails to meet certain income tests of the tax law, it may, generally,
nonetheless retain its qualification as a REIT if it pays a 100% tax on the
amount by which it failed to meet the income tests so long as its failure was
due to reasonable cause and not willful neglect. Any such taxes would
adversely affect the Company's ability to pay dividends.
TAXATION OF TAXABLE DOMESTIC STOCKHOLDERS
As used herein, the term "U.S. Stockholder" means a holder of the
Company's stock who, for United States federal income tax purposes is (i) a
citizen or resident of the United States, (ii) a corporation created or
organized in or under the laws of the United States or of any political
subdivision thereof, (iii) an estate the income of which is subject to United
States federal income taxation regardless of its source, or (iv) a trust if a
court within the United States is able to exercise primary supervision over
the administration of such trust and one or more United States persons as
defined in section 7701(a)(30) of the Code have the authority to control all
the substantial decisions of such trust.
As long as the Company qualifies as a REIT, distributions made to its
U.S. Stockholders out of current or accumulated earnings and profits (and not
designated as capital gain dividends) will be taxable to such stockholders as
ordinary income. Corporate U.S. Stockholders will not be entitled to the
dividends-received deduction with respect to distributions by the Company.
Distributions that are designated as capital gain
21
<PAGE> 23
dividends will be taxable to stockholders as mid-term or as long-term capital
gains (to the extent they do not exceed the Company's actual net capital gain
for the taxable year) without regard to the period for which the stockholder
has held its stock. Subject to certain limitations, such capital gains
dividends received by an individual U.S. Stockholder may be eligible for the
20%, 25% or 28% capital gains rates of tax. However, corporate stockholders
may be required to treat up to 20% of certain capital gain dividends as
ordinary income. Distributions by the Company in excess of its current and
accumulated earnings and profits will not be taxable to a stockholder to the
extent that such distributions do not exceed the adjusted basis of the
stockholder's shares, but rather, will be a nontaxable reduction in a
stockholder's adjusted basis in such shares to the extent thereof and
thereafter will be taxed as capital gain.
Any dividend declared by the Company in October, November or December of
any year payable to a stockholder of record on a specified date in any such
month will be treated as both paid by the Company and received by the
stockholder on December 31, of such year, provided that the dividend is
actually paid by the Company during January of the following calendar year.
U.S. Stockholders holding Capital Stock at the close of the Company's
taxable year will be required to include, in computing their long-term capital
gains for the taxable year in which the last day of the Company's taxable year
falls, such amount as the Company may designate in a written notice mailed to
its shareholders. The Company may not designate amounts in excess of the
Company's undistributed net capital gain for the taxable year. Each U.S.
Stockholder required to include such a designated amount in determining such
shareholder's long-term capital gains will be deemed to have paid, in the
taxable year of the inclusion, the tax paid by the Company in respect of such
undistributed net capital gains. U.S. Stockholders subject to these rules will
be allowed a credit or a refund, as the case may be, for the tax deemed to
have been paid by such shareholders. U.S. Stockholders will increase their
basis in their Capital Stock by the difference between the amount of such
includible gains and the tax deemed paid by the shareholder in respect of such
gains.
Stockholders may not include in their individual income tax returns any
net operating losses or capital losses of the Company. Instead, such losses
would be carried over by the Company for potential offset against its future
income (subject to certain limitations). Taxable distributions from the
Company and gain from the disposition of the Capital Stock will not be treated
as passive activity income and, therefore, stockholders generally will not be
able to apply any "passive activity losses" (such as losses from certain types
of limited partnerships in which the stockholder is a limited partner) against
such income. In addition, taxable distributions from the Company and gain from
the disposition of Capital Stock generally will be treated as investment
income for purposes of the investment interest limitations. The Company will
notify the stockholders after the close of the Company's taxable year as to
the portions of the distributions attributable to that year that constitute
ordinary income, return of capital, and capital gain. In general, any gain or
loss realized upon a taxable disposition of the Capital Stock by a stockholder
who is not a dealer in securities will be treated as mid-term capital gain or
loss if the Capital Stock has been held for more than one year but not more
than 18 months, as long-term capital gain if held for more than 18 months and
otherwise as short-term capital gain or loss. Long-term capital gain of an
individual U.S. Stockholder with respect to the sale of stock is generally
subject to a maximum tax rate of 20% in respect of property held in excess of
18 months and a maximum tax rate of 28% in respect of property held for more
than one year but not more than 18 months. However, any loss upon a sale or
exchange of Capital Stock by a stockholder who has held such stock for six
months or less (after applying certain holding period rules) will be treated
as a mid-term or long-term capital loss to the extent of distributions from
the Company required to be treated by such stockholder as mid-term or
long-term capital gain, as the case may be. All or a portion of any loss
realized upon a taxable disposition of the Capital Stock may be disallowed if
other shares of the Capital Stock are purchased within 30 days before or after
the disposition.
22
<PAGE> 24
BACKUP WITHHOLDING
The Company will report to its U.S. Stockholders and to the IRS the
amount of dividends paid during each calendar year, and the amount of tax
withheld, if any. Under the backup withholding rules, a U.S. Stockholder may
be subject to backup withholding at the rate of 31% with respect to dividends
paid unless such holder: (a) is a corporation or comes within certain other
exempt categories and when required demonstrates this fact, or (b) provides a
taxpayer identification number, certifies as to no loss of exemption from
backup withholding, and otherwise complies with applicable requirements of the
backup withholding rules. A U.S. Stockholder that does not provide the Company
with a correct taxpayer identification number may also be subject to penalties
imposed by the IRS. Any amount paid as backup withholding will be creditable
against the stockholder's income tax liability. In addition, the Company may
be required to withhold a portion of capital gain distributions to any U.S.
Stockholders that fail to certify their non-foreign status to the Company. See
"--Taxation of Foreign Stockholders."
TAXATION OF PENSION TRUSTS
One of the requirements for the Company to qualify as a REIT for Federal
income tax purposes is that, during the last half of each taxable year, not
more than 50% in value of the Company's Capital Stock can be owned by five or
fewer individuals (as defined in the Code to include certain entities). For
purposes of the "five or fewer" test described above, beneficiaries of a
domestic pension trust that owns shares in the Company generally will be
treated as owning such shares in proportion to their actuarial interests in
the trust. In addition, amounts distributed by the Company to a tax-exempt
pension trust generally do not constitute "unrelated business taxable income"
("UBTI") to such trust unless the trust owns more than ten percent of the
Capital Stock, in which case a portion of such amounts distributed may be
treated as UBTI.
TAXATION OF NON-U.S. SHAREHOLDERS OF THE COMPANY
The rules governing United States federal income taxation of the
ownership and disposition of Capital Stock by persons that are, for purposes
of such taxation, nonresident alien individuals, foreign corporations, foreign
partnerships or foreign estates or trusts (collectively, "Non-U.S.
Stockholders") are complex, and no attempt is made herein to provide more than
a brief summary of such rules. Accordingly, the discussion does not address
all aspects of United States federal income tax and does not address state,
local or foreign tax consequences that may be relevant to a Non-U.S.
Stockholder in light of its particular circumstances. In addition, this
discussion is based on current law, which is subject to change, and assumes
that the Company qualifies for taxation as a REIT. Prospective Non-U.S.
Stockholders should consult with their own tax advisers to determine the
impact of federal, state, local and foreign income tax laws with regard to an
investment in Capital Stock, including any reporting requirements.
Distributions by the Company. Distributions by the Company to a Non-U.S.
Stockholder that are neither attributable to gain from sales or exchanges by
the Company of United States real property interests nor designated by the
Company as capital gains dividends will be treated as dividends of ordinary
income to the extent that they are made out of current or accumulated earnings
and profits of the Company. Such distributions ordinarily will be subject to
withholding of United States federal income tax on a gross basis (that is,
without allowance of deductions) at a 30% rate or such lower rate as may be
specified by an applicable income tax treaty, unless the dividends are treated
as effectively connected with the conduct by the Non-U.S. Stockholder of a
United States trade or business. Dividends that are effectively connected with
such a trade or business will be subject to tax on a net basis (that is, after
allowance of deductions) at graduated rates, in the same manner as domestic
shareholders are taxed with respect to such dividends, and are generally not
subject to withholding. Any such dividends received by a Non-U.S. Stockholder
that is a corporation may also be subject to an additional branch profits tax
at a 30% rate or such lower rate as may be specified by an applicable income
tax treaty. The
23
<PAGE> 25
Company expects to withhold United States income tax at the rate of 30% on the
gross amount of any such distributions made to a Non-U.S. Stockholder unless
(i) a lower treaty rate applies and any required form or certification
evidencing eligibility for that reduced rate is filed with the Company or (ii)
the Non-U.S. Stockholder files an IRS Form 4224 with the Company claiming that
the distribution is effectively connected income.
Distributions in excess of current or accumulated earnings and profits of
the Company will not be taxable to a Non-U.S. Stockholder to the extent that
they do not exceed the adjusted basis of the shareholder's Capital Stock, but
rather will reduce the adjusted basis of such Capital Stock. To the extent
that such distributions exceed the adjusted basis of a Non-U.S. Stockholder's
Capital Stock, they will give rise to gain from the sale or exchange of its
Capital Stock, the tax treatment of which is described below. As a result of a
legislative change made by the Small Business Job Protection Act of 1996, it
appears that the Company will be required to withhold 10% of any distribution
in excess of the Company's current and accumulated earnings and profits.
Consequently, although the Company intends to withhold at a rate of 30% on the
entire amount of any distribution (or a lower applicable treaty rate), to the
extent that the Company does not do so, any portion of a distribution not
subject to withholding at a rate of 30% (or a lower applicable treaty rate)
will be subject to withholding at a rate of 10%. However, the Non-U.S.
Stockholder may seek a refund of such amounts from the IRS if it subsequently
determined that such distribution was, in fact, in excess of current or
accumulated earnings and profits of the Company, and the amount withheld
exceeded the Non-U.S. Stockholder's United States tax liability, if any, with
respect to the distribution.
Distributions to a Non-U.S. Stockholder that are designated by the
Company at the time of distribution as capital gains dividends (other than
those arising from the disposition of a United States real property interest)
generally will not be subject to United States federal income taxation, unless
(i) the investment in the Capital Stock is effectively connected with the
Non-U.S. Stockholder's United States trade or business, in which case the
Non-U.S. Stockholder will be subject to the same treatment as U.S.
Stockholders with respect to such gain (except that a shareholder that is a
foreign corporation may also be subject to the 30% branch profits tax, as
discussed above), or (ii) the Non-U.S. Stockholder is a nonresident alien
individual who is present in the United States for 183 days or more during the
taxable year and has a "tax home" in the United States, in which case the
nonresident alien individual will be subject to a 30% tax on the individual's
capital gains.
Under the Foreign Investment in Real Property Tax Act ("FIRPTA"),
distributions to a Non-U.S. Stockholder that are attributable to gain from
sales or exchanges by the Company of United States real property interests
(whether or not designated as a capital gain dividend) will cause the Non-U.S.
Stockholder to be treated as recognizing such gain as income effectively
connected with a United States trade or business. Non-U.S. Stockholders would
thus generally be taxed at the same rates applicable to U.S. Stockholders
(subject to a special alternative minimum tax in the case of nonresident alien
individuals). Also, such gain may be subject to a 30% branch profits tax in
the hands of a Non-U.S. Stockholder that is a corporation, as discussed above.
The Company is required to withhold 35% of any such distribution. That amount
is creditable against the Non-U.S. Stockholder's United States federal income
tax liability.
Although the law is not entirely clear on the matter, it appears that
amounts designated by the Company as undistributed capital gains in respect of
shareholders' shares would be treated with respect to Non-U.S. Stockholders in
the manner outlined in the preceding two paragraphs for actual distributions
by the Company of capital gain dividends. Under that approach, the Non-U.S.
Stockholders would be able to offset as a credit against their United States
federal income tax liability resulting therefrom their proportionate share of
the tax paid by the Company on such undistributed capital gains (and to
receive from the IRS a refund to the extent their proportionate share of such
tax paid by the Company were to exceed their actual United States federal
income tax liability).
24
<PAGE> 26
Sale of Capital Stock. Gain recognized by a Non-U.S. Stockholder upon the
sale or exchange of Capital Stock generally will not be subject to United
States taxation unless such shares constitute a "United States real property
interest" within the meaning of FIRPTA. The Capital Stock will not constitute
a "United States real property interest" so long as the Company is a
"domestically controlled REIT." A "domestically controlled REIT" is a REIT in
which at all times during the specified testing period less than 50% in value
of its stock is held directly or indirectly by Non-U.S. Stockholders.
Notwithstanding the foregoing, gain from the sale or exchange of Capital Stock
not otherwise subject to FIRPTA will be taxable to a Non-U.S. Stockholder if
the Non-U.S. Stockholder is a nonresident alien individual who is present in
the United States for 183 days or more during the taxable year and has a "tax
home" in the United States. In such case, the nonresident alien individual
will be subject to a 30% United States withholding tax on the amount of such
individual's gain.
The Company believes that it will continue to be a "domestically
controlled REIT," and therefore that the sale of Capital Stock will not be
subject to taxation under FIRPTA. However, because the Capital Stock is
publicly traded, no assurance can be given that the Company will continue to
be a "domestically controlled REIT." If the Company fails to qualify as a
"domestically controlled REIT," gain arising from the sale or exchange by a
Non-U.S. Stockholder of Capital Stock still would not be subject to United
States taxation under FIRPTA as a sale of a "United States real property
interest," if (i) the Capital Stock (as applicable) is "regularly traded" (as
defined by applicable Treasury Regulations) on an established securities
market (e.g., the New York Stock Exchange) and (ii) the selling Non-U.S.
Stockholder held 5% or less of the value of the outstanding class or series of
shares being sold at all times during a specified testing period. If gain on
the sale or exchange of Capital Stock were subject to taxation under FIRPTA,
the Non-U.S. Stockholder would be subject to regular United States income tax
with respect to such gain in the same manner as a U.S. Stockholder (subject to
any applicable alternative minimum tax and a special alterative minimum tax in
the case of nonresident alien individuals), and the purchaser of the Capital
Stock would be required to withhold and remit to the IRS 10% of the purchase
price.
Backup Withholding Tax and Information Reporting. Backup withholding tax
and information reporting will generally not apply to distributions paid to
Non-U.S. Stockholders outside the United States that are treated as (i)
dividends subject to the 30% (or lower treaty rate) withholding tax discussed
above, (ii) capital gains dividends or (iii) distributions attributable to
gain from the sale or exchange by the Company of United States real property
interests. As a general matter, backup withholding and information reporting
will not apply to a payment of the proceeds of a sale of Capital Stock by or
through a foreign office of a foreign broker. Information reporting (but not
backup withholding) will apply, however, to a payment of the proceeds of sale
of Capital Stock by a foreign office of a broker that (a) is a United States
person, (b) derives 50% or more of its gross income for certain periods from
the conduct of a trade or business in the United States or (c) is a
"controlled foreign corporation" (generally, a foreign corporation controlled
by United States shareholders) for United States tax purposes, unless the
broker has documentary evidence in its records that the holder is a Non-U.S.
Stockholder and certain other conditions are met, or the shareholder otherwise
establishes an exemption. Payment to or through a United States office of a
broker of the proceeds of a sale of Capital Stock is subject to both backup
withholding and information reporting unless the shareholder certifies under
penalty of perjury that the shareholder is a Non-U.S. Stockholder, or
otherwise establishes an exemption. A Non-U.S. Stockholder may obtain a refund
of any amounts withheld under the backup withholding rules by filing the
appropriate claim for refund with the IRS.
The United States Treasury Department has recently finalized regulations
regarding the withholding and information reporting rules discussed above. In
general, these regulations do not alter the substantive withholding and
information reporting requirements but unify certification procedures and
forms and clarify and modify reliance standards. These regulations generally
are effective for payments made after December 31, 1999, subject to certain
transition rules. A Non-U.S. Stockholder should consult its own advisor
regarding the effect of the new Treasury Regulations.
25
<PAGE> 27
USE OF PROCEEDS
The Company will not receive any cash proceeds from the issuance of the
Redemption Shares to holders of Units tendered for redemption; however, the
Company will acquire Units from such holders and thereby increase its interest
in the Operating Partnership.
PLAN OF DISTRIBUTION
This Prospectus relates to the issuance by the Company of up to 353,537
Redemption Shares if and to the extent that holders of Units acquired pursuant
to the Southlake Acquisition tender such Units for redemption in accordance
with the terms of the Redemption Rights Agreement and the Company, in its sole
and absolute discretion, elects to issue Redemption Shares in consideration
for such Units. The Company has registered the Redemption Shares for sale to
provide the holders thereof with freely traceable securities, but registration
of such shares does not necessarily mean that any of such shares will be
issued by the Company upon redemption of Units or offered or sold by the
holders thereof.
The Company will not receive any cash proceeds from the issuance of the
Redemption Shares to holders of Units tendered for redemption; however, it
will acquire one Unit (subject to certain anti-dilution adjustments) in
exchange for each Redemption Share that the Company issues to holders of Units
pursuant to this Prospectus and will thereby increase its share in the
Operating Partnership. Consequently, with each redemption by the Company, the
Company's interest in the Operating Partnership will increase.
The Redemption Shares will be listed on the NYSE, subject to official notice of
issuance.
LEGAL MATTERS
The validity of the Redemption Shares offered hereby will be passed upon
for the Company by Neal, Gerber & Eisenberg.
EXPERTS
The consolidated financial statements of the Company as of December 31,
1997 and 1996 and for each of the three years in the period ended December 31,
1997 and the consolidated financial statement schedule as of December 31, 1997
have been incorporated by reference herein from the Company's Annual Report on
Form 10-K for the year ended December 31, 1997, and the Statement of Revenues
and Certain Expenses of Northbrook Court for the year ended December 31, 1997
has been incorporated by reference herein from the Company's Current Report on
Form 8-K/A dated June 2, 1998, all in reliance upon the reports of Coopers &
Lybrand L.L.P., independent certified public accountants, and upon the
authority of said firm as experts in accounting and auditing. The combined
statement of revenues and certain expenses of certain retail properties of
MEPC American Holdings Inc., U.K.-American Properties, Inc. and Caledonian
Holding Company, Inc. (wholly owned subsidiaries of MEPC plc) for the year
ended September 30, 1997 has been incorporated by reference herein from the
Company's Current Report on Form 8-K/A dated June 2, 1998 in reliance upon the
report of KPMG Peat Marwick LLP, independent certified public accountants, and
upon the authority of said firm as experts in accounting and auditing. The
combined statement of revenues and certain expenses of the Landmark Mall,
Mayfair Complex, The Meadows, Northgate Mall, Oglethorpe Mall and Park City
Center for the year ended December 31, 1997 has been incorporated by reference
herein from the Company's Current Report on Form 8K/A dated June 2, 1998 in
reliance upon the report of Deloitte & Touche, LLP, independent certified
public accountants, and upon the authority of said firm as experts in
accounting and auditing.
26
<PAGE> 28
No dealer, salesperson or any other person has been authorized to give
any information or to make any representations other than those contained or
incorporated by reference in this Prospectus and, if given or made, such
information or representations must not be relied upon as having been
authorized by the Company or any broker, dealer or agent. This Prospectus does
not constitute an offer or solicitation by anyone in any jurisdiction in which
such offer or solicitation is not authorized or in which the person making
such offer or solicitation is not qualified to do so or to anyone to whom it
is unlawful to make such offer or solicitation. Neither the delivery of this
Prospectus nor any sale made hereunder shall, under any circumstances, create
an implication that there has been no change in the affairs of the Company
since the date hereof.
TABLE OF CONTENTS
<TABLE>
<S> <C>
Available Information 2
Incorporation of Certain Documents
by Reference 2
Forward Looking Statements 3
The Company . . 3
Recent Developments 4
Capital Stock . . 5
Summary of Partnership Agreement 10
Redemption of Units .. ..... 12
Comparison of Ownership of Units and
Shares of Common Stock .............14
Certain Federal Income Tax
Considerations .. ............. 18
Use of Proceeds .......... 26
Plan of Distribution ..... 26
Legal Matters .... 26
Experts . . . 26
</TABLE>
353,537 Shares
GENERAL GROWTH
PROPERTIES, INC.
Common Stock
PROSPECTUS
, 1998
<PAGE> 29
PART 11
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following table sets forth the various expenses in connection with
the sale and distribution of securities being registered, other than
discounts, concessions and brokerage commissions.
<TABLE>
<S> <C>
SEC registration fee .......................................... $ 3,722
Blue sky fees and expenses .................................... 250*
Legal fees and expenses ....................................... 5,000*
Accounting fees and expenses .................................. 2,500*
Miscellaneous (including NYSE listing fees).................... 1,528*
Total ...................................................... 13,000
</TABLE>
* Estimated
The Company will bear all of the foregoing expenses.
Item 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The Company is a Delaware corporation. In its Certificate of
Incorporation, the Company has adopted (a) the provisions of Section 102(b)(7)
of the Delaware General Corporation Law ("DGCL"), which enables a corporation
in its certificate of incorporation or an amendment thereto to eliminate or
limit the personal liability of a director for monetary damages for breach of
the director's fiduciary duty, except (i) for any breach of the director's
duty of loyalty to the corporation or its stockholders, (ii) for acts or
omissions not in good faith or which involve intentional misconduct or a
knowing violation of law, (iii) pursuant to Section 174 of the DGCL (providing
for liability of directors for unlawful payment of dividends or unlawful stock
purchases or redemptions) or (iv) for any transaction from which a director
derived an improper personal benefit and (b) the provisions of Section 145 of
the DGCL, which provide that a corporation may indemnify any persons,
including officers and directors, who are, or are threatened to be made,
parties to any threatened, pending or completed legal action, suit or
proceeding, whether civil, criminal, administrative or investigative (other
than an action by or in the right of the corporation), by reason of the fact
that such person was an officer, director, employee or agent of the
corporation, or is or was serving at the request of such corporation as a
director, officer, employee or agent of another corporation or enterprise. The
indemnity may include expenses (including attorneys' fees), judgments, fines
and amounts paid in settlement actually and reasonably incurred by such person
in connection with such action, suit or proceeding, provided such officer,
director, employee or agent acted in good faith and in a manner he reasonably
believed to be in or not opposed to the corporation's best interest and, with
respect to criminal proceedings, had no reasonable cause to believe that his
conduct was unlawful. A Delaware corporation may indemnify officers or
directors in an action by or in the right of the corporation under the same
conditions, except that no indemnification is permitted without judicial
approval if the officer or director is adjudged to be liable to the
corporation. Where an officer or director is successful on the merits or
otherwise in the defense of any action referred to above, the corporation must
indemnify him against expenses (including attorneys' fees) that such officer
or director actually and reasonably incurred.
The Company has entered into indemnification agreements with each of its
officers and directors. The indemnification agreements, among other things,
require the indemnification of the Company's officers and directors to the
fullest extent permitted by law, and require that the Company advance to the
officers and directors all related expenses, subject to reimbursement if it is
subsequently determined that indemnification is not
II-1
<PAGE> 30
permitted. Such indemnification agreements also provide for the
indemnification and advance of all expenses incurred by of ricers directors
seeking to enforce their rights under the indemnification agreements, and
require the Company to cover officers and directors under the Company's
directors' and officers' liability insurance. Although the indemnification
agreements offer substantially the same scope of coverage afforded by
provisions in the Certificate and the Bylaws, such agreements provide greater
assurance to directors and officers that indemnification will be available,
because, as a contract, it cannot be modified unilaterally in the future by
the Board of Directors or by the stockholders to eliminate the rights they
provide.
ITEM 16. EXHIBITS.
4.1 Specimen certificate representing Common Stock (incorporated by
reference to the Company's Registration Statement on Form Sell
(File No. 33-56640), filed on April 6, 1993).
5.1 Opinion of Neal, Gerber & Eisenberg, counsel for the Company.
8.1 Tax Opinion of Neal, Gerber & Eisenberg, counsel for the Company.
23.1 Consent of Coopers & Lybrand L.L.P.
23.2 Consent of KPMG Peat Marwick LLP
23.3 Consent of Deloitte and Touche LLP
23.4 Consent of Neal, Gerber & Eisenberg (included in Exhibit 5.1
and Exhibit 8.1).
24.1 Powers of Attorney of certain officers and directors of the Company
(included on signature page).
Item 17. Undertakings.
(a) The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are
being made, a post-effective amendment to this Registration Statement:
To include any material information with respect
to the plan of distribution not previously disclosed in the
Registration Statement or any material change to such
information in the Registration Statement.
(2) That, for the purpose of determining any liability under
the Securities Act, each such post-effective amendment shall be deemed
to be a new Registration Statement relating to the securities offered
therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain
unsold at the termination of the offering.
(b) The undersigned registrant hereby undertakes that, for purposes
of determining any liability under the Securities Act, each filing of the
registrant's annual report pursuant to Section 13(a) or Section 15(d) of the
Securities Exchange Act of 1934 that is incorporated by reference in the
Registration Statement shall be deemed to be a new Registration Statement
relating to the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona fide offering
thereof.
(c) Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to directors, officers and controlling persons
of the registrant pursuant to the foregoing provisions or otherwise, the
registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification
II-2
<PAGE> 31
is against public policy as expressed in the Act and is, therefore,
unenforceable. In the event that a claim for indemnification against such
liabilities (other than insurance payments and the payment by the registrant
of expenses incurred or paid by a director, officer or controlling person of
the registrant in the successful defense of any action, suit or proceeding) is
asserted by such director, officer or controlling person in connection with
the securities being registered, the registrant will, unless in the opinion of
its counsel the matter has been settled by controlling precedent, submit to a
court of appropriate jurisdiction the question of whether such indemnification
by it is against public policy as expressed in the Act and will be governed by
the final adjudication of such issue.
II-3
<PAGE> 32
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
registrant certifies that it has reasonable grounds to believe that it meets
all of the requirements for filing on Form S-3 and has duly caused this
registration statement to be signed on its behalf by the undersigned,
"thereunto duly authorized, in the City of Chicago. State of Illinois, on June
29, 1998.
GENERAL GROWTH PROPERTIES, INC.
(Registrant)
By: /s/ MATTHEW BUCKSBAUM
Matthew Bucksbaum
Chairman of the Board and
Chief Executive Officer
We, the undersigned officers and directors of General Growth Properties,
Inc., hereby severally constitute Matthew Bucksbaum, Robert Michaels and
Bernard Freibaum, and each of them singly, our true and lawful attorneys with
full power to them, and each of them singly, to sign for us and in our names
in the capacities indicated below, any and all amendments, including
post-effective amendments, to this registration statement, and generally to do
all such things in our name and behalf in such capacities to enable General
Growth Properties, Inc. to comply with the applicable provisions of the
Securities Act of 1933 and all requirements of the Securities and Exchange
Commission, and we hereby ratify and confirm our signatures as they may be
signed by our said attorneys above, or any of them, to any and all such
amendments.
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed below on June 29, 1998, by the
following persons in the capacities indicated:
<TABLE>
<CAPTION>
Signature Title
<S> <C>
/s/ MATTHEW BUCKSBAUM Chairman of the Board, Chief Executive Officer
Matthew Bucksbaum and Director (Principal Executive Officer)
/s/ ROBERT MICHAELS President and Director
Robert Michaels
/s/ JOHN BUCKSBAUM Executive Vice President and Director
John Bucksbaum
/s/ BERNARD FREIBAUM Executive Vice President and Chief Financial
Bernard Freibaum Officer (Principal Financial and Accounting
Officer)
/s/ ANTHONY DOWNS Director
Anthony Downs
</TABLE>
II-4
<PAGE> 33
<TABLE>
<S> <C>
/s/ MORRIS MARK Director
Morris Mark
/s/ BETH STEWART Director
Beth Stewart
/s/ A. LORNE WEIL Director
A. Lorne Well
</TABLE>
II-5
<PAGE> 34
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
<S> <C>
4.1 Specimen certificate representing Common Stock (incorporated by
reference to the Company's Registration Statement on Form S-ll
(File No. 33-56640), filed on April 6, 1993).
5.1 Opinion of Neal, Gerber & Eisenberg, counsel for the Company.
8.1 Tax Opinion of Neal, Gerber & Eisenberg, counsel for the Company.
23.1 Consent of Coopers & Lybrand L.L.P.
23.2 Consent of KPMG Peat Marwick LLP
23.3 Consent of Deloitte and Touche LLP
23.4 Consent of Neal, Gerber & Eisenberg (included in Exhibit 5.1 and
Exhibit 8.1).
24.1 Powers of Attorney of certain officers and directors of the
Company (included on signature page).
</TABLE>
II-6
<PAGE> 1
EXHIBIT 5.1
June 26, 1998
General Growth Properties, Inc.
110 North Wacker Drive
Chicago, Illinois 60606
Re: Registration Statement on Form S-3
Gentlemen:
We have acted as counsel to General Growth Properties, Inc., a Delaware
corporation (the "Company"), in connection with the registration under the
Securities Act of 1933, as amended, of up to 353,537 shares of its common
stock, par value $.10 per share (the "Shares"), which are proposed to be
issued by the Company as described in the Company's Registration Statement on
Form S-3 (the "Registration Statement") to be filed with the Securities and
Exchange Commission on or about June 29, 1998.
As such counsel, we have examined such documents and certificates of
officers of the Company as we deemed relevant and necessary as the basis for
the opinion hereafter expressed. In such examinations, we have assumed the
genuineness of all signatures and the authenticity of all documents submitted
to us as originals and the conformity to original documents of all documents
submitted to us as conformed or photostatic copies.
Based upon the foregoing, we are of the opinion that the Shares have been
duly authorized and, upon issuance as described in the Registration Statement,
will be duly and validly issued and fully paid and non-assessable.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and to the reference to our firm under the heading
"Legal Matters" in the Prospectus comprising a part of the Registration
Statement.
Please be advised that Marshall E. Eisenberg, a partner in our firm, is
the Secretary of the Company and that certain partners of, and attorneys
associated with, our firm and members of their families, own shares of the
Company's Common Stock. No knowledge is to be imputed to this firm by virtue
of Mr. Eisenberg's position as Secretary of the Company.
Very truly yours,
/s/ NEAL, GERBER & EISENBERG
<PAGE> 1
EXHIBIT 8.1
NEAL, GERBER & EISENBERG
TWO NORTH LASALLE STREET
SUITE 2200
CHICAGO, IL 60602
(312) 269-8000
June 26, 1998
General Growth Properties, Inc.
110 North Wacker Drive
Chicago, Illinois 60606
Gentlemen:
We are rendering the opinions contained herein in our capacity as tax
counsel to General Growth Properties, Inc., a Delaware corporation (the
"Company"). In so acting and in rendering the opinions expressed below, we
have examined and relied upon the originals, or copies certified or otherwise
identified to our satisfaction of such records, documents, agreements and
instruments as we have deemed necessary to the rendering of these opinions.
Based upon and subject to the assumptions noted below, we are of the
opinion that for federal income tax purposes under current law, (1) for the
period beginning April 15, 1993 and ending December 31, 1997, the Company has
been organized and operated in a manner that has enabled it to qualify as a
real estate investment trust under Sections 856 through 859 of the Internal
Revenue Code of 1986, as amended (the "Code"), and (2) based on representation
letters from the Company, the Company's proposed method of operations will
enable it to continue to so qualify in the future.
The opinions expressed herein are subject to the following qualifications
and assumptions:
1. We have relied upon certain representations from the management
of the Company as to certain matters of fact upon which the foregoing opinions
are based and we have no reason to believe that such reliance is not justified.
2. The Company will, in the future, operate and remain organized in
the same manner that it has operated and been organized for the period from
April 15, 1993 through December 31, 1997.
<PAGE> 2
General Growth Properties, Inc.
June 26, 1998
Page 2
3. All documents submitted to us as originals and the originals of all
documents submitted to us as certified or photostatic copies are authentic,
all documents submitted to us as certified or photostatic copies conform to
the original documents and all signatures are genuine.
The opinions herein are given as of the date hereof, are based upon the
Code, regulations of the Department of the Treasury, published rulings and
procedures of the Internal Revenue Service, and judicial decisions, all as in
effect on the date hereof. These opinions are limited to the matters expressly
set forth herein and no opinions are to be implied or may be inferred beyond
the matters expressly so stated. We disclaim any obligation to update this
letter for events, whether legal or factual, occurring after the date hereof.
This letter is given solely for your benefit in connection with the
Company's Registration Statement on Form S-3 relating to the registration
under the Securities Act of 1933 of 353,537 shares of the Company's Common
Stock, par value $.10 per share (the "Common Stock"). Without our prior
written consent, this letter may not be used or relied upon by any other
person or for any other purpose.
Please be advised that Marshall E. Eisenberg, a partner in our firm, is
the Secretary of the Company and certain affiliates of the Company and that
certain of the attorneys in our firm are equity holders in the Company or
trustees or officers or stockholders of trustees of certain trusts which
directly or indirectly own equity securities or other interests in the Company
and/or GGP Limited Partnership, a Delaware limited partnership.
Very truly yours,
/s/ NEAL, GERBER & EISENBERG
<PAGE> 1
EXHIBIT 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in this Registration Statement of
General Growth Properties, Inc. on Form S-3 of our report dated February 9,
1998, on our audits of the consolidated financial statements of General Growth
Properties, Inc. as of December 31, 1997 and 1996, and for the three years in
the period ended December 31, 1997, and the financial statement schedule as of
December 31, 1997, included in Annual Report on Form 10-K for the fiscal year
ended December 31, 1997, and of our report dated February 6, 1998, except as
to Note 1 of which the date is May 28, 1998, on our audit of the statement of
revenues and certain expenses of Northbrook Court for the year ended December
31, 1997 which is included in Form 8-K/A of General Growth Properties, Inc.
dated June 2, 1998. We also consent to the reference to our firm under the
caption "Experts."
/s/ COOPERS & LYBRAND L.L.P.
Chicago, Illinois
June 26, 1998
<PAGE> 1
EXHIBIT 23.2
CONSENT OF INDEPENDENT AUDITORS
To Board of Directors
General Growth Properties, inc.:
We consent to the incorporation by reference herein of our report dated May 8,
1998, with respect to the combined statement of revenues and certain expenses
for certain retail properties of MEPC American Holdings Inc., U.K. - American
Properties, Inc. and Caledonian Holding Company, Inc. (wholly owned
subsidiaries of MEPC plc, a United Kingdom company) for the year ended
September 30, 1997, which report appears in the Form 8-K/A dated June 2, 1998
of General Growth Properties, Inc., and to the reference to our firm under the
heading "Experts" in the Registration Statement.
/s/ KPMG PEAT MARWICK LLP
Dallas, Texas
June , 1998
<PAGE> 1
EXHIBIT 23.3
INDEPENDENT AUDITORS CONSENT
We consent to the incorporation by reference in this Registration Statement of
General Growth Properties, Inc. on Form S-3 of our report dated May 14, 1998,
relating to our audit of the combined statement of revenues and certain
expenses of the Landmark Mall, Mayfair Complex, The Meadows, Northgate Mall,
Oglethorpe Mall and Park City Center (the "Malls") for the year ended December
31, 1997, included in this Form 8-K/A of General Growth Properties, Inc.,
dated June 2, 1998, and to the reference to us as experts in such registration
statements.
/s/ DELOITTE & TOUCHE
Atlanta, Georgia
June 26, 1998
